NEW YORK (Reuters) — American International Group Inc, crippled by losses on bad mortgage bets, said yesterday it will focus on its main insurance operations and put the rest of its businesses up for sale to repay up to $85 billion borrowed from the US government.

The company, whose shares soared by as much as 24 percent before sliding into negative territory in late trading, said it would keep its US property and casualty, and foreign general insurance businesses, and an ownership interest in its foreign life operations, which generated nearly $40 billion in revenues in 2007.

"Literally, everything else that doesn't fit under that definition we are considering for sale," said AIG chief executive Edward Liddy on a conference call with analysts.

Liddy said he didn't expect a fire sale, adding that buyers would have to assume the debt of the businesses they acquire.

"I want to balance speed with value. ... We have a number of buyers interested," Liddy said in an interview with Reuters.

The company, with offices in 130 countries, has significant operations in Bermuda where it employs some 200 people.

According to industry experts, the Bermuda operations are not in imminent danger of sale. "I'd interpret it as good news for the Bermuda operations," said David Bradford of Advisen, a New York and London based analyst group, of yesterday's developments. "Nothing I heard suggested they are being considered for sale at this time."

Among the assets AIG may sell are aircraft leasing unit International Lease Finance Corp (ILFC) and its stake in reinsurer Transatlantic Holdings Inc.

It could also sell parts of American Life Insurance Co (ALICO), which operates as a life insurer in more than 55 nations and regions, and a minority stake in American International Assurance Company Ltd.

AIG also said it was working on alternatives for its financial products business and securities lending programme.

"Aside from the derivative mess ... there seems to be a significant amount of value still in AIG despite what happened," said Michael Sheldon, chief market strategist of RDM Financial Group.

The company, once the world's largest insurer, received a federal bailout on September 16 after losses in its financial products unit drove it to the brink of collapse.

The bailout — in the form of a loan in exchange for warrants — would give the US government 80 percent ownership.

The loan — which provides liquidity to meet short-term financing needs while AIG prepares the assets sale — carries a high interest rate and fees, and must be repaid within two years. AIG also suspended dividends on its common stock.

The insurer's troubles, similar to those of Wall Street firms, stem from guarantees it wrote on mortgage-linked derivatives that have resulted in $18 billion in losses over the past three quarters. AIG's revenue fell 3 percent to $110 billion last year.

It said it had drawn $61 billion on the Federal Reserve facility as of September 30 and used the proceeds to cover securities lending and ensure liquidity.

"I am not a big fan of the word 'never,"' Liddy told analysts when asked whether AIG would go back to the Fed for more help.

"I think what the Federal Reserve has provided us has been very generous, and we are going to do everything we cannot to have to go back to them," said Liddy.

Standard & Poor's revised the outlook on its ratings of AIG and its guaranteed subsidiaries to "negative" from "developing," citing risks related to the businesses sale as well as the heavy debt-service requirements of a smaller and less-diversified AIG.

"The $61 billion draw to date on the facility is much larger than we had previously anticipated, causing the scope of the planned business sales to exceed our expectations," S&P analyst Rodney Clark said in a statement.

AIG's shares, which have traded as high as $70.13 in the last year, fell to $1.25 in the hours before the bailout. The shares slipped to $3.96, off 1 percent, in afternoon trading on the New York Stock Exchange.

Liddy said some of AIG's smaller businesses — such as the Hartford Steam Boiler Inspection and Insurance Co and AIG's 60 percent stake in Transatlantic — could sell quickly.

"People are already looking at those. We want to make sure the contracts are rock solid," he said. "Nothing has been signed, but we have started the process."

The company, which on Monday agreed to sell its stake in London City Airport, is also in advanced talks with a buyer for part of its domestic personal lines business.

Maurice Greenberg, a former CEO who left the company in 2005 following an accounting scandal, has asked Liddy for the chance to bid on AIG assets.

Liddy said he would consider selling some toxic assets to the US government if it made sense for the company once the $700 billion financial bailout plan takes effect.

Blackstone Group LP and J.P. Morgan Chase & Co are the global coordinators for the divestiture programme.