AIG said to be close to selling Taiwan unit to Primus

New York-based AIG is in advanced talks with Primus and the two companies may sign an agreement as early as next week, the three people said, asking not to be identified. Primus Financial, co-founded by former Citigroup Inc. Asia investment banking chief Robert Morse, offered more than US$2 billion for AIG's Taipei-based Nan Shan Life Insurance Co., two of the people said. AIG, once the world's biggest insurer, is divesting units to repay loans included in its US$182.5 billion government bailout. The selection of Primus Financial would end a four-month battle for Nan Shan that pitted the Hong Kong-based company against Chinatrust Financial Holding Co. and Cathay Financial Holding Co.

Jennifer Chen, a spokeswoman for Primus, declined to comment. An outside spokeswoman for AIG, who declined to be identified citing company policy, had no comment.

Primus Financial and Chinatrust sweetened terms of their offers in September as they entered final talks with AIG, two people familiar with the matter said. Fubon Financial Holding Co. and Cathay Financial dropped out of bidding after AIG rejected their offers, they said.

Primus Financial is teaming up with Hong Kong-traded China Strategic Holdings Ltd. to acquire Nan Shan. China Strategic said last month it plans to sell US$1 billion of convertible notes to fund the purchase.

Hong Kong tycoons including Henderson Land Development Co. Chairman Lee Shau-Kee; Joseph Lau, chairman of Chinese Estates Holdings Ltd.; and New World Development Co. Chairman Cheng Yu- tung and have agreed to buy the notes, one of the people said. Spokespersons for the three executives either declined to comment or weren't immediately available.

Morse will be appointed as vice chairman of China Strategic once it buys Nan Shan, the company said Sept. 3.

Nan Shan, with 4 million policyholders, is burdened with unprofitable guaranteed-return policies it sold in the 1990s when interest rates were higher, raising concerns that a buyer may need to inject more capital.

Nan Shan's 36,000 agents are also asking AIG to return NT$14 billion of pensions that may have been used as operating capital for Nan Shan, Grace Feng, an agent who represents the employees, said in an interview in August. AIG on Aug. 21 agreed to return 27 percent of the amount to the agents once it finds a buyer for Nan Shan, Feng said.

AIG was rescued by the government last year after wrong-way bets on securities tied to U.S. subprime mortgages brought it to the brink of collapse, threatening to cause a financial-system meltdown. The company has agreed to sell assets including a U.S. auto insurer, a Japanese office tower and Canadian operations for about US$9.8 billion in the past year.

Nan Shan raised US$1.45 billion in a rights offer last year to avoid slipping below a regulatory capital requirement. AIG, which owns 97.57 percent of the unit, contributed most of the money. Nan Shan's management holds the rest of the company.

The AIG unit and other Taiwanese insurers sold policies before 2000 with guaranteed returns of at least 6.25 percent, said Andy Chang, a director at Taiwan Ratings, the local partner of Standard & Poor's, in August. Most policies sold now carry returns of about 2 percent, he said at the time.

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