AIG to offload remaining stake in AIA for US$6.5b

American insurer expected to quit 93-year association with HK-listed company in move seen as boosting prospects for local the firm

PUBLISHED : Tuesday, 18 December, 2012, 12:00am
UPDATED : Tuesday, 18 December, 2012, 3:51am


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American International Group (AIG) plans to sell its remaining stake in Hong Kong-listed insurer AIA to raise up to US$6.5 billion, marking the end of the US financial group's almost century-old association with the Asian insurer.

According to a term sheet obtained by the South China Morning Post, AIG will sell its entire 13.69 per cent of AIA, or 1.65 billion shares, to selected institutional investors in the price range of HK$29.65 to HK$30.65 per share. This represents a discount of 3.2 per cent to 6.3 per cent from AIA's last close, HK$31.65, on Friday. The company suspended trading yesterday.

Deutsche Bank and Goldman Sachs are the joint global co-ordinators on the offering.

"This should be good news for AIA as investors have always worried that AIG would dispose of its stake in the Hong Kong-listed insurer to repay the bailout money it received from the US government," said Louis Tse Ming-kwong, director of VC Brokerage.

"With AIG now planning to sell its remaining stake in AIA, it removes all uncertainties and would boost the prospects for AIA."

Another broker, who did not want to be identified, said the offer was attractive as AIA had a profitable business in Asia.

The company is the biggest insurer in Hong Kong and also has operations in growing markets such as Singapore, Thailand, Vietnam and mainland China.

Shares in AIA have risen 61 per cent since its initial public offering in 2010. Many fund managers are said to be interested in buying into it as its market share is likely to benefit from the growth of the wealthy middle classes in Asia and the resultant increase in demand for insurance and other financial products.

The plan to sell AIA comes on the heels of AIG's announcement that it will sell its plane-leasing unit for US$4.23 billion to a consortium of Chinese investors.

AIA said in a statement that it had been informed by AIG that "it has commenced a potential sale by way of placing of a significant proportion" of AIA shares it held, but did not elaborate. AIA expected to resume trading today.

AIG, a financial giant headquartered in New York, was hit hard in the 2008 global financial crisis and almost collapsed before rescue came in a government bailout of US$182.3 billion.

Since then, the group has been forced to sell off many of its units and allow its flagship AIA to go public in Hong Kong two years ago to raise money to repay the bailout money.

Selling its remaining stake in AIA would mark the end of an era for AIG as it has operated life insurance and pension businesses through AIA since 1919.

In the 2010 initial public offering of AIA, AIG reduced its stake in the Asian insurer to 33 per cent. The group has sold about US$8 billion of AIA shares in two placements - in March and in September this year - to cut its holding to 13.69 per cent.

AIG has also sold more than US$65 billion worth of assets since its 2008 rescue, including consumer finance units and property. After completing the sale of its assets, AIG chief executive Robert Benmosche plans to focus on the US life insurance and the global general insurance markets.

The US government's ownership of AIG came to an end on Friday when the Treasury announced it sold its remaining stake in the insurer.