Mar
8
AIG and Prudential agree on breakup fee clause
Filed Under AIG, Insurance Company, Life Insurance | 1 Comment
As American Insurance Group’s (AIG) sale of American International Assurance (AIA)to Prudential PLC moves forward, Prudential has agreed to pay American Insurance Group a fee of GB£153 million (US$231 million) should the deal for Asian life insurance unit AIA fall through.
American Insurance Group announced the deal on Monday, March 1st for approximately US$35.5 billion, divided up between US$25 billion in cash, US$8.5 billion in equity and equity-linked securities at nominal value, and US$2 billion in preferred stock. AIG expects the deal to be closed by the end of 2010.
Based on late Friday filings with the U.S. Securities and Exchange Commission (SEC), Prudential has not only agreed to the US$231 million breakup fee, but also payments 0.4% of the outstanding cash value of the deal, possibly over US$100 million per month, should it not be wrapped up by September 1st, 2010. The board members of both Prudential and AIG have given their approval, but the deal still awaits regulatory and shareholder approval.
The deal already has been given the go-ahead by the U.S. Government, which owns nearly 80% of AIG due to a taxpayer funded bailout of the company for US$182.3 billion. While AIG still owes nearly US$130 billion, it plans on using the US$25 billion cash portion of AIA’s sale to Prudential to buy back US$16 billion of preferred interests in the special purpose vehicle holding AIA stocks from the Federal Reserve Bank of New York (FRBNY), and also pay back a further US$9 billion held by the FRBNY Credit Reserve. In total, money paid back from the sale of AIA would make up nearly 20% of the outstanding debt held by taxpayers.
Companies Mentioned:
AIA
AIA is a Hong Kong-based life insurance company doing business across Asia that has been in business since 1919. They service over 20 million policies through 23,000 employees and 300,000 agents throughout markets in Asia, including; Vietnam, Thailand, Taiwan, South Korea, Singapore, Philippines, New Zealand, Malaysia, Macau, Indonesia, India, Hong Kong, Mainland China, Brunei and Australia.
AIG
The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally.
Prudential P.L.C.
Prudential has been in the insurance and financial services business since 1848. Today they operate throughout the UK, US and Asia offering international health insurance and retirement planning services, supported by 27,000 employees worldwide.
Mar
4
Sale of AIA to Prudential under watch by HK Insurance Authority
Filed Under AIG, Health Insurance, Hong Kong, Insurance Company | 1 Comment
The Insurance Authority of Hong Kong is said to be analysing the potential impact to the local insurance market resulting from the combination of AIA and Prudential. Of particular interest, whether this deal could diminish the choices of insurance products and services in the market, and what impact would it have on policyholders of the two insurance companies.
In the view of the regulator, Hong Kong currently enjoys an adequate supply of service providers and wants to make sure that the principle of “fair competition” is maintained after the intended sale. The proposed sale of AIA to Prudential (estimated at US$35.5 billion), is subject to clearing the hurdles imposed by shareholder and regulatory approvals.
Assuming there are no policies surrendered, it is estimated that by combining the market share of both companies they would control approximately 21% of the life insurance market, which may impact the dynamics of competition and cause a wave of redundancies, hurting confidence in the insurance industry in Hong Kong.
Whichever the outcome of this proposed merger, the Insurance Authority of Hong Kong aims to secure that the field remains levelled and the sense of fair competition in this industry is not affected.
Insurance Companies mentioned:
AIA is a Hong Kong-based life insurance company doing business across Asia that has been in business since 1919. They service over 20 million policies through 23,000 employees and 300,000 agents throughout markets in Asia, including; Vietnam, Thailand, Taiwan, South Korea, Singapore, Philippines, New Zealand, Malaysia, Macau, Indonesia, India, Hong Kong, Mainland China, Brunei and Australia.
Prudential has been in the insurance and financial services business since 1848. Today they operate throughout the UK, US and Asia offering international health insurance and retirement planning services, supported by 27,000 employees worldwide.
Mar
1
Prudential in negotiations to buy American International Assurance
Filed Under AIG, Insurance Company, Life Insurance | 3 Comments
London-based Financial services company, Prudential P.L.C. is in talks over purchasing AIG’s Asian life insurance business, American International Assurance.
Although the deal has not been finalized yet, it would see Prudential buy American International Assurance or AIA for approximately US$35.5 billion; US$25 billion in cash and US$10.5 billion in stocks.
AIG had been planning on an initial public offering for AIA since late 2009, placing the business in a Special Purpose Vehicle in which the Federal Reserve Bank of New York holds the preferred interests and AIG holding all common interests in AIA. The sale of AIA would pave the way for the largest repayment of the US$180 billion that AIG received in U.S. government bailouts, with the Federal Reserve Bank of New York prepared to receive billions from the sale.
Hong Kong-based AIA has been operating since 1919 and is a major player in the Asian life insurance market with extensive distribution networks in 15 geographical markets and over 20 million policies in-force in the region. The addition of AIA’s business operations in addition to Prudential’s existing 11 million policies would make Prudential a market leader in the Asian life insurance industry.
