Prudential is trying to lower the $35.5 billion price tag for the Asia assets of American International Group, with Prudential hoping the US insurer will go as low as $30 billion, the Financial Times reported yesterday.

Citing people familiar with the situation, the FT reported that AIG’s board and the US government had not yet decided to accept the price cut.

The report said AIG and the government were considering moving to an earlier plan — an initial public offering for the unit. One person familiar with the matter told the FT that there was “less than a 50/50 chance that the deal with Pru gets done.”

Prudential and AIG declined to comment on the matter.

The report comes as Prudential’s bid for AIG’s American International Assurance division is already on a knife-edge, with the UK insurer forced to knock down rumors yesterday that the offer had already been scrapped.

Talk among traders that the insurance industry’s biggest-ever takeover was off had propelled Prudential’s shares and sterling higher, but they later steadied after the company said the deal was on track.