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AIG Opts To Sell Taiwan Life Insurer For Over $2 Billion
2009-10-20
In an effort to raise cash in the aftermath of the U.S. government bailout last year, American International Group (AIG) has agreed to sell its Taiwan life insurance division, Nan Shan Life, for $2.15 billion to Primus Financial. Robert Morse of Primus and China Strategic Holdings, a Hong Kong investment group, will now control AIG's 97.5 percent stake in Nan Shan. The purchase will bring an end to the nearly five-month auction of this division. It is the largest divestiture of an AIG holding since the controversial government bailout of the failing company. However, it is unlikely to be the last as AIG turns to Asian interest in two other major assets. American Life Insurance Co., which generates a substantial portion of its revenue in Japan and Hong Kong based life insurer AIA, could be next on the chopping block.
Back in September of last year, in a deal brokered by the Federal Reserve, Congress reluctantly infused $80 billion in taxpayer money to save the troubled insurance giant. Even though some members of congress were not in agreement with the bailout itself, most agreed that AIG met the standard of "too big to fail". As the initial bailout proved insufficient and roughly $100 billion later, the U.S. now has an approximate 80 percent stake in New York-based AIG. In addition, the company's tab to taxpayers has grown to over $180 billion. This sale is an indication that AIG is sincere about the effort raise capital by selling off its more lucrative divisions. AIG's holdings are abundant and diverse. The company started in 1919 in Shanghai as a property/casualty insurer and grew into an expansive conglomerate owning assets that range from retirement and insurance businesses to a ski resort in Vermont.
Even though AIG is aggressively selling assets, current CEO Benmosche said that the company would wait to spin off profitable units until AIG could get a fair price. This auction hardly seems the "fair price" that investors and stockholders were banking on as AIG stock value soared last month amid such promises. However, AIG's troubles seem far from over. When major ratings agencies downgraded AIG's credit rating, some commercial policyholders exercised provisions that allowed them to cancel coverage. It remains to be seen if the company will be able to meet its obligation under the bailout agreement.
In his Sept. 15, 2009 issue of the Low Risk Newstrader, options guru Bob Weidenbaum summarizes the concern of many taxpayers, "Here is a company that has about $180 million of debt. It is forced to sell its income producing assets and probably has no hope of ever repaying Uncle Sam."
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In an effort to raise cash in the aftermath of the U.S. government bailout last year, American International Group (AIG) has agreed to sell its Taiwan life insurance division, Nan Shan Life, for $2.15 billion to Primus Financial. Robert Morse of Primus and China Strategic Holdings, a Hong Kong investment group, will now control AIG's 97.5 percent stake in Nan Shan. The purchase will bring an end to the nearly five-month auction of this division. It is the largest divestiture of an AIG holding since the controversial government bailout of the failing company. However, it is unlikely to be the last as AIG turns to Asian interest in two other major assets. American Life Insurance Co., which generates a substantial portion of its revenue in Japan and Hong Kong based life insurer AIA, could be next on the chopping block.
Back in September of last year, in a deal brokered by the Federal Reserve, Congress reluctantly infused $80 billion in taxpayer money to save the troubled insurance giant. Even though some members of congress were not in agreement with the bailout itself, most agreed that AIG met the standard of "too big to fail". As the initial bailout proved insufficient and roughly $100 billion later, the U.S. now has an approximate 80 percent stake in New York-based AIG. In addition, the company's tab to taxpayers has grown to over $180 billion. This sale is an indication that AIG is sincere about the effort raise capital by selling off its more lucrative divisions. AIG's holdings are abundant and diverse. The company started in 1919 in Shanghai as a property/casualty insurer and grew into an expansive conglomerate owning assets that range from retirement and insurance businesses to a ski resort in Vermont.
Even though AIG is aggressively selling assets, current CEO Benmosche said that the company would wait to spin off profitable units until AIG could get a fair price. This auction hardly seems the "fair price" that investors and stockholders were banking on as AIG stock value soared last month amid such promises. However, AIG's troubles seem far from over. When major ratings agencies downgraded AIG's credit rating, some commercial policyholders exercised provisions that allowed them to cancel coverage. It remains to be seen if the company will be able to meet its obligation under the bailout agreement.
In his Sept. 15, 2009 issue of the Low Risk Newstrader, options guru Bob Weidenbaum summarizes the concern of many taxpayers, "Here is a company that has about $180 million of debt. It is forced to sell its income producing assets and probably has no hope of ever repaying Uncle Sam."
