The unwinding of Maiden Lane III, which had been created in 2008to assume certain toxic assets held by American InternationalGroup, represents an ongoing reduction of government support forAIG, and reflects improving trends overall at the company, saysMoody's Investors Service.

In its Weekly Credit Outlook, Moody's notes that the resent saleof remaining assets held in MLIII represents the end of the FederalReserve Bank of New York's support to AIG. The only remaininggovernment support for the company, says the ratings agency, is theU.S. Treasury's ownership of common stock.

Moody's says there has been growing investor appetite for AIG'sdebt and equity securities, and adds that the value of the MLIIIassets was aided by a gradual recovery in the U.S. housing marketand economy.

As further positive signs for the insurer, Moody's pointed tothe strong market presence and diversification of its coreinsurance operations, Chartis and SunAmerica. Moody's also says AIGhas continued to monetize noncore holdings. The positive trends areoffset by “relatively weak profitability of the core operations,the remaining exposure to certain noncore holdings with weakercredit profiles, and the complexity of risk management acrossnumerous business lines and regions.”