Dealmakers: AIG's life unit seeks buyer, MetLife and Hartford talk union

October 15, 2008

While the insurance end of the broad financial services market was said to be less infected by toxic mortgage-related securities, AIG's bailout and the recent announcement that juggernauts MetLife and the Hartford are talking marriage indicate otherwise.

The U.S. life insurance and annuities units of American International Group are rumored to be on the block to help repay a two-year $85 billion federal government loan with annual interest payments of at least 8.5%, which averted financial ruin following three quarterly losses totaling more than $18 billion and credit downgrades.

The embattled company, once the world's largest insurer, has hired JPMorgan Chase to find buyers, according to published reports. France's Axa SA, Swiss Reinsuance and ING Groep of the Netherlands have been identified as potential suitors. Some industry analysts believe the domestic units could fetch some $22 billion to $28 billion, while AIG's overseas life insurance division is appraised at about $62 billion.

CEO Edward Liddy, who initially sought to preserve as many insurance operations as possible after he was appointed by the government to run AIG, is promising investors a nimbler firm with a focus on the property and casualty line and a stake in an overseas life insurance unit that caters to fast-growing markets across Asia and India.
Meanwhile, MetLife recently approached life and property insurer Hartford Financial Services Group about a merger, according to the Wall Street Journal. The paper reports that the talks did not lead anywhere.

Source: Employee Benefit Advisor