American International Group refused Tuesday to lower the $35.5 billion price tag on its Asian operations, casting major doubt over the planned sale of the unit to the British insurer Prudential.

The rejection deals a major setback to Prudential's ambitions to become a dominant player in a market with huge growth potential. It could also hinder A.I.G.'s ability to repay the $182 billion in U.S. government aid that the insurance giant has received in a series of rescues since September 2008.

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