Taipei (AFP) Oct 13, 2009
American International Group said Tuesday it would sell its Taiwan unit for 2.15 billion US dollars as the insurance giant raised money to pay off a huge US government bail-out loan.
AIG announced a consortium led by Hong Kong-based Primus Financial Holdings would buy Nan Shan, Taiwan's number two life insurer, in what observers said would be the largest deal ever to take place in the island's financial sector.
"(Primus) has pledged to continue Nan Shan's commitment to its policy holders, agents, and employees, as well as to the people of Taiwan," said Robert Benmosche, AIG chief executive officer, in a statement.
After an auction that lasted several months, recently-established Primus beat several rivals for Nan Shan, including Taiwan's Chinatrust Financial Holding.
The sale to the consortium, which also includes Hong Kong Stock Exchange-listed China Strategic Holdings, still requires approval from Taiwan's government.
AIG was on the brink of bankruptcy in September 2008 and only survived after the US government offered it a financial lifeline in exchange for an 80 percent stake in the company.
The insurer, deemed too big to be allowed to fail, now needs to repay nearly 121 billion dollars in US taxpayer aid, according to recent data from the Government Accountability Office, an investigative arm of Congress.
Primus Financial has promised not to change Nan Shan's brand or the existing compensation and benefits packages, AIG said in the statement.
"We have the highest respect for Nan Shan's dedicated management team, agents and employees who have built the company into the prominent Taiwan institution that it is today," said Primus Chairman Robert Morse.
"We aim to develop Nan Shan into a leading Taiwan-based, pan-Asia financial services company," he told a briefing in Taipei.
Morse dismissed rumours that Chinese capital -- banned under Taiwan law -- was involved in the transaction, but hinted at ambitions beyond the island.
"If Nan Shan can excel and succeed in a competitive environment like Taiwan, think how well it can succeed and operate in less developed and competitive markets," Morse said.
Analysts pointed out the cost is only about 70 percent of Nan Shan's net value, which totalled 99.6 billion Taiwan dollars (3.1 billion US dollars) in May.
"It's definitely a good bargain," said Mars Hsu, a Taipei-based analyst with Grand Cathay Securities, adding that he believed the Hong Kong consortium had a bigger target behind the deal.
"I think Primus does not eye Nan Shan only. It may also look to acquire AIG's life units in South Korea, India and Hong Kong," he said.
"It could then integrate them into a big life insurer and list it on the Hong Kong or Chinese stock market."
Professor Thomas Lee of National Chengchi University urged Taiwan's financial watchdogs to carefully scrutinise the transaction, pointing out that Primus Financial Holdings was only set up in April.
"The company is new. It has no track record. We don't know what their attitude is towards the transaction," he said.
If Primus is looking to make a quick profit "then the deal may not be helpful to domestic financial stabilisation and could even create additional problems for Taiwan," he added.
Nan Shan was established in 1963, and now has a network of 24 branches and 450 agency offices, employing a staff of 4,000 and more than 34,000 agents.
It had a premium income of 219 billion Taiwan dollars in 2008, according to the Taiwan Insurance Institute.
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