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WSJ Reports AIG Could Raise $2.2-$3 Billion from Taiwan Life Unit Sale

Source: Dow Jones

Posted on 28 Dec 2010

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In its second attempt to sell its Taiwan life insurance unit, American International Group Inc. (AIG) could raise between $2.20 billion and $3.00 billion surpassing the $2.15 billion it would have raised in an earlier deal rejected by the island's regulators in August, according to a report in the Wall Street Journal.

Tsai Cheng-yuan, a member of the Taiwan legislature's finance committee, told Dow Jones Newswires that according to his contacts at the U.S. Treasury Department, Chinatrust Financial Holding Co. submitted the highest bid out of the four companies interested in buying AIG's Nan Shan Life Insurance Co., with an offer of $3 billion.

Cathay Financial Holding Co. bid $2.7 billion, Ruentex Group $2.5 billion, and Fubon Financial Holding Co. $2.2 billion, Tsai said.

Nan Shan's large customer base makes it an attractive target to local firms looking to secure a bigger share of the island's crowded insurance market, as the high penetration rate and low profit margins prompt foreign investors to exit the island, said a local investment banker who isn't involved in the deal. He added Nan Shan is the biggest foreign player in the island's insurance market in terms of market share.

Whether AIG's latest bid to offload its unit succeeds depends on Taiwan's Financial Supervisory Commission. In August, the FSC rejected AIG's first attempt to sell Nan Shan for $2.15 billion, well above market expectations, to battery maker China Strategic Holdings Ltd. and partner Primus Financial Holdings Ltd., saying the bidders didn't have experience in managing an insurance business, and it had concerns about the companies' long-term funding abilities.

Chinatrust, which leads the bidding so far, doesn't have life-insurance experience, and as of the end of September, its cash and bank balance totaled $4.80 billion, which could raise concerns within the FSC given its $3 billion offer for Nan Shan.

An official at Chinatrust who asked not to be named declined to comment on the bid, saying only that the company will sell new shares if it needs to raise any funds.

The U.S. insurer has been winnowing the list of bidders based mostly on which is likely to win regulatory approval, rather than which will pay top dollar, people familiar with the matter said last week.

AIG will likely pick a preferred bidder for Nan Shan this week, the people said.

The FSC has said its approval of a potential deal will depend on whether a buyer has sound financing and insurance experience, will look after policyholders and staff and make a long-term commitment to the company, and can meet future funding needs.

Both Cathay and Fubon already have insurance operations and are better capitalized. Ruentex lacks significant experience operating an insurance company.

AIG spokeswoman Lauren Day declined to comment on Tsai's remarks. Cathay, Fubon and Ruentex couldn't immediately be reached for comment.
AIG has been attempting to sell Nan Shan as part of a broader sale of assets to help repay taxpayers for its financial-crisis-era bailout.