American International Group Inc. (AIG) has moved closer to getting its AIA Aurora L.L.C. subsidiary out of hock the U.S. Treasury Department.

AIG, New York (NYSE:AIG), has paid the Treasury Department $2 billion of the $2.16 billion it took in by selling a subsidiary — Nan Shan Life Insurance Company Ltd., Taipei, Taiwan – to a holding company owned by Ruentex Industries Ltd., Taipei, and Pou Chen Corp., Taichung City, Taiwan, for $2.16 billion.

The Treasury Department and the Federal Reserve Bank of New York pumped about $180 billion in aid into AIG after the credit market freeze of 2007 left the company gasping for capital at a time when little private-market capital was available. AIG has paid off much of what it owes, and the Treasury Department and the New York Fed have restructured AIG’s obligations in such a way that the Treasury Department acquired some of the obligations from the New York Fed.

The Treasury Department has been holding about $13 billion in preferred equity interests in AIA Aurora, a subsidiary that controlled American International Assurance Company Ltd., a major AIG insurer that sold coverage outside the United States.

AIG divested control of AIA Aurora through a public stock offering in September. AIG still owns a one-third stake in the subsidiary.

The $2 billion payment to the Treasury Department has reduced the department’s remaining liquidation preference of preferred interests in AIA Aurora to about $9.3 billion, AIG says.

“We continue to make progress in helping the Treasury and taxpayers recoup their investment in AIG,” AIG President Robert Benmosche says in a statement.

Tim Massad, the Treasury Department’s assistant secretary for financial stability, says AIG has been undergoing a remarkable turnaround.

“We continue to make progress in recovering the taxpayers’ investments in AIG,” Massad says.

The Treasury Department now has a total of about $51 billion invested in AIG, officials say.

The New York Fed has lent AIG about $19 billion through two New York credit facilities, Maiden Lane II and Maiden Lane III.

The Treasury Department spent a total of about $412 billion on Troubled Asset Relief Program aid on all of the companies it has helped since late 2008, and the recipients have paid the Treasury Department about $313 billion, officials say.