* Buyer group formally ends deal to buy Nan Shan unit
* China Strategic says unlikely to bid again; shares tumble
* New sale seen most likely, IPO a possibility
* Taiwan's Chinatrust reaffirms interest (Recasts with companies' and analyst's comments)
By Faith Hung and Jonathan Standing
TAIPEI, Sept 21 (Reuters) - AIG is sure of at least one bidder for its Taiwan Nan Shan Life unit should it put it back on the market, with Chinatrust Financial reaffirming its interest on Tuesday after the original buyers pulled out.
China Strategic and Hong Kong fund Primus Financial, the original buyer group, formally ended their $2.2 billion bid on Monday after Taiwan's regulators had blocked it at the end of August.
AIG is widely expected to put Nan Shan, Taiwan's No.3 insurer by market share with T$1.5 trillion ($47 billion) in assets, back on sale as it seeks to repay U.S. government funds following its bailout during the global financial crisis.
"We want to, and need to know what AIG's next move will be," Chinatrust President Daniel Wu told Reuters.
"We would bid for Nan Shan by ourselves ... via either selling shares or bonds."
AIG's Taipei-based media relations company said on Tuesday that the insurer was "evaluating its options with respect to its ownership of Nan Shan".
China Strategic's chief executive, Raymond Or, told Reuters that it was too early to say whether it would consider bidding again, but said he would have to assess whether a fresh bid would have any chance of success.
"If there is no chance, then there is no point in spending time and money," Or said.
"Currently I would think it is better for China Strategic to move on."
Primus Financial declined to comment.
Shares of China Strategic dropped over 8 percent in morning trading and trimmed their losses to end 4.8 percent down at HK$0.295 while the Hang Seng Index was nearly flat.
Last month Taiwan regulators blocked the bid from China Strategic, a battery maker, and Primus, saying the two did not have experience in the insurance industry and lacked the ability to raise capital for future operations.
The buyers did not take the option of appealing the ruling, which lawyers said would have been unlikely to succeed.
FAILED SALE
The sale was the second failed attempt in Asia by AIG to sell assets to repay billions of U.S. taxpayer dollars used to bail out the company. In May, the $35.5 billion sale of its American International Assurance (AIA) unit to Britain's Prudential Plc fell through.
The U.S. insurer now plans to list AIA in Hong Kong on Oct. 29 in a $15 billion float, the biggest ever in Hong Kong and also the biggest ever insurance float.
It was not likely to take that option for Nan Shan, analysts said.
"It would be in AIG's best interest to launch another bid," said an analyst at an European-based securities house. "An IPO of Nan Shan would simply take too much time and get too complicated."
In addition to Chinatrust, Fubon Financial Holding has expressed interest in buying Nan Shan..
Cathay Financial may also be interested, analysts have said.
A source with direct knowledge of the sale process told Reuters earlier this month that regulators were unlikely to take issue with bids from Fubon or Cathay, either alone or with partners such as private equity companies.
But they would be wary of a Chinatrust bid, because the firm, Taiwan's biggest credit card issuer, is heavily leveraged.
All three were losing bidders in the original sale of Nan Shan last October. (Editing by Chris Lewis and Muralikumar Anantharaman)