Once separated the United States Federal Reserve will have a stake in the business, however it is planned that AIA will be sold, possibly through an initial public offering (IPO) of shares to investors.

Money used from the sale will be used by AIG to repay loans to the US government.

"The ultimate success of our restructuring plan centres on ensuring that the unique businesses that make up AIG can thrive on their own," AIG chairman and chief executive Edward Liddy said in a statement.

"While this process may take up to several years to complete, we will ultimately create stronger, sounder businesses worthy of investor, customer, and regulatory confidence."

"The separation of AIA from AIG represents a major step forward for AIA and will reinforce its position as a leading company in Asia," AIA President Mark Wilson said.

AIG also confirmed that it had received proposals to acquire all or part of the share capital of AIA. These proposals are preliminary and are being reviewed along with AIG’s consideration of a full or partial IPO of AIA. In addition, AIG has decided to retain Philam Life, together with the operations of AIA. "We will continue to consider all strategic alternatives for AIA and evaluate expressions of interest from qualified parties with access to capital," Wilson said.

AIG Life New Zealand chief executive David Pierce says he is excited by the news and "very pleased with these developments."