Bob Benmosche will remain as chief executive of bailed-out insurer American International Group Inc for at least another year, having responded very well to treatment for cancer, the company said on Monday.

The update, which comes slightly earlier than had been expected, is likely to remove a cloud that was hanging over the company going into a blockbuster stock offering this spring.

AIG said last October that Benmosche was receiving aggressive chemotherapy for an undisclosed cancer, but that he intended to remain CEO into 2012, health permitting.

Benmosche said in a statement Monday his doctors had given him an encouraging prognosis and believed he could continue working for 12 to 18 months.

AIG and the U.S. Treasury are expected to sell at least $15 billion in stock in May, and Benmosche recently told Reuters he intended to participate in the pre-deal roadshows to pitch the

We are very pleased for Bob and look forward to continuing to work with him as AIG seeks to repay the balance of the taxpayers' investment, Treasury Secretary Timothy Geithner said in a statement.

In case something changes, though, AIG said its existing succession plan will remain in place. Chairman Steve Miller would step in as interim CEO if needed until the company was able to name a permanent replacement.

The news is likely to cheer AIG employees, some of whom have been known to break into tears at the mere mention of Benmosche's illness.

While none of us knows precisely how much time we have in life, I now know that I have the luxury of more time than I might have imagined. I am going to make the most of it, Benmosche said in a letter to AIG employees announcing his plan to stay.

AIG shares ticked slightly higher in after-hours trading, to $42.10 from a $41.95 close.

At those levels, the U.S. Treasury stands to make a profit of nearly $27 billion on its 92 percent stake in the company. Such a profit would be an unexpected end to a bailout that once totaled just more than $182 billion.

(Reporting by Ben Berkowitz; editing by Carol Bishopric, Bernard Orr)