June 30 (Bloomberg) -- Carlyle Group, Primus Financial Holdings Ltd. and MBK Partners Ltd. may seek to buy American International Group Inc.’s Taiwanese life insurance unit, three people familiar with the matter said.

KKR & Co., Affinity Equity Partners Ltd., Cathay Financial Holding Co. and Chinatrust Financial Holding Co. have also asked New York-based AIG for information about the sale and may take part in a first round of bids scheduled for July 3, the people said. The unit may fetch about $2 billion, they said, declining to be identified because the discussions are private.

AIG, formerly the world’s largest insurer, is selling assets outside the U.S. to repay a $182.5 billion government bailout. The Taiwan unit, Nan Shan Life Insurance Co., is the island’s second-biggest life insurer with 4 million policyholders and 11 percent market share in total premiums.

“Everyone hopes this is going to be a fire sale as AIG is in a difficult situation,” said Andy Chang, a director at Taiwan Ratings, the local partner of Standard & Poor’s. “Buyout firms are betting they can exit with a premium because interest rates may rise, benefiting insurer’s investment returns.”

AIG separated Nan Shan Life from other non-U.S. life insurance assets it’s selling. Nan Shan Life, burdened with unprofitable policies, raised $1.45 billion in a rights offer last year to avoid slipping below a regulatory capital requirement. AIG owns 97.5 percent of the unit and Nan Shan’s management owns the remainder.

Cathay Financial President Chen Tsu-pei and Daniel Wu, Chinatrust’s chief investment officer, said in interviews the companies are considering bidding for Nan Shan Life. They declined to say whether the firms will enter bids this week. April Pan, a spokeswoman at Taipei-based Nan Shan, declined to comment on the sale.

Sales Force

Officials at Carlyle, KKR, Affinity, Primus and MBK Partners either declined to comment or weren’t immediately available.

AIG disclosed deals raising about $6.7 billion since the company was rescued by the U.S. in September. The insurer’s bailout includes a $60 billion credit line from the Federal Reserve, a $70 billion investment from Treasury and $52.5 billion to fund two vehicles to retire credit-default swaps and a securities-lending program.

Nan Shan Life has a sales force of about 35,000 agents and operates 24 branches and 427 sales offices, according to Pan. It was founded in 1963, qualifying the company to expand into China, which requires foreign insurers to have at least 30 years of operating history. The company had NT$1.5 trillion ($45.5 billion) of assets at the end of April.

The AIG unit and other Taiwanese insurers sold policies before 2000 with guaranteed returns of at least 6.25 percent, said Chang of Taiwan Ratings. Traditional policies sold now typically carry returns of about 2 percent, he said.

The size of final bids will depend on how much capital buyers estimate Nan Shan Life will need to cover the legacy policies, the people said.

Aegon, Prudential Exits

Aegon NV of the Netherlands announced the sale of its unprofitable Taiwanese life insurance unit to Zhongwei Company Ltd. to free up capital after the unit last year posted a net loss of 103 million euros ($133 million), Aegon said in April.

Prudential Plc, the U.K.’s second-largest insurer, transferred its Taiwanese sales force and 94 percent of its liabilities on the island in February to China Life Insurance Co. for a nominal sum. The agreement will free up capital by shedding products that pay guaranteed returns, which reduced profitability after Taiwan began cutting interest rates in 2001.

ING Groep NV, the biggest Dutch financial-services company, sold its life insurance business in Taiwan in October to Fubon Financial Holding Co. for $600 million. ING has said it will book 427 million euros ($575 million) in losses on the sale of a unit it started two decades ago.

KKR Korea Deal

Private-equity investment in Asia has shown signs of reviving as credit markets thaw. KKR, the private-equity firm run by Henry Kravis and George Roberts, agreed to buy South Korea’s Oriental Brewery for $1.8 billion from Anheuser-Busch InBev NV in May.

Primus Financial, co-headed by former Citigroup Inc. Asia investment banking chief Robert Morse, raised $1 billion this year to invest in Asian financial services companies.

Carlyle announced a purchase of as much as a 36.6 percent stake of Ta Chong Bank Ltd. in Taiwan in 2007.

Taiwan’s benchmark Taiex index has risen 41 percent this year on optimism demand for the island’s exports will strengthen and revive an economy that shrank an unprecedented 10.24 percent last quarter. Credit Suisse Group AG and Barclays Capital Plc last week increased their forecasts for Taiwan’s economic growth next year, to 4 percent and 5 percent respectively.

To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net

Last Updated: June 29, 2009 22:26 EDT