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AIG Expects its AIA Unit to Have an Operating Profit of $2B

Source: WSJ

Posted on 27 Sep 2010

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According to a Wall Street Journal article, American International Group Inc. (AIG) said it expects its AIA Group Ltd. life-insurance business will likely have an operating profit of at least $2 billion in the fiscal year ending Nov. 30.

Premium income at AIA, which AIG plans to list on the Hong Kong stock exchange in October, increased by 11% in the first nine months of the year to $9.3 billion, according to an unaudited accounting released by AIG on Saturday. The increase was driven by growth in Thailand and South Korea.

AIG launched plans to sell a portion of AIA in an initial public offering after an earlier deal to sell the Asian life-insurance operation fell through. The insurer recently received regulatory approval in Hong Kong for a $10 billion to $15 billion IPO, according to a person familiar with the matter.

Pre-marketing of the IPO is scheduled to begin on Monday. The stock offering is expected to be priced on Oct. 21. One person familiar with the deal said earlier that AIG was considering selling as much as 50% of AIA, but that no decision had been made.

AIG released the latest profit estimate and updated results after the insurer first provided the information to analysts in Hong Kong, according to an AIG statement Saturday. AIA's largest markets are Hong Kong, Thailand, Singapore and Malaysia.

The figures released Saturday may not compare exactly to previously announced results released in the U.S. AIG cautioned in its statement that the data corresponded with international financial reporting standards, which differ from U.S. guidelines.

Earlier this year, AIG had reached an agreement to sell all of AIA to Prudential PLC for $35.5 billion. When the deal was announced, Prudential said AIA's unaudited operating profit for 2009 was $1.8 billion.

Prudential PLC pulled out of the deal in May when shareholders protested.

The IPO is intended to help AIG in its efforts to repay U.S. taxpayers the more than $90 billion they owe from a government bailout.

People familiar with the matter said last week that the U.S's Prudential Financial Inc., which isn't related to Prudential PLC, is nearing a deal to buy two Japanese life-insurance businesses from AIG for a combined $4 billion to $5 billion.

AIG is set by year end to close a $15.5 billion deal to sell its second-biggest overseas-based life-insurance unit, American Life Insurance Co., or Alico, to MetLife Inc. Alico has a large presence in Japan and Europe.