New York: American International Group (AIG), the insurer that repaid a US bailout, plans to sell out of AIA Group for as much as $6.5 billion, exiting the business from which it was formed in Shanghai in 1919. AIG, based in New York, is selling about 1.65 billion shares in Hong Kong-headquartered AIA at HK$29.65 to HK$30.65 each, according to a term sheet obtained by Bloomberg News. AIG holds a remaining 13.7 per cent stake in AIA, according to data compiled by Bloomberg.
AIG Chief Executive Officer Robert Benmosche is focusing on US life insurance and global property-casualty coverage after divesting units to help repay a government bailout that swelled to $182.3 billion. The latest sale may mark the final chapter in a two-year exit process from what Maurice "Hank" Greenberg, who built AIG into the world's largest insurer during his four-decade leadership of the firm until 2005, called one of his company's "crown jewels." "AIA is a company of strong cash flow and business growth," said Li Wenbing, a Beijing-based analyst at Bocom International. "AIG had no option but to sell it to help repay its debt."
AIG sold about $8 billion of AIA shares in March and September, following a 2010 initial offering that reduced the New York insurer's stake to 33 per cent. "We're looking for the right time and the right price to monetise our ownership of AIA," Benmosche said on an August 3 conference call with analysts. "We have a very good performing company out there." The US Treasury Department sold its last 234.2 million of AIG shares, the government said in a December 10 statement. It marked the end of the rescue more than four years after the US took over the company to save the global economy.
AIA, which announced that AIG has started to sell "a significant proportion" of the remaining 13.7 per cent stake in a statement to the Hong Kong stock exchange, didn't reveal the exact number of shares on sale. Trading of Hong Kong-based AIA has been suspended. The shares are being offered today as much as 6.3 per cent lower than AIA's closing price of HK$31.65 on December 14, based on the terms of the sale. AIG expects the shares to be priced on December 17 or December 18, according to AIA's statement. AIA may resume trading no later than December 18, it added.
AIG will use the proceeds for general corporate purposes, it said in the statement. The company would like to pay a dividend in 2013 if its capital position is strong enough, Benmosche said on a third-quarter conference call in November. The sale of AIA will reduce volatility in AIG's quarterly results, which had swung with fluctuations in the market value of the company. AIA traces its roots to 1919 when Cornelius Vander Starr, an American businessman, set up a fire and marine insurance agency.