NEW YORK (CNNMoney.com) -- AIG said Monday that it had reached a definitive agreement to sell its Asian life insurance business to Britain's Prudential PLC in a deal valued at $35.5 billion.
The deal includes $25 billion in cash, which AIG says is the largest cash proceeds it's received from any sale during its current restructuring efforts.
Negotiations were first reported on Sunday by The Wall Street Journal's online edition, which said that AIG (AIG, Fortune 500) was closing in on the sale of American Insurance Assurance Ltd. (AIA) to the British company.
AIG Chief Executive Bob Benmosche said in a statement that the deal will allow AIG "to realize value on a faster track to repay U.S. taxpayers" and will give the company "greater flexibility" with its restructuring plans.
AIA "represents a unique and strategically compelling opportunity" to create the leading insurer in South East Asia," Prudential said in a statement released early Monday.
Under the terms of the deal, AIG plans to pay $16 billion of the cash component back to the government to buy back preferred shares given in the bailout.
The remaining $9 billion in cash will be used to pay down the more than $25 billion outstanding under a credit facility from the New York Fed.
Shares of AIG rose 8% in premarket trading.
The deal marks yet another step in getting AIG out from the nearly $132 billion it borrowed from the federal government beginning in 2008 to avoid collapse.
AIA markets life insurance throughout Asia and the South Pacific. AIG has said AIA has about 20 million customers throughout the region.
On Friday, AIG announced it lost $8.9 billion in the fourth quarter of 2009, largely due to costs associated with selling off large stakes in its insurance businesses to reduce the debt it owes to taxpayers.
The majority of AIG's fourth-quarter loss came from its December sale of large stakes in AIA and Alico, another foreign life insurance businesses, to the U.S. government. In exchange for those transactions, the Fed reduced the amount AIG has to repay taxpayers by $25 billion. AIG said it took a $5.2 billion charge for that sale last quarter. 
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