Credit Suisse: AIG May Sell More Than Half Its Assets

(Reuters) – American International Group Inc (AIG.N: Quote, Profile, Research, Stock Buzz) may need to sell more than half of its businesses and the most coveted of its properties could be its international life businesses and the domestic retirement unit, Credit Suisse’s global insurance analysts said in a report.

The combined saleable value for AIG would be $82 billion after deducting $33 billion of estimated costs associated with the need for de-risking its portfolio, analysts led by Thomas Gallagher noted.

The New York-based financial titan, which was once the world’s most valuable insurer, needs to raise cash quickly to repay an $85 billion U.S. Federal Reserve loan that allowed it to avoid bankruptcy after taking massive losses on mortgage derivatives.

AIG’s businesses that may be up for sale are international life insurance, foreign general, and the domestic retirement business, and some of the big foreign players may be interested buyers in the US on both life and property and casualty sides, Credit Suisse said.

In the U.S. commercial property and casualty business AIG has a 11 percent market share, and its removal from the market has the potential to lead the industry to a significant loss of surplus, the analysts said.

A sale of AIG’s international life insurance businesses could “dramatically alter” the competitive landscape in countries like Taiwan and Hong Kong, and will have a “material impact” on life insurance industries of Japan and the U.S.

The brokerage said the asset sales by AIG will benefit Aflac Inc (AFL.N: Quote, Profile, Research, Stock Buzz) and Prudential Financial Inc (PRU.N: Quote, Profile, Research, Stock Buzz) on the Japanese side, and Prudential UK in the non-Japan Asian countries.

On the other hand, if China Life (2628.HK: Quote, Profile, Research, Stock Buzz) were to be the buyer of some or all of these properties, this could represent a formidable new competitor, making the benefit more temporary, the brokerage added.

AIG shares shot up today after the new chief executive of the embattled insurer said he expected it to emerge from a federal bailout as a leaner, stronger company.

In mid-day trade AIG shares were trading up 16.1 percent at $5.48 on the New York Stock Exchange.

(Reporting by Supantha Mukherjee in Bangalore, Editing by Dinesh Nair)