Moody's: AIG Likely Able to Repay Government Bailout Funds

American International Group Inc. has made tangible progress on its restructuring plan and will likely be able to repay the government's loan and much of its preferred equity stake, Moody's Investors Service said on Monday.

The restructuring plan still relies heavily on government support, but if AIG's operations and global financial markets continue to stabilize, the company can likely generate enough value to repay the government, Moody's said in a statement.

AIG, the giant insurer bailed out by the U.S. government, posted its second straight quarterly profit last week, helped by a recovery in the value of its investments, though its underlying business remained weak.

The quarterly results "show continued stabilization of the core insurance operations despite challenging market conditions,'' Moody's said.

With the government now likely to recoup its investment, it has incentive to continue supporting AIG and its various creditors, Moody's said. The agency affirmed AIG's long-term rating of A3, the seventh-highest investment grade, with a negative outlook.