Companies Mentioned:
AIA
AIA is a Hong Kong-based life insurance company doing business across Asia that has been in business since 1919. They service over 20 million policies through 23,000 employees and 300,000 agents throughout markets in Asia, including; Vietnam, Thailand, Taiwan, South Korea, Singapore, Philippines, New Zealand, Malaysia, Macau, Indonesia, India, Hong Kong, Mainland China, Brunei and Australia.
AIG
The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally.
Prudential P.L.C.
Prudential has been in the insurance and financial services business since 1848. Today they operate throughout the UK, US and Asia offering international health insurance and retirement planning services, supported by 27,000 employees worldwide.
Feb
24
American International Group May be on the Road to Recovery
Filed Under AIG, Income Protection, Insurance Company, Life Insurance | 3 Comments
American International Group may be on the road to recovery 17 months after the company received a US$ 182.3 Billion bailout from the American government at the peak of the global financial crisis of 2008/2009.
AIG, whose failure threatened to collapse the USA’s economy, has improved its means to repay the bailout which it received through increased sales in the company’s property-casualty business. Property-Casualty contributed to a third of AIG’s revenue in the three quarters following the opening shots of the great recession. In conjunction with rising Life and Retirement product sales, the mainstay of AIG’s offerings, in the third quarter of 2009 the company looks well placed to pull out of what many industry analysts are referring to as a “death spiral”.
Managing Director of Nomura Securities International, David Havens, said “There are clear signs that AIG has pulled out of what could have been a death spiral.” Nomura Securities was a key player during the Global Financial Crisis, taking over the European and Asian business of defunct banking giant Lehman Brothers.
Industry observers are forecasting a positive outlook for AIG, and point to recently released third quarter results that see the company moving more in line with industry averages, rather than continuing poor performance. During the fourth quarter of 2008, the first full reporting period after they received their bailout, AIG posted Property-Casualty premiums sales of US$ 7.1 billion. This figure has risen during 2009 with the property-casualty arm posting sales of US$ 7.7 billion in the first quarter, US$ 7.9 billion in the second quarter, and US$ 8.1 billion in the third.
Life insurance however, may be slower to recover. During the fourth quarter of 2008, AIG posted Life insurance revenues of US$ 15.2 billion. The first quarter of 2009 saw British clients abandon the firm due to a perceived lack of confidence, and consequently saw Life insurance sales drop to US$ 14.5 billion. The life insurance arm of AIG continued to struggle in the second quarter of 2009 with sales down to US$ 13 billion, but a recent reversal of the downward trend, and an increase in Life insurance sales, up to US$13.7 billion in the third quarter, means that stability may be returning to this beleaguered company.
In other AIG news, AIG Star Life Insurance Co. Ltd, a life insurance subsidiary located in Japan, has formed a partnership with Orix Corp. to sell annuity products. Aiming to enhance AIG Star’s customer base, the two companies will pursue a venture which will see them jointly marketing annuity products to Orix Corp’s existing clients.
Companies Mentioned
The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally
A wholly owned subsidiary of Nomura Holdings, Nomura Securities is a finanical services company in addition to being a global investment bank. Based in Tokyo, Nomura Securities has approximately 26,000 staff worldwide.
Feb
3
American International Group to sell American Life Insurance Company
Filed Under AIG, Insurance Company, International Healthcare, Life Insurance, MetLife | 18 Comments
American International Group Inc. has confirmed on Tuesday that it is in talks with MetLife Inc. to sell the groups’ life insurance unit, the American Life Insurance Company. Rumors surfaced last month with regards to a potential MetLife deal for the AIG unit, and market analysts speculated that such a move would be incredibly beneficial to MetLife as the American Life Insurance Company has an extensive international health and life insurance business operating in more than 50 countries around the world.
Despite the discussions around the American Life Insurance Company, AIG has stipulated that it will not consider the sale of two Japanese life insurance companies which it took off the market in 2009. Star Life Insurance Co. and AIG Edison Life Insurance Co. were up for sale following the turning of AIG’s fortunes in 2008 at the peak of the global financial crisis, but had been removed from the market by the fourth quarter of 2009.
With a number of global insurance providers supposedly in position to increase their international reach through acquisitions, some analysts have speculated that AIG may be willing to play in a competitive market. However, AIG spokesman Mark Herr stated of both Star Life and AIG Edison that “they are good businesses and we are pleased to have them in the AIG family.”
The move for MetLife to buy the AIG unit may have its roots in the sharp loss of profits experienced by MetLife in the fourth quarter of 2009. MetLife has stated that the company’s profit dropped by approximately 70% as it paid out more benefits and claims.
Insurance Companies Mentioned:
The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally.
Possessing over 140 years of insurance expertise, MetLife aims to be an innovator in the field of international Life insurance. Globally, MetLife is able to offer its clients accident and health insurance, life insurance, disability income protection, and retirement and savings products.