American International Group Inc. (AIG) has begun the process of rebranding of its insurance units as an independent entity, AIU Holdings, by transferring the company to a special purpose vehicle (SPV) in preparation for the potential sale of a minority stake in the business, which ultimately may include a public offering of shares, depending on market conditions.
AIG announced March 2 that AIU Holdings will have a board of directors, management team and brand distinct from AIG. Under the plan, AIU Holdings will serve as the holding company for AIG’s Commercial Insurance, Foreign General Insurance, and Private Client Group units.
“Placing AIU Holdings into an SPV marks the latest significant step to position our strong insurance companies as independent businesses, which will benefit all stakeholders, including policyholders, employees and distribution partners,” said Edward Liddy, AIG chairman and CEO.
Under the SPV arrangement, AIG intends to contribute the equity of AIU Holdings into an SPV in exchange for preferred and common interests in the SPV.
AIG also intends to purchase from AIU Holdings its equity interests in International Lease Finance Corp., United Guaranty Corp. and Transatlantic Holdings Inc. The sale of these interests to AIG further separates the property/casualty operations from AIG and its other affiliates.
“Taken together, these actions accelerate the move of AIU Holdings toward greater independence,” said Kristian P. Moor, president, AIU Holdings. “Securing the value of these well capitalized insurance companies, which had net written premiums of about $36 billion in 2008 serving millions of clients around the world, is in the best interests of policyholders and the American taxpayer.”
The Federal Reserve Bank of New York called the move “an important next step in the company’s efforts to place key business units in the best position to optimize their operations and maximize their value.”
Ratings analysts at A.M. Best and Standard & Poor’s said the move would have no immediate effect on ratings of any AIG companies but both saw the move as a positive step.
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