Just days after American International Group Inc. announced its recapitalization plan was set to be approved this week, the insurer took another step forward by agreeing to sell a Taiwanese life insurer.

AIG today announced an agreement to sell its 97.57% interest in Nan Shan Life Insurance Co. Ltd. to Ruen Chen Investment Holding Co. Ltd. for $2.16 billion in cash. The transaction is still subject to regulatory approval. Last year, AIG had agreed to sell the company to an investor group led by Hong Kong's Primus Financial for about $2.15 billion, but the deal was later nixed by the Taiwan regulatory authority, which cited concerns over their financial capability and long-term commitment.

Nan Shan is the largest life insurer in Taiwan by total book value, and the third-largest by total premiums, serving four million policyholders via a network of 24 branches, 500 agency offices, approximately 4,100 employees and more than 33,000 agents. 

“The participants in the consortium enjoy an excellent reputation in Taiwan,” AIG President and CEO Robert Benmosche said in a statement. “Ruen Chen offers strong operational and funding capabilities and possesses a clear ability to satisfy the strict criteria that governed AIG’s bid review process. Consistent with these criteria, Ruen Chen has demonstrated that it is able and willing to invest in Nan Shan’s future, and that it will protect and serve the best interests of Nan Shan’s policyholders, employees and agents.”

The purchase agreement includes a number of commitments that offer important protections for employees and agents, including an agreement to maintain the existing compensation and benefits package for employees and the existing agency organizational and commission structure following the closing of the transaction, AIG said in a release. Ruen Chen has also expressed its intention to retain the current Nan Shan management team, as well as its long-term commitment to maintain both its majority ownership in Nan Shan and the Nan Shan brand. 

Last week, as part of its recapitalization plan, AIG announced 75 million warrants to purchase shares of AIG common stock at $45 per share were to be distributed on Jan. 19, 2011, to AIG's common shareholders of record as of Jan. 13, 2011. Benmosche said the warrants were a necessary step to ensure repayment of the $182 billion in assistance the company received from the U.S. Treasury and Federal Reserve Bank of New York during the financial crisis.  

"This marks continued progress for AIG towards completing the recapitalization and furthering our work to repay the U.S. taxpayer," Benmosche said in a statement. "We are working diligently to complete this plan in the coming weeks."

Additionally, news of the warrants has stirred speculation that the insurer's stock prices may suffer. Citing a source close to the situation yesterday, Reuters said AIG shares are expected to settle back to a level in the mid-$40 range (from about $57 yesterday) once the company's newly announced warrants begin trading.