Steve Wevodau AIG
Part Of Continuing Effort To Reduce Investment Portfolio And Risk
NEW YORK–(BUSINESS WIRE)–AIG Financial Products Corp. (AIGFP), an AIG company (AIG), reported today that it has closed the sale of its interests in two transactions and related commodity hedges from its energy and infrastructure book of business for total net proceeds of $60.5 million. The purchaser was not disclosed.The two transactions, known as volumetric production payment (VPP) transactions, comprise limited-term overriding royalty interests entitling the VPP owner to a priority allocation of a fixed monthly production of oil and natural gas from designated producing reserves located in Texas, Louisiana and Mississippi.
The sale of these interests follows AIGFP’s January agreement to sell its commodity index business.
“These successful asset dispositions provide further evidence of the progress we are making in reducing AIGFP’s investment portfolio and overall risk profile,” said Gerry Pasciucco, AIGFP Interim Chief Operating Officer. As previously disclosed, AIGFP began the process of unwinding certain of its businesses and portfolios late last year.
American International Group, Inc. (”AIG”), a world leader in insurance and financial services, is the leading international insurance organization with operations in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. In addition, AIG companies are leading providers of retirement services, financial services and asset management around the world. AIG’s common stock is listed on the New York Stock Exchange, as well as the stock exchanges in Ireland and Tokyo.
Contact:
AIG
Communications:
Nick Ashooh, 212-770-3523
Nick.Ashooh@aig.com
or
Investor Relations:
Teri Watson, 212-770-7074
Teri.Watson@aig.com
Source: AIG Financial Products Corp.
Tags: AIG, Steve Wevodau AIG, Steven Wevodau AIG
Calling Bank of Montreal’s (BMO) C$375-million cash purchase of AIG’s Canadian insurance business “a bit of a steal,” Dundee Securities analyst John Aiken highlighted the fact that management’s calculated price to book was under 1.1 times. That compares to an average price to book multiple of 1.3x for Canada’s four publicly traded insurers.
More importantly given the current environment, however, is the fact that the acquisition of AIG Life of Canada will only have a modest impact on BMO’s capital ratios, Mr. Aiken told clients. The bank’s management anticipates a less than 15 point decline in its Tier 1 ratio. On a pro forma basis including recent capital issues and changes in risk-weighted assets, the analyst said BMO’s Tier 1 capital is above 10.2%, “still above the market’s apparently mandated 10% minimum threshold.”
Mr. Aiken said:
We view the acquisition favourably as it will benefit BMO by diversifying its revenues, gaining access to additional customers and add to earnings. However, this is not a transformational acquisition but does put the bank in good stead if the Canadian Bankers Association can lift the restriction of branch sales of insurance at some future point.
Nor does it change the analyst’s position on BMO, which he said has been leading the charge in credit deterioration among the Big 6 banks so far in the current downturn. So while this deal may help explain why BMO issued common equity in December, Mr. Aiken said it still does not justify the bank issuing shares below book value. He continues to rate BMO at “neutral” with a C$28 price target.
Desjardins Securities analyst Michael Goldberg notes that bank investments in insurance subsidiaries are not consolidated under Basel II rules. However, those rules will change in 2011 when 50% of an investment would be deducted from Tier 1 capital, which he said would produce a further 10 basis point reduction.
“BMO’s intent is to become a one-stop shop for its clients, allowing it to expand its insurance and wealth management offerings,” Mr. Goldberg said in a research note.
He views the acquisition as immaterial to near-term earnings but positive for optics. “For BMO, optics are relatively more important as its uncertain outlook is reflected in the stock’s 8.5% yield,” the analyst said. Nonetheless, he thinks the near-term impact will be positive, as optics should outweigh the small near-term fundamental impact. Mr. Goldberg rates BMO at “hold” with a C$44.50 price target.
He also believes that markdowns and the losses incurred aside, earnings in the Canadian banks are prolific. “The question remains: how large are the holes that are to be filled.”
RBC Capital Markets analyst Andre-Philippe Hardy noted that AIG’s life insurance business is small with earnings of C$48-million in 2009 and a loss of C$17-million in the last 12 months. This compared to BMO’s annual earnings of more than C$2-billion.
