AIA targets US$20b from share offering

https://www.nshk.org.hk/pdf/c_awards/2010/103.pdf

American International Group has pinned its hopes on a share sale by its Asian life insurance unit, AIA Group,after the collapse in June of an attempt to sell the group to British insurer Prudential for US$35.5 billion.

Announcing details of the sale at a press conference in Hong Kong yesterday, AIA group executive chairman and chief executive Mark Tucker said via a live video link from the United States that the group could issue up to 8.08 billion shares if it exercised a greenshoe option.

That would bring the total raised to about US$20 billion – well below the US$35.5 billion price tag attached to a complete sale of the assets, but would leave AIG with a stake of 32.9 per cent.

Without the greenshoe option which allows the underwriters to sell more shares, AIA is offering 5.86 billion shares, which have been priced at between HK$18.38 and HK$19.68 a share, or around US$15 billion.

According to the listing prospectus, AIG will own 51.4 percent of AIA following the flotation but its stake can be reduced to 32.9 percent if both the offer size adjustment option and over-allotment option are exercised.

Tucker, the former chief executive of Prudential who has replaced Mark Wilson as executive chairman and chief executive of AIA, would not say more than what is disclosed in the listing prospectus on AIG’s future exit strategy or how much influence the US insurer will have over AIA.

The listing prospectus said AIA had sold 6.5 percent of its offering to a number of corporate investors who would have their holdings locked up for six months following the flotation. They are sovereign wealth fund Kuwait Investment Authority, Peter Woo Kwong-ching, chairman of real estate investment holding companies Wheelock and Wharf (Holdings); Cheng Yu-tung, who controls Chow Tai Fook and NWS Financial Management Services; and from Malaysia, conglomerate Guoco, Hong Leong Financial, and government pension fund Kumpulan Wang Persaraan (Diperbadankan).

Tucker said he had already introduced a number of initiatives at AIA but said he was not ready to give away details of his plans for the Hong Kong-based pan-Asian insurer now.

He was hired by AIG chief executive Robert Benmosche in July after the collapse of the Prudential bid in June when the British-based insurer investor baulked at the price.

In a research note, Patricia Cheng, an analyst with CLSA Asia-Pacific Markets who had earlier argued that the Prudential bid for AIA was overvalued, said the valuation of the AIA offering was also too high given its low growth prospects. AIA has lost its No 1 ranking among foreign insurers operating in Hong Kong and Singapore.

It is still the leader in Thailand, although its market share there dropped to 31 percent by the first half of this year from 43 percent in 2005.

According to its listing prospectus, distributable earnings are expected to decline after 2015, from a US$10.89 billion in 2010-2015 to US$7.95 billion in 2016-2020.

AIG has been selling its assets to pay off debts but so far the US insurer has not been wholly successful in doing so.

It failed to sell its Taiwan unit, Nan Shan Life Insurance, which was valued at US$2.15 billion.

In August, Taiwan’s regulators rejected the application made by Hong Kong-based China Strategic Holdings and private equity fund Primus Financial Holdings to buy Nan Shan because the two companies did not have track records in running an insurance business.

Benmosche earlier said AIG would be “well within striking distance” of repaying the taxpayers’ money the US government used for its bailout, after the sale of AIA and another non-US unit, American Life Insurance.