American International Group Inc.’s ( AIG - Analyst Report ) $2.16 billion sale of its local unit, Nan Shan Life Insurance Co., has finally been sanctioned by Taiwan’s Financial Supervisory Commission (FSC). However, the sanction came with certain conditions.

In January this year, AIG accepted the bid from Ruen Chen Investment Holding Co. Ltd. (Ruen Chen) in order to divest its 97.57% stake in its Nan Shan unit in Taiwan, for a cash deal of $2.16 billion. However, the deal was kept pending as it awaited a regulatory approval, and as expected, the deal received the approval in the first half of 2011.

The verdict came in after severe scrutiny and intense reviewing. The FSC had been seeking the bidder’s capability of raising funds for the deal as well as the strategy for carrying out Nan Shan’s business in future. This strategy further included both the financial and the operational aspects.

As a result, FSC has granted approval based on the condition that the Ruen Chen Group has to maintain a deposit account of 6 billion Taiwan dollars or $208 million. Alongside, the Ruen Chen will also have to seek permission from the FSC before carrying out any level of financial transaction or investments.

This indicates the ceasing of over two-year resistance faced by AIG from the Taiwan regulators. While the decision to divest Nan Shan unit was taken in October 2009, it was followed by couple of attempts to accelerate divestment but the regulators defied permission.

Despite the sound fundamentals of Nan Shan, which enjoys the third-largest position as per the market share in the Chinese insurance market with more than 4 million policy holders, the regulatory authorities overall appear to be concerned about vending Nan Shan to the Ruen Chen Group. Their apprehension was based on the acquiring party’s inadequate experience to take over such a high profile business.

On the flip side, AIG has been able to get rid of a huge asset burden through this deal, and has already listed Nan Shan as its discontinued operation.

Overall, AIG has been working for the past several quarters to sell its unnecessary businesses in an effort to repay the bailout money. Through the second half of 2010, the company completed the successful IPO of AIG’s AIA Group Ltd. while also disposing of other assets such as ALICO toMetLife Inc. ( MET - Analyst Report ) , Japan-based AIG Star and AIG Edison to Prudential Financial Inc. ( PRU - Analyst Report ) and AGF to Fortress Investment Group LLC ( FIG - Snapshot Report ) .