$2.15 bn sale to new firm set up by Robert Morse and China Strategic Holdings
AIG has agreed to sell its 97.57% share in Nan Shan Life, its Taiwan life insurance unit, for $2.15 bn to a consortium of Primus Financial (a new firm founded by Robert Morse, Citigroup's former investment banking head in Asia) and China Strategic Holdings Limited, the Hong Kong Stock Exchange-listed investment company. The deals ends a five-month auction for the unit. Blackstone Advisory Partners and Morgan Stanley acted as financial advisors and Debevoise & Plimpton LLP and Lee & Li were legal advisors to AIG.
The deal marks a success for AIG's hitherto slow asset sales programme, which it embarked on to raise cash to pay back loans to the U.S. government, which bailed it out and took majority ownership last year. AIG is trying to sell two other major assets in Asia. Hong Kong-based life insurer AIA is seeking a more-than $2 billion initial public offering while American Life Insurance Co, which generates half its revenue in Japan, is seeking a reported $5 billion in an IPO.
“We are pleased to have found a buyer who shares our confidence in Nan Shan’s bright future, and who has pledged to continue Nan Shan’s commitment to its policyholders, agents, and employees, as well as to the people of Taiwan,” said Robert Benmosche, AIG Chief Executive Officer.
In acquiring Nan Shan, the Primus Financial consortium has agreed to maintain the Nan Shan brand, the existing compensation and benefits package for employees and the existing agency organizational and commission structure for a minimum of two years following the closing of the transaction. The current Nan Shan management team will remain in place.
Some analysts and bankers involved in the deal said putting a valuation on the AIG's Taiwan life insurance unit was difficult.
"The pricing is tricky. If you just look at the book value of Nan Shan, then the acquisition price is at a 30 percent discount," said Pandora Lee, analyst with UBS.
"But for an insurance company, book value is not the only consideration, there are other factors like the people, the products etc," Lee said. "So its difficult to say at this point if they've got a good deal or not."
Primus and China Strategic will seek loans from Taiwanese banks to finance the deal.
Established in 1963, Nan Shan is the largest life insurer in Taiwan by total book value and the third largest by total premiums. It has four million policyholders via 24 branches, 450 agency offices, 4,000 employees, and 34,000 agents.