American International Group struck a deal to sell its Taiwan life insurance for $2.15 billion,marking its largest disposal of a division since a government bailout last year saved it from collapse.
Primus Financial, a new firm founded by Citigroup's former Asia investment banking head, together with a Hong Kong partner, agreed to buy Nan Shan Life,ending a five-month auction that saw big interest from many corporates and private equity bidders.
"The deal priced Nan Shan at about one time price to book, which is fair when you compare 1.9 times for Cathay Financial and Fubon Financial, and one time for smaller rival Shin Kong Financial," said Dexter Hsu, an analyst at JP Morgan in Taiwan yesterday.
With the Nan Shan agreement sealed,AIG is now likely to raise cash from two other major assets in Asia.
Hong Kong-based life insurer AIA is seeking a more-than $2 billion initial public offering while American Life Insurance Co, which generates half its revenue in Japan, is seeking a reported $5 billion in an IPO.
Both companies have also attracted acquisition interest, though nothing yet has materialised.
The sale of Nan Shan, in an auction run by Morgan Stanley, allows AIG to check one business off its list of units to sell, after the United States injected $80 billion in taxpayer money into the firm after it nearly collapsed late last year.
Primus, run by former Citi executive Robert Morse, and Hong Kong investment group China Strategic Holdings would pay $2.15 billion for AIG's 97.5%stake in Nan Shan, AIG said yesterday.
Earlier this year, Primus co-chief executive Wing-fai Ng said in an interview with Reuters that Primus planned to use Nan Shan, Taiwan's No.3 life insurer,as a base to expand to Hong Kong, Malaysia and Japan.
Nan Shan has assets of $46.4 billion and employs 36,000 sales agents in Taiwan and has a market share of 10%with its four million customers.
Some analysts and bankers involved in the deal said putting a valuation on the AIG's Taiwan life insurance unit was difficult.
"The pricing is tricky. If you just look at the book value of Nan Shan, then the acquisition price is at a 30% discount,"said Pandora Lee, an analyst with UBS.
First Commercial Bank and Taiwan Cooperative Commercial Bank in Taiwan are arranging a NT$20 billion (around US$588 million) loan for Primus to back its purchase of Nan Shan, according to Thomson Reuters LPC.
FCB and Taiwan Cooperative are expected to each prefund NT$10 billion (around US$294 million) of the loan before Primus settling the Nan Shan transaction.
The agreement marks the end of an auction that spanned several months and involved multiple bidders, including private equity firms, such as the Carlyle Group. Primus had been competing in the end with Chinatrust Financial.
Saturday, October 31, 2009
BAY taps bancassurance
Bank of Ayudhya has set an ambitious growth target for its bancassurance business next year, helped by its "boxed"insurance policies, says senior vicepresident Kris Chantanotoke.
The bank aims to increase first-year premiums by 50% next year, thanks to its low base and the growth potential of business segmentation. For the first eight months of the year, BAY recorded firstyear premiums of 3.5 billion baht. The bank expects to achieve its target of 4 billion this year compared with 3 billion last year.
Business expansion will be supported by its products and services, particularly the bundled or boxed policies. BAY is the first bank in Thailand to offer this convenient and simple product.
For the remainder of the year, the bank expects to sell 200,000 boxes (policies). BAY, the country's fifth-largest bank by total assets, launched three insurance boxes after the bank entered the market three years ago.
Bancassurance in Thailand has grown for more than five years and the market showed significant growth in the past two years because of added players. The market started with some banks around 2004, but now most banks in the country offer the financial product.
Thailand's third-largest bank by total assets, Siam Commercial Bank, ranks number one in bancassurance, followed by Kasikornbank and Bangkok Bank,respectively. The nationwide network of large banks is supporting the rapid growth rate of bancassurance.
Mr Kris forecast that the country's insurance market would grow 13% next year, while the bancassurance business is expected to grow 15%. He said that 95% of insurance sales from the products of its three partners come from its branches, with 3% from telemarketing.
The bank aims to increase first-year premiums by 50% next year, thanks to its low base and the growth potential of business segmentation. For the first eight months of the year, BAY recorded firstyear premiums of 3.5 billion baht. The bank expects to achieve its target of 4 billion this year compared with 3 billion last year.
Business expansion will be supported by its products and services, particularly the bundled or boxed policies. BAY is the first bank in Thailand to offer this convenient and simple product.
For the remainder of the year, the bank expects to sell 200,000 boxes (policies). BAY, the country's fifth-largest bank by total assets, launched three insurance boxes after the bank entered the market three years ago.
