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The company said it will retain its U.S. property/casualty and foreign general insurance businesses and a continuing ownership interest in its foreign life insurance operations.
AIG is exploring divestiture opportunities for its remaining high-quality businesses and assets, and is pursuing a number of alternatives for its financial products business and its securities-lending program, it said.
AIG (NYSE: AIG | Quote | Chart | News | PowerRating) said its worldwide property/casualty businesses generated approximately $40 billion in revenues in 2007.
The sale of assets will ?generate sufficient liquidity to repay the outstanding balance? of the loan from the Federal Reserve Bank of New York, and address its capital structure. AIG said it had drawn $61 billion on the Fed credit facility as of Sept. 30.
?To realize our objective, we will sell a number of extraordinary businesses that are proving to be highly attractive to buyers,? Chairman and Chief Executive Officer Edward M. Liddy said in a statement. ?We have already been contacted by numerous strong, stable parties, and we expect that buyers will recognize the value of these properties, be a good strategic fit and offer the greatest potential for growth, profitability, and continuing opportunities for employees. Our goal is to emerge from this process as a smaller but more nimble company that is solidly profitable and has good long-term growth prospects.?
AIG said its global coordinators for the divestiture program are The Blackstone Group and J.P. Morgan.
Liddy is scheduled to host an investors? conference call on the morning of Oct. 3 to discuss what steps AIG will take.
The loan creates a 24-month secured revolving credit facility. The loan will accrue interest at 850 basis points above the three-month London Interbank Offered Rate, is collateralized against the assets of AIG's primary nonregulated subsidiaries and the stock of its regulated subsidiaries. Current AIG shareholders will see their equity diluted 79.9% by the issuance of warrants to the federal government, which also retains the right to veto dividend payments (BestWire, Sept. 17, 2008).
Recently, a report by insurance analytics provider Advisen Ltd. speculated that the properties for sale will include AIG?s profitable aircraft leasing arm, its stake in reinsurer Transatlantic Holding, and its consumer lending and variable annuities businesses.
However, due to the size of its liabilities, Advisen said it believes AIG must sell some of the insurance subsidiaries that are ?autonomous and which serve well-defined sectors" such as Hartford Steam Boiler Inspection & Insurance Co.; 21st Century Insurance Co.; and Audubon Insurance Co. (BestWire, Sept. 23, 2008)
The current Best's Financial Strength Rating of A (Excellent) of most of AIG's insurance units is under review with negative implications.
Shares of AIG closed at $4.00 on Oct. 2.
(By Alyn Ackermann, senior associate editor, BestWeek: Alyn.Ackermann@ambest.com)
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