AIG raises $7.9b in final stake sale of insurer AIA

PHOTO: AIG raises $7.9b in final stake sale of insurer AIA

HONG KONG - Asian insurer AIA said Tuesday that US giant American International Group (AIG) had sold its remaining stake in the firm, raising US$6.45 billion (S$7.9 billion) and completing an exit that started two years ago.

AIG offloaded its final 13.69 per cent holding for HK$30.30 (US$3.90) per share, AIA said in a statement, adding that it was one of Asia's biggest secondary placements.

"This latest divestment of the remaining holding is noteworthy in AIA's history since it marks the end of AIG's shareholder interest in AIA," AIA group chief executive Mark Tucker said.

However, AIA shares in Hong Kong plunged 3.32 per cent from Friday's close to end at HK$30.60, although they are still above the price at which the US firm sold up. The stock was suspended Monday pending the sale announcement.

The benchmark Hang Seng Index closed flat.

AIG sold two-thirds of AIA in a US$20.5 billion initial public offering in Hong Kong in 2010 - one of the world's biggest listings - as it sought to repay a US$182 billion US government bailout during the financial crisis.

AIG sold further AIA shares twice this year, raising a total of US$8 billion.

"We think this is positive news for AIA because it has removed the long term uncertainty" of AIG selling the stake, investment bank Core Pacific-Yamaichi analyst Timothy Li told AFP.

He said market's negative reaction was expected because the placement was made at a discount to AIA's close on Friday but he was confident the stock will rebound.

"For AIG, it lost an important vehicle in the Asian insurance market but it will help the firm to regain its financial strength," Li said, adding that he believes AIG will seek to tap the booming Asian market through other means.

AIG invested US$500 million in the US$3.1 billion initial public offering of China state-owned insurer PICC in Hong Kong earlier this month, while it will also set up a joint venture with the firm to sell insurance products in Chinese cities.

The US firm's move to fully exit AIA followed last week's US Treasury sale of all of its remaining shares in AIG for $7.6 billion, taking Washington's net profit on its 2008 bailout to US$22.7 billion.

The Treasury continues to hold warrants to purchase 2.7 million AIG shares.

The bailout of what was once the world's largest insurer included equity and loans from the Treasury and Federal Reserve after the firm was swept into a liquidity crisis by its exposure to insurance on bad mortgage-backed securities.

At the time, it was feared AIG's collapse would spark a chain reaction throughout the global financial system.

But the rescue was deeply controversial, with critics saying the money put into AIG simply went toward paying off its counterparties, rather than having them take losses on their AIG-related investments.

In the past four years, AIG has been reduced in size by nearly half through restructuring and sales of some of its units.

On December 9, AIG announced it was selling up to 90 per cent of its aircraft leasing firm ILFC to a group of Chinese investors, in a deal that values ILFC at US$5.28 billion.