American International Group (AIG) has entered into an agreement with the Federal Reserve to positioning the American International Assurance (AIA) for an initial public offering, depending on market conditions.
AIA is the Hong Kong-based company which is the parent for AIG Life in New Zealand.
Under the agreement, AIG will contribute the equity of AIA to a special purpose vehicle (SPV) in exchange for preferred and common interests in the SPV.
The Federal Reserve will receive preferred interests in the AIA SPV of US$16 billion, which will reduce the debt owed by AIG to the US government.
"The face value of the preferred interests represents a percentage of the estimated fair market value of AIA. AIG will hold the common interests in the AIA SPV and will benefit from the fair market value of AIA in excess of the preferred interests as the SPV monetizes its stake in the company in the future," the company says in a statement.
AIG expects this transaction to close in the second half of 2009 subject to customary closing conditions, including regulatory approvals.
"This action accelerates the move of AIA toward separation and helps maintain the value of the franchise," AIA, Group Chief Executive Officer and President Mark Wilson says.
"Securing the value of this well-capitalized, pan-Asian insurer is in the best interests of policyholders, distribution partners and shareholders. We are very excited to begin this new chapter in the life of one of the world's leading life insurance companies."
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