AIG, the insurance giant that was effectively nationalised by Washington last week for $85 billion, will have assets to sell by next week, Edward Liddy, its new chief executive, said.

The world’s biggest insurer needs to raise cash quickly to repay the huge Federal Reserve loan that prevented it from going bankrupt, after taking big losses on mortgage derivatives.

Shares rose by 43 per cent, boosted by hopes that quick asset sales might mean the struggling insurer can repay an emergency bailout loan and stay out of the clutches of the US Government. It was the third day of gains for the stock, which hit its record low of $1.25 on September 16. AIG shares closed up 87 cents, or 22.6 per cent, at $4.72.

At the weekend Henry Paulson, US Treasury Secretary, said that the predicament of AIG was so dire, that it was just hours away from going bust when Washington bailed it out.

While Mr Paulson and Ben Bernanke, the Chairman of the Federal Reserve, allowed Lehman Brothers to fail last Sunday, both were adamant that AIG must be saved because of its enormous global reach.

Both believed that the consequences of the insurer going under would be felt worldwide because of its large share of the global credit default swap market. Such securities are a type of insurance contract which protects investors from the default of corporate bonds.

The break-up of AIG will mark the first steps taken by Mr Liddy, who was appointed by Mr Paulson last week. Mr Liddy, who also sits on the Goldman Sachs board, succeeded Robert Willumstad, who was fired over the phone by the US Treasury Secretary last week.

Mr Liddy said: “I hope within the next seven to ten days to be out there with a plan that lists everything that’s for sale and maybe even execute some of those transactions by then.”

He did not identify which of AIG’s many operating units might be up for sale.

Wall Street analysts have speculated that its aircraft leasing unit, International Lease Finance Corp, and its large US life insurance and annuity arm American General, which it bought in 2001, were favourites to be disposed of. All of the businesses are highly lucrative.

In a television interview, Mr Liddy said: “It will look a lot like it [AIG] did prior to 1998, 1999, with less reliance on the financial services side."

He added that he hoped to be able to pay off the full $85 billion Fed loan quickly. If the loan is not repaid, the US Government has the right to take an almost 80 per cent stake in the company.

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