AIG, MetLife Agree on $15.5 Billion Deal for Asian Life Insurer
March 8, 2010 – Officials for taxpayer-rescued American International Group (AIG) today announced they have finalized a $15.5 billion deal to sell the insurer’s Asia-based life insurance subsidiary to MetLife.
The deal for AIG’s American Life Insurance Company, popularly called “Alico,” is the second major sale announced by AIG officials during the past week and means the two transactions combined will allow the insurer to pay down about $51 billion of its remaining $102 billion in debt remaining from AIG’s $182.5 billion, taxpayer-backed federal debt. AIG last week announced a $35.5 billion deal to sell its American International Assurance firm to Prudential.
Initially planned to be concluded by the end of February, the deal for Alico was put on hold while MetLife officials look into potential federal tax issues related to how Alico conducts its business overseas. Headquartered in Delaware but primarily doing business in Asia, Alico officials routinely withhold federal taxes from life insurance distributions made to its U.S.-based customers. But because Alico does most of its business overseas, the firm does not withhold federal taxes from distributions to non-U.S. citizens living in other nations.
Concerned U.S. officials might take exception to Alico’s tax-withholding methods, officials for MetLife and AIG are seeking a clarification on the matter from the U.S. Internal Revenue Service. Company officials say the request for a clarification from federal officials is more of a formality and likely won’t delay the potential sale occurring by the end of the month. Selling Alico for $15.5 billion would be the second-largest transaction done by AIG as company officials attempt to repay its staggering debt to U.S. taxpayers.
Alico mostly does business overseas in 50 nations and is one of the largest life insurance companies in lucrative, emerging Asian markets. Industry analysts say $15.5 billion is a large amount to pay for a company valued at about $4 billion in 2008, but Alico has a large share of lucrative emerging life insurance markets in China and other parts of Asia.
The deal means the Federal Reserve Bank of New York would get about $9 billion as partial reimbursement for the taxpayer-funded bailout of the nearly bankrupted insurer in 2008. AIG would retain the remaining $6 billion. The $9 billion would be used to buy back preferred shares of AIG stock the federal government owns as collateral for rescuing the ailing insurer in 2008.
Formerly the world’s largest insurance company, AIG became the world’s most indebted insurer after federal officials last year agreed to extend the company an $85 billion loan in exchange for an 80 percent share of company stocks. Federal officials said allowing AIG to go bankrupt would have a devastating impact on U.S. and international financial markets and later revised lending terms, making it a $153 billion loan with a lower interest rate and longer repayment period.
Federal Tax Issue Puts Brakes on AIG, MetLife Deal
Feb. 18, 2010 – A $15 billion deal for the sale of a leading Asia-based insurance company being negotiated between MetLife and American International Group (AIG) officials has hit a tax-related obstacle.
Initially planned to be concluded by the end of February, the deal for AIG’s subsidiary American Life Insurance Company, popularly known as “Alico,” has been puts on hold while MetLife officials look into potential federal tax issues related to how Alico conducts its business overseas. Headquartered in Delaware but primarily doing business in Asia, Alico officials routinely withhold federal taxes from life insurance distributions made to its U.S.-based customers. But because Alico does most of its business overseas, the firm does not withhold federal taxes from distributions to non-U.S. citizens living in other nations.
Concerned U.S. officials might take umbrage at Alico’s practice, officials for MetLife and AIG are seeking a clarification on the matter from the U.S. Internal Revenue Service, Reuters reported yesterday. Company officials say the request for a clarification from federal officials is more of a formality and likely won’t delay the potential sale occurring by the end of the month. Selling Alico for $15 billion would be the largest single transaction done by AIG as company officials attempt to repay its staggering debt to U.S. taxpayers.
Alico mostly does business overseas in 50 nations and is one of the largest life insurance companies in lucrative, emerging Asian markets. Industry analysts say $15 billion would be a large amount to pay for a company valued at about $4 billion in 2008, but Alico has a large share of lucrative emerging life insurance markets in China and other parts of Asia. If MetLife does purchase Alico from AIG, the Federal Reserve Bank of New York would get about $9 billion as partial reimbursement for the taxpayer-funded bailout of the nearly bankrupted insurer in 2008. AIG would retain the remaining $6 billion.
The $9 billion would be used to buy back preferred shares of AIG stock that the federal government received as collateral for rescuing the ailing insurer in 2008. AIG officials also would allocate $16 billion to the Federal Reserve Bank of New York from the proceeds from the expected initial public offering of AIG’s Asian-based life insurance unit, American International Assurance (AIA), on the Hong Kong stock exchange later this year.
Formerly the world’s largest insurance company, AIG became the world’s most indebted insurer after federal officials last year agreed to extend the company an $85 billion loan in exchange for an 80 percent share of company stocks. Federal officials said allowing AIG to go bankrupt would have a devastating impact on U.S. and international financial markets and later revised lending terms, making it a $153 billion loan with a lower interest rate and longer repayment period.
Under the new plan, the Federal Reserve provided AIG $60 billion in loans and the U.S. Treasury another $40 billion so company officials could buy up preferred stock. Federal officials also approved $53 billion to purchase the company’s risky mortgage-backed assets and other debt contracts.
