NEW YORK (Bloomberg) — American International Group Inc., the insurer bailed out by the US, filed to sell a stake of almost $1 billion in its majority-owned reinsurer Transatlantic Holdings Inc.

AIG may sell 26 million shares, Transatlantic said yesterday in a regulatory filing. That holding is valued at about $985 million based on Wednesday's closing price of $37.87. The New York-based insurer holds about 39 million shares, or 59 percent of Transatlantic, the reinsurer said. The stake will be less than 20 percent after the sale, AIG said.

AIG scaled back plans to sell units in their entirety as the recession eroded the value of insurance assets and made financing more expensive for potential buyers. The company, which is seeking to repay a government bailout of as much as $182.5 billion, has disclosed deals for $5.6 billion and said in March it will place its two biggest non-US life insurers into trusts for eventual public offerings or sales.

"Our restructuring programme is clearly a work-in- progress," AIG vice-chairman Paula Reynolds said on a May 7 conference call. The insurer was in "various types of negotiations" regarding Transatlantic, a plane-leasing unit and two life insurance businesses, Reynolds said then.

Peter Tulupman, a spokesman for AIG, declined to comment. Transatlantic chief financial officer Steven Skalicky didn't immediately return a call for comment.

AIG's stake in Transatlantic may slip to just under 14 percent if the brokers underwriting the stock sale exercise the right to buy as many as 3.9 million shares. JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley are leading the sale of shares, AIG said.

Transatlantic's first-quarter net income fell 35 percent to $75.2 million on the declining value of investments, the company said last month. The reinsurer was incorporated in 1986 and listed on the stock market in a 1990 initial public offering.

The New York-based reinsurer sells coverage of property, corporate boards, medical malpractice, auto liability and aviation, according to a regulatory filing.

AIG's Reynolds was hired in October to help chief executive officer Edward Liddy reorganise and dismantle parts of what was once the world's biggest insurer. She's overseen the sale of a US auto insurer and an equipment guarantor.

AIG, which reported a $99.3 billion loss last year, has been unprofitable for six straight quarters on bad bets tied to sub-prime mortgages.