AIG Reaches Deal with MetLife for Life Insurance Company

Posted in AIG , Life Insurance , Met Life

March 9th, 2010

After working with MetLife in an effort to sell its American Life Insurance Company (ALICO), the two companies were finally able to strike a deal. For $15.5 billion, AIG will be selling its second-largest foreign life insurance business and in turn, own roughly one-fifth of MetLife.

The Specifics of the Agreement

According to both companies, AIG agreed to sell ALICO for $6.8 billion in cash and $8.7 billion in MetLife equity, which includes common stock and convertible preferred securities. Under this deal, the company would take a stake of about 20 percentin MetLife, which would result in 78.2 million common shares and 6.6 million shares of convertible preferred stock.

The shares that AIG holds would come with voting restrictions, however. The company would not be able to influence MetLife’s operations and business decisions. But it would be exposed to MetLife’s fortunes for up to two-and-a-half years.

AIG Still Trying to Repay Its Debt

Over the past year, AIG has been working hard to repay U.S. taxpayers for the debt incurred after having the government bail it out twice for a total of nearly $200 billion. Ever since receiving the help, which resulted in the company being nearly 80 percent owned by the government, it has made every effort to reduce its debt.

Recently, it sold its Asia unit to Prudential for $35 billion and it has plans to repay its debt via cash generated by its insurance business and asset sales.

Of course, President Barack Obama is placing some life insurance companies on the hook for a tax that will ensure repayment. With this tax, it is estimated that AIG will be required to pay back $388.8 million. With all of the mistakes that the company has made over the last year, it looks probable that the company is indeed picking up the pieces and moving forward in the right way that will not affect customer life insurance rates.