Bailed-out insurance giant American International Group, Inc. announced Monday it had repaid $3.95 billion of the debt it owes the Federal Reserve Bank of New York, reducing its outstanding principal to just over $15 billion.

The payment is the largest single payment that AIG has made since it exchanged equity interest in subsidiaries AIA Group Ltd. and American Life Insurance Co. for a $25 billion reduction in its outstanding balance.

The funds for the most recent repayment came from the sale of $4.4 billion in debt by International Lease Finance Corp., AIG's aircraft leasing subsidiary.

As a result of the payment, $10 billion in collateral pledged to the New York Fed by the leasing unit has been released.

AIG's credit line from that organization has now been reduced to about $30 billion from $34 billion.

"This is continuing tangible evidence of AIG's progress in repaying the American taxpayers," said Robert Benmosche, AIG's president and chief executive, in a statement. "AIG is getting stronger every day. We still have more work to do, but we will finish the job and make sure we repay the American taxpayers."

AIG now owes a total of about $21 billion on the New York Fed credit facility, an amount that includes principal and interest.