UPDATE 4-AIG raises $17.9 bln, prices AIA IPO at top

* AIA IPO poised to be world’s third-biggest IPO

* Upsize option exercised thanks to strong demand

* Fund managers see AIA close to fully valued at top of
range

* Values AIA at 1.32 times embedded value, below China
rivals

* Life insurance premiums to grow 12 pct annually in Asia
(Updates with company statement and details)

By Denny Thomas and Kennix Chim

HONG KONG, Oct 22 (BestGrowthStock) – AIA, the Asian life insurance
arm of AIG (AIG.N: ), raised $17.9 billion by pricing its Hong
Kong IPO at the top of its range, as investors piled into a
company with a wide footprint across rapidly growing Asia.

The pricing of the IPO, set to be the world’s third
biggest, comes amid a boom of new listings in Asia and puts an
end to a long-running saga for American International Group Inc
(AIG.N: ).

Its bid to sell AIA and use some of the proceeds to pay
back part of a whopping $182.3 billion U.S. bailout it received
during the financial crisis began two years ago and included
two failed auction attempts and two floatation efforts.

AIA said on Friday the IPO was priced at HK$19.68 each and
fully exercised the upsize option, confirming an earlier
Reuters report. If the underwriters exercise the overallotment
option, the IPO size will rise by 15 percent to $20.5 billion.
AIA’s trading debut is set for Oct. 29.

“Investors did not dare to miss this jumbo deal, as the
market has ample liquidity and the sentiment is very strong,”
said Antonny Cheng, a fund manager at Gain Asset Management
Ltd.

AIA has been in the Asian region for more than 90 years and
operates in 15 markets, with forecast pre-tax operating profit
of $2 billion.

Life insurance premiums in Asia-Pacific are forecast to
grow at a compound annual clip of 12.3 percent between
2009-2014, Sigma Swiss Re estimates, compared with flat to
modest growth in other parts of the world.

Still, the company faces a tough challenge with expanding
in China, where the mainland’s top industry players dominate
and more foreign competitors are flooding the market.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For BREAKINGVIEWS on AIA valuation [ID:nLDE6930KI] Factbox on world's biggest stock offerings [ID:nN17141638] Insider clip on IPOs: http://link.reuters.com/dar67m Graphic on top global IPOs: http://link.reuters.com/kum57p Graphic on top Asia IPOs: http://link.reuters.com/mep57p Graphic on AIA in Asia http://link.reuters.com/xed59p ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

The IPO will value AIA at $30.5 billion at the top end,
with AIG holding a 41.6 percent stake that will drop to 33
percent if the green-shoe option is exercised in full.

“It’s more or less fully valued after the shares were sold
at the top end,” said Francis Lun, general manager with
Fulbright Securities. “Still one could expect a 5 percent
upside on debut.”

AIA sold 5.86 billion secondary shares and exercised the
upsize option to sell an additional 1.17 billion secondary
shares due to strong demand from investors.

Unlike many other foreign insurers, AIA has 100 percent
ownership of its entities in China, Indonesia, Malaysia,
Thailand and Vietnam. AIA has more than 300,000 agents in Asia.

“This is a cost effective way for IPO investors to ride
China’s growth,” said Francis Gaskins, president of
IPOdesktop.com in Marina del Rey, California.

Asian IPOs raised $90 billion in the first three quarters,
more than double the combined total from the United States,
Europe, the Middle East and Africa, according to Thomson
Reuters.

LONG ROAD TO IPO

AIA IPO and auction efforts started and stopped just after
the U.S. bailout. AIA was nearly sold this year to British
insurer Prudential (PRU.L: ), which offered $35.5 billion but
then trimmed the amount to $30.4 billion. The talks collapsed
in May.

The successful listing of AIA will be welcome news to
Robert Benmosche, AIG’s third CEO since the bailout. AIG and
the U.S. government last month agreed on a plan that would step
up the payback of AIG’s bailout. [ID:nN30139597]

The AIA IPO is expected to generate up to $355 million in
fees for banks involved in the sale. [ID:nTOE69E01U]

That will take year-to-date fees from Asia IPOs to $2.67
billion, according to Thomson Reuters/Freeman Consulting data,
making 2010 the best year for IPO commissions since 2000.

A source with direct knowledge of the matter told Reuters
that demand from institutions exceeded the offering size by
eight times. The retail portion of the AIA offering, which was
10 percent of the deal, generated demand in excess of $14
billion, according to a term sheet obtained by Reuters.

CHALLENGES AHEAD

AIA CEO Mark Tucker, who was roped into AIA from Prudential
in July, is an old Asia hand, having worked in the region for
17 years.

Tucker, 52, is credited with building Prudential’s Asian
business, but has new hurdles at AIA.

The former professional footballer has said he will focus
on organic growth to expand AIA’s Asian platform. His major
challenge is to boost growth in China, a market which is fast
growing but dominated by home grown insurers.

AIA relies heavily on an agency network to drive premiums,
and only about 8 percent of its business comes from
bancassurance. Tucker told a media briefing last week, beefing
up bancassurance was a key focus area.

AIA will be valued at 1.32 times price to embedded value,
far lower than some of the Chinese insurers such as China Life
(2628.HK: ) and Ping An Insurance Co (2318.HK: ).

By comparison, China Life Insurance (2628.HK: ) (601628.SS: )
(LFC.N: ), China’s No.1 life insurer traded at 2.38 times
forecast 2010 embedded value, a Merrill Lynch report says.

Citigroup Inc. (C.N: ), Deutsche Bank AG (DBKGn.DE: ), Goldman
Sachs Group Inc (GS.N: ) and Morgan Stanley (MS.N: ) (Read more about the money market today. ) are joint
global coordinators for the IPO.

Other banks involved in the offering include Bank of
America Merrill Lynch (BAC.N: ), Barclays, Credit Suisse
(CSGN.VX: ), JP Morgan (JPM.N: ), UBS (UBSN.VX: ), ICBC International
and CIMB.
(Additional reporting by Phil Wahba and Clare Baldwin in NEW
YORK and Donny Kwok in Hong Kong; Editing by Michael Flaherty
and Dhara Ranasinghe)

UPDATE 4-AIG raises $17.9 bln, prices AIA IPO at top