The deals mean that AIG has reduced its outstanding liability with FRBNY to around $17 billion, excluding interest and fees.
Bob Benmosche, chief executive officer at AIG, said: "Today's announcement â¦ sends a clear message to taxpayers: AIG continues to make good on its commitment to pay the American people back."
The debt reduction moves AIG closer to its aim of selling off two of its insurance operations, American International Assurance Company (AIA) and American Life Insurance Company (ALICO).
Under the terms of the debt-for-equity swaps, the FRBNY will receive preferred shares in AIA worth $9 billion and $16 billion worth in ALICO and will hold a liquidation preference in both organizations.
Last week, AIG settled several outstanding legal disputes with its former chief executive officer Maurice Greenberg and finance chief Howard Smith in a settlement package that may cost the institution up to $150 million.
By Claire Archer