China fund stake in AIG?

The Straits Times
Nov 21, 2008 | 8:54 AM
China fund stake in AIG?

TOKYO - A CONSORTIUM led by sovereign wealth fund China Investment Corp is in talks to buy a 49 per cent stake in American Life Insurance Co (Alico), a unit of AIG, in a deal that could be worth up to US$10.6 billion (S$16.2 billion), Japan's Nikkei business daily reported on Friday.

The paper said US insurance firm American International Group (AIG) was holding preferential talks with the CIC-led consortium, which includes Chinese insurance companies, with a year-end deadline, possibly opening the way for China to become a major player in the global insurance market.

A senior official of CIC, a US$200 billion sovereign wealth fund, said this week China and other developing countries should be given more influence in the global financial system if they provide money to help resolve the world's economic crisis.

Mr Jin Liqun, CIC's supervisory board chairman, also said the fund that manages part of China's nearly US$2 trillion of foreign exchange reserves would continue to expand its investment overseas and would not be intimidated by the current global market turmoil.

The Nikkei paper said AIG was considering a sale on condition that it keeps more than 50 per cent of voting rights in Alico, which has operations in more than 55 countries.

Based on Alico's business value, the acquisition of a 49 per cent stake would likely cost the Chinese investors between 500 billion yen and 1 trillion yen (S$16.2 billion), Nikkei reported.

An AIG spokesman in Japan said the firm was still checking the facts and was not in a position to comment on the report.

AIG, once the world's biggest insurer by market value, averted bankruptcy in September with an US$85 billion federal bailout but the aid ballooned to US$152 billion when it became clear the lower amount would not be enough.

AIG has said it plans to sell everything except for its US property and casualty business, foreign general insurance and an ownership interest in foreign life operations.

Alico Japan, a branch of Alico, accounts for 60 to 70 per cent of the company's insurance premium revenue, the Nikkei said, adding that AIG had said in October it would sell Japanese subsidiaries AIG Edison Life Insurance Co and AIG Star Life Insurance Co along with Alico Japan. -- REUTERS