FORTUNE — Insurance giant AIG has always enjoyed a special relationship with AIA, its former Asian subsidiary. After all, AIG was founded in Shanghai in 1919 by C.V. Starr, an adventurous Californian who pioneered life insurance in Asia. AIG (AIG) left China in 1950, one year after Mao’s communist takeover, but AIA remained something of a crown jewel, with real estate holdings in some of Asia’s toniest districts.
More recently, the Asian insurer has been AIG’s savior: Amid the 2008 financial meltdown, the U.S. Federal Reserve Bank provided AIG with a huge credit facility in exchange for warrants in the company. To help repay the Fed, AIG sold most of its stake in AIA.
Today, a reinvigorated AIG — the U.S. government sold off its entire stake at a profit — may be looking to compete with its old sibling. In late November, AIG announced an agreement with People’s Insurance Co. of China, a state-owned insurer, to invest roughly $500 million in PICC’s December public offering in Hong Kong, which raised $3.1 billion. As part of the deal, the two companies are expected to form a joint venture to sell life insurance in China — AIA’s old turf.
It won’t exactly be a head-to-head contest: AIA now controls just 1% of the Chinese life insurance market, according to Credit Suisse. China Life and Ping An together boast nearly 50% market share. By joining forces with PICC, the country’s fifth-largest life insurer, AIG will have a headstart, though AIA is a leading player in much of Southeast Asia. (Credit Suisse expects AIA to generate 2012 net profits of $2.65 billion, up 66% from a year earlier, thanks to a growing middle class in this market.)
Some analysts speculate that AIG’s deal with PICC is just the first of many. A big move into Asia could provide AIG with, well, insurance against the next downturn stateside.
This story is from the January 14, 2013 issue of Fortune.