The American company also said in an email sent to Reuters that it was "in active discussions" with the club regarding the current four-year $100 million deal, which runs until next May.
The English club, former home to David Beckham and current team of FIFA World Player of the Year Cristiano Ronaldo, has a huge global fan base, making it one of the top prizes in sports sponsorship.
"In October, AIG told Manchester United that it is not renewing its sponsorship," the company said in response to questions from Reuters.
"Further, AIG has been in active discussions with the club regarding the current contract, which expires in May 2010."
Once the world's biggest insurer by market value, AIG averted bankruptcy in September last year with an $85 billion federal bailout, which later swelled to about $152 billion.
"The process for the 2010 season has already started," Townsend said. "Sahara is one of a number of companies who have expressed an interest."
"We would be starting the process now to find a new sponsor to have the new shirts ready in time for our outlets and fans around the world."
Sahara, which sponsors the Indian cricket team, on Tuesday said it had received an "elaborate" sponsorship proposal from the club.
United's appeal is enhanced by its growing legion of fans in the largely untapped Asian market. The club has a series of exhibition games in China, Malaysia, South Korea and Indonesia planned for later this year.
