AIG, the stricken insurance giant, may have to scrap the sale of its Asian life assurance unit after attracting only lukewarm interest from potential bidders, according to people familiar with the matter.
AIG recently started an auction process to divest American International Assurance, one of its prized assets, to raise up to $20bn to help repay the $60bn US government loan that it keeping the group alive.
However, AIG is expecting only three expressions of interest to be lodged when first round bids close this Friday.
People familiar with the matter said that Prudential of the UK, ManuLife Financial of Canada and Temasek of Singapore were the only groups to indicate firm interest in making a bid.
Other potential interested parties, including HSBC, Axa and Allianz, are not expected to submit bids.
Significantly, Chinese interest in acquiring AIA appears to have cooled, with no mainland group expected to join the bidding.
The Financial Times reported this month that Bank of China was considering making a bid, with funding from China Investment Corp, the country’s sovereign wealth fund.
People familiar with the matter said that AIG was likely to scrap the process if there was a lack of competitive tension.
There are also doubts that groups which enter the bidding will have the ability to raise funds to acquire AIA.
“At this stage it looks like only three names will be in the hat and none of them will be Chinese,” says one person familiar with the situation. “AIG and their advisers will sit down next week and assess what to do.”
Depending on the state of the equity markets, AIG could seek to raise cash with an initial public offering of AIA.
The lack of bidders for its flagship assets could also prompt AIG to renegotiate the terms of its bail-out with the US government, with the insurer repaying a chunk of its debts by handing over stakes in assets such as AIA.
AIG came close to collapse last year and had to be bailed out twice by the US government, which now owns 80 per cent of the troubled insurer.
AIA, a cornerstone of the company’s business for a century, boasts 20m policyholders across 13 countries, employs 200,000 tied agents and last year made an aggregate operating profit of about $2bn.
It also has a lucrative property portfolio, including landmark buildings in Hong Kong and Shanghai.
AIG and its advisers Blackstone, Goldman Sachs and Citigroup, all declined to comment.
(FT, February 25, 2009, Tepid interest in AIG Asia unit)