AIG Looks Healthier, Says GAO

For the first time since the second quarter of 2008, additions to AIG life and retirement policyholder contract deposits have exceeded withdrawals, and AIG's property/casualty companies "also have shown some improvements," officials write.

But the balance that AIG owes the Federal Reserve System and the Treasury Department is lower than it could be partly because the Federal Reserve Board and Treasury officials have let AIG use equity to repay some of the debt, and "federal assistance has been a critical factor" in efforts to restore AIG to health, according to the GAO.

Although AIG Financial Products succeeded at unwinding its super senior credit default swap portfolio, it has had less success with disposing of its multi-sector collateralized debt obligations, officials write.

"The government's ability to fully recoup the federal assistance will be determined by the long-term health of AIG, the company's success in selling businesses as it restructures, and other market factors such as the performance of the insurance sectors and the credit derivatives markets that are beyond the control of AIG or the government," the GAO says.

.