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

The ALICO sale includes $7.2 billion in cash and $9 billion in MetLife securities to be sold over time to provide more funds to pay back the government, which made more than $182 billion available to the New York-based company two years ago when it faced a liquidity crisis due to a downgrade in its credit rating. AIG said it owed the government $101.2 billion as of June 30.

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

Then AIG said its direct debt to the FRBNY and the $26 billion interest the FRBNY has in two special purpose vehicles (SPV) will be repaid in full and AIG will issue common stock to the U.S. Treasury Department to up its ownership in AIG to about 92 percent from 80 percent. This will be accomplished by converting $49.1 billion of preferred shares it has under the Troubled Asset Relief Program (TARP) into about 1.66 billion shares of common stock.

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

To repay the $26 billion interest the FRBNY has in two special purpose vehicles, $22 billion in TARP funds will be used to purchase an equal amount of interests in each SPV before giving them to the Treasury as part of the plan to sell stock to the public, AIG said.

ALICO RATING

Standard & Poor's Rating Services said it changed its outlook on ALICO from negative to positive after the acquisition by MetLife and affirmed ALICO's A-plus counterparty credit and financial strength ratings.

"We consider ALICO to be a strategically important subsidiary to the MetLife group," said Shellie Stoddard, S&P credit analyst. The acquisition will allow MetLife to grow internationally and shift its business mix to more lower-risk products.

The outlook on MetLife remains negative due to uncertainty in the operational and integration risks associated with the acquisition as well as the need to build operating capital and the need to enhance enterprise risk management to control international risk, S&P said.

Fitch Ratings upgraded to AA-minus from A-plus the financial strength rating assigned to ALICO and affirmed all existing ratings assigned to MetLife and its subsidiaries. The rating outlook is stable.

Fitch said ALICO maintains top five market share in 23 of 55 countries. Its biggest market is Japan, which accounted for about 70 percent of operating income in 2009. Here ALICO sells individual life, accident & health, and fixed annuity products via several channels.