NEW YORK (CNNMoney.com) -- Troubled insurer AIG reported a quarterly profit Friday, as the company's core insurance businesses continued to stabilize.
The New York-based insurance giant reported net income attributable to the company of $1.5 billion, or $2.16 per share, during the three-month period ended March 31. A year earlier, AIG lost $4.4 billion, or $39.67 per share.
Sales for the bailed out company rose 22.6% to $16.3 billion.
The announcement comes as the company continues to work towards its goals of improving its insurance operations and selling off non-core businesses to pay back its sizeable debt to taxpayers. AIG has received a bailout worth up to $182 billion in loans and direct payments from the Federal Reserve and the Treasury Department, of which the insurer still owes $120.3 billion.
"Our people continue to make great progress in not only stabilizing our business but in restoring the strength of AIG's operating performance," said AIG Chief Executive Robert Benmosche in a pre-recorded message. "2010 will continue to be a transition year ... and earnings could be volatile. I am pleased with their progress, but there is still more work to be done."
The insurer's strong push to stabilize its insurance units, a key step toward paying back the government, has begun to pay off. Premiums were down only marginally and profits soared.
"Our teams have worked extremely hard to strengthen their franchises, through extensive distribution, client, and employee outreach, in the midst of very competitive market conditions," Benmosche added.
After initially rising 3%, shares of AIG (AIG, Fortune 500) fell 2% Friday. AIG's stock has risen 23% this year on renewed hopes that it will be able to repay its loan to the Federal Reserve and Treasury Department.
AIG's debt total will be almost cut in half after the insurer completes the sales of two large foreign insurance businesses, which will provide the company with $51 billion to hand over to the government. The company made an additional $729 million in the quarter off the sale of its asset management group and an initial public offering of its reinsurance company.
The insurer also continued to wind down its controversial derivatives portfolio in its Financial Products unit, which plummeted in value when the housing market bottomed and nearly caused the company to collapse. AIG reduced the size of that portfolio by 20% in the quarter to $755 billion. At the end of 2008, the portfolio was worth $1.6 trillion.
AIG has said it would keep approximately $300 billion worth of the derivatives in its portfolio.
Also Friday, AIG dropped investment bank Goldman Sachs (GS, Fortune 500) as its advisor, according to the New York Times. AIG reportedly replaced Goldman with Bank of America (BAC, Fortune 500) and Citigroup (C, Fortune 500), which also received extraordinary bailouts from taxpayers during the height of the credit crisis.
AIG's downfall stemmed from insurance contracts (credit default swaps) on assets called collateralized debt obligations owned by Wall Street firms including Goldman Sachs. The Securities and Exchange Commission has charged Goldman with fraud related to one CDO that Goldman hired AIG to insure.
AIG is now reportedly thinking about going after Goldman if it can prove the Wall Street giant lied about the underlying value and risk of that CDO.
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