By Clara Ferreira-Marques and Paritosh Bansal
LONDON/NEW YORK (Reuters) - PRUDENTIAL (PRU.LO)
The talks are going on as AIG, which is trying to pay back the U.S. government after a $182.3 billion taxpayer-funded rescue, also moves ahead on its plan for an initial public offering for the unit, American International Assurance (AIA), the sources said.
A Hong Kong IPO for the unit is expected to raise more than $10 billion, depending on the size of the stake that is sold.
Financing for the bid could include a share issue by Pru, the sources said.
One of the sources said Pru Chief Executive Tidjane Thiam, appointed to the top job a year ago, held talks with AIG executives in New York last week. Pru could issue a statement to the market as early as Monday.
A deal with Pru would be one of the largest overseas deals to date for a British firm and make the UK company one of the biggest insurers in Asia.
It would also help AIG make a significant dent in its outstanding bill from the government, which owns nearly 80 percent of the insurer and has a $16 billion preferred interest in a special purpose vehicle that holds AIA.
AIG is also in advanced talks to sell another large foreign life insurance unit, American Life Insurance Co, to MetLife Inc
The news comes as AIG posted a quarterly loss of $8.9 billion on Friday, as it struggles to find its feet more than a year after September 2008 rescue.
Prudential and AIG declined to comment.
The sources did not confirm earlier reports by Britain's Sky News that the cash call could aim to raise as much as 15 billion pounds ($22.8 billion), making it one of the largest UK rights issues to date.
AIA is regarded as AIG's Asian crown jewel, a 90-year-old business providing coverage to about 20 million customers, or close to a third of AIG's total customer base.
Sources familiar with the matter said a year ago that Prudential had made a preliminary offer for AIA, but its modest price fell short of the seller's expectations.
At the time, AIG had wanted between $20 billion and $40 billion for AIA, depending on the size of the stake to be sold.
UK's Pru operates in 13 Asian markets where it has more than 11 million life customers. Asia, which accounted for 44 percent of Pru's profits in 2008, is also seen as the engine of the group's future growth.
(Editing by Ron Askew and Stacey Joyce)