MetLife, AIG Officials Mulling Terms for Asian Life Insurance Unit
Feb. 11, 2010 – Apparently having reached a tentative selling price of about $15 billion to acquire Asian-based American Life Insurance Company (Alico) from the American International Group (AIG), MetLife officials reportedly are offering about $8 billion in company shares as partial compensation.
Several news reports indicate MetLife officials want to give AIG a combination of common and preferred shares of MetLife stock totaling about $8 billion with the rest paid in cash. MetLife has access to about $5 billion in financing from several large international banks, including the Bank of America, JPMorgan Chase, Credit Suisse and Deutsche Bank, Bloomberg News reported.
MetLife officials view AIG’s Alico subsidiary as a good way to gain a large share of the growing Asian life insurance market. But several credit ratings firms have warned a deal weakening MetLife’s financials would result in credit downgrades for the life insurer. MetLife officials contend they only would complete a transaction beneficial for the company and its shareholders.
“Because MetLife is financially strong and has a deep management team, we are in a very good position to pursue acquisitions that are strategic and would accelerate our long-term growth,” company chairman C. Robert Henrikson said last week. “If we reach an agreement, it will be because the transaction meets our criteria for acquisitions, including having the potential to generate long-term value for both shareholders and customers.”
Although headquartered in the United States, Alico primarily does its business overseas in 50 nations and is one of the largest life insurance companies in lucrative, emerging Asian markets. A deal likely will be finalized by the end of February, according to recent reports in the Wall Street Journal and New York Times.
AIG’s current top executive, Robert Benmosche, previously was the chief executive officer for MetLife. Benmosche has said he would not use his former position at MetLife to AIG’s advantage, but MetLife is one of the few companies with sufficient assets to obtain the capital necessary for such a large transaction. Industry analysts say $15 billion would be a large amount to pay for a company valued at about $4 billion in 2008, but Alico has a large share of lucrative emerging life insurance markets in China and other parts of Asia.
If MetLife does purchase Alico from AIG, the Federal Reserve Bank of New York would get about $9 billion as partial reimbursement for the taxpayer-funded bailout of the nearly bankrupted insurer in 2008. AIG would retain the remaining $6 billion.
The $9 billion would be used to buy back preferred shares of AIG stock that the federal government received as collateral for rescuing the ailing insurer in 2008. AIG officials also would allocate $16 billion to the Federal Reserve Bank of New York from the proceeds from the expected initial public offering of AIG’s Asian-based life insurance unit, American International Assurance (AIA), on the Hong Kong stock exchange later this year.
MetLife Shares Fall After Confirming Bid for AIG Unit
Feb. 4, 2010 – Shares in life insurer MetLife declined slightly during recent trading after the life insurer earlier this week confirmed its interest in acquiring an overseas American International Group (AIG) subsidiary and reporting its 2009 fourth quarter earnings.
MetLife traded at a high of nearly $36.60 on the New York Stock Exchange during trading Feb. 2, but confirmation of MetLife’s bidding for AIG’s Asian-based subsidiary, American Life Insurance Company, popularly known as “Alico,” sent shares down to a low of $34.35 per share before rebounding slightly the next day. MetLife shares closed at $34.73 after today’s trading.
Several credit ratings firms have warned a deal weakening MetLife’s financials would result in credit downgrades, but MetLife officials say they only would complete a transaction beneficial for the company and its shareholders.
“Because MetLife is financially strong and has a deep management team, we are in a very good position to pursue acquisitions that are strategic and would accelerate our long-term growth,” company chairman C. Robert Henrikson said in a prepared statement. “If we reach an agreement, it will be because the transaction meets our criteria for acquisitions, including having the potential to generate long-term value for both shareholders and customers.”
MetLife officials in the federal filing also reported net income of $289 million and $12 billion in revenue for the fourth quarter of 2009. The firm reported $954 million in net income and $14 billion in revenue during the same period in 2008.
Several recent news reports claim AIG nearly has secured a deal to sell its Delaware-based Alico life insurance unit to MetLife for up to $15 billion. Although headquartered in the United States, the American Life Insurance Company (Alico) primarily does its business overseas in 50 nations and is one of the largest life insurance companies in lucrative, emerging Asian markets. A deal likely will be finalized by the end of February, according to recent reports in the Wall Street Journal and New York Times.
AIG’s current top executive, Robert Benmosche, previously was the chief executive officer for MetLife. Benmosche has said he would not use his former position at MetLife to AIG’s advantage, but MetLife is one of the few companies with sufficient assets to obtain the capital necessary for such a large transaction. Industry analysts say $15 billion would be a large amount to pay for a company valued at about $4 billion in 2008, but Alico has a large share of lucrative emerging life insurance markets in China and other parts of Asia.
If MetLife does purchase Alico from AIG, the Federal Reserve Bank of New York would get about $9 billion as partial reimbursement for the taxpayer-funded bailout of the nearly bankrupted insurer in 2008. AIG would retain the remaining $6 billion.
