Prudential

, Britain's largest insurer, is in advanced talks to buy the Asian arm of U.S. giant AIG , in what could be one of the largest overseas deals to date for a UK firm, sources familiar with the discussions said on Saturday.

Financing for the bid -- which could be worth more than $20 billion and would propel Pru to the top spot among insurers in Asia -- could include a share issue, the sources said.

One of the sources said Pru Chief Executive Tidjane Thiam, appointed to the top job a year ago, held talks with AIG executives in New York last week. Pru could issue a statement to the market as early as Monday.

The sources did not confirm earlier reports by Britain's Sky News that the cash call could aim to raise as much as 15 billion pounds ($22.8 billion), making it one of the largest UK rights issues to date.

Prudential declined to comment. AIG in New York were not immediately available for comment.

AIG is currently pushing ahead with plans for an initial public offering for its Asian arm, to help repay some of the $180 billion the U.S. government has plowed into what was once the world's biggest insurer and to allow the profitable Asian life insurance subsidiary, American International Assurance (AIA), to break from its ailing parent.

After failing to sell a large stake in AIA, the insurer said last year it would continue to try and seek a buyer or an IPO.

AIA is regarded as AIG's Asia crown jewel, a 90-year-old business providing coverage to about 20 million customers, or close to a third of AIG's total customer base.

Sources familiar with the matter said a year ago that Prudential had made a preliminary offer for AIA, but its modest price fell short of the seller's expectations.

At the time, AIG had wanted between $20 billion and $40 billion for AIA, depending on the size of the stake to be sold.

UK's Pru operates in 13 Asian markets where it has more than 11 million life customers. Asia, which accounted for 44 percent of Pru's profits in 2008, is also seen as the engine of the group's future growth.

(Additional reporting by Paritosh Bansal in New York; Editing by Ron Askew)

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