Prudential in talks over AIG's Asian arm

Pru is understood to be planning a record investor cash-call of up to 15 billion to finance the takeover, said to be worth a mammoth 30 billion US dollars (19.8 billion).

The life and pensions firm said it was in "advanced talks" and has asked for its shares to be suspended ahead of an expected takeover announcement.

Pru already has a significant presence across Asia, but the deal will transform it into the largest insurer in the region.

Reports suggested Pru may look to sell its British arm after the acquisition, but the widely touted suitor for its domestic business - Friends Provident owner Resolution - said today that it was not in talks with Pru.

It is thought that AIG - which is now controlled by the US government after a 182 billion dollar (120 billion) bail-out - may take a stake in Pru as part payment for AIA, its Asian operation.

Pru said: "Prudential confirms that it is in advanced discussions with AIG regarding a possible combination of its business with that of AIA.

"As part of Prudential's continued focus on its Asian growth strategy, the business continually reviews opportunities for expansion.

"AIA represents a unique and strategically compelling opportunity for Prudential and AIA to create the leading insurer in South East Asia."

Its reported plans to fund the takeover by tapping investors for up to 15 billion would also see the group make UK corporate history with the largest rights issue, surpassing even the mammoth 13.5 billion capital raising by Lloyds Banking Group last November.

The UK insurer already has 11 million customers in Asia. In 2008, the region accounted for 57% of its 1.31 billion new business profits.

A sale of the AIA unit may help the US insurer pay back some of the huge support it has been given by the US taxpayer as a result of the financial crisis.

AIG - which is best known in this country as the sponsor of Premier League champions Manchester United - had to be saved from collapse by the US government in September 2008.

The company racked up huge losses on toxic derivative deals and the government decided the business was too important to the country's economy to be allowed to fail.

A year ago AIG posted the biggest quarterly loss in US corporate history - 61.7 billion US dollars (43.9 billion) for the fourth quarter of 2008.

Results for the final three months of 2009 published on Friday showed a smaller net loss of 8.9 billion dollars (5.8 billion).