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U.S. insurer American International Group Inc., will merge next year 2007 in a bid to reinforce their competitive edge, sources said Friday.

AIG bought operating rights at Chiyoda Mutual Life Insurance Co., which failed in 2000, and set up AIG Star.

AIG also set up AIG Edison by acquiring in 2003 a Japanese insurance unit of the General Electric group, which had inherited the operations of the failed Toho Mutual Life Insurance Co.