The $9 billion would be used to buy back preferred shares of AIG stock that the federal government received as collateral for rescuing the ailing insurer in 2008. AIG officials also would allocate $16 billion to the Federal Reserve Bank of New York from the proceeds from the expected initial public offering of AIG’s Asian-based life insurance unit, American International Assurance (AIA), on the Hong Kong stock exchange later this year.
Fed Gets $9 Billion if MetLife Buys AIG Subsidiary
Jan. 21, 2010 – Reports of a pending sale of a lucrative, Asian-based life insurance unit to MetLife by the American International Group (AIG) could mean U.S. taxpayers will recoup up to $9 billion of their involuntary rescue of the nearly bankrupted insurance giant.
Several recent news reports claim AIG nearly has secured a deal to sell its Delaware-based Alico life insurance unit to MetLife for up to $15 billion. Although headquartered in the United States, the American Life Insurance Company (Alico) primarily does its business overseas in 50 nations and is one of the largest life insurance companies in lucrative, emerging Asian markets. A deal likely will be finalized by the end of February, according to recent reports in the Wall Street Journal and New York Times.
AIG’s current top executive, Robert Benmosche, previously was the chief executive officer for MetLife. Benmosche has said he would not use his former position at MetLife to AIG’s advantage, but MetLife is one of the few companies with sufficient assets to obtain the capital necessary for such a large transaction. Industry analysts say $15 billion would be a large amount to pay for a company valued at about $4 billion in 2008, but Alico has a large share of lucrative emerging life insurance markets in China and other parts of Asia.
If MetLife does purchase Alico from AIG, the Federal Reserve Bank of New York would get about $9 billion as partial reimbursement for the taxpayer-funded bailout of the nearly bankrupted insurer in 2008. AIG would retain the remaining $6 billion.
The $9 billion would be used to buy back preferred shares of AIG stock that the federal government received as collateral for rescuing the ailing insurer in 2008. AIG officials also would allocate $16 billion to the Federal Reserve Bank of New York from the proceeds from the expected initial public offering of AIG’s Asian-based life insurance unit, American International Assurance (AIA), on the Hong Kong stock exchange later this year.
Formerly the world’s largest insurance company, AIG became the world’s most indebted insurer after federal officials last year agreed to extend the company an $85 billion loan in exchange for an 80 percent share of company stocks. Federal officials said allowing AIG to go bankrupt would have a devastating impact on U.S. and international financial markets and later revised lending terms, making it a $153 billion loan with a lower interest rate and longer repayment period.
Under the new plan, the Federal Reserve provided AIG $60 billion in loans and the U.S. Treasury another $40 billion so company officials could buy up preferred stock. Federal officials also approved $53 billion to purchase the company’s risky mortgage-backed assets and other debt contracts.
AIG is attempting to sell off its overseas life insurance units and other subsidiaries to repay up to $60 billion in loans this year. Company officials intend to focus future business on property and casualty insurance markets and maintain a minority financial interest in some profitable overseas ventures.
AIG Plans Hong Kong IPO for Subsidiary Partly Owned by U.S. Taxpayers
Dec. 3, 2009 – Soon after allocating billions of dollars worth of shares in subsidiary firms to the federal government in exchange for debt forgiveness, officials for taxpayer-rescued insurance giant American International Group (AIG) today announced plans to list one of the life insurance subsidiaries on the Hong Kong stock exchange.
In exchange for forgiving $25 billion in debt to U.S. taxpayers, the Federal Reserve Bank of New York was given preferred shares in AIG’s Asian-based life insurance subsidiaries, American International Assurance (AIA) and the American Life Insurance Company (ALICO). Dow Jones Newswires recently reported AIG officials would offer up to 33 percent of AIA on the Hong Kong Stock Exchange in order to raise somewhere between $5 billion to $10 billion during the first quarter of 2010.
In exchange for preferred shares of the life insurance units, the Federal Reserve Bank of New York forgave $25 billion owed by AIG to U.S. taxpayers. AIG now owes some $17 billion to taxpayers through its lending agreements with Federal Reserve officials but still has access to up to $35 billion in potential taxpayer loans. AIG’s chief executive officer said the move underscores the firm’s commitment to repaying its debt while making the subsidiary units more attractive to potential buyers.
AIG officials initially disclosed the then-pending business transfer while reworking terms of its nearly $183 billion taxpayer bailout. The transfer enables AIG to reduce its debts while awaiting a recovery among credit markets, which has made it hard for AIG officials to find buyers and get a fair value for its assets while attempting to repay its federal debt.
Formerly the world’s largest insurance company, AIG became the world’s most indebted insurer after federal officials last year agreed to extend the company an $85 billion loan in exchange for an 80 percent share of company stocks. Federal officials said allowing AIG to go bankrupt would have a devastating impact on U.S. and international financial markets and later revised lending terms, making it a $153 billion loan with a lower interest rate and longer repayment period.
Under the new plan, the Federal Reserve provided AIG $60 billion in loans and the U.S. Treasury another $40 billion so company officials could buy up preferred stock. Federal officials also approved $53 billion to purchase the company’s risky mortgage-backed assets and other debt contracts.
