American International Group said the sale of one foreigninsurer and the initial public offering of a second have raisedenough money to repay a line of credit it has with the FederalReserve Bank of New York.

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In the meantime, an update from the U.S. Department of theTreasury said the government expects to earn a profit from itsloans and investments in AIG.

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The New York-based company closed the sale of American LifeInsurance Company (ALICO) to MetLife Inc. for $16.2 billion andraised about $20.5 billion from an IPO of its unit, AIA Group Ltd.in Hong Kong. Of the $36.71 billion raised from these transactions,about $27.71 billion is in cash.

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About $20 billion in principaland interest is owed to the FRBNY as of Oct. 27, AIG said. Theremaining cash will be put toward paying other governmentobligations.

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"We promised the American taxpayers we would repay them, and theinitial public offering of AIA last week and the completion of theALICO transactions move us closer to delivering on our promise,"said Robert H. Benmosche, AIG president and chief executiveofficer, in a statement.

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The ALICO sale includes $7.2 billion in cash and $9 billion inMetLife securities to be sold over time to provide more funds topay back the government. The government made more than $182 billionavailable to the New York-based company two years ago when it faceda liquidity crisis due to a downgrade in its credit rating. AIGsaid it owed the government $101.2 billion as of June 30.

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The news comes about a month after AIG announced a plan with federal officials to repay Americantaxpayers and restructure the company.

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Then AIG said its direct debt to the FRBNY and the $26 billioninterest the FRBNY had in two special purpose vehicles would berepaid in full, and that AIG would issue common stock to theTreasury to up its ownership in AIG to about 92 percent from 80percent. This will be accomplished by converting $49.1 billion ofpreferred shares it has under the Troubled Asset Relief Programinto about 1.66 billion shares of common stock.

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The Treasury will then sell the common stock to the public overtime, but not until the FRBNY is repaid.

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The Treasury's shares of common stock in the company are worthabout $69.5 billion, based on current market value, which exceedsthe Treasury's $47.5 billion cash investment in AIG, it said in theupdate.

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The estimate has led the government to believe it will "earn aprofit on its loans and investments in AIG assuming therestructuring announced September 30 is completed," Treasurysaid.

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The restructuring is expected to be completed by the end of the2011 first quarter, AIG has said.

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To repay the $26 billion interest FRBNY has in two specialpurpose vehicles, $22 billion in TARP funds will be used topurchase an equal amount of interests in each SPV before givingthem to the Treasury as part of the plan to sell stock to thepublic, AIG said.

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The Treasury's estimates of projected losses on its investmentin AIG were questioned late last month by an independent auditor ofTARP.

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Special Inspector General of TARP, Neil Barofsky, questioned the"dramatic shift" from the $45 billion loss on its AIG investmentjust six months ago to a newly projected loss of $5 billion inrecent weeks.

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While he admitted AIG's situation has improved during the lasthalf-year, Mr. Barofsky wondered if it was due to a "change in theTreasury's methodology for calculating losses" rather than AIG'simprovement.

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