New York-based AIG said the government has launched an offering of $6 billion shares, with an underwriter option to purchase an additional $900 million in stock. The insurer said it intends to repurchase shares of its stock worth $3 billion to minimize shareholder dilution.

The share sale is being managed by Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and Morgan Stanley.

AIG and Treasury have also worked out a deal for the insurer to repay $8.5 billion in other obligations, funded by proceeds from divestitures. That repayment would release certain collateral owned by AIG including its interest in International Lease Finance Corp. and American International Assurance Co. Ltd.

AIG received $182 billion from the U.S. government during the global financial crisis, necessitating a scramble by the company to sell assets and raise funds. Treasury raised about $34 billion through asset sales, $20 billion in the initial public offering of AIA and a further $9 billion when AIG floated post-bailout shares. However, Treasury still owns more than 75% of the company.

Upon completion of this latest offering, Treasury would own about 70% of AIG, worth about $40 billion.

The insurer called the deal a positive for both sides, providing Treasury with a partial exit while continuing AIG's push to separate it from government control.

"The bottom line is this: the people of AIG have achieved another significant milestone in our progress toward our goal that American taxpayers recoup their entire investment in AIG at a profit," AIG chief executive Robert H. Benmosche said in a statement. "We are very pleased with our progress to date and look forward to building on our momentum."

AIG shares traded down 3.43%, to $28.44, on Thursday morning.

A Cleary Gottlieb Steen & Hamilton LLP team led by Craig Brod and Jeffrey Karpf, and including Helena Grannis, Jane Shen, John Cornelius and Guido Liniado advised the underwriters.