AIG is attempting to sell off its overseas life insurance units and other subsidiaries to repay up to $60 billion in loans this year. Company officials intend to focus future business on property and casualty insurance markets and maintain a minority financial interest in some profitable overseas ventures.
AIG has raised more than $2 billion through the sale of several subsidiary units. Industry analysts say the insurer could raise up to $50 billion through the sales of AIG’s U.S.-based and overseas life insurance units and retirement savings units.
Fed Goes into Business with AIG for $25 Billion
Dec. 2, 2009 – Having already taken an involuntary plunge into the auto industry as owners of General Motors, U.S. taxpayers now are the involuntary proprietors of two overseas life insurance units.
Officials for struggling insurer American International Group (AIG) this week announced they have closed two deals with the Federal Reserve Bank of New York in which the Federal Reserve Bank gets control of AIG’s Asia-based American International Assurance Company (AIA) and the American Life Insurance Company (ALICO), which is headquartered in Delaware but primarily does business in Asia.
In exchange for preferred shares of the life insurance units, the Federal Reserve Bank of New York forgave $25 billion owed by AIG to U.S. taxpayers. AIG now owes some $17 billion to taxpayers through its lending agreements with Federal Reserve officials but still has access to up to $35 billion in potential taxpayer loans. AIG’s chief executive officer said the move underscores the firm’s commitment to repaying its debt while making the subsidiary units more attractive to potential buyers.
“Today’s announcement that we have reduced our debt to the Federal Reserve Bank of New York by $25 billion sends a clear message to taxpayers: AIG continues to make good on its commitment to pay the American people back,” said AIG’s top executive, Bob Benmosche, when announcing the deal yesterday. “Moreover, these transactions position AIA and ALICO, two terrific, unique international life insurance businesses, for the future.”
AIG officials are weighing several possibilities for unloading the two international life insurance firms, including making an initial public offering or selling them to third parties.
U.S. Senator Chuck Grassley (R-Iowa) criticized the move by the Federal Reserve, saying it endangers U.S. taxpayers.
“Exchanging debt for equity still leaves taxpayer dollars at substantial risk,” Grassley said in a letter to U.S. Treasury Secretary Timothy Geithner. The move means taxpayers could lose billions of dollars, Grassley contends.
AIG officials initially disclosed the then-pending business transfer while reworking terms of its nearly $183 billion taxpayer bailout. The transfer enables AIG to reduce its debts while awaiting a recovery among credit markets, which has made it hard for AIG officials to find buyers and get a fair value for its assets while attempting to repay its federal debt.
Formerly the world’s largest insurance company, AIG became the world’s most indebted insurer after federal officials last year agreed to extend the company an $85 billion loan in exchange for an 80 percent share of company stocks. Federal officials said allowing AIG to go bankrupt would have a devastating impact on U.S. and international financial markets and later revised lending terms, making it a $153 billion loan with a lower interest rate and longer repayment period.
Under the new plan, the Federal Reserve provided AIG $60 billion in loans and the U.S. Treasury another $40 billion so company officials could buy up preferred stock. Federal officials also approved $53 billion to purchase the company’s risky mortgage-backed assets and other debt contracts.
AIG is attempting to sell off its overseas life insurance units and other subsidiaries to repay up to $60 billion in loans this year. Company officials intend to focus future business on property and casualty insurance markets and maintain a minority financial interest in some profitable overseas ventures.
AIG has raised more than $2 billion through the sale of several subsidiary units. Industry analysts say the insurer could raise up to $50 billion through the sales of AIG’s U.S.-based and overseas life insurance units and retirement savings units.
AIG Unloading Minority Stake in India Life Insurer
AIG Unloading Minority Stake in India Life Insurer
Sept. 25, 2009 – Officials for ailing insurer American International Group (AIG) likely will sell the insurer’s 26 percent stake in India-based Tata-AIG Life Insurance, according to recent news reports. The buyer would be AIG’s majority partner in the joint venture, global giant Tata.
India’s Tata owns the remaining 74 per cent of the joint life insurance enterprise and has hired auditing firm KPMG to work out terms of the proposed deal. AIG reportedly could get up to $170 million for its stake in Tata-AIG Life Insurance
Founded in 2001, Mumbai-headquartered Tata-AIG Life has grown into one of the larger life insurance providers in India with about 200 offices dispersed across the nation and more than $2 billion in assets. Although AIG officials are unloading their minority interest in Tata-AIG Life Insurance, the recently taxpayer-rescued firm will continue another joint venture with Tata, the Tata-AIG General Insurance Company.
The potential sale is part of AIG’s previously announced plan to unload most or all of its life insurance businesses and focus on property and casualty insurance markets and other sectors as the federally rescued insurer works to repay its staggering debt to U.S. taxpayers. AIG officials have been trying to sell its Asia-based American International Assurance, which is one of the largest life insurance and financial services companies operating in Asia with more than $60 billion in assets and offices in Australia, Brunei, China, Hong Kong, India, Indonesia, Macau, Malaysia, New Zealand, Singapore, South Korea, Thailand and Vietnam. But tightened credit markets during a global recession have hampered AIG’s restructuring efforts.
