American International Group's failed sale of its Asian life insurance unit AIA has led to increased tensions between Chief Executive Robert Benmosche and Chairman Harvey Golub, the Financial Times said, citing people close to the situation.

AIG is weighing its options for its Asian life insurance unit after a $35.5 billion deal to sell the business to Prudential fell apart.

Benmosche had supported Prudential PLC deal and argued for accepting a reduction of about $5 billion to help the British company win support from its shareholders, the people told the paper.

However, AIG's board led by Golub rejected the idea by an overwhelming margin, forcing AIG to go back to its original plan for a public listing of AIA, the FT said.

The divestment of AIA, which could include an IPO, is seen as a key step in AIG's efforts to repay the government for its $182.3 billion bailout.

The rift between AIG's two top executives has triggered concerns within the board and among officials in the U.S. government, who fear one of the two men might leave less than a year after their appointment, the paper said.

However, the relationship between Benmosche and Golub has not yet completely broken down, the people told the paper.

AIG could not immediately be reached by Reuters for comment outside regular U.S. business hours.

(Reporting by Sakthi Prasad in Bangalore; Editing by Lincoln Feast)

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