He told clients:
AIG’s range of individual life and annuity products allows BMO to broaden its range of insurance products, which has primarily been credit life and disability insurance, but the small scale will not have a large impact on the growth outlook.
Since Canadian banks cannot sell life insurance in their branches nor share databases with their life insurance subsidiaries, revenue synergies will be limited, Mr. Hardy said. However, BMO intends to offer insurance products as an extension of existing wealth management offering and can sell through its brokerage channel, he added.
RBC maintained its “underperform” rating on BMO. It views the bank’s stronger capital position positively but believes the bank has more exposure to “potentially problematic off-balance sheet assets” and to U.S. lending.
Tags: AIG, Bank of Montreal, Steve Wevodau AIG, Steve Wevodau Bank of Montreal, Steven Wevodau AIG, Steven Wevodau Bank of Montreal
The news is out about AIG’s (AIG) Canadian Life Insurance business, and despite the rumors on Bloomberg, BMO Financial Group (BMO) wound up as the winning bidder.
I was in a TV studio in mid-December, and one of folks sitting beside me asked me what I thought would “happen” with the BMO dividend. The premise of his question was understandable: with a 9% handle, won’t BMO management have to cut the dividend? Isn’t that what the market is telling us?
I suggested that he separate the actual implied yield from what is most likely to happen. The market might be pounding both the Bank of Montreal and the Bank of Nova Scotia (BNS) for a variety of reasons, but the fact that the dividend at BMO had hit 9% as a result, was an afterthought - if any PMs were thinking about it, at all. If BMO had to cut the dividend, it would be due to future unforeseen financial problems, not the simple fact that the stock was at $30 and the implied yield was 9%.
A short time later, BMO raised $1 billion of equity at $30, which confirmed that 1), the market hadn’t given up hope on the business, and 2), that BMO management must have known that selling stock, only to cut the dividend a few quarters later, would potentially be a potentially career limiting move, and were comfortable with where it stood.
Two more weeks have passed, and BMO is spending $375MM of that $1 billion on an important new business thrust. This is not the act of an institution, which is worried about free cash flow, or its ability to continue to pay the $2.80 dividend (now yielding 8.5%).
That’s why it is in the Decade of Daddy Mirror Fund.
Disclosure : I own BMO.
Tags: AIG, BMO Financial Group, Steve Wevodau AIG, Steve Wevodau BMO Financial Group, Steven Wevodau AIG, Steven Wevodau BMO Financial Group
By Leah SchnurrNEW YORK (Reuters) - Stock index futures pointed to a mixed open on Wednesday, which will bring to a close one of Wall Street’s worst years, but not before what is expected to be more bleak data on the labor market.
The Federal Reserve on Tuesday pushed forward with its effort to drive down mortgage costs, setting a target of buying $500 billion in mortgage-backed securities by mid-2009.
The move could bolster optimism as investors have been heartened by signs that the Fed that it is fighting aggressively to stave off the recession, including dropping interest rates to near zero.
“Things haven’t improved but at least the Fed has stopped things from appreciably worsening,” said Barry Ritholtz, chief market strategist at Fusion IQ in New York.
“Clearly most investors this year were not prepared for what happened and I think there’s a sigh of relief from those that were blindsided that the year is finally over.”
S&P 500 futures rose 3.10 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures climbed 12 points, while Nasdaq 100 futures were off 0.50 points.
The broad S&P 500 looks set to end 2008 down about 40 percent for the year, though it has recovered almost 18 percent since hitting an 11-year low on November 20.
Markets around the world have been pummeled as the collapse of the U.S. housing market evolved into a global credit crunch and economic slowdown infecting all sectors from financials to automakers to retailers.
Among the U.S. casualties include the bankruptcy, acquisition or government takeover of such household names as Bear Stearns, American International Group (NYSE:AIG - News), Washington Mutual, Merrill Lynch and Lehman Brothers.
AIG, which was rescued by the government soon after the collapse of Lehman, is prepared to ask the Federal Reserve to relax rules on its more than $60 billion disposals program to allow bidders to use a greater proportion of shares to pay for its assets, the Financial Times reported.
On the housing front, demand for U.S. mortgage applications was unchanged during the Christmas holiday week, holding the highest levels in more than five years with loan rates near record lows, an industry group said on Wednesday.
