Citing Uncertainties, China Life Drops Out of Bidding for AIG?s Asia Life Unit

A China Life spokesman told BestWire that AIG had earlier ?proactively contacted? China Life and invited the Chinese insurer to participate in the bidding for AIA, as AIG was seeking investors globally.

The spokesman said the last time China Life had been in touch with AIG was ?before the Chinese New Year,? during the last week of January. He added that, having evaluated the investment arrangement proposed by AIG, China Life found the investment plan was ?inappropriate to its own investment directions? and decided to ?drop out the bidding.?

The spokesman would not provide further detail about what is wrong with the investment proposal, but he claimed ?the situation was changing? due to the uncertain investment environment, as well as the U.S. government?s bailout policies on AIG.

The speculation that Beijing-based China Life would be interested in bidding for AIA has been circulated around the market since earlier reports cited China Insurance Regulatory Commission Vice Chairman Li Kemu saying on Feb. 26 that China Life and AIG were in talks over the sale of AIG?s Asian unit.

Li said in a statement that AIG's problems have been a ?hot topic.? He said AIG has sent its senior executives around the world, including to China, to discuss its operations.

According to Li, the planned sale of AIA is ?a commercial matter? between AIA and those involved companies that have capabilities to acquire AIA. As an insurance regulator, the CIRC is concerned more about the risk problem, or ?the stability of AIA?s Chinese operations,? said Li.

To effectively protect insurants? interests, Li said the CIRC has had close discussions with United States, Hong Kong and other insurance regulators.

The Chinese regulator is also highly concerned about AIA?s operations in China. Li said. Currently, AIA?s Chinese operations are ?normal,? he said.

The final bids for Hong Kong-based AIA are reportedly due on Feb. 27.

Patricia Chua, a spokeswoman for AIA, declined to comment if AIG has negotiated with China Life regarding the sale of AIA. She confirmed that ?there would not by any official announcement from AIA by today [Feb. 27].?

AIG Hong Kong said in a statement that, ?AIG has not yet reported the fourth-quarter and 2008 year-end results. We continue to work with the U.S. government to evaluate potential new alternatives for addressing AIG's financial challenges. We will provide a complete update when we report financial results in the near future."

AIG's 2008 results are expected to be released March 2.

American International Assurance Co. Ltd., American International Assurance Company (Bermuda) Ltd., American International Assurance Company (Australia) Ltd. and AIA Pension and Trustee Co. Ltd. (AIA companies or AIA) collectively claimed to be one of the largest life insurance groups in Asia, with branches, subsidiaries and affiliates located in China, Hong Kong, Macau, Australia, Brunei, India, Indonesia, Malaysia, New Zealand, Singapore, South Korea, Thailand and Vietnam.

The China Life spokesman said the insurer does ?not have any explicit foreign investment target.? at present. He said the company needs to consider both the ?capital and long-term liability? problems carefully when searching for a suitable acquisition target.

When asked if China Life will shift to focus more to investing in domestic infrastructure projects during the global financial crisis, the spokesman did not confirm this, but said ?such a guess is reasonable.

(By Rebecca Ng, Hong Kong news editor: Rebecca.Ng@ambest.com)

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