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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AIG's Rivals Blame Bailout for Tilting Insurance Game

Posted By Michael Collins

The federal bailout of insurance giant American International Group Inc., designed to help stabilize financial markets, is roiling another corner of the corporate world.

AIG's competitors claim the insurer's federal lifeline is unfairly tilting the commercial-insurance playing field. And they're pressing federal officials to crack down.

In a meeting March 4 at the St. Regis Hotel in Washington, some of AIG's biggest competitors complained directly to Federal Reserve Chairman Ben Bernanke, AIG's top government overseer. They urged him to prevent AIG from using the government rescue to win an advantage, particularly by cutting prices. Mr. Bernanke said he'd look into the complaints, according to people familiar with the meeting.

In the six months since the government stepped in, AIG at times has slashed insurance prices -- by more than 30% in some cases -- to fend off rivals and to keep or win contracts, according to public documents, insurance buyers, executives and others in the industry. This tack has helped AIG insure customers ranging from the U.S. Olympic Committee and an Arizona airport to an Illinois nursing home and a Florida town government.

State insurance regulators in New York and Pennsylvania are investigating, as is the Government Accountability Office, which issued a preliminary report at last week's congressional hearing on the AIG bailout. The GAO said insurance regulators, brokers and buyers say AIG "may be pricing somewhat more aggressively than in the past in order to retain business," but the pricing didn't appear "inadequate." The GAO said it hadn't "drawn any final conclusions."

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U.S. readies another $30B as AIG debt problems mount

posted by SooYeon(Pia), Shin

The government is preparing to offer AIG access to as much as $30 billion in new cash to keep it alive, according to several people with knowledge of the deal who spoke only on the condition of anonymity because of the sensitivity of the matter. In addition, the government will convert its previous investment in so-called preferred shares into shares that don't receive a dividend payment. Also, the government will gain a stake in two of AIG's insurance subsidiaries as payment for $35 billion of previous loans.

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