AIG Predicts Gains In $2 Billion G.E. Acquisition

AIG Predicts Gains In $2 Billion G.E. Acquisition

NU Online News Service, July 2, 3:49 p.m. EDT?American International Group Chairman Maurice R. Greenberg yesterday cited a variety of cost benefits he expects his company will receive from its planned $2.15 billion purchase of several G.E. Insurance units.

In a talk with analysts discussing the acquisition of G.E.'s U.S. auto and home business and Japanese life insurance business, Mr. Greenberg said his company decided to hold a conference call after getting calls from people who wanted more information.

"As most of you know," Mr. Greenberg said, "AIG has a significant business in Japan. This acquisition fits our life operation in Japan quite well. The price is $2.15 billion for both life and the auto business in the United States."

He noted that AIG will see immediate profit and cost savings from the transaction--the deal is expected to add more than $200 million in annual income to AIG's bottom line. The New York-headquartered insurer is also expecting savings of some $50 million a year after the purchase, which is scheduled to be completed in the next three months.

The purchase of U.S. auto and home businesses is a smaller part of this overall transaction, with AIG paying some $250 million for G.E.'s auto and home business in the United States while spending some $1.8 billion for Edison Life Insurance Co., G.E. Insurance's Japanese life insurance operation, he noted.

But purchasing G.E.'s U.S. auto and home businesses has been "part of the discussion from the beginning," Mr. Greenberg said.

According to a spokesperson for Richmond, Va.-based G.E. Insurance, G.E.'s U.S. auto and home businesses recorded $545 million in premiums last year. In comparison, AIG posted $1.4 billion in premiums for its annual personal automobile earned premiums in 2002.

Mr. Greenberg added, "The auto business fits our direct marketing in the United States. It's a niche business, and it fits quite well."

He also said during the conference call that, as far as he knows, the transaction has been "cleared with rating agencies," noting that his company's executives have visited rating agencies and "they had no problem with it."

AIG's status with rating agencies was unchanged by the acquisition announcement.