NEW YORK (Bloomberg) — American International Group Inc. may hand its faltering business insuring corporate clients to the US Government, shedding the division that was previously intended to be the core of the firm after a US rescue, a person familiar with the situation said.

AIG told the government that the business has struggled to attract customers as employees quit to work for competitors, said the person, who declined to be named because the discussions are private. Turning the division over to the U.S. could retire some of AIG's debt and protect the operation from losses at other parts of the company, the person said.

Deteriorating results from the business that includes commercial property and workers' compensation coverage threaten chief executive officer Edward Liddy's plans to salvage the insurer. Employees were stung by a 99 percent stock drop in 12 months, and potential customers shied away after more than $40 billion in net losses company-wide prompted them to question AIG's claims-paying ability.

"The stock price tells me they're going away," said Andrew Rothstein, an analyst at HGK Asset Management Inc., speaking about the company that was once the world's largest insurer. "That turns into a downward spiral. They lose talent, which begets a lower stock price, which begets losing more talent." HGK's large-cap fund owns stock in AIG competitors Travelers Cos. and Allstate Corp.

AIG shares gained 6 cents, or 13 percent, to 52 cents in New York Stock Exchange composite trading yesterday.

More AIG news on page 23