Money Matters, Simplified.
AIG sells Asian insurance business to Prudential PLC
by Ishita Sood - March 2, 2010 - comments
The deal will add 250,000 agents to Prudential, which already has an existing sales force of 420,000. AIG said it plans to use the sales proceeds to repay the debt it owes to Federal Reserve Bank of New York.
American International Group Inc. (AIG) sold its Asian life insurance business to Prudential PLC of Britain on Monday. The deal was inked for $35.5 billion and is reportedly the largest insurance takeover so far.
Prudential will be paying $25 billion in cash, $2 billion in preferred shares, and $8.5 billion in stock and equity-linked securities to AIG. AIG in turn will get an 11 percent stake in Prudential.
Prudential chief Tidjane Thiam and AIG's Robert Benmosche said they would hold a meeting about the deal on Tuesday.
“We decided that a sale to Prudential enables AIG to realize value on a faster track to repay U.S. taxpayers,” said Benmosche in a statement.
Thiam said that the company has no plans to sell its UK operation, though he will tour Asia in order to meet with insurance agents of both companies.
Chiefly, Thiam is the man responsible behind the whole acquisition.
“He's an incredibly clever man and very charming,” said analyst Kevin Ryan at ING. “He's one of these guys who's a bit of a polymath -- a genuinely impressive guy.”
Advantages of the deal
Once the deal is through, Prudential will be No. 1 insurance dealer in Southeast Asian market, according to an analysts’ presentation.
The deal will also add 250,000 agents to Prudential, which already has an existing sales force of 420,000.
On the other hand, AIG said it plans to use the sales proceeds to repay the debt it owes to Federal Reserve Bank of New York.
Research marketing firm and consultancy McKinsey said it expects up to 100 million households to cross the $10,000 per year income mark between 2007 and 2012.
Also, annual premiums have risen to $750 billion from $632 billion in 2007, creating up to 200 million new customers for companies like Prudential.
About Prudential PLC
Listed on the LSE, Prudential PLC has operations in 12 countries.
Prudential recently launched itself in India as ICICI Prudential, a 26 percent joint venture with India’s leading bank, ICICI.
It also has businesses in China, Hong Kong, Taiwan, Japan, Singapore, South Korea, Malaysia, Indonesia etc.
Prudential was in talks with football team Manchester United in 2009 for becoming its sponsor. However, Manchester United announced later that it had signed a four-year sponsorship deal with Aon Corporation.
Prudential's shares tumbled 12 percent on Monday while AIG's shares rose 4.1 percent.