Prudential in Advanced Talks to Buy AIG’s AIA for $35.5B

American International Assurance Co. [AIA], considered AIG’s crown jewel in Asia, could be sold for more than $35 billion to Britain’s largest insurer, Prudential, according to a Reuters report on Saturday.

Sources familiar with the matter told the paper the UK company is in advanced talks to buy the Asian arm of American International Group (AIG) in a deal worth about $35.5 billion. One of the sources also said Prudential’s Chief Executive Tidjane Thiam, appointed to the top job a year ago, held talks with AIG executives in New York last week and that a statement could be issued to the market as early as Monday.

Plans to sell 49% of AIA — a 90-year-old business that manages more than $60 billion in assets and provides coverage to about a third of AIG’s total customer base — were first put in place in fall of 2008, shortly after the U.S. govt saved the international insurer from collapse. But the company has since indicated that it’s willing to sell the entire life insurance unit for the right price (AIG has maintained that a price between $20 billion and $40 billion — depending on the size of the stake sold would be fair for its Asian arm).

If a deal is reached, it will be one of the biggest ever foreign acquisitions made by a British firm and make the UK company one of the top insurers in Asia.

AIA plans to go public in the first half of 2010 in Hong Kong. That offering is expected to raise more than $10 billion.

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