The Treasury and banks working on the sale of the government's stake in bailed-out insurer American International Group are too early in the process to come up with specific numbers for a potential offering, a source close to the situation said on Thursday.

The government and the company are expected to conduct a stock offering this month, the first step in the process to reduce the Treasury's 92 percent stake in what was once the world's largest insurer.

At one point that offering was expected to top $15 billion, but that was before a precipitous decline in AIG shares.

CNBC, citing sources, said on Thursday that the Treasury wanted a price around $31.50 per share, while underwriters were pushing to go as low as $25 per share, arguing the lower price would encourage a larger overall sale.

AIG and the Treasury declined comment.

AIG is due to report first-quarter financial results on Thursday afternoon. Once those results are public, marketing for the share sale can begin.

The government breaks even on its AIG investment at $28.72 per share, so the debate comes down to whether or not the Treasury is willing to lose money on a bailout that ultimately cost more than $182 billion.

At $31.50 per share, the government's 1.66 billion shares would generate a profit of about $4.6 billion. At $25 per share, the sale of the whole stake would generate a loss of $6.16 billion.

The initial share sale is not expected to cover the whole stake. AIG has said that it expects the government to have sold its position by mid-2012.

The jockeying over price echoes what happened in the period before the government made an initial public offering of General Motors Co . The difference in this case is that AIG already has a publicly traded stock, which could be seen as an indicator of what the market thinks shares are worth.

The Treasury ended up selling part of its GM stake at a loss. It still owns about a third of the company.

AIG shares were down 1.4 percent at $31.20 in afternoon trading. Since a warrant issue in late January that was part of the company's recapitalization, the stock has lost more than 30 percent of its value.

(Reporting by Ben Berkowitz, editing by Gerald E. McCormick)

Aig Down Sale