AIG plans sale of some business units
CHARLOTTE, N.C. — The insurance holding company American International Group Inc. said Friday it plans to sell off a number of business units to pay off its massive government loan, while retaining its U.S. property and casualty and foreign general insurance businesses.
AIG, one of the world’s biggest insurers, said it also plans to retain an ownership interest in its foreign life insurance operations.
“The company is exploring divestiture opportunities for its remaining high-quality businesses and assets and the proceeds from any divestitures will be used to repay the Federal Reserve loan and to address our capital structure going forward,” newly appointed Chairman and Chief Executive Edward Liddy said in his first call with investors and analysts.
So far, AIG has announced only one deal, a sale of its 50 percent interest in London City Airport to its partner in the venture, Global Infrastructure Partners. It bought the stake as a joint venture with the private-equity fund in 2006 for a total price estimated around $1.4 billion. The companies didn’t disclose the terms of the deal.
Liddy said the company has been contacted by “numerous” parties regarding possible sales of businesses, and AIG will try to sell its operations to “brand-name” buyers who have strong ratings and balance sheets.
One unit that analysts have said could be sold is the International Lease Finance Corp., which leases out more than 900 aircraft with asset values topping $44 billion at the end of the second quarter. Another unit that could possibly be sold, consumer-focused lender American General Finance Corp.
Other businesses AIG operates include life, commercial auto and accident and health insurers.
AIG said the insurance company businesses “continue to operate normally and remain adequately capitalized and fully capable of meeting their obligations to policyholders.”
As a holding company, AIG is a separate, federally regulated legal entity that is distinct and apart from its subsidiary insurers.
The subsidiary insurers are governed by state laws, which are designed to protect the interest of policyholders.
No records show the value of insurance coverage AIG has in force in Nebraska, according to the Nebraska Department of Insurance. But here are the total premiums Nebraskans paid to AIG during the first six months of the year: life insurance, $8.8 million; annuities, $18.6 million; accident and health, $1.4 million; general property and casualty insurance, $59.9 million.
On the brink of failure last month, AIG was bailed out when the government offered it a two-year $85 billion loan to avoid bankruptcy during one of the most tumultuous times during a credit crisis that drove Lehman Brothers Holdings Inc. into bankruptcy and forced the sale of Merrill Lynch & Co. to Bank of America Corp.
In return for the loan, the government received warrants to purchase up to 79.9 percent of AIG.
As of Sept. 30, AIG had drawn $61 billion on the credit facility.
Problems at AIG did not come from its traditional insurance subsidiaries, but instead from its financial services operations, and primarily its insurance of mortgage-backed securities and other risky debt against default.
AIG’s traditional insurance subsidiaries have widely been viewed as safe and are likely to attract buyers. The New York-based insurer said it has already been contacted by a number of suitors.
Last week, during an interview with CNBC, billionaire investor Warren Buffett of Omaha said his firm, Berkshire Hathaway Inc., would be interested in acquiring a couple of AIG’s assets depending on what the company was willing to sell.
AIG, one of the world’s biggest insurers, said it also plans to retain an ownership interest in its foreign life insurance operations.
“The company is exploring divestiture opportunities for its remaining high-quality businesses and assets and the proceeds from any divestitures will be used to repay the Federal Reserve loan and to address our capital structure going forward,” newly appointed Chairman and Chief Executive Edward Liddy said in his first call with investors and analysts.
So far, AIG has announced only one deal, a sale of its 50 percent interest in London City Airport to its partner in the venture, Global Infrastructure Partners. It bought the stake as a joint venture with the private-equity fund in 2006 for a total price estimated around $1.4 billion. The companies didn’t disclose the terms of the deal.
Liddy said the company has been contacted by “numerous” parties regarding possible sales of businesses, and AIG will try to sell its operations to “brand-name” buyers who have strong ratings and balance sheets.
One unit that analysts have said could be sold is the International Lease Finance Corp., which leases out more than 900 aircraft with asset values topping $44 billion at the end of the second quarter. Another unit that could possibly be sold, consumer-focused lender American General Finance Corp.
Other businesses AIG operates include life, commercial auto and accident and health insurers.
AIG said the insurance company businesses “continue to operate normally and remain adequately capitalized and fully capable of meeting their obligations to policyholders.”
As a holding company, AIG is a separate, federally regulated legal entity that is distinct and apart from its subsidiary insurers.
The subsidiary insurers are governed by state laws, which are designed to protect the interest of policyholders.
No records show the value of insurance coverage AIG has in force in Nebraska, according to the Nebraska Department of Insurance. But here are the total premiums Nebraskans paid to AIG during the first six months of the year: life insurance, $8.8 million; annuities, $18.6 million; accident and health, $1.4 million; general property and casualty insurance, $59.9 million.
On the brink of failure last month, AIG was bailed out when the government offered it a two-year $85 billion loan to avoid bankruptcy during one of the most tumultuous times during a credit crisis that drove Lehman Brothers Holdings Inc. into bankruptcy and forced the sale of Merrill Lynch & Co. to Bank of America Corp.
In return for the loan, the government received warrants to purchase up to 79.9 percent of AIG.
As of Sept. 30, AIG had drawn $61 billion on the credit facility.
Problems at AIG did not come from its traditional insurance subsidiaries, but instead from its financial services operations, and primarily its insurance of mortgage-backed securities and other risky debt against default.
AIG’s traditional insurance subsidiaries have widely been viewed as safe and are likely to attract buyers. The New York-based insurer said it has already been contacted by a number of suitors.
Last week, during an interview with CNBC, billionaire investor Warren Buffett of Omaha said his firm, Berkshire Hathaway Inc., would be interested in acquiring a couple of AIG’s assets depending on what the company was willing to sell.
Copyright © 2002-2009 Lincoln Journal Star. All rights reserved.