Troubled US insurer AIG has returned to first-quarter profitability with net income of $US1.45 billion ($1.62 billion), reversing last year’s opening quarter loss of $US4.35 billion ($4.85 billion).

Improved investment earnings were credited for a 24% gain in profit at global general insurance subsidiary Chartis, which earned $US879 million ($980.9 million) against $US710 million previously ($792.3 million).

Despite the increase in profit, Chartis net written premium fell 1.1% to $US7.6 billion ($8.5 billion) during the first quarter while the combined ratio deteriorated to 102.5% from 96.7%.

Catastrophe losses of around $US481 million ($536.7 million) served to limit the gains made by the insurer.

AIG says Chartis is maintaining price discipline where market rates are unsatisfactory in certain lines, including workers’ compensation.

AIG’s net profit from discontinued operations amounted to $US1.17 billion ($1.3 billion), reflecting the substantial contribution of the sale of AIA, Alico and Nan Shan units.

President and CEO Robert Benmosche says those and other asset sales worth more than $US51 billion ($56.9 billion) “are expected to close by the end of 2010 and allow the company to substantially reduce its obligations to the Federal Reserve Bank of New York and take a significant step toward a sustainable capital structure”.

The company has also disclosed ongoing progress in unwinding the AIG Financial Products unit, with a further 20% reduction in its derivative portfolio and an 11% reduction in trade positions.