NU Online News Service

American International Group Inc. and Zurich Financial ServicesGroup announced a $1.9 billion deal today for the sale of AIG'sauto unit, 21st Century Insurance Group, to Zurich's Farmers GroupInc. subsidiary.

Under the terms of the transaction, AIG said Farmers Group willpay $1.9 billion, consisting of $1.5 billion in cash and $400million in face amount of subordinated, euro-denominated capitalnotes backed by Zurich Insurance Company--Zurich's principaloperating unit.

In addition, Farmers will also assume 21st Century's outstandingdebt of $100 million.

Based in Wilmington, Del., 21st Century includes the former AIGDirect and Agency Auto business, and employs 6,000 people.

AIG said the personal auto insurer now operates in 49 states andWashington, D.C., with 2008 premiums of $3.6 billion--including$2.7 billion in direct sales and $900 million through independentagents.

The transaction, AIG said, excludes the AIG Private ClientGroup, which provides property and casualty insurance to high networth individuals.

"We are very pleased to reach agreement on a $2 billiontransaction, especially in this market environment," said AIG'schairman and chief executive officer, Edward Liddy.

He noted that the company--which also announced the sale todayof its wealth management arm, AIG Private Bank Ltd., to AabarInvestments PJSC of Abu Dhabi for $308 million--is "moving forwardwith discussions for several other transactions, and we continue toevaluate how best to assure the continued strength and success ofall of AIG's businesses."

Zurich CEO James J. Schiro, in a statement explaining thepurchase, said that expansion of U.S. personal lines capabilitiesat Farmers "has always been one of our strategic priorities."

Beefing up Farmers, he said, "reduces the overall volatility ofour portfolio of businesses, while continuing our focus onprofitable growth through customer, product and distributionexcellence."

He said that despite the present economic climate, "financialdiscipline" can position Zurich to capitalize on marketopportunities--"provided they meet our strategic objectives andfinancial hurdle rates."

The purchase of 21st Century, Zurich said, gives Farmersopportunities to achieve benefits of scale, as well as to leveragetalent and technical capabilities.

"Both 21st Century and Farmers are strong companies, providingpolicyholders with exceptional levels of service and personalizedcoverage," said Anthony J. DeSantis, 21st Century's president andCEO. "This is an excellent fit, and we look forward to a smoothintegration that will be seamless to our customers."

AIG, which has now arranged to sell off 11 different units, hasbeen dealing off assets to pay back more than $150 billion ingovernment loans and other financial supports that total $182.5billion.

The financially-troubled company secured taxpayer support lastSeptember after credit default swaps traded by its FinancialProducts unit left AIG in distress. In exchange for a federalbailout, AIG gave the government a 79.9 percent interest in thecompany.

Zurich said that as part of the transaction, Farmers Group Inc.will immediately sell the portion of the acquired business that iscomprised of regulated insurance businesses to the FarmersExchanges, which Zurich manages but does not own.

F. Robert Woudstra, CEO of Farmers Group Inc., said the dealpositions Farmers as "the fastest growing personal andsmall-business insurer in America," and gives his company anexpanded agency force and "one of the most successful directdistribution platforms within one of the fastest growingdistribution channels in the U.S."

Farmers said its direct sales distribution channel grew from 7.7percent to 18 percent of the total U.S. auto insurance market from1997 to 2006.

Acquiring 21st Century, according to Farmers, adds approximately1.5 million direct auto customers, plus an estimated 500,000 newcustomers per year to Farmers' personal lines operations. AIG'sU.S. Personal Auto Group in 2008 had gross written premiums of $3.6billion.

Banc of America Securities LLC acted as financial advisor andSidley Austin LLP acted as legal counsel to AIG on thistransaction. Blackstone Advisory Services provided financial adviceto AIG in connection with AIG's global restructuring program.

Reacting to the sale announcement, Fitch Ratings in Chicago saidit has revised its Rating Watch on the insurer financial strengthratings of American International Group, Inc. auto subsidiaries to"negative" from "evolving."

It noted that Zurich's insurer financial strength rating is'A-plus' and the companies' rating outlook is "negative."

Fitch placed the AIG subsidiaries' ratings on RatingWatch-Evolving on Sept. 17, 2008, when U.S. financial assistance toAIG was announced and AIG's plans to divest these specificcompanies began emerging.

Fitch said its expectation is that the majority of the proceedsfrom the sales will be retained in AIG's insurance operatingsubsidiaries and that the effect on these subsidiaries' capitalpositions will be modest.

The AIG subsidiaries' current insurer financial strength ratingsare "double-A-minus," reflecting benefits from being part of theAIG organization and the benefits of recent government support,said Fitch.

Fitch advised that when the deal closes it expects that the autoinsurance companies' financial strength ratings will likely bedowngraded "to a level more commensurate with that ofZurich's."

