Moody's Investors Service said Tuesday that insurance giant American International Group (AIG) should have the ability to repay its government loan.

Moody’s said that the $120.6 billion the government invested in AIG should be repaid if AIG’s operations continue in their current positive direction, and if the financial markets continue to stabilize.

"We believe that the slower approach to restructuring could help AIG to generate more favorable values from its business portfolio than would be the case under rushed asset sales," Moody's said.

AIG's third-quarter results, reported Friday, show that AIG’s insurance operations are stabilizing, according to Moody’s.

Shares of AIG are up 4.6% at $37.86.