American International Group Inc, which was saved by four US bailouts, will seek to sell shares in its Asian life insurance unit during the first quarter of 2010, four people with knowledge of the matter said.
The sale of American International Assurance Co may raise as much as $8 billion, two of the people said, asking not to be identified because the matter is confidential. That figure assumes selling about 30 per cent of the division, they said.
Chief Executive Officer Edward Liddy, aiming to pay back government debt that ballooned to $182.5 billion, has announced about $5.6 billion of asset sales since AIG’s first bailout in September. AIG has asked investment banks to submit proposals for a listing plan, including how to structure the sale, and their views on the valuation, before May 29, the people said.
“There will be appetite for this sale because you have limited options when investing in insurers with Asia-wide exposure,” said Chris Leung, a Hong Kong-based portfolio manager at Taifook Asset Management Ltd, which oversees $500 million. “Asian stock markets should start to recover in the first quarter of 2010.”
The Federal Reserve Bank of New York, one of the government’s main supervisors of AIG, is expected to nominate Morgan Stanley as one of the joint global coordinators of the IPO, one of the people said, citing a letter sent by Blackstone Group LP, which is advising AIG. The insurer plans to finish picking underwriters by mid-June, the people said.
Bonnie Wu, an AIA spokeswoman in Hong Kong, declined to comment, as did Morgan Stanley spokesman Nick Footitt.
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The New York-based insurer, once the world’s largest, was forced to shelve talks with potential corporate buyers of AIA in March because bids were too low, people familiar with the matter said at the time.
AIG, founded in Shanghai in 1919, announced this week it will accelerate efforts to list the unit on an Asian exchange, and separate AIA’s managers and board from the parent company.
Preliminary estimates value the sale at between $5 billion and $8 billion and the final deal size may change depending on AIA’s 2009 earnings, the people said.
AIA and American Life Insurance Co, known as Alico, are AIG’s biggest non-US life insurance units. AIA operates in China, India, Korea, Australia, Singapore, Malaysia, Thailand, Vietnam and Indonesia. The unit has more than 20 million customers and more than $60 billion of assets.
Alico, which AIG is also seeking to sell or take public, operates in more than 50 countries, including parts of Europe, Latin America, the Caribbean, the Middle East and Japan. Japan is Alico’s biggest market.
AIG plans to transfer its businesses in the Philippines and the Alico operations in Taiwan into AIA, the company said in a statement on May 18.
MetLife Inc made a preliminary offer of $11.2 billion for Alico, and Axa SA put in a bid that excluded the Japanese operations, three people familiar with the matter said in February.
AIG was first rescued in September with an $85 billion credit line after a liquidity squeeze caused by credit-default swaps the insurer sold to banks. The bailout expanded to $182.5 billion as the government sought to prevent losses at banks that did business with AIG.
AIA had attracted interest from Manulife Financial Corp, Prudential Plc and Temasek Holdings Pte, with all seeking to buy a stake, according to people with knowledge of the matter. The unit had an embedded value of about $20 billion, a person familiar with the valuation said on February 27. Embedded value estimates a company’s net worth excluding new business.
AIA, which has operated in Asia for 90 years, has 20,000 employees and 250,000 agents in markets spanning China to Australia, it said in the statement earlier this week. It sells life, accident and health insurance policies and private retirement planning and wealth management services, according to its Web site.
AIG shares fell 1.7 per cent to $1.78 in New York Stock Exchange composite trading on Wednesday. The stock has declined 95 per cent in the past year.