Anyone lucky enough to participate in the initial public offering of American International Group Inc.'s (NYSE:AIG) Asian life business American International Assurance Co. Ltd. will snatch up a prized asset at a bargain.

AIG appeased its largest shareholder and lender -- Uncle Sam -- by executing a massive HK$138.35 billion ($17.8 billion) offering of a nearly 59% AIA stake at the top end of its range of HK$19.68 ($2.54) per share. But the price is a steal given AIA's growth prospects.

The offering represents about 1.2 times Hong Kong-based AIA's "embedded value," which is the present value of the unit's future profits, says David Merkel, principal of Baltimore-based investment manager Aleph Investments. Merkel, a former equity analyst for Hovde Securities LLC and an AIG life actuary in the late 1980s and early 1990s, notes that this premium is eclipsed by the more than 2 times embedded value premiums at which AIA's competitors Ping An Insurance Co. of China Ltd. and China Life Insurance Co. Ltd. (NYSE:LFC) trade.

"It's not a huge premium to pay for underpenetrated markets," adds CreditSights Inc. analyst Rob Haines. AIA has a foothold in Southeast Asia, one of the few growth markets remaining for life insurance, he says.

The insurer has 23 million policies in place in 15 Asian markets, and as of late 2009 held No. 1 market share positions in seven of them: Brunei, China, Hong Kong, Macau, Philippines, Singapore and Thailand, according to its website.

Recall that London's Prudential plc (NYSE:PUK) was ready to acquire AIA at about $30.4 billion, below the roughly $30.7 billion at which the IPO values the entire business.

"I think AIG could have done better if it negotiated with Pru," Merkel says.

But Haines argues that Pru's lowered offer -- from an initial $35.5 billion -- "had no guarantee it would have closed," and that if AIG accepted the lowered bid and it fell through, the already pressured seller would have started from an even lower ceiling in pricing an IPO.

Haines chalks up the IPO's low premium to the collapse of the Pru deal, volatile markets, AIG's position as a forced seller and the "sheer size of the deal." The AIA offering is the largest listing ever on the Hong Kong Exchange and could be even bigger -- up to $20.5 billion -- if the underwriters exercise the overallotment option. The stock will begin trading on Friday.

Regardless of AIG's inability to milk a higher price out of AIA, it's ability to unload an asset of this size -- or at least a majority of it -- is a coup nonetheless. "This was a trophy asset, but it is good news for AIG that it was able to get the deal executed," Haines says.

It's particularly good news for the Federal Reserve Bank of New York, which will receive proceeds from the offering to help pay down AIG's $20 billion in senior secured debt.

And while the government may have been more than pleased with a sale of the entire business to Pru or another strategic buyer, there is an upside to AIG retaining up to a 41% stake in this growing business.

And now with the distractions of AIG's "problem years" out of the way, AIA could realize its growth potential.