Eight months after being selected to guide American International Group out of the financial fog, Edward M. Liddy can now see the light at the end of the tunnel.

Edward Liddy

The current chairman and CEO of the once iconic insurer has announced that he will step down from the post he has occupied since September 2008, once AIG‘s board of directors can find his successors. Liddy left his retirement from Allstate behind to take over the ailing insurer at the request of former U.S. Treasury Secretary Henry M. Paulson, who worked alongside Liddy at Goldman Sachs.

The insurer announced May 21 that it was accepting Liddy’s recommendation to separate the roles of chairman and CEO. The company recently announced the nomination of six new directors up for election at the company’s June 30 annual shareholder’s meeting.

The new directors will reconfigure the board so a majority of its members will be newly elected independent directors, AIG said.

The company said it concurred with Liddy’s assessment that in conjunction with reconfiguring the board, AIG should also initiate actions to install a more permanent leadership team and structure. AIG said the search for a new chairman and CEO will include participation by the new board and the Trustees of the AIG Credit Facility Trust.

In Liddy’s tenure, in which he accepted only $1 in annual salary, AIG has accepted upwards of $170 billion in federal aid from the U.S. Treasury Department, posted record losses – including a $61 billion loss in the last quarter of 2008 – and begun the process of selling off assets to strengthen the core of the company and repay American taxpayers.

In a statement, Liddy said, “Much work remains to be done at AIG, but much has already been accomplished.”

“With the financial assistance of the Federal Reserve Bank of New York and the U.S. Department of the Treasury, we have made substantial progress in stabilizing AIG, reducing the systemic risk that led the government to rescue the company, protecting our policyholders and our businesses, and developing a plan to repay American taxpayers,” he said.

Liddy added that he is “proud” the insurer is now implementing repayment plans” and that “our pace of success will depend on global economic conditions and financial markets.” He has estimated that repaying the government for its investment in the company will take several years.

“AIG should have a leadership team committed to a similar time horizon and prepared to carry the plan to completion,” Liddy said.

Stephen A. Bollenbach, AIG’s lead director, said Liddy “answered the call of his country and the needs of AIG without reservation amid one of the darkest periods of the current financial crisis.”

“Coming out of retirement, he has led AIG effectively and courageously – and without compensation. Today, AIG has a durable capital structure, manageable liquidity, and is executing on a credible plan to repay the American taxpayer. We are deeply grateful for Ed’s accomplishments and his leadership, and we wish him well in his return to retirement. He deserves it,” Bollenbach said in a statement.