Bancassurance in Thailand has grown for more than five years and the market showed significant growth in the past two years because of added players. The market started with some banks around 2004, but now most banks in the country offer the financial product.
Thailand's third-largest bank by total assets, Siam Commercial Bank, ranks number one in bancassurance, followed by Kasikornbank and Bangkok Bank,respectively. The nationwide network of large banks is supporting the rapid growth rate of bancassurance.
Mr Kris forecast that the country's insurance market would grow 13% next year, while the bancassurance business is expected to grow 15%. He said that 95% of insurance sales from the products of its three partners come from its branches, with 3% from telemarketing.
Tuesday, October 20, 2009
Aviva expects windfall from Delta float
British insurer Aviva expects to pocket 1.2 billion ($1.79 billion) for future growth and possible acquisitions when it floats Dutch unit Delta Lloyd in Europe's largest IPO this year.
Aviva said yesterday that Delta Lloyd shares would be offered on Euronext's Amsterdam exchange at between 15.5 and 19 each, valuing the business at 2.6 billion to 3.1 billion.About 42% of Delta's shares will be sold, leaving Aviva as the group's biggest investor with 57%. The balance is held by Dutch charitable trust Fonds NutsOhra.
"This step, which will be the largest IPO in western Europe this year, will free up capital for us to use elsewhere and give us the option of exploring further growth opportunities," Aviva chief executive Andrew Moss said in a statement.
"There are no surprises there, the timing and details were as people were expecting," said MF Global analyst Peter Eliot."From Aviva's point of view, it is probably less than they would have like to have received for it, at less than embedded value, but at the same time it is a loss-making business."
At the upper end of the price range,the shares represent a 24% discount to Delta Lloyd's market-consistent embedded value (MCEV), a measure of insurance companies' worth which includes the present value of future earnings from life policies.
Delta Lloyd calculated its own MCEV at 4.1 billion at the end of June.Reuters reported on Sunday that the IPO would be offered at a discount to MCEV to stimulate investor interest amid a raft of competing share sales.
But under Aviva's more conservative approach, Delta Lloyd had an MCEV of
2.7 billion at the half-year, putting the IPO at a slight premium at the midpoint of the price range.
Aviva said in August that it would consider using the proceeds of the Delta IPO to acquire rivals weakened by the financial crisis.
The company yesterday reiterated that Delta Lloyd's stock market listing could also help it make acquisitions as the Benelux insurance market undergoes a period of consolidation.
Aviva would have to give its approval to any merger or takeover involving Delta Lloyd that took the British insurer's stake below 50%.
Delta Lloyd said yesterday that it made a net loss of ฃ88 million ($143.4 million)in the nine months to Sept 30, while life new business sales for the period fell 12% to ฃ2.8 billion.
Trading in Delta Lloyd shares is expected to begin in Amsterdam on Nov 3, Aviva said.
Aviva said yesterday that Delta Lloyd shares would be offered on Euronext's Amsterdam exchange at between 15.5 and 19 each, valuing the business at 2.6 billion to 3.1 billion.About 42% of Delta's shares will be sold, leaving Aviva as the group's biggest investor with 57%. The balance is held by Dutch charitable trust Fonds NutsOhra.
"This step, which will be the largest IPO in western Europe this year, will free up capital for us to use elsewhere and give us the option of exploring further growth opportunities," Aviva chief executive Andrew Moss said in a statement.
"There are no surprises there, the timing and details were as people were expecting," said MF Global analyst Peter Eliot."From Aviva's point of view, it is probably less than they would have like to have received for it, at less than embedded value, but at the same time it is a loss-making business."
At the upper end of the price range,the shares represent a 24% discount to Delta Lloyd's market-consistent embedded value (MCEV), a measure of insurance companies' worth which includes the present value of future earnings from life policies.
Delta Lloyd calculated its own MCEV at 4.1 billion at the end of June.Reuters reported on Sunday that the IPO would be offered at a discount to MCEV to stimulate investor interest amid a raft of competing share sales.
But under Aviva's more conservative approach, Delta Lloyd had an MCEV of
2.7 billion at the half-year, putting the IPO at a slight premium at the midpoint of the price range.
Aviva said in August that it would consider using the proceeds of the Delta IPO to acquire rivals weakened by the financial crisis.
The company yesterday reiterated that Delta Lloyd's stock market listing could also help it make acquisitions as the Benelux insurance market undergoes a period of consolidation.
Aviva would have to give its approval to any merger or takeover involving Delta Lloyd that took the British insurer's stake below 50%.
Delta Lloyd said yesterday that it made a net loss of ฃ88 million ($143.4 million)in the nine months to Sept 30, while life new business sales for the period fell 12% to ฃ2.8 billion.
