American International Group Inc 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.
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 US 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 US commercial property and casualty business AIG has an 11% 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 US
The brokerage said the asset sales by AIG will benefit Aflac Inc and Prudential Financial Inc on the Japanese side, and Prudential UK in the non-Japan Asian countries.
On the other hand, if China Life 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. (Reuters)