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AIG Mulls IPO For Its Asia Arm AIA After Failed Strategic Sale Plans

20 May, 2009

Troubled US insurer AIG is planning to take public its Asian life-insurance arm AIA in an Asian stock exchange (most likely the Hong Kong market) in 2010. This comes after efforts to sell it to a strategic acquirer (including some Indian bidders) and some individual investors from middle east did not bear fruit. It has hired Blackstone Group to advise on the reorganisation and the public float on an Asian exchange.

AIA, which includes most of AIG’s life business in Asia (including its two 74:26 JVs with Tatas in India but excluding the Japanese business), is said to have an embedded value of $20 billion plus. There are indications that AIG is looking to sell around a fifth of its shares to the public to raise over $5 billion valuing the firm at around $25 billion. Earlier Indian bidders were looking at a bargain purchase of AIA at an expected price of $5-6 billion.

The IPO in Hong Kong (if it finally happens there although there has been no official statement to that effect) would diversify the South East Asian exchange’s heavy tilt towards Chinese firms. The AIA IPO could be one of the biggest flotations in Hong Kong since October 2006 offering of Industrial and Commercial Bank of China which raised $16.06 billion.

Earlier Attempts To Sell AIA

Among those who were in the race to acquire the Asian insurance business of AIG included Reliance ADAG (reportedly approached by Citibank, acting on behalf of AIA) and Tatas. But sources told VCCircle that the prospective Indian acquirers backed out early this year and some middle east investor was leading the race to buy the unit.

The move is part of plans to sell property and business units to repay the US government which bailed out the insurance giant after the credit-default swaps threatened to sink AIG. AIG has already struck deals to raise about $4.4 billion selling assets such as a US auto insurer, an equipment guarantor and a bank focused on wealthy clients in Asia, and operations in Brazil and Thailand.

The Asian insurance arm, AIA has more than 20 million customers with assets of over $60 billion in 13 markets in Asia. It has been present in Asia for 90 years having 20,000 employees and 250,000 agents. AIA sells life, accident and health insurance policies besides private retirement planning and wealth management services.

Other Assets

Its two Indian insurance JVs with Tatas are most likely to be excluded from the public float. Tatas have reportedly been looking to buyout AIG’s stake in the Indian JVs after the credit crises sent rumours of AIG going bankrupt.

Meanwhile, AIG has also reportedly taken steps to sell its operating life-insurance unit in Taiwan–Nan Shan Life Insurance Co (the second largest life insurer by gross premiums after Cathay Life Insurance) either to a strategic acquirer or through a public float. At the end of March 09, Nan Shan had a book value of around $ 2.64 billion.

AIG also plans to bring its units in the Philippines and the Alico business in Taiwan (currently separate unit from AIA) into AIA. AIG had earlier scrapped a separate sale of its Philippine life insurance unit in March and made it part of the AIA group. AIG in March suspended talks to sell Alico and AIA into trusts. Alico, which has operations in more than 50 countries and whose biggest market is Japan, and AIA are AIG’s biggest non-US life insurance units.


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AIG Mulls IPO For Its Asia Arm AIA After Failed Strategic Sale Plans

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