PRUDENTIAL is in advanced talks with two strategic investors to take a 20% stake in the company and help mount a $15 billion (£8.6 billion) bid for the Asian business of AIG, the insurance giant bailed out by the American taxpayer.

The Pru, which is being advised by UBS and Credit Suisse, is negotiating with investment funds in the Middle East and China.

It is not yet clear whether one or two investors will take part, but whoever does will be offered board representation.

The new investors could pump at least £1.2 billion of new capital into the company.

Last week Mark Tucker, Prudential’s chief executive, was in New York holding discussions with AIG over the purchase. Two other big financial firms are also keen to buy AIG’s Asian and Japanese business. They are Axa, the French insurance giant, and ING of the Netherlands.

The Pru’s ambitions to expand run counter to the City’s view of the the firm’s immediate prospects. Last week Prudential and rival insurers saw their share prices hammered on growing concerns over their solvency position.

The group’s share price fell 28% to close at 270p, valuing it at £6.7 billion. Five months ago the share price was more than 700p.

This Tuesday, when the Pru issues a trading statement, it is likely to release a strong set of numbers showing that the group’s international portfolio is growing in the mid-teens. Growth in Asia has slowed but it is still in the high single digits. Its solvency buffer also stands at £1.2 billion, higher than many analysts have predicted.

If Prudential is successful in buying AIG’s business it would be a transformational deal.

Both firms run big distribution networks and there is room for huge savings. The Pru directly and indirectly employs 450,000 people in the region.

Fears have been mounting about the capital strength of all the world’s big insurers. Plunging equity markets have been eroding the values of shares held in insurers’ investment portfolios.

It comes as the Financial Services Authority prepares to pass billions of pounds of potential mis-selling liabilities onto insurers’ balance sheets.

Costs for mis-selling with-profits insurance policies – particularly in relation to endowment mortgages– have historically been charged to the with-profit funds that wrote the business. Those costs are now being moved directly onto insurers’ balance sheets as a result of a consultation that closed last month.

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