Insurers Set $17.8 Billion Stock Deal

In a merger of insurance giants, American International Group, a world leader in corporate insurance, agreed yesterday to buy SunAmerica Inc., a pioneer in selling investments for retirement, for stock valued at $17.8 billion.

The deal, one of the largest in the financial services industry, vaults American International Group into the rapidly growing business of variable annuities -- mutual funds with insurance that protects against market dips -- and gives SunAmerica a springboard to worldwide expansion through American International Group's offices in 130 countries.

The deal also brings together a pair of chief executives -- Maurice R. (Hank) Greenberg of American International Group and Eli Broad of SunAmerica -- who are among the most respected and admired in the insurance business. Both hold large stakes in their companies and are among the world's wealthiest people, with fortunes exceeding $1 billion each.

Mr. Greenberg is to continue as chairman and chief executive and Mr. Broad will become a member of the board of the merged company. Mr. Broad, whose personal wealth would jump more than $250 million in the transaction, will continue to direct SunAmerica from its headquarters in Los Angeles.

''It's a terrific fit,'' Alice D. Schroeder, an analyst at Paine Webber, said. ''It fills the biggest hole in A.I.G.'s product lineup and offers a platform that SunAmerica can instantly plug into its globalization strategy.''

Under the terms, SunAmerica shareholders will get 0.855 of one A.I.G. share for each SunAmerica share. Based on A.I.G.'s closing price of $94.625 Wednesday before the announcement, the deal is worth $17.8 billion.