AIG Sells Prudential Its Asia Unit for $35 Billion

On Monday, American International Group (AIG) announced that it had reached an agreement to sell its Asian life insurance business to Britain’s Prudential PLC. The deal between the two companies is valued at $35.5 billion and is the second deal the insurer has worked out to sell off some of its business, which would in turnpay back taxpayers for its 2008 and 2009 bailouts.

The Deal with Prudential

In its effort to restructure its business and pay back taxpayers, AIG struck the deal to sell its Asianlife insurance business to Prudential. The deal, according to published reports,includes $25 billion in cash.Theinsurer says that this is the largest cash proceeds it has received from any sale during its current restructuring efforts. The money, says Chief Executive Bob Benmosche, will give the company “greater flexibility” as it tries to restructure.

Of the $25 billion in cash, $16 billion will go to the government to buy back preferred shares that were given to it during the bailout. The remaining $9 billion will be used to pay down more than $25 billion outstanding owed to the New York Fed.

Getting Business in Order

AIG has been in the news lately for its attempts to pay taxpayers back after its bailout. Most recently, it has been noted for its decision to sell one of its international insurance units to MetLife for$15 billion. Also, it has recently announced its decision to stop using cash flows from its own life insurance businesses to repay taxpayers, which is something that has probably prompted it to sell these businesses instead.

Since its first bailout in 2008, AIG has been on the fast track to repay its debts. In addition to the tax that Obama plans to impose on insurance companies and banks to repay their debts, we may see announcements from other companies that plan to do the same.