AIG Seeks as Much as $1.27 Billion From PICC P&C Share Sale

  • U.S. insurer is offering 740 million shares at up to HK$13.35
  • Hancock has been freeing up capital to repurchase AIG stock

American International Group Inc. is seeking as much as HK$9.88 billion ($1.27 billion) from the sale of shares in PICC Property & Casualty Co., as Chief Executive Officer Peter Hancock frees up capital to repurchase more of his company’s stock.

The largest commercial insurer in the U.S. and Canada is offering 740 million shares in PICC P&C at HK$13.06 to HK$13.35 apiece, according to terms of the deal obtained by Bloomberg News. The price range represents a discount of as much as 8 percent to the Chinese insurer’s HK$14.20 close on April 29.

Hancock, under pressure from activist investors John Paulson and Carl Icahn to boost returns and simplify operations, announced in January that he was creating a new legacy portfolio. That book includes about a quarter of the company’s equity and is comprised of discontinued businesses and investments that AIG plans to exit. The PICC P&C holding is one of the easier ones to sell, given that the stock is publicly traded in Hong Kong.

“On the legacy portfolio, we think that the right metric for success is how quickly we can extract capital by either divestitures, reinsurance, or other efficient runoff methods without giving away too much of our book value,” Hancock said in a Jan. 26 presentation. The CEO plans to free up about $9 billion as part of a two-year plan to fund $25 billion of share buybacks and dividend payments.

Morgan Stanley

AIG owned about 851 million shares in Beijing-based PICC P&C at the end of December, according to data compiled by Bloomberg. After the sale, AIG is subject to a 60-day lockup on its remaining stake, according to the terms. Morgan Stanley is a joint global coordinator arranging the sale, the terms show.

AIG bought about 1.1 billion shares at HK$1.80 each in the initial public offering of PICC P&C in 2003, data compiled by Bloomberg show. The U.S. insurer also took part in PICC P&C’s rights offerings in recent years at subscription prices of less than HK$8.

Last year, AIG pared its stake via two major transactions, selling 256.5 million shares at HK$15.15 each in March and then disposing of another 361 million shares at HK$16.14 apiece in December, data compiled by Bloomberg show. PICC P&C has fallen 7.9 percent this year, taking its decline over the past 12 months to 18 percent.

AIG is scheduled to report first-quarter earnings Monday and have a conference call the next day to discuss results and the company’s strategy.

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