Formerly the world’s largest insurance company, AIG became the world’s most indebted insurer after federal officials in September 2008 agreed to extend the company an $85 billion loan in exchange for an 80 percent share of company stocks. Federal officials said allowing AIG to go bankrupt would have a devastating impact on U.S. and international financial markets and later revised lending terms, making it a $153 billion loan with a lower interest rate and longer repayment period.
Under the December revision, the Federal Reserve provided AIG $60 billion in loans and the U.S. Treasury another $40 billion so company officials could buy up preferred stock. Federal officials also approved $53 billion to purchase the company’s risky mortgage-backed assets and other debt contracts. The latest bailout adjustment boosts its total value to nearly $183 billion.
AIG is attempting to sell off its overseas life insurance units and other subsidiaries to repay up to $60 billion in loans this year. Company officials intend to focus future business on property and casualty insurance markets and maintain a minority financial interest in some profitable overseas ventures.
AIG has raised nearly $9 billion through the sale of several subsidiary units, including its domestic personal auto insurance units for $1.9 billion, commercial insurer Hartford Steam Boiler for about $742 million and joint Brazilian venture for about $820 million. Industry analysts say the insurer could raise up to $50 billion through the sales of AIG’s U.S.-based and overseas life insurance units and retirement savings units.
The Hartford to Focus on Insurance Instead of Annuities
The Hartford to Focus on Insurance Instead of Annuities
Sept. 10, 2009 – Having accepted a $3.4 billion, taxpayer-funded federal bailout earlier this year, officials for The Hartford Financial Services Group say the reviving company will focus future business on insurance instead of maintaining its position as the top provider of annuities in the United States.
The Hartford’s chairman and top executive, Ramani Ayer, announced the insurer’s change in business focus during an insurance conference held earlier today in New York City and broadcast on the Internet. Officials for The Hartford already ceased underwriting new variable annuities in Britain and Japan and are looking to reduce additional business costs. The Hartford Financial Services Group recently reported a second-quarter net loss of $15 million, which was much lower than industry analysts predicted and was the smallest loss posted by The Hartford during the past year.
Partly bolstered by a $3.4 billion infusion of taxpayer dollars and stock market investment gains, The Hartford recently reported an unexpected $360 million gain that reduced its total loss to $15 million for the second quarter of this year, company officials reported. The Hartford had posted losses totaling $4.6 billion during the prior three quarters combined.
The Hartford, like other life insurers, suffered significant losses tied to annuities and mortgage-backed investments that reduced its capital holdings. But company officials said the firm finished the second quarter of 2009 with a suitable level of capital and used some of its $3.4 billion in taxpayer bailout funds to increase the capital surplus backing its life insurance operations and policies.
The Hartford was a life insurance industry leader in annuity sales as insurers began offering guaranteed returns for annuity owners during the 1980s and 1990s. In 2002, the Hartford made it easier for consumers to make withdrawals from their annuities. The insurer’s “Principal First” annuity product guaranteed withdrawals of up to 7 percent per year to allow owners to recover their principle investment. Annuity owners also could add investment gains to the guaranteed amount after maintaining the Principal First annuity for five years.
The Hartford’s annuity product became so popular it sparked an industry-wide trend of offering guaranteed annual, monthly and sometimes daily investment returns to consumers on top of their normal investment gains. Some insurers also promised to increase the guaranteed repayment amount by up to 7 percent each year.
Although a solid profit-generator for several years, annuities proved to be a serious liability in 2008 when many large life insurance companies had to build up their reserves and capital levels to meet state regulatory requirements prove their ability to honor their annuity policies. The downturn inflicted a $2.6 billion third-quarter loss on the Hartford’s balance sheet, including a $932 million loss tied to the insurer’s annuity business. Officials for the Hartford in October arranged a $2.5 billion capital infusion from German insurance giant Allianz SE.
U.S. Seniors Selling Life Insurance Policies as Economy Tightens
U.S. Seniors Selling Life Insurance Policies as Economy Tightens
Aug. 31, 2009 – As the nation’s economy grew worse during the past year, many senior citizens finding themselves in need of quick cash have resorted to selling their life insurance policies to third parties in exchange for a smaller payout in advance.
Senior citizens in the United States last year sold off life insurance policies totaling nearly $12 billion – nearly double the amount sold two years ago, according to a U.S. Senate special committee on aging. Most did so to replenish depleted retirement funds or help pay for medical bills.
While selling off a life insurance policy generally means forfeiting up to 80 percent of the face value, many seniors find it preferable to surrendering policies for a much smaller payout – usually a return of premiums paid minus fees. Instead, many use specialized brokers to sell their life insurance policies to investors for lump-sum payments often many times greater than they can get through a policy-surrender. The new owners of the life insurance policy then continue making premium payments until the insured either dies or the policy matures at age 100.
Selling life insurance policies often times isn’t a good idea, but seniors in their 70s and older who have policies valued at $500,000 or more but who no longer need such large sums typically are ideal candidates for executing a “life settlement” in advance, according to the National Association of Insurance Commissioners. Many no longer need to protect assets or don’t need to leave an estate for heirs.
