AIG has moved one step closer to removing US Government control by increasing its loan repayments to taxpayers.

In a filing to the New York Stock Exchange last week AIG says it has signed a recapitalisation agreement with the US Treasury Department to repay the remainder of its debt owed to the Federal Reserve.

The insurer plans to raise up to $US3 billion ($3.04 billion) from the Treasury by next August to repay taxpayers. It also has the option to raise an additional $US4 billion ($4.05 billion) from the Treasury if needed.   

“Today we have signed the definitive recapitalisation agreement with the Government that marks an important step forward in our progress toward completely repaying taxpayers,” AIG said in a statement.

“We remain committed to executing the steps and meeting all conditions in the agreement as soon as possible.”

It’s understood Treasury plans to sell at least $US15 billion ($15.2 billion) of AIG shares in the first quarter of next year.

This will represent about 25% of the Government’s stake in the insurer. It currently owns 79.8% of AIG’s shares.

Next year could also see Treasury selling off $US60 billion ($60.8 billion) of AIG’s stock, although there are concerns such a large sale could destabilise the insurer’s market price.

As part of any sale, the US Government could also force AIG to sell the stakes it has in the recently floated AIA and MetLife businesses to repay debt.