The financially troubled American International Group is hoping to take some of the pressure off a precarious situation by selling part of its stake in a Chinese insurer and agreeing to end its reinsurance relationship with Weston Hicks’s Alleghany Corp.
AIG aims to raise between $750 million and $1 billion with the sale of some of its shares in PICC Property and Casualty Co. Ltd. The company shared its intention in a term sheet obtained by Thomson Reuters, which stated that
AIG is offering between 355 million and 365 million shares in PICC in a range of HK$16.08 to HK$167.38 apiece – a discount of about 4.3% to 6.1% to PICC’s last traded price.
The deal has a $250 million up-size option, Reuters said, and the sale is being managed by Citigroup, Goldman Sachs and Morgan Stanley.
AIG has been a cornerstone investor in China’s state-run insurer since 2003, ahead of PICC’s IPO, and the company’s roots in the region run deep. Though AIG sold part of its Asian life insurance business AIA Group to help repay its bailout by the US government following the 2008 crisis, it reentered the market in 2013 by investing about $500 million in PICC.
Prior to the sell-down, AIG held 1.2 billion PICC shares, or about a 26.4% in the company, making it the biggest investor in the insurer.
AIG is also looking forward to a share of $400 million, which Alleghany Corp. is planning to pay AIG and
Berkshire Hathaway for decades-old policies – a deal that would end both companies’ relationship with Alleghany subsidiary Transatlantic Reinsurance Co.
Transatlantic hopes to end contracts that covered asbestos-related illness and environmental liabilities, according to an Alleghany regulatory filing last week. The company will also post a $20 million charge in the fourth quarter tied to the action.
No details on the split of the $400 million have emerged, though the deal comes as AIG suffers from a $231 million net loss last quarter.
On the heels of the loss, the company has faced mounting pressure from investors led by activist Carl Icahn to split the company into three and improve profitability.
