American International Group on Tuesday announced its largest divestment since its rescue last year with a $2.15bn sale to Hong Kong-based buyers led by a new fund ambitious to build a financial services conglomerate in Asia.
The sale by AIG of its Taiwanese life assurance unit is a coup for Robert Morse, chairman of Primus Financial, a former senior Citigroup executive in Asia who helped to set up the fund in May with two former colleagues.
The acquisition of Nan Shan, the country’s third largest life assurer, by a consortium comprising Primus and Hong Kong interests, is subject to local regulatory approval.
If successful, it will be Taiwan’s largest financial-sector deal involving a foreign acquirer, eclipsing Standard Chartered’s $1.2bn take over of Hsinchu International Bank in 2006. It will also rank as among the top five financial-sector acquisitions in Asia.
Primus faced strong opposition to acquire Nan Shan from powerful domestic groups in Taiwan.
AIG has been selling assets to help to repay more than $100bn in debt and equity to its post-rescue owner, the US government, including the $2bn disposal of its auto unit to Zurich Financial Services. AIG will receive cash upon completion of the deal.
The consortium will acquire 97.5 per cent of Nan Shan, with Primus taking 20 per cent and China Strategic, a Hong Kong-listed battery-maker backed by the city’s tycoons, the remainder. “We feel we have been given the privilege of buying the crown jewel of the insurance industry in the world,” Mr Morse said. Primus planned to turn Nan Shan into an international insurer, he added.
Nan Shan has an 11 per cent market share and total assets of more than $46bn.
Taiwan, however, is one of the world’s least-profitable insurance markets with participants losing money on investment-linked policies with high guaranteed rates of return.
Taiwan’s life assurers earned an average return on assets of less than 1 per cent between 2003 and 2007, and that figure fell to negative 1.5 per cent last year because of the financial crisis, says ratings agency Fitch.
“If Nan Shan can excel in an environment like Taiwan, think of how it can succeed in other countries with less developed markets and weaker competition,” Mr Morse said.
Deutsche Bank advised Primus and Morgan Stanley advised AIG.
Nan Shan is not part of American Interational Assurance, AIG’s pan-Asian life assurance unit, which has appointed banking advisers to assist with a $5bn-plus Hong Kong listing expected next year.