Industry titan AIG is reportedly in talks to offload its insurance business connected with Lloyd’s of London to Canada’s biggest pension fund.
The insurer is in “early discussions” with Canada Pen
sion Plan Investment Board (CPPIB) to sell its operations at Lloyd’s and a Bermuda-based reinsurance firm, The Wall Street Journal
reported, citing unnamed sources familiar with the matter.
However, the insiders also said that the two sides may not reach a final deal. But if completed, the reported transaction could give “hundreds of millions of dollars” in proceeds to AIG, the sources told the publication.
On the other hand, the potential acquisition would mark the Canadian fund’s latest move to establish itself as a major player in the global insurance industry, the report noted.
The business unit being discussed is Ascot Underwriting, the managing agency of the Lloyd’s syndicate for which AIG provides the capital. The insurer is also a minority owner of Ascot.
Acquiring Ascot could further extend the Canadian fund’s insurance operations since the AIG-backed firm has operations in Houston and Asia.
According to The Wall Street Journal
, CPPIB is also attracted to the insurance business because the cash flows generated by the industry match up well with the long-term pension liabilities of the pension fund.
CPPIB is exploring the deal with AIG while the insurer tries to restructure its business as part of an extensive overhaul promised to shareholders to repel activist investor Carl Icahn, Reuters
noted. The American magnate has urged the insurer to split up into three companies.
Last week, AIG announced that it had agreed to sell its mortgage-insurance business, United Guaranty Corporation, to Bermuda-based global insurer Arch Capital Group for US$3.4 billion.
The insurance conglomerate has been making these latest business moves following the announcement of its half-year financial results.
Earlier this month, AIG reported that its net profit nosedived by 59%, from US$4.27 in the first six months of 2015 to US$1.73 billion in the same period this year.
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