Bernard Madoff, alleged to have run a decades-long $50 billion Ponzi scheme, faces a Wednesday deadline to tell regulators how much he is worth and where his money and other assets are.
The Madoff scandal, which came to light earlier this month, has added to already negative sentiment in the markets. Scores of wealthy people, banks, universities and charities around the world say they are victims, but so far the exact amount of money is not known in what could be the largest fraud in Wall Street history.
On the economic front, weekly initial jobless claims are expected later in the morning, a day early due to the New Year’s holiday on Thursday.
On Tuesday, stocks climbed after the government expanded its bailout of the auto industry, encouraging hopes policy-makers will continue to take steps to minimize the severity of the year-long recession.
(Editing by Tom Hals)
Tags: AIG, Bernard Madoff, Lehman Brothers, Madoff scandal, Merrill Lynch, Steve Wevodau AIG, Steve Wevodau Washington Mutual, Steven Wevodau AIG, Steven Wevodau Washington Mutual, Washington Mutual
POSTED BY STEVEN WEVODAU
In our M&A Roundup for the week ended Dec. 28, the year ends with only 21 transactions being signed, garnering a mere $1.1 billion.
Roy Harris, CFO.com | US
December 29, 2008
Dealmaking continued to dwindle as 2008 neared its last days, with only American International Group’s $742-million sale of its Hartford Steam Boiler holding company to Germany’s Muenchener Rueckversicherung Gesellschaft Aktiengesellschaft topping the $300-million mark.
The 21 deals done during the week ended Sunday totaled only $1.1 billion, in terms of the value to North American companies.
There was plenty of worry concerning one huge deal potentially coming undone — Dow Chemical’s $15.3-billion purchase of coatings and electronic products maker Rohm & Haas Co. It was said to depend on a $17.4-billion petrochemical joint venture between Dow and Kuwait, which Kuwait now has cancelled. During the day, however, reports circulated that because the Rohm & Haas transaction is fully financed by a one-year bridge loan and convertible preferred investments by billionaire Warren Buffett’s Berkshire Hathaway and the Kuwait Investment Authority, the Dow-Rohm transaction still might be completed.
Another undone deal — of another sort — weighed on the stock market: billionaire investor Kirk Kerkorian’s reported sell-off of the rest of his Ford Motor holding, a 133.5-million-share transaction that Kerkorian had suggested in recent months would occur. That represented about 6.09 percent of the troubled carmaker’s shares.
Among smaller deals that were done last week, there was some interesting defense-industry consolidation. Esterline Technologies Corp., an aerospace manufacturer based in Bellevue, Wash., is paying $173 million for Racal Acoustics Ltd., a personal-communications equipment maker for defense and avionics businesses being sold by Harrow, UK-based ECI Partners LLP. Also, Carson, Calif.-based aircraft and space components maker Ducommun Inc. is buying Coxsackie, N.Y.-based DynaBil Industries Inc. from DeltaPoint Capital Management LLC and HSBC Capital (USA) Inc. for $47 million in cash and notes. DynaBil makes sheet metal components and assemblies for the aerospace industry.
For the year to date, the $1.06 trillion of merger-and-acquisitions transactions was sharply off from the $1.50 trillion of deals done in the record year of 2007. In numbers, 3,845 deals were struck this year, down from 5,058, according to data provided to CFO.com by mergermarket.
Muenchener Rueckversicherung Gesellschaft Aktiengesellschaft to buy HSB Group Inc. from American International Group Inc. for $742 million
German insurance company Munich Re Group paid cash to acquire the Hartford, Conn.-based holding company for Hartford Steam Boiler Inspection and Insurance Co. from New York City-based AIG, the insurance and financial services group. Terms called for Munich Re to assume HSB’s $76 million of outstanding capital securities. The transaction which is expected to complete in the first quarter of 2009.
