LONDON (Bloomberg) — American International Group Inc. suffered an 87 percent quarterly sales decline at its European life business as UK clients abandoned the firm, draining value from operations the insurer is selling to repay a US bailout.

AIG halted withdrawals on its Premier Access Bond investment offering in the UK last year, and the closure drove third-quarter European premiums and deposits to $256 million from $1.97 billion a year earlier. The investment, promoted to savers who wanted "easy access" to funds, was marketed by banks including Coutts & Co., which counts Queen Elizabeth II among its clients.

"It's such a tainted brand I can't imagine any reason why I'd put an AIG product in front of a client," said Danny Cox, head of advice at Hargreaves Lansdown Plc, the UK's biggest retail investment broker. New York-based AIG needed a $182.3 billion rescue after making bad bets tied to subprime mortgages. AIG froze the bond fund on September 15, 2008, after clients withdrew more money in three days than they typically withdraw in three months. The next day AIG announced its US rescue.

About a quarter of a successor fund is invested in asset-backed securities, according to a note to investors. Clients got half their capital back and must wait until 2012 to be guaranteed the full amount, said Neil Denton, a spokesman for the UK unit.

"The decline in sales in Western Europe is attributable to our decision last December to stop selling our high-volume Premier Access Bond business in the UK," said Mark Herr, an AIG spokesman. He declined to comment further.

The insurer transferred two non-US life insurance divisions to Federal Reserve vehicles to repay $25 billion of its bailout debt, AIG said on Tuesday.