A take over that will create the world's largest insurance company by market value is a step closer to becoming a reality after shareholders of American General Corporation (AGC) voted on Wednesday to approve a $23 billion bid by American International Group (AIG).

The deal, reached in May, now needs the approval of several more state insurance regulators before it can close, and because the two firms do business nationwide in the US, the deal has to be approved by each state's insurance commissioner.

One of the world's largest insurers with offices in Bermuda, New York based AIG outbid Britain's Prudential PLC for Houston based AGC.

And the two companies have said they are keen to close the deal as soon as possible after approval from the state insurance regulators.

Under the terms of the agreement, AGC shareholders will receive $46 per share in AIG common stock. AGC's quarterly cash dividend of 24 cents per common share will be paid September 1 to shareholders of record as of August 9.

Established in 1926, AGC was considered a good takeover candidate because of its strong US market share of fixed and variable annuities.

The company has 1,350 offices and 16,000 employees in 40 states and is one of the nations largest diversified financial-services organisations, providing retirement services, investments, life insurance and consumer loans to more than 12 million customers.

AGC's Houston headquarters will remain open as the company operates as an AIG subsidiary.

AIG is already one of the world's largest insurers and has 1,350 offices in 130 countries and is the largest underwriter of commercial and industrial insurance in the US and generates more than half of its revenue overseas.

The company also has interests in consumer finance, aircraft leasing and data processing.