The bank now has permission to move forward with its plan to sell 75 million warrants as part of the planned recapitalization.
Every warrant included in the sale will entitle the holder to purchase a single share of common stock for $45 per share.
Robert H Benmosche, AIG president and chief executive officer, said: âWith [this] announcement, we anticipate that we will be able to deliver on our promise to the American people to repay the extraordinary assistance they provided to AIG during the financial crisis of 2008.
"We remain grateful for their support of AIG, and we remain convinced that the American people will realize a profit on their investment in our company.â
If the proposals are approved, then AIG will exchange 1.66 billion worth of shares with the US Treasury for $49.1 billion in preferred shares.
AIG is also expecting to repay $21 billion it owes to the New York Federal Reserve.
By Jim Ottewill