Bailed out U.S. insurer American International Group has chosen Deutsche Bank and Morgan Stanley as joint global coordinators for the more than $4 billion IPO of its Asian life insurance unit, banking sources said on Thursday.

The choice of Deutsche Bank came as a surprise to rivals who thought the top coordinators would be U.S. banks with strong ties to what was once the world's largest insurer.

The American International Assurance Co (AIA) offering will be the biggest Hong Kong IPO since April 2007 and a fee bonanza for the banks. Coordinators and bookrunners typically earn around 3 percent in fees -- so a $5 billion IPO could produce at least $150 million in fees split between the banks.

More than 30 banks submitted proposals to be global coordinators and bookrunners for the job.

Ninety-year-old, Hong Kong-based AIA, with more than $60 billion in assets under management, provides coverage to about 20 million customers -- close to a third of AIG's total customer base.

Morgan Stanley, which is advising the U.S. Federal Reserve on the AIG bailout, had been expected to be named as a global coordinator.

The bigger surprise is Deutsche Bank, as much of the speculation for the lead role had focused on U.S. banks that had previously worked with AIG and AIA. Citigroup and Goldman Sachs advised on the sale of AIA this year, that was ultimately pulled.

Deutsche Bank, though, does have a track record on major Asian IPOs.

It was appointed joint global coordinator of China Life's <601628.SS> $3.48 billion IPO in December 2003, and was among the banks that handled the $19.1 billion IPO of Industrial and Commercial Bank of China <601398.SS> in October 2006.

The sources involved in the AIA process cautioned that the formal structure of the joint coordinators and bookrunners had yet to be made official. Co-managing an IPO is another role, but usually comes without a fee.

The sources were not authorized to speak publicly about the IPO because the final decision on bookrunners had not been made.

The IPO is part of a larger divestiture program by AIG as it looks to repay U.S. taxpayers after a series of bailouts in which the federal government committed about $180 billion to AIG's rescue, including about $85 billion in loans.

The AIA IPO is expected in the first half of 2010 in Hong Kong. AIA and AIG would have separate boards and management teams.

(Reporting by Michael Flaherty; Editing by Jacqueline Wong, Chris Lewis and Ian Geoghegan)