AIG Fire Sale Consumes Two More Businesses

By Antonio Perez
Antonio Perez
Antonio Perez
September 9, 2009 Updated: October 1, 2015

Logo of troubled insurer American International Group Inc. September 17, 2008 outside their office in the lower Manhattan area of New York. (Stan Honda/AFP/Getty Images)
Logo of troubled insurer American International Group Inc. September 17, 2008 outside their office in the lower Manhattan area of New York. (Stan Honda/AFP/Getty Images)
NEW YORK—When Robert Benmosche took the helm at troubled insurer American International Group, Inc. last month, he promised to pare down the fire sales held by his predecessor. 

Until now, that is. 

Last weekend, AIG sold two major businesses. Its external fund management unit was sold off to Hong Kong’s Pacific Century Group, which is controlled by billionaire Richard Li. On Monday, AIG auctioned off Taiwan’s Nan Shan Life Insurance business to Chinatrust Financial for $2.4 billion. 

Benmosche, a highly regarded former MetLife executive, promised that he would be “maximizing the value of the company’s assets and meeting all of our stakeholder obligations” as CEO, according to a company statement.

So far, he has preached restraint in selling off some of the company’s bigger-ticket items. He immediately stopped the sale of AIG’s broker-dealer last month, arguing that he needed time to review AIG’s restructuring plan to obtain better valuation for the company’s assets. 

Sales of noncore businesses aim to pay back more than $180 billion the U.S. federal government has invested in the insurance giant, which collapsed last fall during the financial crisis. This week's sales bring total divestitures to $9.8 billion year-to-date for the company.  

AIG’s asset management business fetched approximately $500 million, including cash of $300 million and future shares of carried interest worth $200 million. The advisory and asset management business was sold to Bridge Partners, L.P., a company controlled by Pacific Century Group, a Hong Kong-based private equity firm. 

The price tag was far short of the $800 million some bidders were discussing a few months ago, sources told the Wall Street Journal. But AIG felt that it received fair value. 

“After conducting an extensive and rigorous auction process, we concluded that this transaction provides fair value for AIG and achieves the greatest long-term stability and potential,” said AIG Senior Vice President Alain Karaoglan in a statement. 

The unit manages $88.7 billion in assets and operates in 32 countries, AIG said. 

The deal grants Li access to AIG’s wealthy clients in Asia.

The fund manages accounts holding stocks, bonds, private equity, and hedge fund of funds, according to a statement from AIG. Li is the son of Li Ka-Shing, the chairman of Hong Kong’s Hutchinson Whampoa Limited and Asia’s richest man. 

Taiwan Insurance Arm Sold Taipei, Taiwan-based AIG Nan Sha Life Insurance business became the largest Asian asset sold by AIG. Yesterday, Chinatrust Financial reportedly won the bidding with a T$80 billion ($2.4 billion) offer. Chinatrust is Taiwan’s largest credit card issuer. 

Primus Financial was also in the running to acquire the business, but dropped out after Chinatrust raised its bid. "Paying that much is suicidal," a source told Reuters, referring to Chinatrust's offer.

"It is 100 percent certain Primus is not in the game any more." AIG initially valued Nan Sha at $2 billion. If the deal closes at $2.4 billion, AIG would make a $400 million profit. 

Early last month, AIG sold its Hong Kong consumer finance business to China Construction Bank Corp. for $627 million.  Benmosche promised AIG’s board of directors that he would not sell off the company’s assets at any price.

But AIG is under severe pressure to repay more than $80 billion in loans from the federal government. Credit Suisse Group on Tuesday cut its rating on AIG’s stock to “underperform,” citing that pressures to sell assets have eroded shareholder value.

 

Antonio Perez
Antonio Perez