The sale of 21st Century Insurance, which one person said would be valued at about $2 billion, would be AIG’s biggest divestiture since its government bailout in September. The companies are still working on a formal agreement, said the people, who declined to be identified because talks are private.
Paula Reynolds, AIG’s restructuring chief, is seeking to unload as much as two-thirds of the company and has struck deals worth $2.3 billion. Once the world’s biggest insurer, AIG was overwhelmed by bad bets tied to U.S. housing and has posted about $43 billion in net losses over four quarters. It had tapped $38.9 billion of a $60 billion government credit line as of year-end.
“This will certainly be one of the bigger contributors for AIG to get to their goal,” David Bradford, an executive vice president of consultant Advisen Ltd., said today in a phone interview. “21st Century is a well-regarded company and to the extent Zurich wants to expand their footprint in auto insurance, it’s a strong acquisition for them.”
A significant portion of the purchase price may be paid in non-cash considerations, one of the people said. That would require special permission from the Federal Reserve, whose arrangement with AIG requires at least 90 percent of asset-sale prices be paid in cash.
Both AIG and Zurich declined to comment.