AIG to Sell Most of IPC Stake

Bermuda-based IPC Holdings, Ltd. announced that AIG has given notice that it intends to exercise its demand registration rights to register for sale up to 15.397 million of the IPC common shares it owns (24.2 percent of outstanding shares) in a public offering, subject to market conditions.

Standard & Poor’s and A.M. Best both hastened to affirm IPC’s ratings in the wake of the announcement late Wednesday, April 19 (see following article), but S&P said the outlook was negative.

AIG was the “sponsoring shareholder” of IPC in 1993 and has provided IPC with investment management, administrative and other services since then. The announcement said “these aspects of AIG’s business relationship with IPC are intended to continue following the sale.” S. George Cubbon, President and CEO of American International Company, Ltd., intends to remain on IPC’s Board of Directors.

IPC also noted that “AIG does not provide financial support to IPC, and the sale of AIG’s share ownership will not affect IPC’s capital structure, financial condition or policyholders. The sale of AIG’s ownership should provide more flexibility to IPC in managing its capital, including potentially through share repurchases,” but it also indicated that such action was not currently being considered.

“Our financial condition remains healthy and our balance sheet, through our recent capital raising efforts, is strong,” stated IPC President and CEO Jim Bryce. “AIG was our sponsoring shareholder and all of us at IPC would like to thank AIG for its support over the years. We are on excellent footing to capitalize on the favorable market conditions.”

AIG’s President and CEO Martin Sullivan commented: “We have had a long and successful investment in IPC and remain confident in its business model and management team. Our registration request is a part of our ongoing management of our business portfolio and strategic redeployment of capital. IPC has a track record of disciplined underwriting since its founding in 1993. We look forward to continuing our successful business relationships with IPC, including as one of its clients.”

The bulletin also noted: “The manner, timing and execution of any sale of AIG’s IPC shares would be in AIG’s discretion and subject to market conditions and there is no assurance it will occur.”

A number of analysts reacted to the news by raising questions about some of AIG’s other investment positions, notably its 59.2 percent stake in Transatlantic Re. The current surge in share prices, particularly in the U.S., could make it a convenient time for AIG to sell some of its investments in order to raise capital that it might want to deploy elsewhere. In addition Sullivan seems to be moving towards putting his own stamp on the giant insurer, as he moves out of the shadow of long-time Chairman and CEO Maurice “Hank’ Greenberg.

Topics AIG