AIG is steadily getting closer to repaying the $132 billion debt that it took in 2008 from the government to avoid collapse. The latest step in the direction is AIG’s agreement to sell its international life insurance unit, American Life Insurance Co. (Alico) to MetLife Inc.
The $15.5 billion deal would involve payment of $6.8 billion in cash and the remaining in AIG’s MetLife equity. Post the closure of the deal, AIG would still be the second largest shareholder in MetLife with a stake of more than 20%. The deal is expected to close by the end of the year and is currently awaiting approval from regulatory authorities both in the U.S. and overseas. It has already been approved by the boards of AIG and MetLife. But considering the sheer size of Alico, analysts have taken a cautionary stand on the deal.
Earlier last week, AIG had announced the sale of its Asian life insurance business to Prudential PLC for $35.5 billion. The two deals put together are likely to generate $50.7 billion to repay the New York Federal Reserve Bank. This will include around $31.5 billion in cash and rest in securities, which AIG would sell slowly to pay the taxpayers back.
With these sale agreements, AIG is now looking at rebuilding and restructuring its core insurance business. Having shed off the weight, the much leaner AIG is likely to focus on its U.S. operations for the time being and target greater profitability.
The acquisition is expected to benefit MetLife, the largest seller of life insurance products in the U.S., by giving it the platform to expand its operations internationally, especially in Japan, the second largest life insurance market in the world. Asia is the high growth market that a number of insurance companies have their eyes on. Once the deal is approved, MetLife will be propelled to the league of large international life insurance companies.
With Japan being at the center of its business, Alico also has its footprints in Brazil, Chile, Russia and Eastern Europe. The company sells life, health and accident insurance along with other wealth management and retirement products in more than 50 countries. The buyout of Alico is going to help MetLife diversify its product portfolio and expand its presence across the globe.
Despite all the potential benefits, the markets would keep a keen eye on MetLife to see if the company is able to successfully integrate Alico’s operations with its own.