AIG to return $25b after activist siege

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But the plan put forward by the world's fourth largest insurer by market value stops well short of the demands of activists. They want a wholesale break up of the New York-listed company.

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AIG's initiatives include a partial listing of its mortgage insurance arm, United Guaranty. A stake of 20 per cent would be floated, as a "first step towards a full separation". The division as a whole is estimated to be worth about $6 billion -- less than a tenth of AIG's $70 billion market capitalisation.

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Mr Icahn and Mr Paulson have been pushing for a split since the autumn, highlighting that Washington plans to hit the group with higher capital requirements since it is deemed "systemically important".