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WASHINGTON: US life insurance giant MetLife will acquire a unit of American International Group in a US$15.5-billion deal that will help AIG pay back part of its government bailout, the firms said Monday.
MetLife will take over American Life Insurance Company (ALICO) in a deal that will comprise US$6.8 billion in cash plus some US$8.7 billion in MetLife stock, they said in separate statements.
The stock portion of the purchase will consist of 78.2 million shares of MetLife common stock valued at US$3 billion, and the rest in convertible preferred stock and equity units.
The deal would leave AIG owning about 20 per cent of MetLife, according to The Wall Street Journal.
AIG said the cash portion of the proceeds from the sale will be used to reimburse the Federal Reserve Bank of New York (FRBNY), which helped bail out the company during the global financial crisis.
"This sale is an important step toward repaying the government," said Harvey Golub, chairman of the AIG board of directors.
He said that with the sales of ALICO and the Asian unit AIA to Prudential, which was announced last week, the company was on track to generate approximately US$50.7 billion from these two transactions alone.
Approximately US$31.5-billion in cash will be used to repay the FRBNY, while another approximately US$19.2-billion in securities will be sold over time to pay back the federal government.
AIG neared collapse in September 2008, unable to meet its obligations for contracts written to insure mortgage securities and related assets without sufficient capital.
The Federal Reserve, fearing a shock to the global financial system in the event of an AIG default, provided a loan of US$85 billion to AIG in September 2008 in what would be the first portion of a staggering bailout worth some US$180 billion, some of which came from the Troubled Asset Relief Program (TARP).
For its part, MetLife said the transaction would increase its 2011 operating earnings per share by approximately 0.45 to 0.55 dollars per share.
"With this acquisition, MetLife is delivering on its strategy to accelerate international expansion as a powerful growth engine for the company," MetLife chief executive Robert Henrikson said in a statement.
"Today's transaction will bring together two profitable, complementary, well-established businesses with superb track records and strong long-term growth potential," he added.
"We expect it will increase MetLife's return on equity and be accretive to operating earnings."
Founded in 1921, ALICO has 12,500 employees in more than 50 countries and 20 million customers worldwide.
MetLife said the transaction also includes ALICO's global benefits network serving US and foreign multinational corporations.
The transaction has been approved by the boards of directors of both MetLife and AIG, and is expected to close by the end of 2010.
- AFP/yb
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