Also called “viatical settlements,” life settlements became popular in United States in the 1980s among investors who recognized the near certainty of a high profit from paying a terminally ill patient $200,000 knowing a $300,000 life insurance payoff awaits them after his or her death. The AIDs epidemic of the early 1980s help spur creation of viatical settlements.
But as medical science progressed and a better understanding of AIDs and other “terminal” illnesses became known, many investors began shying away from viatical settlements unless the “terminal” illness were nearly certain.
Both parties take on risk when buying or selling life insurance through viatical settlements. The person selling the policy might settle for too little money and wind up short-changing heirs. For the investor, the primary risk is the insured party will live many more years, reducing profitability while increasing the risk of the life insurance company going out of business before paying the death benefit.
While viatical settlements are legal and sometimes necessary, many industry experts say it’s better to get a life insurance policy with an accelerated death benefit than to sell a life insurance policy through a viatical settlement.
Accelerated death benefits sometimes are included in life insurance policies and other times are sold as riders. They usually pay up to half a life insurance policy’s value upon diagnosis of a terminal illness with no tax penalty and efficient services. Viatical settlements can take time to process, are subject to taxation and result in losing a portion of the life insurance value.
Report: World’s Largest Life Insurer Likely to Invest in AIG Unit
Report: World’s Largest Life Insurer Likely to Invest in AIG Unit
Aug. 26, 2009 — Officials for the world’s largest life insurance company, the China Life Insurance Company, said the insurer might invest in ailing American International Group’s (AIG) Asian life insurance unit if company officials make an initial public offering on the Hong Kong stock market, Reuters reported today.
AIG officials in May announced plans to make an initial public offering for its Asia-based AIA Group, which has been doing business overseas for 90 years and is one of the world’s largest life insurance companies. AIG has enlisted the support of Deutsche Bank and Morgan Stanley to bring about an estimated $ billion initial public offering for AIA.
China Life officials told reporters they are interested in investing in the AIG unit if it is listed on the Hong Kong stock as part of an overall strategy of investing in branded companies.
“We’re definitely interested in any influential, branded financial institutions with sound results,” China Life Chairman Yang Chao told media members earlier today.
AIA has more than $60 billion in assets and is considered struggling AIG’s top Asian asset. Earlier attempts to sell the company outright were foiled by the recent global economic downturn and tightened credit markets making it nearly impossible for AIG to obtain a reasonable selling price or for suitors to obtain funding. Instead, AIG officials decided an initial public offer would be the best way to raise capital for the struggling parent corporation.
Formerly the world’s largest insurance company, AIG became the world’s most indebted insurer after federal officials in September 2008 agreed to extend the company an $85 billion loan in exchange for an 80 percent share of preferred company stocks. Federal officials said allowing AIG to go bankrupt would have a devastating impact on U.S. and international financial markets and later revised lending terms, making it a $153 billion rescue package with a lower interest rate and longer repayment period.
After another bailout revision in December, the U.S. Federal Reserve provided AIG $60 billion in loans and the U.S. Treasury another $40 billion so company officials could buy up preferred stock. Federal officials also approved $53 billion to purchase the company’s risky mortgage-backed assets and other debt contracts. The most recent bailout adjustment boosts total taxpayer investment in AIG to nearly $183 billion.
The insurer is attempting to sell off AIG’s overseas life insurance units and other subsidiaries to repay its debt. Company officials intend to focus future business on property and casualty insurance markets and maintain a minority financial interest in some profitable overseas ventures.
AIG officials have raised more than $9 billion through the sale of several subsidiary units, including its domestic personal auto insurance units for $1.9 billion, commercial insurer Hartford Steam Boiler for about $742 million and joint Brazilian venture for about $820 million.
Industry analysts say the insurer could raise up to $50 billion through the sales of AIG’s U.S.-based and overseas life insurance units and retirement savings units.
MetLife Reports $1.4 Billion Net Loss for the Second Quarter of 2009
MetLife Reports $1.4 Billion Net Loss for the Second Quarter of 2009
Aug. 4, 2009 – Officials for the nation’s largest life insurer, New York-based MetLife, reported significant derivative and investment losses caused the insurer to post a net loss of $1.4 billion during the second quarter of 2009 after reporting a $915 million profit during the same quarter last year.
Company officials reported total revenues during the second quarter declined by nearly $4 billion from a year ago, from $12.05 billion during the second quarter of 2008 to $8.27 billion during the same period this year. Much of the loss occurred to poor investment performance as MetLife officials reported a $3.8 billion net investment loss during the second quarter, up some $3.5 billion from the $357 million investment loss during the same period in 2008.
The poor second quarter performance resulted in MetLife officials declaring a $2 billion net loss after posting a $1.5 billion profit during the first half of 2008 – before the stock market began its precipitous decline last year. Company officials reported total revenues of $18.48 billion through the first half of 2009 – down from $23.67 billion in revenues during the same period last year.