Seller financial advisor: Blackstone Group; Goldman Sachs; JPMorgan; Morgan Stanley
Bidder financial advisor: Citigroup
Seller legal advisor: Sullivan & Cromwell
Bidder legal advisor: Dewey & LeBoeuf
St. Jude Medical Inc. to buy MediGuide Inc. from Elbit Systems Ltd. and Vitalife Life Sciences Venture for $283 million
St. Paul-based medical technology and services developer St. Jude agreed to acquire Haifa, Israel-based MediGuide, a developer of medical tracking and imaging devices, from Elbit and Vitalife, both based in Tel Aviv. The cash price is in addition to assumption of liabilities totaling $17 million. St. Jude Medical will pay $138 million of the total amount in December; $111 million in November 2009; and up to $34 million in April 2010. The transaction was completed on Dec. 22.
Seller financial advisor: Not Available
Bidder financial advisor: Banc of America Securities
Seller legal advisor: Amit, Pollak, Matalon & Co. Advocates and Notary; Morrison & Foerster
Bidder legal advisor: DLA Piper; Dorsey & Whitney; Gibson Dunn & Crutcher
Esterline Technologies Corp. to buy Racal Acoustics Ltd. from ECI Partners LLP for $173 million
Bellevue, Wash.-based Esterline, a manufacturing company serving the aerospace and defense markets, agreed to acquire private Racal, a Harrow, UK-based manufacturer of specialist personal communications equipment for the defense and avionics sectors. The seller, London-based ECI Partners, is a private equity firm. The deal is expected to close within 30 to 45 days.
Seller financial advisor: Hawkpoint Partners
Bidder financial advisor: Jefferies & Company
Seller legal advisor: Jones Day; SJ Berwin
Bidder legal advisor: Perkins Coie; Taylor Wessing
Wipro Technologies to buy Citi Technology Services Ltd. from Citigroup Inc. for $127 million
The Bangalore, India-based IT service company that is a subsidiary of Wipro Ltd. agreed to pay cash for Mumbai-based Citi Technology Services, a Citigroup unit that is engaged in infrastructure and technology outsourcing business. Terms call for Wipro and Citi to further agree to deliver Technology Infrastructure Services and Application Development and Maintenance services for a period of six years. The transaction is expected to close by March 2009.
Seller financial advisor: Citigroup
Bidder financial advisor: Not Available
Seller legal advisor: Not Available
Bidder legal advisor: Not Available
FMC Technologies Inc. to buy a 45-percent stake in Schilling Robotics LLC from Schilling Robotics Employee Stock Ownership Plan for $116 million
Houston-based FMC, which serves the energy, food processing, and air transportation industries, agreed to acquire the stake in Davis, Calif.-based Schilling from the ESOP in a transaction expected to close before Dec. 31.
Seller financial advisor: Not Available
Bidder financial advisor: Not Available
Seller legal advisor: Not Available
Bidder legal advisor: Not Available
Harmonic Inc. to buy Scopus Video Networks for $48 million
Ha’ayin, Israel-based digital-video developer and marketer Scopus definitively agreed to be acquired by Sunnyvale, Calif.-based Harmonic, which provides video products. Terms call for $5.46 cash per Scopus share, offering a premium of 41.9 percent and an implied equity value of about $76.4 million. The transaction is expected to close in the first quarter of 2009.
Seller financial advisor: Thomas Weisel Partners Group
Bidder financial advisor: Deutsche Bank
Seller legal advisor: Goldfarb, Levy, Eran, Meiri, Tzafrir & Co; Skadden Arps Slate Meagher & Flom (advising Thomas Weisel Partners Group)
Bidder legal advisor: Wilson Sonsini Goodrich & Rosati
Ducommun Inc. to buy DynaBil Industries Inc. from DeltaPoint Capital Management LLC and HSBC Capital (USA) Inc. for $47 million
Carson, Calif.-based aircraft and space components and assemblies maker Ducommun agreed to acquire the private, Coxsackie, N.Y.- based DynaBil, which makes sheet metal components and assemblies for aerospace industry, for cash and notes.
Seller financial advisor: Houlihan Lokey
Bidder financial advisor: Internal
Seller legal advisor: Internal
Bidder legal advisor: Internal
Piramal Healthcare Ltd. to buy MINRAD Inc. for $45 million
Orchard Park, N.Y.-based MINRAD, which is in the acute-care medical devices and pharmaceuticals business, definitively agreement to be acquired by Mumbai-based Piramal, a pharmaceutical and healthcare company. Terms call for each of 49.302 million MINRAD shares to be purchased for 12 cents in cash, a premium of 100 percent. In addition, Piramal agreed to acquire MINRAD’s 8-percent senior secured convertible notes, worth $30.84 million. The transaction is expected to close in the in the first quarter of 2009.
