American International Group Inc realized a loss of up to $2 billion last year as its Financial Products unit ended most of its remaining trades with Goldman Sachs Group Inc , a source familiar with the matter said on Sunday.

AIG realized a loss of $1.5 billion to $2 billion as it ended credit default swaps, or insurance like guarantees, with Goldman on about $3 billion of mortgage collateralized debt obligations, according to the source.

That leaves the unit's swaps with Goldman on $1.3 billion in CDOs, called Abacus, according to the Wall Street Journal, which first reported the news.

It added that AIG officials felt these assets could do better than what their prices would show.

AIG and Goldman declined to comment.

AIG Financial Products, the unit behind AIG's near-collapse in September 2008, has been unwinding its businesses.

Last year, it reduced the notional amount of its derivative portfolio by 41 percent to $940.7 billion at December 31 from $1.6 trillion a year earlier. It reduced the number of its outstanding trade positions by about 18,900, to about 16,100.

AIG has said it would keep derivatives with $300 billion to $500 billion in notional value as it unwinds positions. AIG Financial Products will cease to exist, and either AIG or an external party may manage the positions that remain.

The unit, which operated separately from the insurance operations that AIG was best known for, sold credit default swaps and other hedging and investment products covering currencies, energy, equities and interest rates to clients around the globe.

Once the world's largest insurer, AIG almost collapsed because of these bets, as it was left on the hook for tens of billions of dollars in collateral payouts to some of the biggest U.S. and European financial institutions.

AIG Financial Products has also been a cause for public outrage against AIG, as it made large retention payments to its employees.

(Reporting by Paritosh Bansal)

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