NU Online News Service

American International Group Inc. said it had an agreement tosell American Life Insurance Company to MetLife Inc. forapproximately $15.5 billion.

The sale is the second huge life unit to be sold by the companysince March 1, when the company announced the sale of AmericanInternational Assurance Group Ltd. to London-based Prudential plcfor approximately $35.5 billion.

AIG's sale of the company, which it describes as one of theworld's largest and most diversified international life insurancecompanies with 12,500 employees, will include $6.8 billion in cashand the remainder in equity securities of MetLife, subject toclosing adjustments, the company said.

Reacting to the announcement Fitch Ratings said it was affirmingall ratings assigned to MetLife and its subsidiaries. The"longer-term strategic and financial benefits of the proposedacquisition of ALICO largely offset near-term concerns regardingtransaction financing and integration. The rating outlook isstable," said Fitch, AIG's issuer default rating and senior andhybrid securities ratings were also affirmd and Fitch revised theRating Watch status of ALICO's 'A+' (strong) Insurer FinancialStrength (IFS) rating to Positive from Evolving.

Cash proceeds from this sale will be used to pay down thecompany's billions in debt to the federal government which took a79.9 percent interest in the firm in exchange for a bailout thatrescued it from bankruptcy.

Specifically, AIG said the money would be used to reduce theliquidation preference of the Federal Reserve Bank of New York(FRBNY) in the special purpose vehicle (SPV) formed by AIG and theFRBNY to hold the interests in ALICO.

"This sale is an important step toward repaying the government.ALICO is a unique international life insurer, and we view this as aterrific combination that will further enhance the company'spotential over the long term, said AIG Chairman Harvey Golub in thecompany statement.

Golub said the latest asset sale along with the Prudential plctransaction "puts the company on track to generate approximately$50.7 billion from these two transactions alone, consisting ofapproximately $31.5 billion in cash to repay the FRBNY, plusanother approximately $19.2 billion in securities that we will sellover time to repay the government."

He added that both sales would give AIG "greater flexibility tomove forward with our restructuring and rebuilding efforts, andfocus on enhancing the value of our key insurance businesses."

The FRBNY on Dec. 1, 2009 received preferred interests in theALICO SPV with a liquidation preference of $9 billion.

With the ALICO sale closing, the ALICO SPV will receive and payto the FRBNY approximately $6.8 billion in cash, AIG explained.

ALICO SPV will hold the remainder of the transactionconsideration, consisting of 78,239,712 shares of common stock,6,857,000 shares of newly issued participating preferred stockconvertible into 68,570,000 shares of common stock upon approval ofMetLife shareholders, and 40,000,000 equity units of MetLife with aliquidation preference of $3 billion.

The ALICO SPV, AIG said, intends to monetize the MetLifesecurities over time, subject to market conditions, following thelapse of agreed-upon minimum holding periods.

ALICO SPV will then apply the resulting cash proceeds first topay the remainder of the liquidation preference of the preferredinterests held by the FRBNY in the ALICO SPV and afterward tocontinue paying down AIG's FRBNY credit facility.

Rodney O. Martin Jr., ALICO chairman and chief executiveofficer, said the company "looks forward to a smooth transition anda bright future as part of MetLife's International Business team,combining our global footprints and successful business models tocreate an unrivalled global life insurance franchise."

Founded in 1921, ALICO is a multinational life insurer providingproducts and services for life insurance, accident and healthinsurance, retirement planning, and wealth managementsolutions.

The transaction includes all of ALICO, including the company'sapproximately 60,000 points of distribution, with agents, brokersand financial institutions; locations in more than 50 countries;and 20 million customers worldwide.

The transaction also includes ALICO's Global Benefits Networkserving U.S. and foreign multinationals. In 2008, ALICO had totalstatutory revenue of $32.3 billion and $1.3 billion in after-taxoperating income. As of Dec. 31, 2008, ALICO had $89 billion inassets under management.

AIG said it is assessing the financial statement effects of thetransaction, including the timing and recognition of gain or losson the sale. In addition, as previously disclosed in its 2009 Form10-K, AIG is assessing the recoverability of goodwill.

The transaction has been approved by the boards of directors ofboth MetLife and AIG, and is expected to close by the end of theyear, subject to domestic and international regulatoryapprovals.

ALICO has branch offices, subsidiaries and affiliates inemerging, developing and developed markets in Europe, Asia, theMiddle East, Africa and Latin America. ALICO is domiciled inWilmington, Del., and has regional headquarters in Tokyo, London,Paris, Athens, Dubai and Santiago, Chile.