March 12 (Bloomberg) -- Metropolitan Holdings Ltd., the life insurer with operations from South Africa to Nigeria, may offer property and casualty insurance to its more than 10 million customers through a venture with American International Group Inc.

Metropolitan and AIG, the world's largest insurer by assets, started a pilot program a month ago in South Africa to test the reaction of Metropolitan's customers, outgoing Chief Executive Officer Peter Doyle said in an interview from Cape Town today. AIG will underwrite the cover, which Metropolitan will sell, if the pilot is successful.

``It's a natural product extension,'' Doyle said. ``Our market has unique needs. You won't see anything big or public before the second half of this year.''

Metropolitan, which targets middle- and low-income earners, is expanding beyond life coverage by offering credit cards and health insurance to its customers, mostly in South Africa. It has invested in existing units in Kenya, Botswana, Ghana, Mauritius, Namibia and Lesotho, while expanding in Nigeria, to cut reliance on its home market.

The stock rose 3.6 percent to 13.65 rand in Johannesburg, for a market value of 7.6 billion rand ($970 million).

Mutual & Federal Insurance Co., the nation's second-largest property and casualty insurer, is currently up for sale, after owner Old Mutual Plc said talks with Royal Bafokeng Holdings Ltd., the investment holding company for a 300,000-strong tribal community in South Africa, failed over price. Old Mutual, which owns 77 percent of the insurer, said yesterday it's received interest from domestic and international buyers for the business.

`Can't Comment'

Doyle declined to comment on whether Metropolitan would make a bid for Mutual & Federal, which has a market value of about 6.5 billion rand. ``There is nothing to read into that statement other than I can't comment,'' he added.

Doyle steps down after 10 years as CEO next month and will be replaced by Wilhelm van Zyl, the head of Metropolitan's main South African life unit.

Metropolitan, South Africa's fourth-biggest publicly traded insurer, posted an 11 percent rise in second-half profit after record sales of life, health, savings and asset management products. So-called core earnings, excluding one-time items, jumped to 560 million rand from 503 million rand, according to calculations based on full-year earnings reported today.

Full-year core earnings, which the company uses as its main measure of profit, rose to 1 billion rand, or 1.42 rand a share, in the year to Dec. 31, from 847 million rand, or 1.13 rand, in 2006, it said. Client fund inflows more than quadrupled to 12.5 billion rand.

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