AIG rejects lower bid for Asian unit

NEW YORK (CNNMoney.com) -- AIG on Tuesday rejected Prudential PLC's lower bid for an Asian life insurance unit, jeopardizing a deal that would have accelerated AIG's bailout repayment to the U.S. government.

In early March, the companies had agreed upon a $35.5 billion price tag for AIA, AIG's Hong Kong-based life insurance division. But it became apparent over the past few weeks that Prudential's shareholders were not going to accept the deal.

Prudential confirmed Tuesday that it attempted to renegotiate the terms of the deal with AIG, offering $30.375 billion instead.

"After careful consideration, the company will adhere to the original terms of its previously announced agreement," AIG said in a statement. "The company will not consider revisions to those terms."

On the London Stock Exchange floor, Prudential only said that its board "is considering its position." Prudential PLC is not related to the American insurer Prudential Financial Inc.

AIG has said that it considers the sale of AIA to be a crucial component of its effort to repay the more than $130 billion it has borrowed from U.S. taxpayers. The troubled insurer had planned on using the proceeds of the sale to pay down its debt to the Federal Reserve by $25 billion.

When the deal was first announced on March 1, AIG's Chief Executive Bob Benmosche said the deal would 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.

If the deal with Prudential falls through, AIG may consider an initial public offering for AIA, an option that the company had initially proposed last year. An IPO would take much longer to complete than a direct sale, and the recent market turmoil may dictate a lower price for the unit.

AIA markets life insurance throughout Asia and the South Pacific. AIG said AIA has about 23 million customers throughout the region.