AIA, which was the crown jewel in bailed-out insurer AIG's global business, has invited four banks to pitch for advisory roles for a possible offer, two sources familiar with the process told Reuters. The sources declined to be identified as they were not authorized to speak to the media.

The swift move by AIA underscores the strong appetite for life insurance business in Asia-Pacific, where premiums are forecast to grow 4.4 percent in 2012, nearly double the estimated growth in industrialized economies, according to Swiss Re.

The auction is expected to draw interest from U.S., European Canadian and Japanese companies, sources familiar with the matter told Reuters.

AIA shares gained as much as 1.9 percent on Tuesday to their highest since January 6, while the benchmark Hang Seng share index .HSI was up 2.5 percent. The stock ended up 1.7 percent. ING shares were up 5.3 percent in early trade.

The process is in its early stages and suitors are exploring how best to place their bets. Some potential bidders are hampered by the European debt crises, while others see the need to explore consortium bidding as ING's Asian insurance business is heavily biased towards South Korea and Japan.

Making joint bids would later allow suitors to extract just the businesses complementary to their existing Asia operations.

"If you break it up, you potentially open yourself to a lot more potential buyers. It becomes a lot more onerous to sell it bit by bit, but you potentially open yourself to smaller local players," said Barclays insurance analyst Mark Kellock.

Last week, ING, based in the Netherlands, scrapped plans to list its combined Asian and European insurance and investment management businesses, saying it would consider other options as it had received strong interest for its Asian operations.

ING has hired Goldman Sachs (GS.N) and J.P. Morgan (JPM.N) to advise on the sale, sources told Reuters.

"I can't comment on process. All I can say is that we are exploring all options for the Asian insurance and investment management business," ING spokeswoman Victorina de Boer said.

An AIA spokeswoman declined comment.

EXCESS CAPITAL

The prospective sale by the Dutch bancassurer comes as European banks look to offload assets and repair balance sheets battered by the sovereign debt crisis.

Japan's Sumitomo Mitsui Financial Group (SMFG) (8316.T) and Sumitomo Corp (8053.T) said earlier they would buy Royal Bank of Scotland's (RBS.L) aircraft leasing business in a deal worth $7.3 billion.

AIA, led by former Prudential Plc (PRU.L) CEO Mark Tucker, is a surprise leader in chasing the ING business, some analysts said, as most of AIA's business is generated from fast-growing Asian markets, while more than three-quarters of ING's new sales are in the mature South Korean and Japanese markets.

As in any auction, AIA may decide to pursue or back away from the process, the sources said.

Analysts estimate AIA, which was floated in a $20.5 billion Hong Kong IPO in 2010, has about $3 billion in excess capital over regulatory requirements and would have no problem raising funds if it did go ahead with a complete takeover of ING's Asian insurance business.

TAG TEAMS

ING operates in seven Asian countries, but its businesses in South Korea and Japan are its biggest. In the first three quarters of last year, ING Life Korea accounted for about 43 percent of ING's Asia gross premiums and some 39 percent of underlying profit.

"Since Korea is such a big part of ING's Asia business, the Korea domestic players may hold the key," said a source who advises financial institutions and who asked not to be named as he is not authorized to talk to the media.

ING has an existing life insurance joint venture with South Korea's KB Financial Group (105560.KS), KB Life Insurance.

KB Financial would be interested if ING were to sell the Korean business separately, but would not go for the whole Asian business, said one Seoul-based banking source who did not want to be identified given the sensitivity of the issue.

The Japanese insurers are not interested in entering the Korean market or increasing their Japanese exposure, so would be interested only in the Southeast Asia businesses, they added.

The sources were not authorized to speak about the matter publicly.

Canadian-listed Manulife (MFC.TO) is among the potential suitors for ING's Asian insurance business.

Manulife declined to comment, though CEO Donald Guloien said in September the insurer would be on the lookout for acquisition opportunities, particularly in Asia, if hard-hit European financials sell off assets.

(Additional reporting by Ju-min Park in SEOUL, Cameron French in TORONTO, Myles Neligan in LONDON, and Gilbert Kreijger and Roberta Cowen in AMSTERDAM; Editing by Jonathan Hopfner and Ian Geoghegan)

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