AIG has to decide what assets to unload

— -- The Federal Reserve's decision to lend up to $85 billion to AIG effectively puts the government in control of the nation's largest insurer. AIG plans to pay back the loan by selling assets.

The company has yet to indicate what assets are on the block, but likely candidates include aircraft-leasing business ILFC, some real estate assets and chunks of its profitable insurance operations, analysts and regulators say. Company spokesman Peter Tulupman on Wednesday said only that it's conducting a "strategic review."

Sandy Praeger, president of the National Association of Insurance Commissioners, said, "It will likely be the insurance subsidiaries — or their valuable blocks of business and high-quality assets — that will be sold in an attempt to return the AIG parent company to a more stable financial position."

One business that it makes less sense for AIG to unload, says Andrew Kligerman, an insurance analyst at UBS, is the foreign life insurance business. He considers that the company's "premier" entity.

The business is a market leader in Asia, giving AIG "a competitive edge," he says.

The Federal Reserve, after coming to AIG's aid, will likely have a role in figuring out which assets the company will sell, says Vinnie Aggarwal, chief economist at Frost & Sullivan, a consulting and market research firm.

AIG's sale options are wide. The sprawling conglomerate — which got its start as a property/casualty insurer in Shanghai in 1919 — owns everything from insurance and retirement businesses to the Stowe Mountain ski resort in Vermont.

Despite the asset sales, the company's troubles are far from over.

When major ratings agencies downgraded AIG's credit ratings Monday, that triggered provisions in certain commercial policies that let policyholders cancel coverage, says Michael Paisan, an analyst at Stifel Nicolaus.