AIG nears $2bn sale of Taiwan unit

AIG nears $2bn sale of Taiwan unit

American International Group is on the verge of selling its Taiwanese life assurance unit with an announcement possible this week, according to people familiar with the matter.

The sale of Nan Shan, the country’s third-largest insurer, is expected to bring in more than $2bn, representing the largest divestment made by the stricken US insurer since it began shedding assets last year.

AIG behemoth is trying to regain its feet - Sep-16AIG and former executives agree arbitration - Sep-01Recovery rubs off on Freddie, Fannie, AIG - Aug-26New AIG chief to receive $7m pay - Aug-17Greenberg to contribute to settling AIG lawsuits - Aug-13Harvey Golub to become AIG chairman - Aug-07AIG is selling assets to repay about $100bn in debt and equity to the US government, which rescued it last year. In July, it sold its motor subsidiary to Zurich Financial Services for $2bn. According to people familiar with the situation, the remaining potential buyers are Chinatrust, a local financial conglomerate, and Primus Financial, a Hong Kong investment fund that specialises in banking and insurance.

“Barring anything unexpected, this process is all but finished and I expect a decision to be made in the next few days,” said one person familiar with the matter.

A victory for Primus over Chinatrust would be a significant coup for the fund, which was set up in May by three former Citigroup Asia executives, including Robert Morse, the bank’s former regional boss.

For Chinatrust, Taiwan’s biggest credit card issuer, Nan Shan would give an instant foothold in the insurance market and access to a sizable database of new clients.

AIG owns 95 per cent of Nan Shan, which has an 11 per cent market share. The ultimate winner, however, will face the challenge of regaining profitability in one of the world’s least-profitable insurance markets. Intense competition has in the past led many Taiwanese life assurers, including Nan Shan, to sell investment-linked policies with high guaranteed rates of return.

They are now losing money on those policies because the low interest-rate environment means there are few assets that yield the types of returns insurers have guaranteed their clients.

“Before, the insurers’ strategy was to use price to get market share,” said Jonathan Lee, a senior director at Fitch Ratings.

Taiwan’s life assurers earned an average of less than 1 per cent return on assets between 2003 and 2007, and that figure fell to negative 1.5 per cent last year because of the financial crisis, according to Fitch. Nan Shan has also in recent weeks faced increasing protests from its workers who are concerned that the company’s sale will affect their pension funds.

Nan Shan is not part of American International Assurance, AIG’s pan-Asian life assurance unit.

Hong Kong-based AIA, regarded as a jewel in AIG’s crown, has appointed banking advisers to assist with a $5bn-plus Hong Kong market listing expected next year.

Financial Times