* Loses $2.2 bln on after-tax operating basis
* Life insurance sales grow
* Chartis hurt by reserves
* Shares up 1.4 percent (Adds outlook from annual report)
By Ben Berkowitz
NEW YORK, Feb 24 (Reuters) - Bailed-out insurer American International Group Inc (AIG.N) earned $11.2 billion in the fourth quarter on asset sales, but charges to expand its reserves for old asbestos claims pushed its underlying operations into another loss.
AIG, which was literally minutes from collapse in the fall of 2008, survived thanks to a $182 billion government bailout and the divestiture of major international insurance units like Alico and AIA to remain in business.
The company, still one of the world's largest property insurers and a top U.S. life insurer, is hoping to begin repaying taxpayer funds with the help of an upcoming stock sale worth at least $15 billion, following in the footsteps of other bailout recipients like Citigroup Inc (C.N) and General Motors Co (GM.N).
AIG's global property insurance business Chartis, one of the key units on which it is staking its future as a private company, lost $4 billion in the quarter on those asbestos reserve charges, which had been previously announced.
Business written in the quarter only rose because of the effects of an acquisition in Japan. Excluding that, business was down in a generally weak market.
In its annual report, filed alongside its results, AIG said it expects a tough 2011 for Chartis, with weak growth prospects amid heavy competition and a sluggish global economy. Similar headwinds have plagued other property insurers, with few signs of relief anytime this year.
The company's smaller U.S. life insurance business, SunAmerica, fared much better. Brokers and advisers who once shied away from AIG products amid its survival woes have started selling them again, and SunAmerica saw a surge in life insurance and variable annuity sales.
That improvement should continue this year as distribution expands, AIG said.
AIG also took another hit in the fourth quarter from its aircraft leasing business, ILFC. Industry changes made some of the planes in its fleet less valuable, forcing AIG to take a writedown. Executives have said before they expect to sell ILFC in coming years.
In the annual report, AIG said it planned "one or more" sales of its common stock this year. Sources familiar with the situation have forecast a joint Treasury-AIG stock sale in March or May, with a second possible later this year as well.
AIG Chief Executive Bob Benmosche has said he expects the Treasury to be completely out of its AIG investment by mid-2012. Benmosche, who is battling cancer but has received clearance from his doctors to keep working, is expected to retire next year as well.
On CNBC Thursday, Benmosche said he did not expect the most recent set of charges to have any impact on the stock sale plans.
AIG said it earned $11.18 billion, or $16.60 per share in the fourth quarter, compared with a year-earlier loss of $8.87 billion, or $65.51 per share.
The profit in the most recent quarter included a one-time net gain of more than $16 billion on asset sales. AIG had said in November it would record a "material gain" on the sale of Alico to MetLife. (MET.N)
Stripping out the gains from asset sales, AIG said it lost $2.21 billion on an operating basis, worse than the $1.34 billion it lost on the same basis a year earlier.
AIG shares rose 1.4 percent to $40.99 in after-hours trading, following its earnings report and the filing. At that level, the U.S. government stands to make a profit of more than $18 billion on its 92 percent stake in what had once been the world's largest insurer. (Reporting by Ben Berkowitz; Editing by Gary Hill)