End in sight for AIG’s Taiwan unit sale

By Faith Hung and Jeanny Kao

TAIPEI, June 9 (Reuters) – American International Group won conditional approval from Taiwan’s regulator for the $2.2 billion sale of its Nan Shan Life insurance unit, likely bringing closer an end to an almost two-year long saga.

AIG, looking to pay back the government for a bailout, has been unable to seal a deal since it put the unit on sale in October 2009 due to tight scrutiny from a regulator acutely sensitive to the fate of policy holders, who account for about one-sixth of Taiwan’s 23 million population.

AIG’s first attempt at a sale was rejected last year after regulators deemed the buyer unsuitable, forcing it to put Nan Shan back on the market. It had made clear that it would not seek another buyer and would wind the unit down if the second attempt fell through.

“We have decided to ask Ruen Chen to meet all of the conditions 60 days after they receive our request,” the Financial Supervisory Commission said on Thursday, adding that the deal will take effect after it has checked whether the conditions have been met.

The FSC said the buyer, Ruen Chen Investment Holding, must put T$6 billion ($208 million) into a custody account, and as one of the conditions will not be allowed to borrow money or develop real estate with Nan Shan without FSC approval.

The money is on top of the T$30 billion in cash or equivalent assets that it already has asked Ruen Chen to provide as a demonstration of its commitment.

Ruen Chen Chairman C. T. Cheng told Reuters he is in Shanghai and could not comment immediately as he has not seen the paperwork.

 

STILL UNCERTAINTY

“This is very good. It finally came to an end,” said an analyst at a U.S.-based brokerage, who asked for anonymity due to the sensitivity of the issue.

“The conditions the FSC has set this time indicate that it wants Ruen Chen to run Nan Shan like a real insurance firm instead of one that’s also heavily involved in real estate investments.”

However, Ruen Chen’s financial advisor on the deal said there is still uncertainty.

“This deal has stirred up so many controversies,” Y. T. Tu, chairman of Citigroup Global Markets in Taiwan, told Reuters. “We would not make any comment until the approval is final.”

While there has been little open opposition to the sale, Nan Shan’s labour unions have renewed protests over a long-standing demand for equal pension rights for non-salaried sales agents, staging small-scale rallies and street demonstrations.

In addition, some politicians have complained that the buyer group received special treatment from regulators because of close personal ties between its chairman and that of the Financial Supervisory Commission. The regulator has denied this.

The regulator was forced to issue a statement in March defending its handling of the deal.. AIG meanwhile, stung by negative media reports, asked staff in April to sign a letter of support, saying it was worried that unspecified “ill-intentioned groups” would hinder the deal.

Nan Shan said in a separate statement on Thursday it appreciated the conditional approval, and believed that the quick decision was “in the best interests of Nan Shan policy holders, staff, sales agents and all others involved.”

The regulator said it has agreed with Ruen Chen’s choice of 30-year Nan Shan veteran Guo Wen-der as new chairman.

Ruen Chen is made up of shoe maker Pou Chen, retailer Ruentex and its property affiliate Ruentex Development.

Their stocks ended down by 0.7 percent to 2.6 percent before the news, trailing the main index’s 0.07 percent slide.