World’s Biggest Insurance Transaction: AIG Gives Up Asia Insurance Market to Repay Bailouts
by Efin Advisor | March 5, 2010
In what is the insurance industry’s biggest acquisition in history, Prudential is buying American International Assurance’s Asia organization in the deal of the decade, a bet on the soaring demand in Asia for personal financial services.
The beleaguered American International Group Inc. will give up a cornerstone of its business, the part of it that represents the whole of the Asian insurance marketplace, in a government-approved deal worth a shattering $35.5 billion. The sale could reduce by nearly one-fifth the amount of federal bailout money still invested in struggling AIG.
The cash proceeds of the sale would allow AIG to pay back nearly 20 percent of the almost $130 billion in bailout funds that are outstanding. Together with an anticipated sale of American Life Insurance Co., or Alico, to MetLife Inc., the sale could net enough to eventually cover the Federal Reserve Bank of New York’s $47.9 billion investment in AIG.
With the purchase, Prudential is giving investors a chance to profit from Asian consumers’ growing use of financial services. As the region’s economic growth continues, so will the need for Prudential’s business.
If the sale of AIG’s assets in Asia can offset a substantial part of its debt to the American taxpayers, than we should all breathe a collective sigh of relief!
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There’s an undeniable irony in the fact that had we nationalized a company like AIG, the U.S. government might have been the insurer of Asia’s life, property and casualty policies. That seems like an appropriate balance against the fulcrum of our trade deficit with China and the amount of exports they send our way. Might have been a very nice ‘quid pro quo!’
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An Asia-size market seems like the appropriate offset for repaying the taxpayers!
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And what of Asia’s health insurance policies? Perhaps American health insurers can take their business overseas.
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AIG has also sold Alico, their second largest foreign life insurance arm to MetLife. The buyer is understood to have agreed a £4.6bn cash and shares deal, based on the closing price of MetLife’s common stock on the New York Stock Exchange on March 5.
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