AIG sells itself, bit by bit, to pay off debt

The insurance giant is selling its HSB subsidiary for $742 million to Munich Re in its third unit sale this month.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all RSS FEEDS (close)
By Aaron Smith, staff writer

Are you more likely to buy a car from GM or Chrysler after Friday's bailout?
  • Yes
  • No

NEW YORK ( -- As part of its plan to pay back a massive government bailout, American International Group Inc. is selling assets, with its most recent sale on Monday.

New York-based AIG (AIG, Fortune 500) said Munich Re, a German reinsurer, will buy AIG subsidiary HSB Group Inc., parent of The Hartford Steam Boiler Inspection, an equipment insurer.

The companies said that Munich Re will acquire all outstanding shares for $742 million in cash and assume $76 million of outstanding HSB capital securities. The deal is expected to close at the end of the first quarter of 2009, AIG said.

This is AIG's third unit sale this month, and its stock rose 5% Monday. This is welcome news to a company that has seen its stock plunge 97% so far this year.

"The strategy is for AIG to sell off as many and as much assets as needed to pay off the government," said Michael Paisan, AIG analyst at Stifel Nicolaus & Co. "They're selling assets bit by bit. This is something that's going to be an ongoing affair through 2009."

On Sept. 16, the Federal Reserve agreed to lend $85 billion to AIG to keep the battered insurer from failing out of the fear that it would cause massive disruptions to the economy. AIG's taxpayer bailout has since expanded to $152 billion.

AIG announced two other unit sales in early December, though the company refused to divulge how much money changed hands.

On Dec. 3, AIG and Omaha-based Tenaska Inc. said that Tenaska would re-purchase three units owned by AIG: Tenaska Marketing Ventures, Tenaska Gas Storage and Tenaska Marketing Canada. This deal is expected to close by Jan. 2, 2009.

On Dec. 1, AIG said it would sell its subsidiary AIG Private Bank to Aabar Investments, an institutional investor based in the United Arab Emirates.

Also, on Nov. 26, AIG and the Brazilian bank Unibanco said they would each purchase their "cross-holdings." The companies said that AIG would buy shares in its subsidiaries that were held by Unibanco, and Unibanco would buy shares in its subsidiaries that were held by AIG.

Paisan said these deals are "relatively minor" compared to the debt that AIG has to pay off and compared to its remaining assets. He said the insurer's international life insurance business is worth about $15 billion, its asset management business is worth several billion dollars, and its consumer finance business is worth about $2 billion. To top of page

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.