UPDATE: AIG Plans To Sell 2/3 Of Transatlantic Hdgs Stake

   (Adds background on AIG and Transatlantic and includes fresh stock prices) 
   DOW JONES NEWSWIRES 
 

American International Group Inc. (AIG) plans to sell about two-thirds of its stake in reinsurer Transatlantic Holdings Inc. (TRH) as the ailing insurance giant looks to pare assets and raise capital to pay back the U.S. government for its assistance.

The stock sale comes as a number of financial institutions recently have been taking advantage of recent stock market strength to raise funds to boost capital levels and repay government rescue funds.

After the sale, AIG's stake in Transatlantic would be reduced to 20% from 59% through the sale of at least 26 million shares. If investor demand is sufficient, AIG's stake could fall to as low as 14%.

Transatlantic has been a long-time holding of AIG. When the company announced plans in 1990 to go public, AIG held a 41% stake. By 1999, the stake grew to 56%.

Transatlantic's shares closed at $37.87 on Wednesday and are off roughly 45% since last year. But the shares are up from a 12-year low of $26.16 struck in March.

AIG shares closed Wednesday at $1.66 and didn't trade premarket.

-By Tess Stynes, Dow Jones Newswires; 201-938-2473; [e-mail]