Wednesday, April 15, 2009

AIG Nearing a Deal to Sell Car-Insurance Unit to Zurich

Copy and post by Mei Ling Lin

American International Group Inc. is negotiating to sell a car-insurance unit to a major rival, Zurich Financial Services AG, and a deal could be announced as soon as Thursday.
The price tag for 21st Century Insurance could fall within the $1.5 billion to $2 billion range, according to a person familiar with the matter. The deal has been discussed for some time, and the talks between the two firms were reported in February.
If the sale were completed at that price, it would be the biggest that AIG has been able to complete since announcing plans to sell off assets to help pay back the government, which bailed out the ailing insurer last year. As of April 8, AIG owed taxpayers $45 billion, part of an aid package of up to $173.3 billion.
AIG is also trying to sell off other units, including International Lease Finance Corp., its aircraft leasing business, for which a second round of bids are due late this month, according to a person familiar with the matter. But the strategy of selling off assets has been hurt by the difficult economic conditions, which has winnowed the pool of potential buyers for some of AIG's most prized assets.
A deal could also strengthen Zurich's hand in the U.S. car-insurance business. Zurich owns Farmers Group Inc., which manages the Farmers network of insurance exchanges. The exchanges serve more than 10 million households, making it one of the largest car- and home-insurance networks in the country.

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