Seller financial advisor: Barclays Bank
Bidder financial advisor: UBS
Seller legal advisor: Desai & Diwanji; Hodgson Russ
Bidder legal advisor: Ashurst; Reed Smith; Waller Lansden Dortch & Davis
LaBarge Inc. to buy Pensar Electronic Solutions LLC for $45 million
St. Louis-based LaBarge, which provides electronic components for manufacturing, acquired private, Appleton, Wis.-based Pensar, which makes electronic circuit boards.
Seller financial advisor: William Blair & Company
Bidder financial advisor: Internal
Seller legal advisor: Internal
Bidder legal advisor: Internal
Tadano America Holdings Inc. to buy SpanDeck Inc. from William E. Mitchell for $38 million
Houston-based Tadano, a subsidiary of Tokyo-based Tadano Ltd., and a holding company with interests in making and selling crawler cranes, agreed to acquire Franklin, Tenn.-based SpanDeck, a maker and seller of crawler cranes with a telescoping booms. The seller is an American private investor, and the price includes assumption of debt.
Seller financial advisor: Not Available
Bidder financial advisor: Nomura Holdings
Seller legal advisor: Not Available
Bidder legal advisor: Not Available
source: mergermarket
Tags: AIG, American International Group, Steve Wevodau AIG, Steven Wevodau AIG
POSTED BY STEVEN WEVODAU
WEBWIRE – Friday, December 26, 2008
NEW YORK.- American International Group, Inc. (AIG) today announced that Maiden Lane III LLC (ML III), a financing entity recently created by the Federal Reserve Bank of New York (FRBNY) and AIG, has purchased an additional $16 billion in par amount of multi-sector collateralized debt obligations (Multi-Sector CDOs). As a result, the associated credit default swap contracts and similar instruments (CDS) written by AIG Financial Products Corp. (AIGFP) have been terminated.
ML III’s purchases of CDOs, in conjunction with the termination of related CDS, have mitigated AIG’s liquidity issues in connection with its CDS and similar exposures on Multi-Sector CDOs. To date, ML III has purchased approximately $62.1 billion in par amount of CDOs. The associated notional amounts of AIGFP CDS transactions have been terminated in connection with all of these purchases.
The purchase of the additional $16 billion of multi-sector CDOs was funded by a net payment to counterparties of approximately $6.7 billion and the surrender by AIGFP of approximately $9.2 billion in collateral previously posted by AIGFP to CDS counterparties in respect of the terminated CDS. In accordance with an agreement with ML III, AIGFP received payments aggregating approximately $2.5 billion from ML III in connection with the November and December purchases of Multi-Sector CDOs.
As previously announced, AIG provided $5 billion in equity funding, and the FRBNY has agreed to provide up to approximately $30 billion in senior funding, to ML III. Of this amount, approximately $ 24.3 billion has been funded to effect purchases of CDOs. ML III will collect cash flows from the assets it owns and pay a distribution to AIG for its equity interest once principal and interest owing to the FRBNY on the senior loan have been paid down in full. Upon payment in full of the FRBNY’s senior loan and AIG’s equity interest, all remaining amounts received by ML III will be paid 67 percent to the FRBNY and 33 percent to AIG.
AIGFP continues to analyze possible means of eliminating its exposures to the approximately $2.6 billion of remaining physically-settled CDS and approximately $9.7 billion of “cash-settled” or “pay-as-you-go” CDS in respect of protected baskets of reference credits (which may also include single name CDS in addition to securities and loans).
Tags: AIG, Steve Wevodau AIG, Steven Wevodau AIG
POSTED BY STEVEN WEVODAU
TOKYO, Dec 24 (Reuters) - U.S. insurer American International Group said on Wednesday that it would halt the merger between its two Japanese life insurers, AIG Star Life Insurance and AIG Edison Life Insurance.
AIG, once the world’s largest insurer, said in October that it would postpone the merger between AIG Star and AIG Edison, which was originally scheduled to take place on January 1, 2009.
