HONG KONG (AP) ? US insurer American International Group Inc. has withdrawn an application to add group insurance to its business in China because its Hong Kong agents violated rules by selling policies to mainland Chinese customers, the company said in a filing with US stock regulators.

Foreign insurers are banned from selling insurance to visiting mainland Chinese citizens in Hong Kong, but it is reportedly a common practice.

Hong Kong, a former British colony, returned to Chinese rule in 1997, but the two sides maintain separate political and financial systems.

AIG said in a filing with the US Securities and Exchange Commission that it needs to resolve ?regulatory issues? before seeking approval to sell group insurance in China. AIG said it pulled its application in March.

Among the issues is ?the response to AIG?s acknowledgement that certain of its Hong Kong-based agents sold life insurance to customers on the Chinese mainland in contravention of applicable regulations,? the filing dated earlier this week said.

New York-based AIG received rare permission to have wholly owned life insurance operations in China. It has offices in eight cities, while other foreign companies are limited to working with Chinese partners through joint ventures.

But AIG currently sells only insurance policies to individuals.

Demand for life insurance has grown rapidly in China as its transition to a market economy drives millions to turn to private companies to help provide for their financial future.

American International Assurance Co., AIG?s Asian arm, had life insurance premium revenues in China worth 1.93 billion Chinese yuan ($233 million) in the first four months of 2005, giving it a 1.4 percent share of the country?s life insurance market, according to Chinese government statistics.

AIG shares fell 4 cents to $56.06 in morning trading on the New York Stock Exchange.