AIG Continues Asset Selling Spree - Analyst Blog

In an effort to payback the bailout money, American International Group Inc. (AIG) will sell its American Life Insurance Co. (ALICO) unit for about $15.5 billion to MetLife Inc. (MET). MetLife will pay $6.8 billion in cash and approximately $8.7 billion in MetLife equity securities, subject to closing adjustments.

Last week, the company also announced the sale of its Asian life-insurance unit, American International Assurance (AIA) to the U.K.’s Prudential Plc (PUK) for about $35.5 billion.

Additionally, last Friday, AIG announced its plan to sell its remaining 14% stake in reinsurance company Transatlantic Holdings Inc. (TRH) that is owned by American Home Assurance Company (AHAC), an AIG subsidiary. The offering is concurrent with Transatlantic’s addition to the S&P Midcap 400 Index. Last year, the company raised over a billion from selling a part of its Transatlantic stake.

AIG, which received federal support worth $182.5 billion, has been for the past several quarters trying to sell assets and streamline its operations in an effort to repay federal TARP bailout money.

AIG has also narrowed its fourth quarter loss to $8.9 billion or $65.51 per share from a net loss of $61.7 billion or $458.99 per share reported in the prior-year quarter.

With the improvement in the capital market, AIG is expected to experience a recovery in the value of its investments. However, soft insurance market conditions continue to pose a significant challenge for the company’s core property/casualty operating subsidiaries.

Competitive pricing coupled with a decrease in premium receipts is a cause of concern for profitability. Additionally, the low interest rate environment, asset impairments and equity market volatility are the headwinds in the life and annuity sector.

We believe that the other issues being dealt with head-on, immediately, to help revive AIG are improving overall managerial efficiency and inspiring confidence among the dejected staff. However, though the company stands to benefit from its scale of operations and the equity market appreciation, we remain concerned about its significant exposure to risky assets.

Read the full analyst report on "AIG"
Read the full analyst report on "MET"
Read the full analyst report on "PUK"
Read the full analyst report on "TRH"
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