But the merger process is now officially on hold as AIG plans to sell shares in AIG Star and AIG Edison along with American Life Insurance Co (ALICO) under its global restructuring plans, said AIG in a statement.
“The merger should reflect the intention of new shareholders,” AIG said in a statement.
AIG has been trying to sell assets after nearly collapsing in September and has said it plans to sell its businesses in Asia including Japan, Taiwan and the Philippines.
(Reporting by Mariko Katsumura)
Tags: AIG, American International Group, Steve Wevodau AIG, Steven Wevodau AIG
POSTED BY STEVEN WEVODAU
By Roel Landingin in Manila and Sundeep Tucker in Hong Kong
Published: December 23 2008 13:56 | Last updated: December 23 2008 13:56
AIG, the stricken US insurer, has moved a step closer to selling its Philippine unit after releasing a detailed information memorandum to potential buyers.
Philippine-American Life and General Insurance (Philamlife), is the nation’s largest insurer and analysts believe it could fetch up to $1bn.
AIG was rescued from bankruptcy in September by the US government and is selling assets to help pay back part of a $60bn loan and ease the burden of its $150bn federal bail-out.
A senior executive of Philamlife on Tuesday declined to disclose the recipients of the document, but said that discussions with potential buyers were being handled by Deustche Bank, which AIG has appointed to advise on the sale.
AIG set up Philamlife in 1947 and the local subsidiary has consistently remained the market leader in the country. It reported premiums of 227bn pesos and total assets of 170bn pesos in 2007.
A number of Philippine groups are known to have expressed interest in buying Philamlife, and have teamed up with global and regional companies to pursue the deal.
Banco de Oro Unibank, the country’s biggest lender by assets, has teamed up with Italy’s Generali and Malaysia’s Kuok Group to bid for Philamlife. Metropolitan Bank and Trust, the country’s second biggest lender, could form a consortium with Axa of France to make an offer.
AIG has recently announced several small divestments, including the sale of its private banking business and a stake in its Brazilian joint venture.
This week, it also sold the Hartford Steam Boiler Company to Munich Re, German reinsurer, for $742m. AIG bought HSB, a provider of plant and equipment breakdown insurance and consulting services, for $1.2bn in 2000.
The insurer is also in talks to offload other assets including its US personal lines business, which analysts have valued at up to $6bn.
However, AIG’s Asian assets are regarded as the company’s crown jewels and their sale could help repay a substantial part of the loan owing to the US taxpayer.
The Financial Times reported this month that several leading global insurers are in talks to acquire American Life Insurance, AIG’s Japanese-focused operation which has an estimated value of more than $10bn.
AIG is also planning to divest a large minority stake in AIA, a division with leading life insurance businesses across numerous Asian markets, which analysts say could yield up to $20bn.
Citigroup and Goldman Sachs will run the sale process, which is expected to formally begin next month.
Copyright The Financial Times Limited 2008
Tags: AIG, Steve Wevodau AIG, Steven Wevodau AIG
By Ieva M. Augstums, AP Business Writer
Insurer AIG sells Hartford Steam Boiler unit to German reinsurer Munich Re for $742 million
CHARLOTTE, N.C. (AP) — American International Group Inc. said Monday that it will sell its Hartford Steam Boiler unit to German reinsurer Munich Re for $742 million.The purchase price is considered well below HSB Group Inc.’s value — estimated at between $1 billion and $2 billion by the Financial Times — as the embattled New York-based insurer AIG is forced to sell off units to pay back a U.S. government bailout loan.
“These are financial conditions that we wouldn’t have dreamed of a short time ago,” Munich Re’s chief financial officer, Joerg Schneider, told reporters in a conference call.
An AIG spokesman could not be reached for immediate comment, but in a statement, HSB Group President and Chief Executive Officer Douglas Elliot said the deal will “offer our clients the reassurance that they’re looking for in today’s uncertain market environment.”
Munich Re said it planned to complete the purchase in the first quarter of 2009, and will assume $76 million of HSB’s outstanding capital securities.
HSB, based in Hartford, Conn., is a specialty unit focused on engineering insurance and inspection. It is a subsidiary of The Hartford Steam Boiler Inspection and Insurance Company.
