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AIG said it closed the sale of 21st Century Insurance Group, the wholly owned subsidiaries of AIG's U.S. personal auto insurance business, to Farmers Group Inc., a subsidiary of Zurich, for $1.9 billion.
The purchase price consists of $1.7 billion in cash and $200 million in face amount of subordinated, Euro-denominated capital notes backed by Zurich Insurance Co., Zurich's principal operating unit. FGI also assumed 21st Century's outstanding debt of $100 million.
AIG's U.S. personal auto insurance business includes 21st Century Insurance (comprising the former AIG Direct and 21st Century Insurance), as well as AIG's Agency Auto.
The transaction excludes AIG's Private Client Group, which provides property and casualty insurance to high-net-worth individuals.
Further, AIG said it has agreed to sell 100% of its ownership stake in Inversora Pichincha S.A. and Interdinco S.A., which comprise AIG's consumer finance operations in Colombia, to Banco Pichincha C.A. of Ecuador and other parties. Terms of the transaction were not disclosed.
Inversora Pichincha provides consumer finance products in Colombia, offering vehicle financing, personal loans, student loans, insurance premium financing, commercial loans, credit cards and retail deposits.
The transaction is subject to the satisfaction of certain conditions, including approval by the Ecuador Superintendency of Finance and the Colombia Superintendency of Finance.
AIG almost collapsed last September after rating downgrades forced the company to post collateral on credit default swaps, which banks bought from the insurer. AIG was subsequently bailed out by the U.S. government with a $85 billion initial credit line. The bailout amount rose to $182.5 billion in March with the U.S. government now owning 79.9% of the company.
The troubled company is presently in the process of selling assets and spinning off some subsidiaries to repay bailout loans received from the government.
Last week, AIG entered into an agreement with the Federal Reserve Bank of New York or FRBNY for reducing debt by $25 billion, through initial public offerings of its two life insurance franchises, American International Assurance Co. Ltd. and American Life Insurance Co., depending on market conditions.
The company agreed to sell 98% stake in its consumer finance operations in Russia to Banque PSA Finance SA, a unit of PSA Peugeot Citroën Group. Terms of the transaction were not disclosed. The transaction includes the AIG's Russian unit, OOO AIG Bank, and provides an option for AIG to sell the remaining 2% to Banque PSA after mid-March 2011.
Yesterday, AIG's shareholders approved a reverse 20-for-1 stock split meant to boost the share price.
AIG closed Wednesday's regular trading session at $18.08, up $5.12 or 22.02%, on a volume of 40.80 million shares. However, in the after-hours, the shares lost 12 cents.
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