Report: AIG Close to Selling Taiwan-Based Insurance Firm

Aug. 25, 2009 -- Officials for Hong Kong-based global investment firm Primus Financial Holdings anticipate receiving final approval from regulators in Taiwan to buy struggling American International Group's (AIG) Taiwan-based insurance subsidiary, Nan Shan Life, for up to $2 billion, Reuters reported today.

Primus officials reportedly have been bidding against Bain Capital and the Carlyle Group for what is considered the most lucrative Asian assets being sold by AIG. Primus officials said they plan to list Nan Shan Life on the Taiwanese stock market within three years of closing a deal and soon after would list the firm on the Hong King and later the United States' stock markets and create a global insurance brand.

Primus and Hong Kong-based battery maker China Strategic are teaming to bid on Nan Shan Life, but some industry analysts suggest the battery manufacturer's Chinese connections might sour the deal, claiming Taiwan's regulators won't want investors from rival Communist China having long-term interests in a local insurance enterprise. Primus officials counter such concerns are baseless as there are no Chinese shareholders involved in the attempted acquisition.

AIG officials have narrowed bidding for the Nan Shan Life to four groups of buyers with final bids due by the end of the week. Although valued at up to $2 billion, industry analysts suggest the final selling price could be closer to $1.3 billion in light of Nan Shan's recent $1.4 billion loss in 2008 and expected losses to be posted for 2009 and 2010. The unit is being sold as part of AIG's efforts to repay its staggering debt to U.S. taxpayers.

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.