NEW YORK, USA - US taxpayer-bailed out insurance giant AIG is in 'advanced talks' with Zurich Financial Services to sell its US personal lines insurance business for about US$2 billion (S$3 billion), the Financial Times said on Wednesday.

The negotiations between AIG and ZFS, the subject of much speculation in the economic press for the past two months, 'could still fall apart' but 'a deal could be announced in the next few days,' the British newspaper reported, citing people close to the matter.

US insurer MetLife was also said to have shown an interest in AIG's unit.

The unit includes car, motorcycle and commercial vehicle insurance. Its sale would help AIG repay US$100 billion in federal government aid 'and maintain a chance of a future outside government control,' the Financial Times said.

The federal government has pumped some US$180 billion into the coffers of AIG, now nearly 80 per cent owned by the government under the bailout. Under government pressure, it is working to shed assets.

AIG chairman and chief executive Edward Liddy said that the company, once the world's largest insurer, has struck agreements on the sale of 10 businesses in recent months and that 'several' other transactions were under discussion.