Franklin Life Is Subject of Takeover Talks : Insurance: American General is in ‘serious discussions’ with American Brands for estimated $1.2-billion deal.

American Brands Inc. is negotiating to sell its life insurance unit to American General Corp., a Houston-based insurer.

The company said Tuesday that it is in “serious discussions” with American General over the possible sale of Franklin Life Insurance Co.

The Wall Street Journal, citing unnamed sources familiar with the negotiations, reported Tuesday that the estimated $1.2-billion deal would involve a combination of long-term debt and preferred shares.

Spokesmen for both companies declined further comment on the talks.

Analysts said Franklin Life would be a good fit for American General.

“Franklin Life is in middle-income (life insurance) markets and has an old block of business and a strong agency system, and both of those are of definite interest to American General,” said David Seifer, an insurance analyst at Donaldson Lufkin & Jenrette.

“American General is concentrating in middle-income markets, and to get a block of business and a compatible distribution system, I think that’s certainly part of their strategy.”

The talks concerning Franklin Life come amid American General’s hostile $2.6-billion offer for Unitrin Inc., a Chicago-based insurer. American General spokesman John Pluhowski said its talks with American Brands would not affect its Unitrin offer.

American General is a financial services company with assets of more than $45 billion. Its principal product lines are retirement annuities, consumer loans and life insurance.

American Brands is a consumer products holding company with businesses in tobacco, distilled spirits, hardware, home improvement, office and golf products.