AIG said it took $4.5 billion in restructuring-related charges, including the sale of assets to raise money to pay back aid from the Federal Reserve Bank of New York (FRBNY).
The government-controlled company had posted a net profit of $455 million in the 2009 third quarter.
AIG, once the world's largest insurer, received more than $180 billion from the government two years ago to help cover investments that disappeared amid the collapse of a US real-estate bubble.
The Treasury Department said this week that AIG was poised to repay $36.7 billion in government bailout aid after floating its Asian unit AIA and selling American Life Insurance Company.
"We were extremely pleased to announce a few weeks ago our plan to repay the US government," Robert Benmosche, AIG president and chief executive, said in a statement.
"We will continue with our aggressive plan to close pending transactions in order to repay the FRBNY in full, and provide for the exit of US Treasury ownership over time."
In September, AIG announced it had entered into an agreement with the Treasury Department on a plan for repaying its debt, and has since then taken several steps in that direction.
Earlier this week, AIG's Asian unit, AIA, said it raised $20.5 billion in a listing in Hong Kong, making it the world's third-biggest initial public offering.
AIG has also raised $16.2 billion by selling unit American Life Insurance Company (ALICO) to MetLife Inc.
Shareholders took a scare last month following news that Benmosche, seen by many as the driving power behind AIG's restructuring, was seeking treatment for cancer.
AIG shares were down 1.22 per cent to $44.19 in midday New York trade on Friday.