AIG gets $11.2 billion bid from MetLife for life unit

Forced to auction off dozens of units to repay part of $150 bn govt bailout.

American International Group Inc received bids from MetLife Inc and Axa SA for a life-insurance unit spanning more than 50 countries, a sale that may mark the biggest step yet in the company’s dismantling, said three people familiar with the situation.

MetLife made a preliminary offer of $11.2 billion for American Life Insurance Co, a price that may drop to about $8 billion because of deterioration in the unit’s financial condition, said the people, who declined to be identified because negotiations are private. A rival bid from Axa excludes operations in Japan, Alico’s biggest market, the people said.

Forced to auction off dozens of business units to repay part of a $150 billion government bailout, AIG may shelve the Alico sale or issue shares to the public if it doesn’t find a buyer at the right price, one of the people said. AIG is selling insurance subsidiaries amid a global stock-market rout that pushed the Standard & Poor’s 500 Life & Health Insurance Index down 73 per cent in the past year.

“AIG’s future is in the hands of the government now,” said Mitsushige Akino, who oversees about $430 million as chief investment officer at Ichiyoshi Investment Management Co in Tokyo. “It’s too big to fail so the best scenario is to separate the businesses that are still functioning, like Alico, and leave the main AIG to take all the bad parts and receive the US government help.”

Five continents
AIG may restructure its rescue package for a second time in four months by converting the government’s preferred shares into common stock to reduce pressure on the company’s cash flow, a person familiar with the situation said yesterday. AIG pays a 10 per cent dividend on preferred stock, and none on common shares.

Christina Pretto, a spokeswoman for New York-based AIG, declined to comment, as did Peter Stack, a spokesman for New York-based MetLife, and Emmanuel Touzeau of Paris-based Axa.

Axa fell 7.9 per cent to ¤7.46 at 10.50 am in Paris trading, valuing the company at ¤15.6 billion. AIG fell 7.6 per cent in German trading to 49 cents.

For MetLife, already the largest US life insurer, adding Alico would bring customers on five continents, from the UK to Japan. Robert Henrikson, MetLife’s chief executive officer, said in December his firm was in an “amazing position” to pursue takeovers because it weathered the financial crisis better than rivals. Life insurers are facing losses and credit-rating cuts because of the declining value of investments.

Citigroup takeover
At $8 billion, the purchase would be the biggest since Henrikson took charge in 2006 and the second-largest since MetLife sold shares to the public in 2000. The only bigger deal was MetLife’s purchase of Citigroup Inc’s life and annuity business in 2005 for about $12 billion.

AIG, led by Chief Executive Officer Edward Liddy, is seeking to sell as much as two-thirds of itself after a government bailout last September.

In addition to Alico, the company is selling separate life units in the Philippines and the US, and a 49 per cent stake in an insurer that operates in Asian nations including China.

AIG has secured agreements to raise more than $2.3 billion in sales of units and other assets.