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AIG Generates US$37 billion For Repayment of US Government Debt

Posted on Nov 02, 2010 by Sergio Ulloa ()

The US government funded insurer AIG has raised more than US$37 billion through the initial public offering (IPO) of the company's Asian arm, American International Assurance, or AIA, on the Hong Kong Stock Exchange and from the sale of American Life Insurance Co (Alico) to MetLife. The capital generated by AIG latest actions means the US insurance company has taken considerable steps to repay the American taxpayer for money borrowed in 2008 when the worldwide financial crisis took hold. The floatation on the Hong Kong Stock Exchange of AIG's Asian subsidiary, AIA, has raised US$20.51 billion and, with the sale of Alico to MetLife for US$16.2 billion, the AIG Group will have accumulated almost US$37 billion. AIG who received a US$180 billion bail-out from the US government in 2008 - when the global financial crisis took effect - has been restructuring the group in order to repay the money it owes to the US government. Earlier in 2010, AIA was set to be taken over by British insurers Prudential (PRU) for US$35.5 billion. While this deal was not completed, it subsequently led to the listing of AIA on the Hong Kong Stock Exchange in order to generate revenue to make repayments to the US government. The AIG Group has been selling assets as part of its strategy to raise funds to repay the money borrowed, with the most recent sale of life insurer Alico to MetLife for a reported US$16.2 billion. The move to place AIA for public offering on the stock market proved to be progressive as demand for AIA shares were found to be in high demand from Hong Kong investors. The AIG Group had kept hold of its Asian arm AIA, having turned down a revised offer of US$ 30 billion by the PRU in June 2010, in a bid to increase their exposure in the growing Asian market - where AIG has a presence in 15 countries in the region. Shortly after AIA listed in Hong Kong, the stock reached a market value of US$35.7 billion. The purchase by MetLife of Alico is valued at US$16.2 billion, which was achieved by a cash payment of US$7.2 billion, with the remaining balance of US$9 billion in MetLife securities. The new deal by MetLife for Alico follows the purchase by Mitsui Sumitomo's MS&AD Holdings for MetLife's Japanese joint venture with Mitsue Sumitomo for ¥22.52 billion (US$275 million). Prior to the takeover of Alico, the life insurer MetLife had a reach in over 50 countries. The subsequent deal by MetLife now means the combined customer base exceeds 90 million clients; this makes MetLife one the largest life insurance companies globally offering protection products which include, life, savings, accidents, travel, retirement, business and health insurance. The US government was called upon to bailout the AIG Group - which at the time of the worldwide financial meltdown in 2008 - had a global network of financial institutions; the complete collapse of the group would have caused a domino effect in international financial markets further heightening the effects of the financial downturn. Consequently, a US$180 billion bailout package was structured by the US government to secure AIG's future, which is now seeking opportunities to raise capital to pay-back US tax payers - which the company promised would be achieved when receiving the bailout funds. AIG Chief Executive Robert Benmosche said: "We promised the American taxpayers we would repay them and the initial public offering of AIA last week and the completion of the Alico transaction move us closer to delivering on our promise." Recently AIG agreed to a $4.8 billion sale of its AIG Star Life Insurance Company and AIG's Edison Life Insurance to Prudential Financial. AIG intend to continue to seek opportunities for disinvestment of the group's businesses and other ventures in order to generate income. Even though AIG has become a slimmer and leaner insurer since its bailout, it still holds a strategic position in Asia through its Asian arm AIA. Since the global financial downturn took effect in late 2007, the international landscape has changed for financial institutions, with Asia emerging as a prime hub for financial providers including insurers. AIG's retention of its Asian subsidiary AIA may prove to be a vital stepping stone for long-term prosperity in a region of the world, which is expected to expand and be dominant in the future. Insurance Companies Mentioned: AIG The American International Group - AIGThe American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally. AIA AIAAIA 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. MetLife Metlife InsurancePossessing 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. Alico Alico Alico provides a broad and innovative range of insurance and savings products to individual customers, corporate clients and high net worth customers. With products to support every aspect of their customers' lives, and provide comprehensive cover for the employees and commercial needs of their business clients. Prudential Prudential - Pru 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.
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