AIG Sells ALICO Life Unit To MetLife For $15.5 Billion

NU Online News Service, March 8, 9:55 a.m. EST

American International Group Inc. said it had an agreement to sell American Life Insurance Company to MetLife Inc. for approximately $15.5 billion.

The sale is the second huge life unit to be sold by the company since March 1, when the company announced the sale of American International Assurance Group Ltd. to London-based Prudential plc for approximately $35.5 billion.

AIG's sale of the company, which it describes as one of the world's largest and most diversified international life insurance companies with 12,500 employees, will include $6.8 billion in cash and the remainder in equity securities of MetLife, subject to closing adjustments, the company said.

Reacting to the announcement Fitch Ratings said it was affirming all ratings assigned to MetLife and its subsidiaries. The "longer-term strategic and financial benefits of the proposed acquisition of ALICO largely offset near-term concerns regarding transaction financing and integration. The rating outlook is stable," said Fitch, AIG's issuer default rating and senior and hybrid securities ratings were also affirmd and Fitch revised the Rating Watch status of ALICO's 'A+' (strong) Insurer Financial Strength (IFS) rating to Positive from Evolving.

Cash proceeds from this sale will be used to pay down the company's billions in debt to the federal government which took a 79.9 percent interest in the firm in exchange for a bailout that rescued it from bankruptcy.

Specifically, AIG said the money would be used to reduce the liquidation preference of the Federal Reserve Bank of New York (FRBNY) in the special purpose vehicle (SPV) formed by AIG and the FRBNY 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 a terrific combination that will further enhance the company's potential over the long term, said AIG Chairman Harvey Golub in the company statement.

Mr. Golub said the latest asset sale along with the Prudential plc transaction "puts the company on track to generate approximately $50.7 billion from these two transactions alone, consisting of approximately $31.5 billion in cash to repay the FRBNY, plus another approximately $19.2 billion in securities that we will sell over time to repay the government."

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

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

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

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

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

ALICO SPV will then apply the resulting cash proceeds first to pay the remainder of the liquidation preference of the preferred interests held by the FRBNY in the ALICO SPV and afterward to continue paying down AIG's FRBNY credit facility.

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

Founded in 1921, ALICO is a multinational life insurer providing products and services for life insurance, accident and health insurance, retirement planning, and wealth management solutions.

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

The transaction also includes ALICO's Global Benefits Network serving U.S. and foreign multinationals. In 2008, ALICO had total statutory revenue of $32.3 billion and $1.3 billion in after-tax operating income. As of Dec. 31, 2008, ALICO had $89 billion in assets under management.

AIG said it is assessing the financial statement effects of the transaction, including the timing and recognition of gain or loss on the sale. In addition, as previously disclosed in its 2009 Form 10-K, AIG is assessing the recoverability of goodwill.

The transaction has been approved by the boards of directors of both MetLife and AIG, and is expected to close by the end of the year, subject to domestic and international regulatory approvals.

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