AIG Advances Deal to Position Asian Units for IPOs

American International Group Inc. has entered into an agreement with the Federal Reserve Bank of New York to create separate special purpose vehicles to hold the equity of American International Assurance Co. Ltd. and American Life Insurance Co., the company said.

The previously announced agreement positions the two Asian life insurers to make initial public offerings of stock ?depending on market conditions,? AIG said in a statement.

Under the agreement, AIG's debt to the Federal Reserve is reduced by $25 billion by giving it preferred interests in the two SPVs. AIG said the Fed will receive $16 billion of preferred interests in the AIA SPV, and $9 billion in the Alico SPV.

The transactions are expected to close in the second half of 2009, AIG said.

The intention to create the SPVs was announced in March as part of a reorganization under AIG's federal bailout program, which now totals up to $182.5 billion in loans and other aid. AIG has been seeking to sell assets to help repay the federal assistance (BestWire, March 2, 2009).

AIG said last month it would expedite efforts to position AIA as an independent entity, and seek a public listing on an Asian stock exchange for it (BestWire, May 18, 2009).

Earlier, Alico Japan bought from AIG all shares of its financial information and education subsidiary, Financial Learning KK, as part of planning to spin off Alico as an independent company through a possible IPO (BestWire, May 5, 2009).

AIG has taken similar steps with its core property/casualty businesses. It has said it will expedite plans to establish a new entity containing those businesses, AIU Holdings, by transferring the company to a special purpose vehicle in preparation for a possible IPO (BestWire, April 21, 2009).

Most AIG insurance companies currently have a Best?s Financial Strength Rating of A (Excellent) with a negative outlook.

Shares of AIG were $1.43 in morning trading on June 25, up 0.7% from the previous close.

(By Alyn Ackermann, senior associate editor, BestWeek: Alyn.Ackermann@ambest.com)