NEW YORK (Bloomberg) - American International Group Inc. (AIG), the insurer rescued by the US after losses on derivatives, said about 85 percent of the trades would be retired by year-end and the unit that sold the contracts would be shuttered.

AIG's Financial Products subsidiary will not be needed after most of the $2 trillion in derivatives the company had at the time of its 2008 bailout are terminated, said Mark Herr, a spokesman for the New York-based company. Bets on about $300 billion to $400 billion in assets will be kept by AIG beyond this year because they are expected to be profitable, he said.

CEO Robert Benmosche has slowed the pace of divestitures to boost the value of assets needed to repay loans in AIG's $182.3 billion bailout. He told Financial Products staff in August that they were "selling too fast" while unwinding the contracts and that they should emphasise getting better prices over speed.

"We have been pursuing value maximisation as opposed to a fire-sale of positions," Mr. Herr said on Friday. "We have been able to actually do a better job since you have greater negotiating leverage."

AIG will not need to retain Financial Products employees beyond the end of 2010 to manage the remaining trades, Mr. Herr said. The workers were the focus of criticism from lawmakers and a public backlash that included death threats after AIG paid retention bonuses to staff of the Wilton, Connecticut-based unit following the government rescue.

The insurer may either manage the remaining contracts or hire an outside firm, Mr. Herr said. Financial Products had $940 billion in derivatives and about 220 employees at the end of last year, from more than 400 workers before the rescue. The $300 billion figure for remaining trades was reported on Thursday by the Financial Times.

AIG had to turn to the US for a bailout after collateral calls from banks including Goldman Sachs Group Inc. on credit- default swaps tied to the US housing market. Financial Products also made trades tied to currencies, commodities and stocks.

Under previous CEO Edward Liddy, who was installed by the US after the September 2008 rescue, the "primary goal was to shed as many assets as possible" quickly, Mr. Herr said.

The strategy has changed under Mr. Benmosche, he said.

"I told them yesterday that my biggest concern is you're selling too fast and you're being taken by Wall Street," Mr. Benmosche told employees in August.

"I don't want to feed Goldman Sachs's bonus pool anymore. I don't want to feed Morgan Stanley's bonus pool anymore.

"I want to feed ours. In order to do that, you've got to stop giving this stuff away.

"You've got to ask for decent prices or we'll wait."