Why AIG Omitted JP Morgan from Underwriters for Life Insurer IPO

By and | February 12, 2010

American International Group Inc. turned down JPMorgan’s attempts to get in on the estimated $10 billion Hong Kong IPO of its Asian life insurance unit, sources involved with the deal said on Friday, in a snub partly stemming from soured relations dating back to the financial crisis.

JPMorgan is the only major investment bank omitted from a long list of underwriters for the IPO of American International Assurance (AIA), the U.S. insurer’s Asian arm once labelled by former CEO Maurice Hank Greenberg as the group’s ‘crown jewel’.

The IPO, among the biggest slated for Asia this year, could produce more than $300 million in fees to those involved.

AIG, bailed out by the U.S. government during the global financial crisis, has chosen Citigroup, Credit Suisse, Goldman Sachs, BofA Merrill Lynch, UBS, CCB International and ICBC International to underwrite the IPO, sources involved in the offering said on Thursday.

When that list was circulated — and no underwriting list is final until the prospectus is printed — the sources assumed there was a lingering contractual reason behind JPMorgan’s absence.

JPMorgan and private equity giant Blackstone Group LP acted as advisers to AIG throughout its restructuring. While Blackstone has kept that role, JPMorgan and AIG parted ways last year on a sour note, according to two sources with direct knowledge of the matter.

The sources, who declined to be named due to the sensitivity of the matter, did not pin down the exact reason for the falling out between AIG and the U.S. bank.

“The relationship is not here, which explains why the bank has not been mandated on AIA’s IPO,” said one of the sources, who like the others interviewed for this article, declined to be named due to the issue’s sensitivity.

AIG struggled with parts of its restructuring last year, putting some assets up for sale, taking them off the market, and then putting them back up for sale.

The sources said on Friday that JPMorgan wasn’t actually tied to its previous relationship with AIG, and had pitched hard to get on to the AIA IPO, thinking bygones were bygones.

But old grudges appear to have been at play.

“When you go down the road of including everyone, either you do or you don’t,” said one of the sources involved in the IPO.

“It’s a politically charged IPO,” said the source, referring to the U.S. government involvement in AIG’s bailout and all the advisers and politicians who became part of that difficult process.

“So, within that context, it’s not an accident,” that JPMorgan was left off the AIA IPO, the source said.

JPMorgan and AIA declined to comment on why the bank was left off the underwriting list.

AIG had already selected Deutsche Bank and Morgan Stanley as joint global coordinators for the offering.

(Additional reporting by Paritosh Bansal in NEW YORK; Editing by Ian Geoghegan)

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