American International Group (AIG) expects improved earnings next year following the closure of a $23 billion deal to purchase American General Corporation (AGC) on Wednesday.

AIG has a strong presence in Bermuda and the $23 billion deal marks the largest ever insurance purchase.

AIG signed the deal in mid-May after outbidding British insurer Prudential Plc, and it took regulators only three and a half months to approve it.

AIG chairman Maurice Greenberg said he thought earnings accretion would be between eight and ten percent in 2002, and promised savings over the next two years as a direct result of the deal.

The deal makes AIG the largest annuity seller in the massive US market for retirement savings and increases its US life insurance operations.

AIG will fold its smaller US life insurance operations into American General (which will keep its name) while American General's retirement savings operations will be integrated with AIG's SunAmerica annuities unit.

The deal concretes AIG's position as the world's second largest financial firm by market value behind Citigroup and AIG now has a market value of about $184 billion.

An announcement concerning layoffs from AGC will be made after the US Labour Day holiday next week.

American International Group Inc is the leading US-based international insurance organisation and the largest underwriter of commercial and industrial insurance in the US

Its member companies write property, casualty, marine, life and financial lines insurance in approximately 130 countries and jurisdictions and are engaged in a range of financial services and investment management businesses.

The firm also has some consumer lending operations - which will be boosted by the American General deal - and leases aeroplanes and trades financial instruments through its financial services unit.