Sept. 22 (Bloomberg) -- American International Group Inc., the insurer bailed out by the U.S., shed 10,000 employees in the first half by selling units and cutting jobs.

AIG employed about 106,000 people as of June 30, the U.S. Government Accountability Office said yesterday in a report, about 8.6 percent less than the New York-based insurer’s count in its 2008 annual report. Mark Herr, an AIG spokesman, wouldn’t say how many people were fired, quit, or employed at operations the company sold.

AIG, once the world’s largest insurer, is divesting units to repay loans included in the $182.5 billion government bailout. The company has agreed to sell assets including a U.S. auto insurer, Japanese office tower and Canadian operations for about $9.8 billion in the past year. AIG left its total employment unchanged in 2008.

“AIG is going to be a much smaller company,” said Robert Haines, an analyst at CreditSights Inc. in New York. The rate at which the company sheds workers “will really be dependent on the timing of large asset sales.”

Competitors such as Hartford Financial Services Group Inc. and Genworth Financial Group Inc. are firing workers after businesses and individual consumers spent less on coverage during the recession. MetLife Inc., the largest U.S. life insurer, eliminated 1,000 U.S. jobs in the first three months, Chief Financial Officer William Wheeler said in May.

Insurance Sales Fall

U.S. life insurance sales to individuals dropped 23 percent in the first half, the biggest six-month decline since 1942, trade group LIMRA International said last month. Businesses and consumers have also cut back on property insurance, both to cut costs and because they have less to insure. AIG sells both types of coverage.

AIG’s money-losing consumer lender, American General Finance Corp., said in a regulatory filing last month it had cut 900 jobs in the first half. The unit has scaled back lending after losing access to its usual funding sources.

AIG fell $2.60, or 5.4 percent, to $45.80 at 4:01 p.m. in New York Stock Exchange composite trading on speculation the company would issue new stock. The decline erased part of a 21 percent gain yesterday.

“There are rumors out there they are looking to do a capital raise,” said Robert Bolton, managing director for trading at Mendon Capital Advisors Corp. After yesterday’s gain, “it makes sense that speculators have no problem dumping it on any rumor.”

Herr declined to say whether the company has plans to issue new shares.

The stock had risen yesterday after Representative Edolphus Towns, chairman of the U.S. House Oversight and Government Reform Committee, said he’d give “serious consideration” to a plan to ease the terms of the company’s $182.5 billion bailout. Towns, a New York Democrat, issued the statement after meeting with Maurice “Hank” Greenberg, the former AIG chief executive officer.

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

Last Updated: September 22, 2009 16:37 EDT