AIG to Sell Asia Business for $35.5 Billion to Help Pay Down Bailout Tab

Taxpayer-controlled American International Group (AIG) said Monday it will sell its Asian life insurance business to British insurer Prudential Plc. (PUK) for about $35.5 billion in a move that will help AIG pay down the roughly $180 billion it owes the U.S. government.

AIG will receive $25 billion in cash and $10.5 billion in new shares and securities from Prudential for the sale of American International Assurance Group, considered the company's crown jewel Asia. AIG is already expected to sell its American Life Insurance Co. unit to MetLife (MET) for as much as $50 billion, half of which has already been earmarked for the Federal Reserve Bank of New York.

AIG was the single biggest recipient of federal bailout funds in September 2008, as a liquidity crisis threatened the sprawling insurer with collapse. Since then, it has needed additional financial backstopping from U.S. taxpayers, adding nearly $100 billion in potential commitments to the initial $85 billion bill; the government now owns nearly 80% of the company. The sale of the AIA business will help AIG pay back the U.S. more quickly, the company said.

"In considering two viable, very attractive alternatives to successfully monetize AIA, including an initial public offering, we decided that a sale to Prudential enables AIG to realize value on a faster track to repay U.S. taxpayers," said CEO Bob Benmosche in a statement. "This transaction, the most significant milestone to date in our ongoing effort to repay taxpayers, also gives us greater flexibility to move forward with AIG's restructuring."

Prudential, which is unrelated to the American company with the same name, already has a presence in Asia. Upon completing the deal, Prudential will become the leading life insurer in Hong Kong, Singapore, Malaysia, Indonesia, Vietnam, Thailand and the Philippines, as well as the biggest foreign life insurer in China and India, the company said.

AIG last week reported a narrower fourth-quarter loss, helped by easy year-over-year comparisons, but the company still lost nearly $9 billion in the most recent period and said it might still need more taxpayer help. AIG said It's also exploring strategic restructuring opportunities for International Lease Finance Corp. and American General Finance.