Peter Roeder, a Munich Re board member responsible for U.S. business, said HSB was an attractive, low-risk investment because of its specialized business.
“The acquisition of HSB is a perfect fit for our U.S. strategy,” Roeder said. “It is another step in developing our position in high return specialized niche segments.”
Reinsurers sell backup coverage to other insurers, spreading risk so the system can handle large or widespread losses. Munich Re also operates Ergo, one of Germany’s biggest insurers, and Munich Reinsurance America Inc.
HSB had been rumored to be next on the selling block, as AIG sheds or sells some interest in units globally as a means to pay back the U.S. government’s $150 billion rescue package announced last month to help it pull through the credit crisis.
That rescue package came just two months after AIG was extended an $85 billion loan from the Federal Reserve. The original loan was replaced by the $150 billion package as it became apparent the insurer needed more funds.
AIG said in October it would sell off a number of business units to repay the original $85 billion government loan.
The company has not specifically disclosed the assets it would sell or the expected prices from the sales. However, AIG has said it plans to retain its U.S. property and casualty and foreign general insurance businesses, and plans to retain an ownership interest in its foreign life insurance operations.
As of Dec. 5, AIG had already sold interests in three businesses, and two weeks ago was said to be in the final stages of selling its U.S. personal lines business and one other operation.
Shares of AIG fell 7 cents to $1.53 in premarket trading after closing Friday at $1.60.
Shares of Munich Re were down 0.2 percent at 106.16 euros in Frankfurt trading Monday.
Associated Press Writer Patrick McGroarty contributed to this report from Berlin.
Tags: AIG, Hartford Steam Boiler, HSB, Steve Wevodau AIG, Steve Wevodau Hartford Steam Boiler, Steven Wevodau AIG, Steven Wevodau Hartford Steam Boiler
POSTED BY STEVEN WEVODAU
By Emi Emoto
TOKYO (Reuters) - A Japanese unit of Prudential Financial Inc (PRU.N: Quote, Profile, Research, Stock Buzz) plans to bid for two Japanese life insurers put up for sale by American International Group Inc (AIG.N: Quote, Profile, Research, Stock Buzz), people familiar with the matter said.
Saved from bankruptcy by a U.S. government bailout that has now ballooned to about $152 billion, AIG is looking to raise cash by shedding assets globally.
AIG’s push to sell assets was underscored by comments from chief executive Edward Liddy to the Wall Street Journal. Liddy said in an interview that AIG will try to renegotiate the terms of its rescue package if it can sell off assets to repay the government.
The insurer has said it will sell its three Japanese life insurance businesses — Alico Japan, AIG Edison Life Insurance Co and AIG Star Life Insurance Co.
Prudential unit Gibraltar Life Insurance Co will bid for AIG Edison and AIG Star, three sources told Reuters. The individuals spoke on condition of anonymity because the bidding process is not public.
The sale could fetch several hundred billion yen, the Nikkei business daily has reported.
Spokespeople for Prudential Financial and AIG in Tokyo declined to comment.
Although its population is shrinking, Japan is still seen as a growth market by some overseas financial firms.
Thanks to a culture of frugality, Japanese household savings are now estimated at a staggering $16 trillion. The desire to tap that pool has brought in big overseas financial firms such as HSBC Holdings Plc (HSBA.L: Quote, Profile, Research, Stock Buzz) and Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz).
Insurers have also been drawn by the country’s rapidly aging population. U.S. firm Aflac Inc (AFL.N: Quote, Profile, Research, Stock Buzz) has made an aggressive push in recent years, blanketing the country with advertisements for insurance products.
With insurance revenue of 407 billion yen ($4.37 billion), AIG Edison ranks No.22 in the Japanese industry. AIG Star ranks No.23 with revenue of 266 billion yen.
AIG has hired JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) and Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz) to advise it globally on asset sales, while Prudential is using Nomura Securities to help it weigh a bid for the AIG operations, sources said.
A deadline for the bidding has been set for December 9, the sources said. It was not immediately clear whether Gibraltar was the sole bidder or other potential buyers were involved.
($1=93.14 Yen)
Tags: Steve Wevodau AIG, Steve Wevodau Prudential, Steven Wevodau Prudential