American International Group (AIG) yesterday said it has inked an agreement to sell its 97.57 percent share in Nan Shan Life Insurance Co (南山人壽) to Ruen Chen Investment Holding Co (潤成投資) for US$2.16 billion in cash.
The move marked the second attempt by the US insurance giant to divest itself of its stake in the local subsidiary after Taiwan rejected its first attempt in August over concerns about the long-term commitment and capital increase capability of the previous suitors, China Strategic Holdings Ltd (中策集團) and Primus Financial Holdings Ltd (博智金融).
“AIG has decided to shift its focus to non-life insurance business in the American market following the global financial crisis,” company assistant general counsel Andrew Borodach told a media briefing in Taipei.
Photo: Reuters
Owing to debt obligations to the US government, AIG no longer has the professional expertise or financial capability to support Nan Shan, which may not grow or flourish under AIG’s continued ownership, Borodach said.
AIG is satisfied with the sale price and confident the new buyer group will meet the review criteria set by the Financial Supervisory Commission.
The commission has also required that the buyers safeguard the rights of Nan Shan employees and policyholders, demonstrate professional management competence and comply with funding rules, especially if Chinese capital is involved.
Established in 1963, Nan Shan is the third-largest local insurer by total premiums, serving 4 million policyholders via 4,100 employees and 33,000 agents in 24 branches and 500 agency offices.
“AIG conducted a fair review before selecting the buyer” who can obtain regulatory approval, Borodach said.
He declined to comment on other buyers or the prices they offered.
Ruen Chen, created for the Nan Shan acquisition, is 80 percent owned by Ruentex Group (潤泰集團), a Taiwan-based conglomerate, and 20 percent owned by Pou Chen Corp (寶成工業), a footwear maker.
Samuel Yin (尹衍樑), chairman of Ruentex Group, whose business interests range from textiles to construction and retailing in Taiwan and China, said Ruen Chen will not sell Nan Shan shares in the next 10 years and could meet new capital needs in the next 10 to 20 years.
“We intend to hire all Nan Shan employees for at least two years and keep their current compensation and benefits intact,” Yin said. “We also will keep the Nan Shan brand and maintain the existing agency’s organizational and commission structure.”
Ruen Chen will not make a big reshuffle of the management team, but was recruiting a new chairman and president, Yin said.
The tycoon said that Ruentex and Pou Chen derive their funds from Taiwan, although both firms own businesses in China.
Ruen Chen has a paid-in capital of NT$2.5 billion (US$85.8 million) and the board has approved raising its capital to NT$60 billion.
Tu Ying-tzyong (杜英宗), chairman of Citigroup Global Markets Taiwan Ltd (花旗環球財務管理顧問), which consulted with Ruen Chen on the acquisition, said the consortium would sell Nan Shan shares on the local bourse to raise additional funds.
Borodach said if AIG leads the initial public offering (IPO), the proceeds would go to debt payments in the US, but they would stay with Nan Shan to strengthen its financial strength if the new buyer conducts the IPO plan.
The Financial Supervisory Commission issued a brief statement last night, saying it would soon put together an ad hoc panel to screen the share transfer application.
The review, however, should start with an investment committee under the Ministry of Economic Affairs, the commission said.
The nation’s three largest financial holding firms, Cathay Financial Holdings Co (國泰金控), Fubon Financial Holding Co (富邦金控) and Chinatrust Financial Holdings Co (中信金控), all entered the bidding, but failed.
Another consortium comprised of Primus Financial and Goldsun Development and Construction Co (國產實業), which offered to jointly run Nan Shan with AIG, also failed.
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