NEW YORK (Bloomberg) — Billionaire Warren Buffett and Maurice (Hank) Greenberg may find bargains as the US government opens up American International Group Inc., the biggest US insurer, for a rummage sale.

AIG will probably sell assets to raise cash and repay the $85 billion loan it secured September 16 from the Federal Reserve to stay in business. The insurance units are solvent, regulators said, because New York-based AIG was barred from tapping reserves at the subsidiaries even as $18 billion of losses tied to home loans drained capital from the holding company.

Buffett, chairman of Berkshire Hathaway Inc., and Greenberg, who ran AIG for almost 40 years until 2005, may bump elbows with Allianz SE Chief Executive Officer Michael Diekmann and Munich Re's Nikolaus von Bomhard. Both told reporters this week they would consider bids for parts of AIG.

Bermuda-based Ace Ltd. headed by Greenberg's son, Evan, has also been cited as a possible buyer of parts of the business.

"There's going to be widespread international interest in some of the areas where AIG has accumulated a dominant presence," said Frank Betz a partner at Warren, New Jersey-based Carret Zane Capital Management, which holds Berkshire shares. Buffett is probably "lurking in the shadows," looking for a deal, Betz said.

Insurers are buying US property and casualty companies at the fastest rate in ten years, announcing 33 deals worth $13.5 billion since December 31, after profits rose in 2006 and 2007 on sales outside the US and lower-than-average losses from Atlantic hurricanes. Buffett and CEOs including Prudential Financial Inc.'s John Strangfeld have said they'll be ready to make purchases when the credit crunch pushes rivals to sell assets at distressed prices.

The government tapped former Allstate Corp. chief Edward Liddy to oversee the divestitures. Liddy replaces AIG CEO Robert Willumstad who took over in June and saw the company collapse before he could present a reorganisation strategy, which was set to be unveiled on September 25.

Liddy said yesterday that he had no intention of liquidating AIG and intended to pay back the loan early. (Story: Page 23)

AIG may sell assets including the biggest commercial insurance business in the US and "the best Asian insurance franchise in life and general insurance of any Western company," said David Havens, a credit analyst at UBS AG.

Investors led by Greenberg said hours before the federal loan announcement they might want to buy the insurer's subsidiaries. Greenberg, who controlled 11 percent of AIG's shares before the takeover, the largest block, has the ability to assemble "huge pools of capital" and will likely seek to bid for assets, Betz said.

Munich Re, the world's biggest reinsurer, may pursue AIG's insurance business in Eastern Europe or its industrial protection unit, von Bomhard told a German newspaper.