Sale to help AIG exit state control
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American International Group Inc has agreed to sell its 97.6 percent stake in Taiwan's third-biggest insurer to the Ruen Chen consortium for US$2.16 billion, five months after regulators nixed AIG's first attempt to sell the business.
The deal announced yesterday is part of AIG's efforts to raise funds to exit government ownership after it received the largest United States bailout - US$182 billion - of any financial firm in the wake of the 2008 financial crisis.
Taiwan's Ruen Chen is dominated by the Ruentex Group, a construction and wholesale products concern, with a minority share held by shoe manufacturer Pou Chen.
AIG's sale of Nan Shan Life Insurance Co will have to pass muster with Taiwan's Financial Supervisory Commission, which is far from certain to give approval.
In August, the commission turned down AIG's effort to sell Nan Shan for US$2.15 billion to Hong Kong-based Primus Financial Holdings.
"Ruen Chen has demonstrated that it is able and willing to invest in Nan Shan's future, and that it will protect and serve the best interests of Nan Shan's policyholders, employees and agents," AIG President and CEO Robert Benmosche said in a statement.
But the regulatory approval of this latest deal is not guaranteed. For one, Ruentex has a history of turning its acquisitions over fairly rapidly while the authorities would like the Nan Shan purchaser to hold the company for at least 10 to 15 years.
For another, as a non-financial sector company, Ruentex looks set to borrow significant sums from local banks rather than using its own money as the regulators would prefer.
Ruentex tried to allay some of these concerns.
"We intend to be a long-term stakeholder in Nan Shan, and we want to ensure the sustainability of its operations," the company said.
Nan Shan is the third-biggest insurer in Taiwan by market share. It owns about 4 million insurance contracts on an island with 23 million people.
In a series of noisy protests last year many of its 40,000 employees expressed concern they could lose their jobs if the firm were sold.
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