American International Group Inc. (NYSE:AIG), once perceived as a forced seller, has a bit more leverage these days as it has worked through most of its major asset sales and is nearing its government loan exit.

Its latest divestiture attempt, that of Taiwan's Nan Shan Life Insurance Co. Ltd., has sparked a behind-the-scenes bidding war and the insurer can be choosy.

Home security provider Taiwan Secom Co. Ltd. is reportedly the latest potential bidder for Nan Shan. According to media reports, Taiwan Secom wants to set up a holding company with Hong Kong private equity firm Primus Financial Holdings Ltd. to buy an unspecified Nan Shan stake.

Taiwan Secom director Max Shu confirmed his company's interest to news outlets, but did not specify what size stake it was seeking or how much it would offer. An AIG spokesman declined to comment.

Primus had previously joined investment holding company China Strategic Holdings Ltd. in a $2.15 billion Nan Shan bid that was blocked by Taiwanese regulators in September due to unspecified security concerns.

CreditSights Inc. analyst Rob Haines speculates that the regulators blocked that deal because of its funding. The regulators, he says, may have been "afraid of a hot money private equity investor" running the country's third-largest insurer with about $53 billion in assets.

If that is the case, then what would convince Primus that re-entering the fray with a home security company with no apparent insurance experience would sway regulators?

A partial Taiwan Secom-Primus bid also could compete with relatively attractive offers of up to $3 billion. In a Nov. 12 letter to the Securities and Exchange Commission released by the regulator on Tuesday, the insurer said "other prospective buyers have approached AIG and have provided unsolicited letters of interest in purchasing Nan Shan at prices ranging from $2.15 billion to $3 billion, which exceed AIG's carrying value of Nan Shan at Sept. 30, 2010."

AIG did not specify the bidders, but Taiwanese insurer Fubon Financial Holding Co. Ltd., local bank Chinatrust Financial Holding Co. Ltd., financial services holding company Cathay Financial Holding Co. Ltd. and the chairman of Taiwanese conglomerate Ruentex Group reportedly submitted bids in December.

"If they have the option to sell off the whole thing, which is clearly what AIG's strategy has been, I'd be very surprised if they'd do something like that [the Taiwan Secom transaction]," Haines says.

Furthermore, AIG has been rebuilding its tattered reputation worldwide and the last thing it might want to do is sell to a buyout firm and its inexperienced partner.

"AIG has interest in selling to a buyer that has the wherewithal to meet policyholder interests and not tarnish [its brand]," Haines notes.

David Merkel, principal of Baltimore-based investment manager Aleph Investments LLC and an AIG life actuary in the late 1980s and early 1990s, says the Taiwanese regulators' rejection of the $2.15 billion bid was "very good for AIG."

He adds that since the rejection, the credit markets have continued to improve, making for more favorable conditions for buyers.

That, of course, means more options for the seller.