China Investment Corp. In Talks for AIG Unit

(Reuters) – A consortium led by China’s sovereign wealth fund is in talks to buy a 49 percent stake in AIG (AIG.N: Quote, Profile, Research, Stock Buzz) unit Alico in a deal that could be worth up to $10.6 billion, Japan’s Nikkei business daily reported on Friday.

The paper said U.S. insurance firm American International Group (AIG) was holding preferential talks with the China Investment Corp-led consortium, which includes Chinese insurance companies, with a year-end deadline.

Such a deal could open the way for China to become a major player in the global insurance market.

A spokeswoman for China Investment Corp (CIC) declined to comment. “We never comment on market rumours,” she said.

A senior official of CIC, a $200 billion sovereign wealth fund, said this week that 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.

Jin Liqun, CIC’s supervisory board chairman, also said the fund that manages part of China’s nearly $2 trillion of foreign exchange reserves would continue to expand its investment overseas and would not be intimidated by the current global market turmoil. [ID:nSHA302888]

Nikkei said AIG was considering a sale on condition it keeps more than 50 percent of voting rights in Alico, or American Life Insurance Co, which has operations in more than 55 countries.

Based on Alico’s business value, the acquisition of a 49 percent stake would likely cost the Chinese investors between 500 billion yen and 1 trillion yen ($5.3-10.6 billion), Nikkei said.

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 $85 billion federal bailout, but the aid ballooned to $152 billion when it became clear the lower amount would not be enough.

AIG has said it plans to sell everything except its U.S. 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 percent of the company’s insurance premium revenue, 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.

The vice chairman of AIG subsidiary American International Assurance China, Edmund Tse, was quoted by Chinese financial newspaper 21st Century Business Herald on Wednesday as saying that 30 companies, including Chinese firms, were interested in buying AIA’s Asia assets.

($1=94.02 Yen)

Reporting by Sachi Izumi in Tokyo and Samuel Shen in Shanghai; Editing by Alex Richardson)