American International Group, Inc. (AIG: sentiment, chart, options) confirmed today that its Canadian life insurance business, AIG Life of Canada, will be sold to Bank of Montreal for approximately $305 million. The new company will retain all of AIG Life's 300 employees and 400,000 customers, and will be renamed as BMO Life Insurance Co. This announcement confirms suggestions earlier today that AIG was close to selling one of its business lines.

However, AIG's sale was met with an unequivocally bearish note from Citi analyst Joshua Shanker. "The debt burden on the company remains suffocating and continues to threaten the viability of the corporate entity," said the analyst. "We cannot recommend the stock while these issues remain unresolved."

Shanker also cut his price target on AIG to $1.80 from $4.80, and warned that a future valuation of zero was possible. "We see bankruptcy as remote, but believe AIG could sell assets to pay back debtholders in such a way that leaves little value remaining for common stockholders," the analyst noted.

At last check, it seems the dueling good news/bad news reports are canceling each other out -- AIG is just 1 penny higher at $1.55.