NEW YORK (AP) - AIG, the insurance giant bailed out by the federal government, reported net income of $1.45 billion for the first quarter as its struggling insurance business showed signs of improvement.

The company also said on Friday that recovering credit markets and ongoing efforts to streamline its operations contributed to improved performance.

Shares of AIG rose 75 cents, or two percent, to $37.50 in pre-market trading.

American International Group Inc. (AIG), which received more than $180 billion in aid from the government during the financial crisis, said premiums in its primary insurance division fell just 1.1 percent in the first quarter. That was the smallest decline over the past four quarters.

The $7.64 billion in new premiums written during the quarter was actually a jump of 10 percent from the fourth quarter.

Despite the improvement, AIG remained cautious about generating new business in its Chartis unit, saying new business continues to be affected by "challenging economic conditions".

Investors want to see a rebound in AIG's ability to genInvestors want to see a rebound in AIG's ability to generate new business because once it has sold non-core assets, the insurer will have to rely on traditional insurance underwriting to repay the rest of its government loan.

The amount of outstanding government assistance actually rose by four percent during the first quarter to $134.21 billion.

AIG is hoping to get roughly $51 billion from its agreements to sell two major foreign insurance units and plans to use the proceeds to reduce its government loans.

In March, AIG agreed to sell its American Life Insurance Co. division for $15.5 billion to MetLife Inc. and its Asia-based life insurer, AIA Group, to Britain's Prudential plc. for $35.5 billion.

The two deals - by far the biggest since AIG began selling operations to repay the government - are expected to close by the end of the year.

The proceeds from the AIA and Alico sales would reduce the government's outstanding assistance to $83.21 billion, of which AIG would owe $50.61 billion in loans.

The remaining $32.61 billion is tied to the value of assets the government took over as part of the bailout. As those risky investments are repaid, that money goes directly back to the government.

Overall, AIG had net income of $1.45 billion, or $2.16 per share, during the first quarter, compared with a net loss of $4.35 billion, or $39.67 per share, a year earlier.

Adjusted profit, which excludes earnings from the units it agreed to sell and other special one-time costs, totaled $809 million during the first quarter.

Income available to common shareholders totaled $294 million during the first quarter. Shareholders' portion of the quarterly profit is smaller than overall profit because the government received an 80 percent stake in AIG as part of the bailout package.

A recovery in credit and stock markets helped AIG avoid taking any big write-downs during the first quarter and allowed it to continue to unwind its financial products division. Risky deals set up by the financial products division pushed AIG to the brink of collapse in late 2008.

The insurer said it cut the size of the financial products portfolio by 20 percent to $755.4 billion during the first quarter.