* EPS on operating basis $1.65 vs $1.12 expected by analysts
* 1st-quarter net income of $1.71/shr, vs 31 cents in 2011
* Net income more than double last year's
* Shares dip slightly in after-market trade
May 3 (Reuters) - Bailed-out insurer American International Group said quarterly profit more than doubled from a year earlier, exceeding expectations with the help of investment gains.
The company on Thursday reported first-quarter earnings of $1.65 a share on an operating basis, beating the $1.12 estimated on average by analysts, according to Thomson Reuters I/B/E/S.
AIG's net income for the quarter was $3.2 billion, or $1.71 per share. That compared with year-earlier net income of $1.3 billion, or 31 cents per share.
In the corresponding quarter last year, AIG racked up substantial catastrophe losses arising from the earthquake in Japan. The year-earlier earnings also included a charge for the termination of AIG's credit facility with the U.S. Federal Reserve.
AIG's global property insurance unit, Chartis, earned $1 billion, compared with a loss of $424 million a year earlier when the Japanese earthquake affected results. The company said its loss ratio improved due to a shift to higher value businesses, pricing improvements and risk selection.
"At Chartis, where we had very low natural disaster claims, we're already seeing the benefits of the realigned consumer and commercial geographic structure and emphasis on growth economies," AIG Chief Executive Robert Benmosche said in a release.
SunAmerica, AIG's U.S. life insurer, reported a profit of $1.3 billion in the quarter, up from $1.2 billion, helped by reinvestment of cash during 2011 and rising stock markets in the quarter.
In the quarter, AIG sold 1.72 billion shares of AIA Group Ltd, which New York-based company spun off in a Hong Kong IPO in 2010. AIG used the $5.6 billion of proceeds to pay down a portion of the U.S. Treasury's preferred interest in the AIA SPV, the special purpose entity that holds AIG's remaining interest in AIA.
The value of AIG's shares in AIA increased $1.8 billion in the quarter, including a $600 million gain from the share sale.
The fair value of AIG's interest in Maiden Lane III, a portfolio created during AIG's bailout, increased $1.3 billion in the quarter due to tightening credit spreads, compared with an increase of $744 million in the first quarter of 2011.
In after-market trade, AIG shares were down less than 1 percent from their $33.14 closing price.