NU Online News Service, April 16, 2:56 p.m. EDT

American International Group Inc. and Zurich Financial ServicesGroup announced a $1.9 billion deal today for the sale of AIG'sauto unit, 21st Century Insurance Group, to Zurich's Farmers GroupInc. subsidiary.

Under the terms of the transaction, AIG said Farmers Group willpay $1.9 billion, consisting of $1.5 billion in cash and $400million in face amount of subordinated, euro-denominated capitalnotes backed by Zurich Insurance Company--Zurich's principaloperating unit.

In addition, Farmers will also assume 21st Century's outstandingdebt of $100 million.

Based in Wilmington, Del., 21st Century includes the former AIGDirect and Agency Auto business, and employs 6,000 people.

AIG said the personal auto insurer now operates in 49 states andWashington, D.C., with 2008 premiums of $3.6 billion--including$2.7 billion in direct sales and $900 million through independentagents.

The transaction, AIG said, excludes the AIG Private ClientGroup, which provides property and casualty insurance to high networth individuals.

"We are very pleased to reach agreement on a $2 billiontransaction, especially in this market environment," said AIG'schairman and chief executive officer, Edward Liddy.

He noted that the company--which also announced the sale todayof its wealth management arm, AIG Private Bank Ltd., to AabarInvestments PJSC of Abu Dhabi for $308 million--is "moving forwardwith discussions for several other transactions, and we continue toevaluate how best to assure the continued strength and success ofall of AIG's businesses."

Zurich CEO James J. Schiro, in a statement explaining thepurchase, said that expansion of U.S. personal lines capabilitiesat Farmers "has always been one of our strategic priorities."

Beefing up Farmers, he said, "reduces the overall volatility ofour portfolio of businesses, while continuing our focus onprofitable growth through customer, product and distributionexcellence."

He said that despite the present economic climate, "financialdiscipline" can position Zurich to capitalize on marketopportunities--"provided they meet our strategic objectives andfinancial hurdle rates."

The purchase of 21st Century, Zurich said, gives Farmersopportunities to achieve benefits of scale, as well as to leveragetalent and technical capabilities.

"Both 21st Century and Farmers are strong companies, providingpolicyholders with exceptional levels of service and personalizedcoverage," said Anthony J. DeSantis, 21st Century's president andCEO. "This is an excellent fit, and we look forward to a smoothintegration that will be seamless to our customers."

AIG, which has now arranged to sell off 11 different units, hasbeen dealing off assets to pay back more than $150 billion ingovernment loans and other financial supports that total $182.5billion.

The financially-troubled company secured taxpayer support lastSeptember after credit default swaps traded by its FinancialProducts unit left AIG in distress. In exchange for a federalbailout, AIG gave the government a 79.9 percent interest in thecompany.

Zurich said that as part of the transaction, Farmers Group Inc.will immediately sell the portion of the acquired business that iscomprised of regulated insurance businesses to the FarmersExchanges, which Zurich manages but does not own.

F. Robert Woudstra, CEO of Farmers Group Inc., said the dealpositions Farmers as "the fastest growing personal andsmall-business insurer in America," and gives his company anexpanded agency force and "one of the most successful directdistribution platforms within one of the fastest growingdistribution channels in the U.S."

Farmers said its direct sales distribution channel grew from 7.7percent to 18 percent of the total U.S. auto insurance market from1997 to 2006.

Acquiring 21st Century, according to Farmers, adds approximately1.5 million direct auto customers, plus an estimated 500,000 newcustomers per year to Farmers' personal lines operations. AIG'sU.S. Personal Auto Group in 2008 had gross written premiums of $3.6billion.

Banc of America Securities LLC acted as financial advisor andSidley Austin LLP acted as legal counsel to AIG on thistransaction. Blackstone Advisory Services provided financial adviceto AIG in connection with AIG's global restructuring program.

Reacting to the sale announcement, Fitch Ratings in Chicago saidit has revised its Rating Watch on the insurer financial strengthratings of American International Group, Inc. auto subsidiaries to"negative" from "evolving."

It noted that Zurich's insurer financial strength rating is'A-plus' and the companies' rating outlook is "negative."

Fitch placed the AIG subsidiaries' ratings on RatingWatch-Evolving on Sept. 17, 2008, when U.S. financial assistance toAIG was announced and AIG's plans to divest these specificcompanies began emerging.

Fitch said its expectation is that the majority of the proceedsfrom the sales will be retained in AIG's insurance operatingsubsidiaries and that the effect on these subsidiaries' capitalpositions will be modest.

The AIG subsidiaries' current insurer financial strength ratingsare "double-A-minus," reflecting benefits from being part of theAIG organization and the benefits of recent government support,said Fitch.

Fitch advised that when the deal closes it expects that the autoinsurance companies' financial strength ratings will likely bedowngraded "to a level more commensurate with that ofZurich's."