Trading in Delta Lloyd shares is expected to begin in Amsterdam on Nov 3, Aviva said.
Saturday, October 17, 2009
WATCHDOG FAULTS GEITHNER OVER AIG BONUS PAYMENTS
Treasury Secretary Timothy Geithner is "ultimately responsible" for regulators failing to rein in massive bonus payments at American International Group (AIG) because he led the agencies that provided AIG's lifelines, according to a bail-out watchdog.
Geithner, who was president of the Federal Reserve Bank of New York before taking over at Treasury in January, has said he did not learn until March about the $1.75 billion (Bt58.66 billion) in bonuses and other compensation promised to AIG employees. But Geithner's subordinates at the New York Fed learned of the payments in November, according to Neil Barofsky, the special inspector general for the $700-billion financial bail-out.
"MANAGEMENT FAILURE"
Even if no one told Geithner about the payments, "this is a failure of communication and a failure of management", Barofsky told the House Committee on Oversight and Government Reform on Wednesday. Geithner has been "the head of an organisation that was involved in the bail-out of AIG", he added.
A Treasury spokeswoman said in a statement that the Obama administration's pay czar continues to develop compensation plans for AIG and the other companies that received the costliest bail-outs.
Geithner helped lead Fed efforts starting last fall to prop up AIG with billions in emergency financing. After becoming Treasury secretary, his department and the Fed continued unveiling new aid packages for AIG.
The government has committed a total of more than $180 billion to wind down the New York-based insurance and financial services conglomerate, and Treasury now owns about 80 per cent of the company.
Barofsky wrote that Treasury did not understand AIG's pay structures when it gave the firm billions in aid last fall. He said on Wednesday that officials at the New York Fed "still did not have their arms wrapped around" AIG's compensation structure when he finished his audit last month.
TREASURY CRITICISED
Officials discovered 620 bonus programmes totaling $455 million, and 13 retention plans allocating $1 billion, according to the report. AIG has asked employees to return some of the money voluntarily.
Barofsky criticised Treasury, under then-secretary Henry Paulson, for "outsourcing" its oversight duties to the Fed, which he said had different priorities from Treasury. As a financial institution, the Fed "didn't really view these [bonuses] as being much of a big deal", he said, because they were a tiny part of the aid AIG received.
Treasury was charged with recovering taxpayer money, and would have been "more sensitive" to the appearance that AIG used taxpayer money to grant large bonuses, Barofsky said.
Lawmakers questioned Geithner's leadership on AIG and whether he was truthful in saying he learned about the bonuses in March. Several said Geithner should have known, and that Treasury should have done more to recover the bonus money.
Geithner, who was president of the Federal Reserve Bank of New York before taking over at Treasury in January, has said he did not learn until March about the $1.75 billion (Bt58.66 billion) in bonuses and other compensation promised to AIG employees. But Geithner's subordinates at the New York Fed learned of the payments in November, according to Neil Barofsky, the special inspector general for the $700-billion financial bail-out.
"MANAGEMENT FAILURE"
Even if no one told Geithner about the payments, "this is a failure of communication and a failure of management", Barofsky told the House Committee on Oversight and Government Reform on Wednesday. Geithner has been "the head of an organisation that was involved in the bail-out of AIG", he added.
A Treasury spokeswoman said in a statement that the Obama administration's pay czar continues to develop compensation plans for AIG and the other companies that received the costliest bail-outs.
Geithner helped lead Fed efforts starting last fall to prop up AIG with billions in emergency financing. After becoming Treasury secretary, his department and the Fed continued unveiling new aid packages for AIG.
The government has committed a total of more than $180 billion to wind down the New York-based insurance and financial services conglomerate, and Treasury now owns about 80 per cent of the company.
Barofsky wrote that Treasury did not understand AIG's pay structures when it gave the firm billions in aid last fall. He said on Wednesday that officials at the New York Fed "still did not have their arms wrapped around" AIG's compensation structure when he finished his audit last month.
TREASURY CRITICISED
Officials discovered 620 bonus programmes totaling $455 million, and 13 retention plans allocating $1 billion, according to the report. AIG has asked employees to return some of the money voluntarily.
Barofsky criticised Treasury, under then-secretary Henry Paulson, for "outsourcing" its oversight duties to the Fed, which he said had different priorities from Treasury. As a financial institution, the Fed "didn't really view these [bonuses] as being much of a big deal", he said, because they were a tiny part of the aid AIG received.
Treasury was charged with recovering taxpayer money, and would have been "more sensitive" to the appearance that AIG used taxpayer money to grant large bonuses, Barofsky said.
