Posted on Jun 15, 2010 by Sergio Ulloa
The buyers of Nan Shan Life Insurance, the Taiwanese life insurance unit of AIG, have agreed to amend their purchase agreement to include a escrow funds clause, in order to strengthen the bid for regulatory approval of the transaction.
Under these amended terms, US$325 million (EUR 266.4 million) of the purchase price will be isolated for a 4-year period under escrow, as an additional measure to improve the capital ratio of Nan Shan. This effectively means that AIG will not receive the full purchase price of the deal until 2014.
According to regulations effective in Taiwan, insurers are required to have a risk-based capital ratio of at least 200 percent. The escrow funds would be used to boost the capital ratio of Nan Shan should the need arise during the 4-year special funds lock-up period.
The Taiwan Ministry of Economic Affairs is currently reviewing the sale of Nan Shan to the Hong Kong-based consortium comprising China Strategic and Primus Financial Holdings. There are various concerns related to the transaction which are currently under scrutiny, including the shareholding structure of the consortium, source of capital and future commitments to employees and policyholders to ensure that their interests are safeguarded.
Under the original deal reached last October, AIG had agreed with the said consortium to sell a 97.57 percent stake of Nan Shan for US$2.15 billion (EUR 1.76 billion).
Insurance Companies mentioned:
The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally.
Nan Shan Life Insurance Company, Ltd. was established in July 1963. After its restructuring in January 1970, Mr. K.K. Tse, the then Chairman of American International Underwriters, became the first Chairman of the company. In forty years, Nan Shan has become a super insurance company with the most professional management, the best operational performance, and a solid financial foundation. Its agency force has been recognized as the best in Taiwan's life insurance industry.