AIG has cut its debt to the US Federal Reserve by nearly $US4 billion ($3.5 billion), the single-largest payment the insurer has made since its bailout during the financial crisis.

International Lease Financing Corp, AIG’s aircraft-leasing arm, sold $US4.4 billion ($5 billion) in debt to institutional investors, transferring the proceeds to the repayment of its parent’s US Government loans.

AIG’s outstanding principal, excluding fees and interest, now stands at a little more than $US15 billion ($16.9 billion). By June 30 interest on its credit facility had hit $US6 billion ($6.7 billion).

CEO Robert Benmosche says the group is getting stronger every day.

“Our insurance businesses are profitable, client retention rates have stabilised and surrender rates have improved to normal levels,” he said. “We are starting to see light at the end of the tunnel.”