AIG to Sell 21st Century Insurance to FGI

American International Group, or AIG, has entered into an agreement to sell 21st Century Insurance Group, the wholly owned subsidiaries comprising AIG's US personal auto insurance business, to Farmers Group, a subsidiary of Zurich Financial Services Group.

Under the terms of the transaction, Farmers Group (FGI) will pay AIG $1.9 billion, consisting of $1.5 billion in cash and $400 million in face amount of subordinated, euro-denominated capital notes backed by Zurich Insurance Company, Zurich's principal operating unit. FGI will also assume 21st Century's outstanding debt of $100 million.

The transaction is subject to satisfaction of certain conditions, including approvals by appropriate regulatory authorities.

21st Century, based in Wilmington, Delaware, includes the former AIG Direct business and agency auto business. The company operates in 49 states of the US and Washington, DC.

The transaction excludes AIG's private client group, which provides property and casualty insurance to high net worth individuals.

Banc of America Securities acted as financial advisor and Sidley Austin acted as legal counsel to AIG on this transaction.

Edward Liddy, AIG's chairman and CEO, said: "We are very pleased to reach agreement on a $2 billion transaction, especially in this market environment. In addition, we are moving forward with discussions for several other transactions, and we continue to evaluate how best to assure the continued strength and success of all of AIG's businesses."

Anthony DeSantis, president and CEO of 21st Century, said: "Both 21st Century and Farmers are strong companies, providing policyholders with exceptional levels of service and personalized coverage. This is an excellent fit and we look forward to a smooth integration that will be seamless to our customers."