UPDATE 1-American Financial Q1 profit up 37 pct, raises FY view

* Sees FY EPS between $3.75 and $4.05

* Q1 core net oper profit $1.11/shr vs est $0.99/shr

* Shares rise 4 pct after the bell

May 4 (Reuters) - American Financial Group Inc (AFG.N) posted a 37 percent increase in quarterly profit as investment income rose and costs fell, and the property and casualty specialty insurer raised its full-year profit forecast.

The company increased its core earnings guidance for 2009 to be between $3.75 and $4.05 per share, up from its earlier guidance of $3.70 to $4.00 per share.

Two analysts on average expect the company to post full-year earnings of $3.70 a share, according to Reuters Estimates.

For the first quarter, net earnings attributable to shareholders rose to $103.8 million, or 88 cents a share, from last year's $76.0 million, or 64 cents a share.

Excluding realized investment losses, core net operating earnings, a measure used by insurance analysts, were $131.0 million, or $1.11 a share, beating estimate of 99 cents a share. Quarterly investment income rose 13 percent to $300.2 million, while costs fell 4 percent to $837.6 million.

Shares of the company rose 4 percent to $19.67 in after market trading. They closed at $18.88 Monday on the New York Stock Exchange. (Reporting by Amiteshwar Singh in Bangalore, Editing by Dinesh Nair)