(Bloomberg News) American International Group Inc. may reach a deal as soon as today to sell two Japanese life insurance units to Prudential Financial Inc. for about $4.8 billion in cash, said people with knowledge of the matter.
An agreement would cap two years of intermittent talks for Star Life Insurance Co. and AIG Edison Life Insurance Co. between Prudential Chief Executive Officer John Strangfeld and New York-based AIG, said the people who declined to be identified because the negotiations are private. The transaction under discussion values the units at close to their book value, a measure of assets minus liabilities.
Strangfeld, 56, has been weighing what to do with excess capital he amassed last year by selling stock and bonds and divesting a stake in a securities brokerage.
Prudential "is the most overcapitalized life insurance company that we cover," Randy Binner, an analyst who follows U.S carrierse for FBR Capital Markets, said in the second quarter. "They're the classic acquirer."
Prudential, the second-largest U.S. life insurer, gained $1.40, or 2.5 percent, to $57.20 at 9:33 a.m. in New York Stock Exchange composite trading. AIG slipped 10 cents to $37.22. Bob DeFillippo, a spokesman for Newark, New Jersey-based Prudential, and AIG's Mark Herr declined to comment.
AIG CEO Robert Benmosche, 66, is disposing of assets as rival insurers rebuild capital lost during the 2008 financial crisis. In March, he agreed to sell AIG's American Life Insurance Co. to MetLife Inc., the biggest U.S. life insurer, for about $15.5 billion. Benmosche had called off an attempt in 2009 to divest the Star and Edison units.
The U.S. Treasury Department is in talks with AIG about winding down its stake in the insurer, according to people familiar with the discussions. Benmosche has said he first needs to repay about $19.7 billion in debt on a Federal Reserve credit line before turning to Treasury obligations.
Benmosche was hired in August 2009 to reorganize what was once the world's biggest insurer and repay a government rescue valued at $182.3 billion. AIG is focusing on its property-casualty business and plans to sell shares in the AIA Group Ltd. unit in a public offering after the U.K.'s Prudential Plc backed out of a deal to acquire the business. Prudential Financial isn't related to Prudential Plc.
Prudential Financial has had business in Japan for more than two decades, selling life insurance and fixed and variable annuities. Last year Prudential acquired bankrupt Yamato Life Insurance Co. to add to its businesses in the country.