AIG to Sell Japan Insurance Units to Prudential Financial for $4.8 Billion
A man exits the headquarters of American International Group Inc. in New York, on Feb. 3, 2010. Photographer: Daniel Acker/Bloomberg
70 Pine Street, home to the headquarters of American International Group (AIG), right, is reflected in a neighboring building in New York, on Dec. 4, 2009. Photographer: Daniel Acker/Bloomberg
Prudential Financial Inc. headquarters stands in Newark, New Jersey, on May 12, 2009. Photographer: Steve Hockstein/Bloomberg
American International Group Inc., the bailed-out U.S. insurer, agreed to sell two Japanese subsidiaries to Prudential Financial Inc. for $4.8 billion.
AIG Star Life Insurance Co. and AIG Edison Life Insurance Co. will be sold with $4.2 billion paid in cash and $600 million in debt, AIG said in a statement today distributed through Business Wire.
AIG Chief Executive Officer Robert Benmosche, 66, is disposing of assets as rival insurers rebuild capital lost during the 2008 financial crisis. In March, he agreed to sell AIG’s American Life Insurance Co. to MetLife Inc. for $15.5 billion. Newark, New Jersey-based Prudential, the second-biggest U.S. insurer, is adding to a Japanese business that produced more than $6 billion in revenue last year.
“Pru has been a very large Japanese life insurer,” said Randy Binner, an analyst with FBR Capital Markets, who has an “outperform” rating on Prudential shares. “They think they know that market very well and they’re comfortable there. They see an opportunity to build.”
Prudential’s John Strangfeld is making his second deal in Japan since taking over as chief executive officer in 2008. The company, which entered the world’s second-largest life insurance market in 1987, bought bankrupt carrier Yamato Life Insurance Co. last year after winning an auction for the Tokyo-based firm.
‘Know Very Well’
“It’s a market we know very well,” Strangfeld said of Japan in a June interview. “We have confidence in our management there.”
Prudential and MetLife, the No. 1 U.S. life insurer, are expanding abroad as bailed-out rivals including AIG and Hartford Financial Services Group Inc. retreat. Strangfeld, 56, and MetLife CEO Robert Henrikson shunned government capital last year and raised funds by selling stock and bonds.
“The latest sale is evidence of how AIG is steadily but surely carrying on with its restructuring plan,” said Naoki Fujiwara, a chief fund manager in Tokyo who helps oversee $6 billion at Shinkin Asset Management Co.
“The question would be how Prudential will be able to utilize the acquired units in a country where growth is limited and the outlook for the Japanese insurance market still remains questionable; that will determine whether it was expensive or not,” Fujiwara said.
Japan accounted for about 17 percent of the world’s life insurance sales last year, according to a study by Swiss Reinsurance Co. Premium volume was $399 billion in 2009, down 0.8 percent when adjusted for inflation, Swiss Re said. In the U.S., the world’s biggest market, premiums dropped 15 percent to $492 billion, according to the Zurich-based reinsurer.
AIG, once the world’s biggest insurer, is divesting businesses to repay a $182.3 billion U.S. rescue.
The sale of the Japan units “represents another step in AIG’s program to repay U.S. taxpayers and a key milestone in achieving a complete exit of government support over time,” AIG said in today’s statement.
To contact the reporters on this story: Andrew Frye in New York at afrye@bloomberg.net.
To contact the editors responsible for this story: Dan Kraut at dkraut2@bloomberg.net; Andreea Papuc at apapuc1@bloomberg.net
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