Prudential in fresh deal talks with AIG

The negotiations, centred on the funding behind the deal, include cutting back the $25bn cash component but would not alter the overall price, the sources said yesterday.

AIG may agree to reduce the cash component by $2bn and instead subscribe to a Prudential loan or hybrid securities of that amount.

Prudential's audacious deal to buy American International Assurance (AIA) hit an embarrassing last-minute snag last week, when UK regulators blocked its plans to publish details of a $21bn cash call to finance the deal.

It has also faced growing pressure from shareholders, whose concerns over the deal have increased following the unprecedented delay. Pru needs 75 per cent of investors to improve the takeover, the most audacious in financial services since the financial crisis.

One of Prudential's top investors said yesterday he understood Pru was negotiating with AIG on a lower price, which would ease investors' concerns over the 1bn so-called 'Armageddon fund', a loan facility which Pru has agreed to appease solvency worries raised by UK regulators.

But one of the sources said the talks between AIG and Prudential are "more about structure than about price". The sides are now working to get a deal done this week, although there was no certainty that would happen.