American International Group today sold 14 percent of the stock of its Hong Kong life insurer, AIA Group, Ltd., for approximately $6 billion.
The sale leaves AIG holding about 19 percent of the stock of AIA, regarded as one of its trophy holdings before it got into financial trouble in 2008.
The shares are held in a special facility for the benefit of the U.S. government, which will get the proceeds from the sale.
The facility is a special purpose vehicle created by AIG and the U.S. Treasury to hold the AIA shares in return for cash from the government.
The original special vehicle involving AIA was $25 billion, and included ALICO, since sold to MetLife.
The AIA share was $16 billion; the ALICO share $9 billion. The ALICO portion was paid off as part of the effort to end the Federal Reserve Board’s loans to AIG.
The balance of the loan collateralized by AIA shares was $8.4 billion as of Dec. 31, 2011.
The funds gained from the latest sale will be used to further pay down that loan.
The share price is expected to be $3.50 to $3.54 share in equivalent U.S. dollars, an estimated discount of up to 7 percent of AIA’s market price in Hong Kong.
AIG officials said the exact price will be disclosed by Tuesday.
AIG used to own all of AIA and sold two-thirds of the company in a Hong Kong initial public offering in late 2010. A one-year lockup on further sales expired at the end of October last year, and AIG had been waiting for favorable market conditions to sell more of AIA.
AIA is the third-largest Asia-based insurer by market value, according to various analysis reports.
It operates in 15 markets, including Hong Kong, China, Malaysia, Thailand and Singapore.
Its estimated embedded value is $27 billion, an estimated 10 percent increase since November.
As part of divestitures undertaken by AIG in order to pay back the government and make it simpler to manage AIG also Nan Shan Life Insurance Co., based in Taiwan, for $2.16 billion last year.
According to Bloomberg, AIG has sold AIG has divested more than $50 billion in assets to repay the government rescue, including non-U.S. life insurers, a consumer lender and other businesses. The firm sold a $500 million stake in Blackstone Group LP in a block trade last week, Bloomberg said. That could not be confirmed.
At the moment, the government owes 1.455 billion shares of AIG.
It cut its holders by 200 million in a public sale last May. The government must receive an average of at least $28.72 a share to recoup its investment.