Insurance titan American International Group is preparing to spin off 2 its international life insurance franchises and has appointed a new executive to spearhead the divestitures.

Under a deal inked with the Federal Reserve Bank of New York, AIG, New York, will prepare American International Assurance Company Ltd. and American Life Insurance Co. for initial public offerings, depending on market conditions, the company said. The agreement also will reduce the debt AIG owes FRBNY by $25 billion.

In tandem with these move, AIG announced Alain Karaoglan as senior vice president-divestiture. As head of the company’s divestiture office, Karaoglan will bring AIG’s divesting assets to market and manage the resulting transactions worldwide.

Under the FRBNY agreement, AIG said it will contribute the equity of each of AIA and ALICO to separate special purpose vehicles in exchange for preferred and common interests in the SPVs. The FRBNY will receive preferred interests in the AIA SPV of $16 billion and in the ALICO SPV of $9 billion.

The face value of the preferred interests represents a percentage of the estimated fair market value of AIA and ALICO, the company said. AIG will hold the common interests in the AIA and ALICO SPVs and will benefit from the fair market value of AIA and ALICO above the value of the preferred interests as the SPVs cash in their stakes in these companies in the future.

Upon closing, the transactions will reduce the debt owed by AIG under the FRBNY credit facility and the line available to AIG by $25 billion, according to the company. Currently, AIG’s outstanding balance under the FRBNY credit facility is around $40 billion.

AIG expects these transactions to close in the second half of 2009. Until the spinoffs are complete, AIA and ALICO will remain part of AIG, consolidated in its reported financial statements.

Upon assuming his post with AIG on June 29, Karaoglan will report to Paula Rosput Reynolds, AIG vice chairman and chief restructuring officer. Karaoglan succeeds Philip Jacobs, who has accepted a senior tax-related position with another company.

Previously, Karaoglan had been managing director-equity research at Banc of America Securities L.L.C. There, he led the research team that covered insurance, banks, investment banks, asset managers, consumer finance, exchanges and real estate investment trusts.