In its first year, AIG’s attempt to sell its Taiwanese insurance arm was imbued with a sense of urgency. In its second, as regulators held sway, it was tainted with intrigue. In its third, it is verging on farce.
The deal disclosed on Wednesday between the US insurer and Ruen Chen Investment Holding of Taiwan – 80 per cent owned by a hypermarkets-to-textiles conglomerate, 20 per cent owned by a shoemaker – may not be the end of it. Last August, when it threw out a deal agreed in October 2009 between AIG and a Hong Kong-based consortium, Taiwan’s Financial Supervisory Commission said it would apply its usual “five tests” on policyholder protection, managerial competence, long-term commitment, and current and future funding, in any subsequent auction. AIG’s new preferred consortium has made some extravagant undertakings, including a promise not to sell Nan Shan for 10 years – an improvement on the Hong Kong bidder’s reported pledge to keep 70 per cent of it for seven years. Even so, Ruen Chen’s inexperience, relative to competing bidders Chinatrust Financial, Fubon Financial and Cathay Financial, makes it unlikely to ace all five.
Then there’s the price. A $2.2bn equity valuation is well short of the $3bn offer AIG told the Securities and Exchange Commission it had received, in a November letter. It is also equivalent to less than half the $4.7bn book value Nan Shan reported to the Taiwan Insurance Institute at the end of the past financial year. Just one of the world’s 50 biggest listed life insurers by market capitalisation currently trades at a lower multiple of book, according to Bloomberg. Of that top 50, though, only two have worse three-year average returns on equity. The desperation of chief executive Robert Benmosche to offload this troublesome asset could hardly be more obvious.