AIG to Sell Asian Unit for $35.5 Billion to UK’s Prudential

BY Carolyn O'Hara  March 1, 2010 at 11:30 AM EST

Embattled insurance giant AIG will sell its Asian life-insurance unit, AIA, to British insurance firm Prudential in a deal estimated at $35.5 billion. The deal will make Prudential the biggest insurance provider in several Asian countries, including Singapore, Malaysia, Indonesia, Vietnam, Thailand and the Philippines, and the major foreign provider in China and India, according to reports in the New York Times and Wall Street Journal.

The sale will also allow AIG to pay back the federal government the biggest chunk thus far of the taxpayer bailouts that kept the company afloat in 2008. The Federal Reserve Bank of New York will reportedly receive the first $16 billion from the sale.

Insurance companies consider Asia to be one of the world’s fastest-growing markets, as societies age and turn savings into insurance. Prudential clearly hopes that the investment will position it to reap rewards from the Asian market for decades to come. It’s also a bold move: The value of the sale is bigger than Prudential’s market value of $23 billion. The company plans to tap shareholders for additional cash through stock sales, a move that is subject to shareholder approval, and to borrow the remainder. In early trading, Prudential’s shares were down slightly on the news.

AIG, under CEO Robert Benmosche, is working to pay off about $97 billion in government funds, a little more than half what the government has committed to the company thus far. In a statement Monday, Benmosche said “In considering two viable, very attractive alternatives to successfully monetize AIA, including an initial public offering, we decided that a sale to Prudential enables AIG to realize value on a faster track to repay U.S. taxpayers.”