Carlyle Group, Primus Financial Holdings Ltd and MBK Partners Ltd may seek to buy American International Group Inc’s (AIG) Taiwanese life insurance unit, three people familiar with the matter said.
KKR & Co, Affinity Equity Partners Ltd, Cathay Financial Holding Co (國泰金控) and Chinatrust Financial Holding Co (中信金控) have also asked New York-based AIG for information about the sale and may take part in a first round of bids scheduled for Friday, the people said. The unit may fetch about US$2 billion, they said, declining to be identified because the discussions are private.
AIG, formerly the world’s largest insurer, is selling assets outside the US to repay a US$182.5 billion government bailout. The Taiwan unit, Nan Shan Life Insurance Co (南山人壽), is Taiwan’s second-largest life insurer with 4 million policyholders and 11 percent market share in total premiums.
“Everyone hopes this is going to be a fire sale as AIG is in a difficult situation,” said Andy Chang (張書評), a director at Taiwan Ratings Corp (中華信評), the local partner of Standard & Poor’s. “Buyout firms are betting they can exit with a premium because interest rates may rise, benefiting insurer’s investment returns.”
AIG separated Nan Shan Life from other non-US life insurance assets it is selling. The US company disclosed deals raising about US$6.7 billion since it was rescued by the US government in September.
Nan Shan Life, which is burdened with unprofitable policies, raised US$1.45 billion in a rights offer last year to avoid slipping below a regulatory capital requirement. AIG owns 97.5 percent of the unit and Nan Shan’s management owns the remainder.
Nan Shan Life has a sales force of about 35,000 agents and operates 24 branches and 427 sales offices, spokeswoman April Pan (潘玲嬌) said.
The Taipei-based company was founded in 1963, qualifying it to expand into China, which requires foreign insurers to have at least 30 years of operating history. The company had NT$1.5 trillion (US$45.5 billion) of assets at the end of April.
The AIG unit and other local insurers sold policies before 2000 with guaranteed returns of at least 6.25 percent, Chang said.
Traditional policies sold now typically carry returns of about 2 percent, he said.
The size of the final bids will depend on how much capital buyers estimate Nan Shan Life will need to cover the legacy policies, the people said.
Cathay Financial president Chen Tsu-pei (陳祖培) and Daniel Wu (吳一揆), Chinatrust’s chief investment officer, said in interviews the companies were considering bidding for Nan Shan Life.
They declined to say whether the firms would enter bids this week. Pan also declined to comment on the sale.
Officials at Carlyle, KKR, Affinity, Primus and MBK Partners either declined to comment or weren’t immediately available.