Flowers Eyes Bid for AIG Tokyo Unit

HONG KONG/TAIPEI (Reuters) – Several U.S. private equity firms and Taiwanese financial groups are showing early interest in the sale of AIG’s Taiwan life insurance unit, banking sources said on Friday, in a deal the seller hopes could raise around $2 billion.

U.S. private equity firm JC Flowers & Co. and Taiwan’s Fubon Financial (2881.TW) were expected to pursue a bid for the unit, Nan Shan Life, according to sources close to the process.

The official auction for the business began within the last week, sources said, with sellside adviser Morgan Stanley (MS.N) distributing key financial data to potential buyers.

U.S. private equity firm Kohlberg Kravis Roberts & Co. was also expected to participate in the auction, the sources told Reuters.

JC Flowers did not immediately return a message. The fund is focused on financial sector deals and run by former Goldman Sachs banker Christopher Flowers. KKR declined to comment.

Another Taiwanese competitor, Cathay Financial (2882.TW), was also seen as possible bidder, according to the sources.

Executives at Fubon declined comment, while Cathay officials were not immediately available for comment.

Sources and local media have said AIG hopes to fetch around $2 billion for Nan Shan.

But the sources say that putting a value on the life insurer is difficult. An auction for this kind of business is tough to price, given the way insurance companies are structured.

Life insurance policies are the liabilities, with commitments to pay out later, and the premiums are the assets. But returns on each side can vary.

“There are lots of moving pieces. Unless you have a very detailed view of the assets and liabilities, it’s educated guessing,” said a source involved with the deal.

AIG had put Nan Shan up for sale earlier this year along with other Asian divisions, but the processes were temporarily pulled after the insurer and U.S. government hammered out new aid terms.

A source at one Taiwan bank said it declined to participate in the previous auction after AIG asked for over T$60 billion ($1.82 billion) for Nanshan, a price many considered too high.

Dutch financial group ING Groep (ING.AS) sold its Taiwan business last October to Fubon for $600 million, making it the first foreign insurer to leave Taiwan’s market as it aims to shore up its capital needs at home in the grip of the global financial crisis.

Britain’s Prudential (PRU.L) followed suit, disposing of its Taiwan operation to Taipei-based China Life (2823.TW) last month to meet capital needs at home.

(Reporting by Michael Flaherty and Rachel Lee; Editing by Jacqueline Wong and Chris Lewis)