As expected, American International Group (AIG) said Thursday it will sell AIG Star Life Insurance and AIG Edison Life Insurance in Japan to Prudential Financial (PRU) for $4.8 billion. The deal marks yet another step in the bailed-out insurer's efforts to repay the U.S. taxpayer.
The total purchase price of the two Japanese units amounts to $4.2 billion in cash and $0.6 billion in the assumption of third-party debt. AIG will retain and continue to grow its general insurance business in Japan, the company said.
The deal, which is subject to regulatory approval, is expected to close in the first quarter of 2011. AIG expects to take a non-cash pretax goodwill impairment charge of about $1.2 billion in the third quarter.
"The sale of AIG Star and AIG Edison represents another step in AIG's program to repay U.S. taxpayers and a key milestone in achieving a complete exit of government support over time," AIG said in a statement.
During the financial crisis, AIG's bets on mortgage-backed securities and other toxic assets threatened to topple the company. The company has received a total of $182.3 billion in bailout funds since its near-collapse in September 2008. AIG has been selling off assets to strengthen its financial position, repay the government and regain its independence.
AIG's board also approved a plan for the U.S. Treasury Department to convert preferred shares into common stock, Bloomberg reported, citing unnamed sources. This will enable the government to begin to wind down its nearly 80% stake in AIG. The Wall Street Journal added that according to its sources, the U.S. and AIG have agreed on the plan.
According to the plan, Treasury may begin converting its $49 billion preferred stake into common stock for sale next year, which would bring the government's ownership stake in AIG to above 90%, but the shares would gradually be sold off to private investors. AIG is also planning a debt sale within 12 months.