In another
important step in its restructuring, American International Group
(AIG) is to sell its 97.57% stake in its Taiwan unit, Nan Shan
Life, to Ruen Chen Investment Holding Company for $2.16bn
cash.
Ruen Chen faced opposing bids
from Taiwanese companies such as Fubon Financial, Chinatrust
Financial and Cathay Financial. Ruen Chen is 80% owned by Taiwan
construction and wholesale products conglomerate Ruentex Group,
with footwear manufacturer Pou Chen owning the balance.
Go deeper with GlobalData
The deal is subject to
regulatory approval which in this instance holds far more
significance than normal.
In August 2010, the Taiwan
Financial Supervisory Commission rejected a $2.15bn bid for Nan
Shan by a consortium led by Hong Kong-based financial services
company Primus Financial. The regulator cited concerns over the
consortium’s financial capability and long-term commitment to
running Nan Shan.
The other consortium members
were Fubon Financial and battery manufacturer, China
Strategic.
With regulatory approval
clearly a big factor in the latest deal, AIG chairman and CEO
Robert Benmosche said in a statement: “The participants in the
consortium enjoy an excellent reputation in Taiwan. Ruen Chen
offers strong operational and funding capabilities and possesses a
clear ability to satisfy the strict criteria that governed AIG’s
bid review process.”
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By GlobalDataEstablished in 1963, Nan Shan
is Taiwan’s largest life insurer by total book value and third
largest by total premiums behind Cathay Life and Fubon Life. Nan
Shan has 4m policyholders, 8m policies in force, 24 branches, 500
agency offices, about 4,100 employees and 33,000 agents. According
to the Taiwan Insurance Institute, in 2008 Nan Shan recorded
premium income of TWD219bn ($7.48bn).
Other recent sales by AIG
include a 67% stake in its Asian unit AIA Group through an initial
public offer on the Hong Kong Stock Exchange in October 2010. Since
it began receiving assistance from the US government in 2008
($136bn in total), AIG has sold assets worth some $50bn.
But while Nan Shan and other
sales may be key steps in AIG’s restructuring, not all are
impressed, including former AIG boss Hank Greenberg. In an
interview with news agency Bloomberg, he said that while AIG was
getting good prices for its sales it was selling irreplaceable
assets.
AIG has also reported
progress with other aspects of its restructuring, the most
significant being completion of its recapitalisation in January
this year. This involved exchanging various forms of government
support into ordinary shares, resulting in the US Treasury’s stake
in AIG rising from 80% to about 92%. Among other things, AIG has
also repaid the $21bn outstanding balance under a credit facility
from the Federal Reserve Bank of New York.
Commenting, Benmosche said
recapitalisation marked AIG’s “new beginning”.
“Based on our success over
the last two years in stabilising our businesses, retaining our
clients, achieving momentum in sales, restoring relationships with
distribution partners, and returning to normal rates of employee
turnover, we are confident that we can continue to build long-term
value for all of our stakeholders,” he said.
Less impressed was rating
agency Moody’s Investor Services, which greeted the latest wave of
news with a one-notch downgrade of AIG’s insurer financial strength
rating from A3 to Baa1 with a stable outlook.
Moody’s noted: “The downgrades reflect our view that while
the core insurance operations have stabilised over the past year,
they have not yet improved sufficiently to justify the previous
ratings in the absence of continued government support.”