The fall 2008 stock market crash caused MetLife to lose more than $1 billion in net income for the year as the insurer reported a net income of $3.21 billion for the year compared to $4.32 billion in net income for 2007. The insurer posted a fourth-quarter 2008 profit decline of 12 percent, which was cushioned by investment gains.
MetLife officials said they used investments in derivatives to post consecutive quarterly investment gains during the second half of 2008 despite declining equity markets. As with many life insurance companies, MetLife’s profit margin was hurt by the rising cost of guaranteed minimum returns on annuities and other retirement products.
The insurer’s fourth-quarter 2008 net income dropped to $985 million from $1.12 billion. But MetLife offset the income declined by earning $1.6 billion on derivatives, including interest-rate investments. MetLife officials reported a $1.35 billion investment gain of for the quarter, which surpassed analysts’ expectations.
MetLife generally outperformed its competitors during the recent stock market crash, but the insurer has lagged behind some competitors thus far this year.
MetLife officials sold $2.3 billion in new shares in October and stockpiled cash to prepare for a worsening U.S. economy and rising corporate-bond defaults. The insurer’s bolstered capital could enable the insurer to acquire assets of its struggling competitors, such as recently bailed-out American International Group (AIG). Chief Financial Officer William Wheeler said in September that MetLife is “very aggressively” seeking expansion outside of the United States. AIG is looking to unload its overseas life insurance units.
U.S.-based life insurers lost $77 billion in surplus holdings on investment losses and rising costs of guaranteeing retirement products in 2008, wiping out six years of gains, according to consulting firm Conning & Company. MetLife had $403 million in credit-related losses and writedowns in the fourth-quarter of 2008, joining the Allstate Corporation, Chubb and The Travelers Companies in posting losses on mortgage-backed securities.
The Hartford Post $15 Million 2nd Quarter Loss But Bests Analysts’ Expectations
The Hartford Post $15 Million 2nd Quarter Loss But Bests Analysts’ Expectations
Aug. 4, 2009 — Officials for The Hartford Financial Services Group last week reported a second-quarter net loss of $15 million. While a net loss normally isn’t good for business, the $15 million deficit was much lower than industry analysts predicted and was the smallest loss posted by The Hartford during the past year.
Partly bolstered by a $3.4 billion infusion of taxpayer dollars and stock market investment gains, The Hartford last week reported an unexpected $360 million gain that reduced its total loss to $15 million for the second quarter of this year, company officials reported. The Hartford had posted losses totaling $4.6 billion during the prior three quarters combined.
The Hartford, like other life insurers, suffered significant losses tied to annuities and mortgage-backed investments that reduced its capital holdings. But company officials said the firm finished the second quarter of 2009 with a suitable level of capital and used some of its $3.4 billion in taxpayer bailout funds to increase the capital surplus backing its life insurance operations and policies.
The Hartford has been a life insurance industry leader in annuity sales as insurers began offering guaranteed returns for annuity owners during the 1980s and 1990s. In 2002, the Hartford made it easier for consumers to make withdrawals from their annuities. The insurer’s “Principal First” annuity product guaranteed withdrawals of up to 7 percent per year to allow owners to recover their principle investment. Annuity owners also could add investment gains to the guaranteed amount after maintaining the Principal First annuity for five years.
The Hartford’s annuity product became so popular it sparked an industry-wide trend of offering guaranteed annual, monthly and sometimes daily investment returns to consumers on top of their normal investment gains. Some insurers also promised to increase the guaranteed repayment amount by up to 7 percent each year.
Although a solid profit-generator for several years, annuities proved to be a serious liability in 2008 when many large life insurance companies had to build up their reserves and capital levels to meet state regulatory requirements prove their ability to honor their annuity policies. The downturn inflicted a $2.6 billion third-quarter loss on the Hartford’s balance sheet, including a $932 million loss tied to the insurer’s annuity business. Officials for the Hartford in October arranged a $2.5 billion capital infusion from German insurance giant Allianz SE.
AIG Weighing Initial Public Offering of Overseas Life Insurance Giant
AIG Weighing Initial Public Offering of Overseas Life Insurance Giant
July 16, 2009 – Despite potential sales talks with competing life insurer MetLife, officials for highly indebted American International Group (AIG) this week announced they are stepping up their efforts to make subsidiary American Life Insurance Company (ALICO) a completely separate unit from financially strapped AIG and go through with an initial public offering and public listing on the New York Stock Exchange pending regulatory approval and favorable market conditions.
“We continue to consider all strategic options through a robust, structured and disciplined process. At this stage, we expect that a public offering for ALICO will be beneficial to all stakeholders, including U.S. taxpayers, policyholders, employees and distribution partners,” said AIG Chairman and Chief Executive Officer Edward Liddy in a July 15 statement.
If AIG officials go through with the potential public offering, ALICO would become a wholly independent life insurance company with its own board of directors and management structure. The federal government likely would be given control of a large block of ALICO shares as partial repayment of the insurer’s massive debt to U.S. taxpayers.
