AIG: Making Headway in Asset Sell-off

American International Group, Inc. (NYSE:AIG) is reported to be near selling two of its units to Prudential Financial Inc. (NYSE:PRU) for $4-$5 billion. The Wall Street Journal cites “people familiar with the matter” as its sources for the report. The sale would put another dent in the $90 billion or so that AIG still owes US taxpayers for its bailout.

The two units, AIG Star Life Insurance Co. and AIG Edison Life Insurance Co., operate in Japan and Prudential would add the units to its Japanese operations. The two companies collect about $7 billion annually, and their acquisition by Prudential is seen as a move to improve the company’s scale by eliminating costs.

The deal with Prudential would take some of the sting out of a failed buyout of AIG’s American International Assurance Group Ltd., AIA, earlier this year. Britain’s Prudential PLC (NYSE:PUK), which is not affiliated with the US company, had originally offered $35.5 billion for AIA but later reduced its bid to about $30 billion and AIG walked away. The Taiwanese government also killed a $2.15 billion deal for another AIG unit to a Hong Kong group.

AIG is now preparing an IPO for AIA on the Hong Kong stock exchange, hoping to raise up to $15 billion from the sale of about 40% of the company’s shares, or about half the US government’s stake. The IPO is apparently scheduled for October 29, 2010, and additional share offerings could follow.

One of the expected buyers at the AIA offering is China Life Insurance Co. Ltd. (NYSE:LFC), China’s largest life insurance company. According to the WSJ, China Life discussed a purchase of AIA with AIG in 2008, but stopped the discussions in 2009.

AIG also expects to complete the sale of its American Life Insurance Company, ALICO, to MetLife Inc. (NYSE:MET) by the end of 2010 for a price of about $15.5 billion.

If all the current deals go through, AIG should realize about $35 billion, leaving it with about $55 billion still to repay to the federal government. Truth be told, that remaining amount is probably a lot less than anyone ever thought it would be back in 2008.