The US Treasury made a small profit when it sold a portion of its shares in American International Group Inc on Tuesday, but it was unclear how its investment in the beleaguered insurer will ultimately fare.

The shares were sold for $29 apiece, just above the $28.73 average price the Treasury will need to break even on its record bailout of AIG during the financial crisis.

But the sale price was at only a 1.6 percent discount to Tuesday’s closing price, which could prove scant comfort to investors who have watched AIG shares plummet 40 percent since the beginning of the year.

Tuesday’s $8.7 billion stock offering, which included 200 million shares sold by the Treasury and 100 million sold by AIG itself, is far smaller than the $10 billion to $20 billion deal some banking sources had suggested earlier this year, hinting at a potential lack of investor interest.

To be sure, Treasury and AIG only agreed earlier this month on the size of the offer, and the US government did not make its investments in AIG with the intention of turning a profit. Rather, it acquired the stock under extreme duress, as the potential failure of the insurance giant threatened to exacerbate an already severe financial crisis in late 2008.

"We’re hopeful that we can recover all the investment that we made," Tim Massad, the Treasury’s acting secretary for financial stability said during a conference call with reporters on Tuesday.

The extent of the profits or losses will not be known until Treasury fully exits its investment, a landmark event for which there is no specific timetable, Massad said. Following an agreed "lock-up" period of 120 days, Treasury will continue to reduce its holdings "in an orderly fashion."

"We’re going to sell in a way to maximize value to the taxpayer," Massad said.

So far, Treasury has raised $5.8 billion of the $47.5 billion it needs to break even on the equity portion of its investment. Treasury cut its stake in AIG from 92 percent, but, by far remains the majority shareholder, with 77 percent. It has another 1.5 billion shares to sell.

How quickly, and at what price?

AIG’s share sale is important for the US government, which is trying to sell out of multiple investments it made in companies during the financial crisis.

The bailouts were highly unpopular, especially after it became known that top managers in the same AIG unit that drove the company into a rut had continued to pay themselves handsome bonuses while receiving taxpayers’ help.

The AIG share sale is also a key moment for Chief Executive Officer Robert Benmosche. Benmosche, who became AIG’s fifth CEO in less than five years in August 2009, halted a plan to break the company up in a fire sale of its parts.

He instead embarked on a revival centered around two core businesses: US life insurer SunAmerica and global property insurer Chartis. Other businesses were sold, taken public or left to operate with a view toward an eventual sale.

AIG was literally minutes from bankruptcy when it was rescued in September 2008. The various iterations of the rescue package ended up being worth $182 billion, dwarfing various other bailouts around the world during the financial crisis.

The question now is how quickly the US government exits its investment and whether it ultimately breaks even.

Benmosche has said he expects the government to be out of its AIG position by mid-2012. Fitch Ratings said recently its own models for the company assume the government is out by the end of 2012.