News of a potential deal was leaked late last week after company insiders told Reuters an agreement on the sale was close.
It has now been confirmed that AIG will receive $15.5 billion for the overseas division, with $6.8 billion being paid in cash and $8.7 billion coming in the form of shares and stock options in MetLife.
It means that AIG will take a 20 per cent stake in MetLife â giving US taxpayers a share in the company.
The government currently owns 80 per cent of AIG after handing the firm more than $180 billion in bailout funding.
AIG has also recently sold AIA, its Asian life insurance business, to Prudential for $25 billion as it seeks to repay the state.
Harvey Golub, chairman of AIG, said: "Both sales give AIG greater flexibility to move forward with our restructuring and rebuilding efforts."
By Gary Cooper