ALICO is a global life insurance company licensed to do business in 54 nations. The AIG subsidiary has about 19 million policyholders, more than $89 billion in assets and has generated a great deal of interest among several large global firms. But the current poor global economy has hampered efforts to sell the unit at a suitable price in a down market, although AIG and MetLife officials continue to discuss a potential sale.
Through its subsidiary units, AIG does business in about 130 nations and has more than $1 trillion in assets. But the insurer has had difficulty finding suitable buyers for its larger and more lucrative assets, such as one of the world’s largest aircraft-leasing firms and several Asia-based life insurance units. Tightened markets have made it more difficult for buyers to obtain backing.
Once its restructuring is complete, AIG officials plan to focus future business on property and casualty markets while maintaining a financial interest in some of its more profitable units. But relying on the sales of AIG’s life insurance units to help repay its debt to U.S. taxpayers has not gone as planned.
Formerly the world’s largest insurance company, AIG became the world’s most indebted insurer after federal officials in September agreed to extend the company an $85 billion loan in exchange for an 80 percent share of company stocks. Federal officials said allowing AIG to go bankrupt would have a devastating impact on U.S. and international financial markets and later revised lending terms, making it a $153 billion loan with a lower interest rate and longer repayment period.
Under the December revision, the Federal Reserve provided AIG $60 billion in loans and the U.S. Treasury another $40 billion so company officials could buy up preferred stock. Federal officials also approved $53 billion to purchase the company’s risky mortgage-backed assets and other debt contracts. The latest bailout adjustment boosts its total value to nearly $183 billion.
AIG is attempting to sell off its overseas life insurance units and other subsidiaries to repay up to $60 billion in loans this year. Company officials intend to focus future business on property and casualty insurance markets and maintain a minority financial interest in some profitable overseas ventures.
AIG has raised more than $4 billion through the sale of several subsidiary units, including its domestic personal auto insurance units for $1.9 billion, commercial insurer Hartford Steam Boiler for about $742 million and joint Brazilian venture for about $820 million. AIG in January agreed to sell the insurer’s Philippines-based retail bank and auto-lending subsidiary to the East West Banking Corporation for $48.5 million.
Industry analysts say the insurer could raise up to $50 billion through the sales of AIG’s U.S.-based and overseas life insurance units and retirement savings units.
The Hartford Joins Dodd Benefactors in Gaining Federal TARP Funds
July 7, 2009 – Already facing scrutiny from his handling of the recent bonus scandal regarding executives at ailing American International Group (AIG), another major contributor to U.S. Senator Chris Dodd (D-Conn.) has been approved for a $3.4 billion loan in taxpayer funds and bringing to seven the total number of Connecticut businesses to be granted access to federal relief.
Officials for The Hartford Financial Services Group last week completed a deal for $3.4 billion in federal Troubled Asset Relief Program (TARP) funds, making the Connecticut insurer the state’s seventh business to receive federal taxpayer support. Six Connecticut-based banks and The Hartford now are participating in the federal TARP program and have received a total of $3.8 billion in funds.
Dodd chairs the U.S. Senate Committee on Banking, Housing & Urban Affairs and collected a total of $224,278 in political donations from AIG executives, employees and their families in a failed bid to secure the Democratic Party presidential nomination in 2008, according to Opensecrets.org. And political donors affiliated with The Hartford Financial Services Group donated a total of $161,600 to the Senator’s campaign while donors affiliated with The Hartford contributed another $94,550 to Dodd’s political ambitions during the prior two years.
Currently, Dodd has accepted $183,700 from AIG, $115,300 from the Hartford Financial Services Group and another $94,550 from The Hartford.
Officials for The Hartford reported a $2.7 billion loss in 2008 and another $1.2 billion loss during the first quarter of 2009. The Hartford is a leading provider of annuities and life insurance products as well as a property and casualty insurer. The Hartford was among six major U.S. life insurers to be allowed access to the federal TARP program initially intended for ailing banks and other financial institutions.
Among Connecticut banks and Dodd supporters to receive federal TARP money is Webster Bank, which donated a total of $32,100 to Dodd during the 2006 election cycle and another $36,350 during the 2008 election cycle, according to Opensecrets.org. Webster Bank received $400 million in TARP funds in November.
Also receiving TARP funds were the First Litchfield Financial Corporation, which received $10 million in taxpayer funds, Salisbury Bancorp, $8.8 million, Connecticut Bank and Trust, $5.4 million, BNC Financial Group, $4.8 million, and SBT Bancorp, $4 million, according to the Hartford Business Journal.
The $700 billion TARP fund was intended to purchase toxic assets and strengthen American banks to stave off a potential collapse of the nation’s financial sector. Federal officials since have changed the scope of the TARP program to allow other financial institutions to participate.
But Dodd, along with President Barack Obama, has received recent harsh criticism for ensuring executives at large campaign donors like AIG, Fannie Mae and Freddie Mac would receive contractually obligated bonus pay despite their respective institutions needing taxpayer dollars to remain in business. Dodd initially denied any connection to the matter but later claimed White House staff requested he sponsor an amendment to ensure the executive bonus payments. The three organizations are among several that continue to ply Dodd, Obama and others with campaign donations despite having accepted federal bailout money.