* Loses billions on AGF, Star, Edison sales
* Operating income in ongoing business rises slightly
* Company considering raising capital
* Shares down 0.8 percent (Adds graphic and Breakingviews links, updates shares)
NEW YORK, Nov 5 (Reuters) - AIG (AIG.N) posted slight gains in its main insurance businesses in the third quarter, but the bailed-out company lost more than $2 billion from asset sales linked to its restructuring.
The results underscore the difficulties American International Group Inc faces as it tries to raise money to repay the $100 billion it still owes the U.S. government. AIG is trying to generate more income from its main insurance businesses but is regularly losing money on asset sales.
"It's a company that's made progress but still has more work to do," said Cathy Seifert, an insurance equity analyst at Standard & Poor's.
The company is considering raising capital. Chief Executive Robert Benmosche, who has received much of the credit for bringing the company back from the brink of collapse, said AIG is looking at selling debt in the current quarter and stock in the 2011 first quarter.
In an interview, he called a total capital raise of $3.5 billion a "modest goal," adding, "There's potentially a much stronger demand." The company is in a solid capital position, he said.
Breakingviews on AIG bailout [ID:nN05290597]
Graphic of AIG losses r.reuters.com/mux93q
Shares of AIG fell 0.8 percent to $44.38 in late-morning trade on the New York Stock Exchange.
AIG said it is on track with a recapitalization plan, expected to close early next year, that will pay off debt owed to the Federal Reserve Bank of New York and leave the U.S. Treasury with a stake in the company of just above 92 percent.
AIG reported a third-quarter loss of $2.4 billion, or $17.62 per share, compared with a year-earlier profit of $455 million, or 68 cents per share.
AIG warned in August that the sale of a majority stake in its American General Finance unit to Fortress Investment Group (FIG.N) would lead to a $1.9 billion pretax loss in the third quarter.
It also took a charge of $1.3 billion related to the sale of Japanese life insurance businesses AIG Star and AIG Edison to Prudential Financial (PRU.N), due to close early next year.
In the second quarter, AIG took a charge related to the sale of its Alico unit to MetLife (MET.N). It said in a regulatory filing it would record a "material gain" on the Alico sale, which closed Nov. 1, in the fourth quarter.
CHARTIS UP, SUNAMERICA DOWN
Third-quarter operating results, stripping out extraordinary items and discontinued operations, came in at a loss of $200 million, or $1.47 per share.
"I think one needs to ask are they retaining all the business they need to retain; what are they doing to retain the business," S&P's Seifert said.
AIG's ongoing operations after its global asset sales mostly consist of general insurer Chartis and U.S. life insurer and retirement services provider SunAmerica Financial Group. On a pretax basis the two units earned $2.1 billion in the third quarter, up from $1.9 billion a year earlier.
Chartis' operating income rose 53 percent to $1.1 billion as underwriting income increased and it consolidated Japanese insurer Fuji Fire & Marine. Chartis said in January it would take majority control of Fuji Fire. [ID:nTOE60K080]
Without Fuji, AIG said, net premiums written fell for Chartis in the quarter on difficult economic conditions and heavy market competition.
SunAmerica's operating income fell 18.5 percent to $978 million on lower net investment income, although the company sold more life insurance in the period.
Benmosche said AIG was at the point where it could be selective about what business to pursue.
"We're not any longer needing to chase premium to prove we're OK. You have to remember that we'll wake up one day and still be in business," he said. "We've got to be careful as we look at today that we're putting in a foundation that we know we can build upon."
Through Thursday, AIG shares were up 49 percent for the year, against a gain of 13.5 percent for the S&P insurance index. .GSPINSC The stock has held up despite last week's announcement that Benmosche is being treated for cancer.
"I feel great, I am still jogging about three miles every day or so," the CEO said in a recorded message posted on AIG's website after the third-quarter results were released.
AIG has said Chairman Steve Miller will become interim CEO if Benmosche becomes unable to do the job. [ID:nN27266318] (Reporting by Ben Berkowitz; Editing by Lisa Von Ahn and John Walace)