Chinatrust's announcement on November 17 followed its statement earlier this month that it is considering legal action against American International Group over bids for Nan Shan Life Insurance, the AIG unit.

AIG announced October 12 the sale of its nearly 98 per cent stake in Nan Shan to an investor group consisting of China Strategic and Hong Kong-based Primus Financial for about $2.15 billion, a figure Chinatrust said was lower than its bid.

Chinatrust said in a statement that in exchange for the Nan Shan deal, China Strategic will buy a 9.95 per cent Chinatrust stake through a private placement for 20.8 billion New Taiwan dollars – about $647 million.

The joint China Strategic and Primus acquisition of Nan Shan still has not been finalized pending approval from the Taiwan government.

The Taiwan government is examining the deal closely and has said it will reject it if regulators determine that Chinese funds are involved. Taiwan law does not allow Chinese investment in the financial sector, including insurance companies.

Taiwan and China split amid civil war in 1949, and the self-governing island is sensitive about losing control of its economy to Beijing.