NU Online News Service, June 30, 2:01 p.m. EDT
The New York State Insurance Department said it has approved the $1.9 billion sale announced in April of two AIG insurance companies to Farmers Group and the transaction should close shortly.
Farmers is a subsidiary of Zurich Financial Services. The companies being sold–American International Insurance Company and AIG National Insurance Company–are members of AIG's Personal Auto Group, the 21st Century Insurance Group, which consists of a total of 18 insurance companies.
A source with knowledge of the regulatory activity required for the sale said that with New York's approval an okay from only one more state is needed to complete the deal. AIG's auto companies operate in 49 states and the District of Columbia.
New York Insurance Superintendent Eric Dinallo noted that the Personal Auto Group wrote more than $3.5 billion in premiums nationwide in 2008.
"This sale is a win for everyone, including taxpayers, policyholders and the companies' employees," Mr. Dinallo said. "These two companies will remain domesticated in New York. It furthers the restructuring of AIG while placing AIG's personal lines policyholders with one of the nation's largest insurers. The unprecedented speed with which numerous state regulators worked to approve this transaction shows the responsiveness of the same state regulation that preserved the value of these companies."
The transaction was submitted to the department on April 29 and is scheduled to close July 1, subject to the approval of various other states. Under state law, the sale of any New York insurance company requires the insurance department's approval.
AIG said previously that under the terms of the transaction Farmers Group will pay $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. In addition, Farmers will also assume 21st Century's outstanding debt of $100 million.
The auto segment being sold employs 6,000.
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