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March 2, 2010

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Pru acquires AIG's Asian unit

BRITISH insurer Prudential Plc yesterday said it will buy the Asian unit of bailed-out American International Group Inc in a deal worth US$35.5 billion that will allow AIG to pay back some of the money it owes United States taxpayers.

AIG, which was kept alive by a US$182.5 billion rescue by the US government in September 2008, will get US$25 billion in cash - US$20 billion of that from a Prudential rights issue - and US$10.5 billion in new shares and securities for the sale of AIA Group Ltd.

The combined group will be the leading life insurer in Hong Kong, Singapore, Malaysia, Indonesia, Vietnam, Thailand and the Philippines, as well as the biggest foreign life insurer on the Chinese mainland and India, Pru said.

AIG said it would use cash from the sale to redeem US$16 billion worth of preferred interests held by the Federal Reserve Bank of New York and to repay about US$9 billion to a Fed credit facility. Prudential securities would be sold over time to make extra payments on debt, AIG said.

In selling to Pru, AIG scrapped an earlier plan for an initial public offering of AIA.

"We decided that a sale to Prudential enables AIG to realize value on a faster track to repay US taxpayers," said AIG President and CEO Bob Benmosche.

"This transaction, the most significant milestone to date in our ongoing effort to repay taxpayers, also gives us greater flexibility to move forward with AIG's restructuring and focus on enhancing the value of our key insurance businesses, which will benefit all stakeholders," he said.

AIG, which is now 80 percent owned by the US government, last Friday said it lost US$8.87 billion in the fourth quarter as its general insurance business remained weak.

As of December 31, AIG's outstanding assistance from the US government totaled US$129.26 billion, up 5.7 percent from the end of the third quarter due to accrued interest.

Pru hoped to complete the purchase in the third quarter, subject to approval from regulators and shareholders.


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