Fallen insurance giant American International Group (AIG) today sold its US motor insurance business to Zurich Financial Services for $1.9 billion (£1.3 billion).

The sale of 21st Century Insurance was the biggest deal secured by AIG since it was saved from collapse by the US government with $182.5 billion of taxpayers' money.

AIG chief executive Edward Liddy is trying to dismantle most of the New York-based firm, once the world's biggest insurer, to help repay the debt. But before today's agreement he had only announced deals worth $2.4 billion.

The 21st Century business is one of the most resilient in the AIG stable. Liddy has been in talks with Zurich since last year.

"We are very pleased to reach agreement on a $2 billion transaction, especially in this market environment," said Liddy. "In addition, we are moving forward with discussions for several other transactions and we continue to evaluate how best to assure the continued strength and success of all AIG's businesses."

Zurich bought 21st Century through its subsidiary, Farmers Group, and agreed to take on $100 million of debt.

Robert Haines, analyst at CreditSights, said: "It's the first deal of really any size they have been able to put together. It's clearly a step in the right direction, but since auto insurers have held up better than life insurers, it will be much more difficult for them to unload their other businesses."

AIG acquired 21st Century in 1994 but changed its name to aigdirect.com. But the 21st Century brand came back after AIG was rescued by the White House last year as it racked up billions of dollars of losses in the financial crisis.