Lawmakers questioned Geithner's leadership on AIG and whether he was truthful in saying he learned about the bonuses in March. Several said Geithner should have known, and that Treasury should have done more to recover the bonus money.
Tuesday, October 13, 2009
AIG SELLS TAIWAN UNIT
American International Group said yesterday it would sell its Taiwan unit for US$2.15 billion (Bt71.66 billion) as the insurance giant raised money to pay off a huge US government bail-out loan.
AIG announced that Hong Kong-based Primus Financial Holdings would take over Nan Shan, Taiwan's No 2 life insurer, in what observers said was the largest deal ever to take place in the island's financial sector. "[Primus] has pledged to continue Nan Shan's commitment to its policyholders, agents, and employees, as well as to the people of Taiwan," said Robert Benmosche, AIG chief executive officer.
After an auction that lasted several months, Primus beat several rivals for Nan Shan, including Taiwan's Chinatrust Financial Holding. Primus Financial has promised not to change Nan Shan's brand or the existing compensation and benefits packages.
"We have the highest respect for Nan Shan's dedicated management team, agents and employees who have built the company into the prominent Taiwan institution that it is today," said Primus chairman Robert Morse.
AIG announced that Hong Kong-based Primus Financial Holdings would take over Nan Shan, Taiwan's No 2 life insurer, in what observers said was the largest deal ever to take place in the island's financial sector. "[Primus] has pledged to continue Nan Shan's commitment to its policyholders, agents, and employees, as well as to the people of Taiwan," said Robert Benmosche, AIG chief executive officer.
After an auction that lasted several months, Primus beat several rivals for Nan Shan, including Taiwan's Chinatrust Financial Holding. Primus Financial has promised not to change Nan Shan's brand or the existing compensation and benefits packages.
"We have the highest respect for Nan Shan's dedicated management team, agents and employees who have built the company into the prominent Taiwan institution that it is today," said Primus chairman Robert Morse.
Monday, October 12, 2009
BAY taps bancassurance
Bank of Ayudhya has set an ambitious growth target for its bancassurance business next year, helped by its "boxed"insurance policies, says senior vicepresident Kris Chantanotoke.
The bank aims to increase first-year premiums by 50% next year, thanks to its low base and the growth potential of business segmentation. For the first eight months of the year, BAY recorded firstyear premiums of 3.5 billion baht. The bank expects to achieve its target of 4 billion this year compared with 3 billion last year.
Business expansion will be supported by its products and services, particularly the bundled or boxed policies. BAY is the first bank in Thailand to offer this convenient and simple product.
For the remainder of the year, the bank expects to sell 200,000 boxes (policies). BAY, the country's fifth-largest bank by total assets, launched three insurance boxes after the bank entered the market three years ago.
Bancassurance in Thailand has grown for more than five years and the market showed significant growth in the past two years because of added players. The market started with some banks around 2004, but now most banks in the country offer the financial product.
Thailand's third-largest bank by total assets, Siam Commercial Bank, ranks number one in bancassurance, followed by Kasikornbank and Bangkok Bank,respectively. The nationwide network of large banks is supporting the rapid growth rate of bancassurance.
Mr Kris forecast that the country's insurance market would grow 13% next year, while the bancassurance business is expected to grow 15%. He said that 95% of insurance sales from the products of its three partners come from its branches, with 3% from telemarketing.
The bank aims to increase first-year premiums by 50% next year, thanks to its low base and the growth potential of business segmentation. For the first eight months of the year, BAY recorded firstyear premiums of 3.5 billion baht. The bank expects to achieve its target of 4 billion this year compared with 3 billion last year.
Business expansion will be supported by its products and services, particularly the bundled or boxed policies. BAY is the first bank in Thailand to offer this convenient and simple product.
For the remainder of the year, the bank expects to sell 200,000 boxes (policies). BAY, the country's fifth-largest bank by total assets, launched three insurance boxes after the bank entered the market three years ago.
Bancassurance in Thailand has grown for more than five years and the market showed significant growth in the past two years because of added players. The market started with some banks around 2004, but now most banks in the country offer the financial product.
Thailand's third-largest bank by total assets, Siam Commercial Bank, ranks number one in bancassurance, followed by Kasikornbank and Bangkok Bank,respectively. The nationwide network of large banks is supporting the rapid growth rate of bancassurance.
Mr Kris forecast that the country's insurance market would grow 13% next year, while the bancassurance business is expected to grow 15%. He said that 95% of insurance sales from the products of its three partners come from its branches, with 3% from telemarketing.
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