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AIG Cancels Sale of Star, Edison Units in Japan

Source: WSJ

Posted on 30 Oct 2009

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American International Group Inc. (AIG) on Friday canceled the sale of two Japanese units, following the parent company's improving fortunes and trouble finding buyers for the businesses.

The pullback on the plans to sell AIG Star Life Insurance Co. and AIG Edison Life Insurance Co also reflects the company's more patient approach to shrinking its business. Earlier this year the U.S. insurer pulled backed on selling its non-Japanese Asian operations and now plans an initial public offering of the business.

AIG announced in October last year it would offload its three Japanese life insurance subsidies as it rushed to repay the government for its bailout last September.

But the company's new chief executive, Robert Benmosche, said shortly after his appointment in August that he would take longer if needed to shrink the company and return the $80 billion AIG still owes the government.

"I have come to believe that we can obtain the greatest value for AIG Star and AIG Edison by continuing to operate and grow these companies as part of AIG," said Chief Executive Robert Benmosche on Friday. The decision came after Mr. Benmosche's visit to Tokyo this week.

AIG's business has shown signs of stabilizing, a government watchdog concluded in September. In addition, people familiar with the matter have said AIG has begun getting back collateral it had originally put up to back souring trades as markets have improved.

The sale of Edison and Star has been dogged by delays all year. Among the problems bankers have cited were uncertainties surrounding the U.S. government's position on the sale and difficulties among potential buyers with raising funds.

The uncertainty contributed to a drop in policy sales. Star's new policy sales fell 10.1% to 143,000 in the fiscal year ended March while Edison's dropped 13.5% to 193,000. Employees were holding back on sales because they were unsure who would own the companies in the short term, said a company spokesman in Tokyo. Friday's announcement is partly designed to restore confidence internally.

AIG still plans to sell its American Life Insurance Co. unit, also known as Alico, which does business mostly in Japan.