AIG Unit Inks Deal with China Bank - Analyst Blog

In a move to strengthen its position in China, American International Assurance Co. (“AIA”), the Asian arm of American International Group Inc. (AIG), signed a bancassurance agreement with Industrial & Commercial Bank of China Ltd. (“ICBC”) to sell its life insurance products at ICBC’s branches.

 

To date, AIA has 17 bancassurance agreements in China and is the only foreign company to own its Chinese operating license outright. This agreement will allow AIA to market its products through ICBC’s more than 16,000 branches. AIA will also work hand in hand with ICBC in the field of sales and marketing, product innovation, service quality, technological advancement and sustainable profitability.

 

AIA has already positioned itself as the leading foreign life assurer in China, having more than 25,000 sales agents in the country and a roughly 21% market share of premiums earned by foreign life insurance companies in 2008.

 

Additionally, AIG is on track with the initial public offering (IPO) plan for AIA and is seeking regulatory approval regarding the listing on the Hong Kong Stock Exchange on September 21.

 

According to the IPO deal, AIG wants to sell AIA shares largely to cornerstone investors involving sovereign wealth funds from China as well as other parts of Asia and the Middle East.

 

Citigroup Inc. (C), Deutsche Bank AG (DB), The Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS) will act as the joint global coordinators for the IPO. The bookrunners will include Bank of America Merrill Lynch of Bank of America Corporation (BAC); Barclays Capital, an arm of Barclays plc (BCS); CIMB; Credit Suisse Group AG (CS); ICBC International, the securities arm of ICBC; JPMorgan Chase & Co. (JPM); and UBS AG (UBS).

 

AIG expects to raise about $15 billion through this IPO and thus repay part of the $132 billion remaining out of the $182.3 billion Treasury bailout package that rescued the company at the peak of the financial meltdown.

 

AIA’s IPO came after AIG’s plans of disposing it to Britain's Prudential plc (PUK) for $35.5 billion in May was abandoned. The deal fell through as AIG declined accepting Prudential’s lower offer of $30.4 billion.

 

AIG has been putting in efforts to strengthen its business, manage costs, recover its investments and repay its bailout money. The planned divestitures will help AIG repay and free it of pay restrictions. AIG has already made significant progress toward its plan and sold its American Life Insurance Co. to MetLife Inc. (MET) for $15.5 billion in March 2010.

 

We are thus looking forward for this AIA−ICBC venture to provide a strong foundation and enhance the bancassurance business models in China.