American International Group Inc. has reached an agreement with the Federal Reserve Bank of New York that will allow it to pay back $25 billion in debt owed to the bank through the initial public offerings of two international life-insurance units.

The ailing insurance giant had said last month that it would "accelerate steps" to spin off American International Assurance Co. through a public listing on an Asian stock exchange, as part of its efforts to repay a government bailout totaling up to $173.3 billion.

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