American International Group Inc Chief Executive Robert Benmosche told employees he is confident a $35.5 billion deal to sell its Asian life insurance unit would move forward, a source familiar with the matter said.

Benmosche made the comments about the deal with Britain's Prudential Plc at a meeting in New York on Monday, said the source, who declined to be named because the meeting was not public.

Benmosche's comments come as the American International Assurance deal, the largest ever in the insurance sector, has run into rough weather, with Prudential facing delays in getting regulatory approval.

AIG, which is nearly 80 percent-owned by the U.S. government after a $182.3 billion bailout, and Prudential have been in talks to restructure the deal, according to media reports.

The talks include cutting the $25 billion cash component of the deal by $2 billion, the reports said.

AIG may instead subscribe to $2 billion of a new Prudential loan or hybrid security, according to the Financial Times, which first reported the talks to restructure the deal.

AIG declined to comment.

(Reporting by Paritosh Bansal; editing by John Wallace)

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