American Insurance Group capitalised on a strong rally in the US stock market to sell its remaining stake in Chinese insurer PICC Property & Casualty for HK$1.5 billion ($193 million) through a block trade over the weekend.
For the second time this year, AIG launched a trade on a Saturday to avoid potential volatility going into the following week. The US insurer sold $1.25 billion worth of PICC P&C shares over one weekend in April, marking its third selldown since acquiring a 9.9% stake in 2003.
This time round, AIG was able to achieve better terms compared to the April transaction, partly because the broader market was about 12% higher than five months ago. It was also launched as PICC P&C shares reached a three-month high after rising 3.2% on Friday.
Bankers familiar with the situation said US stock gains on Friday also helped, allowing sole bookrunner Bank of America Merrill Lynch to secure several anchor orders to back the Saturday trade up.
The order book was fully subscribed within 15 minutes of launch late on Saturday and ended up oversubscribed multiple times, with 60% of the shares going to the top 10 accounts, according to a banker familiar with the situation.
Initial terms of the deal – 111 million PICC P&C shares offered at HK$13.39 to HK$13.46 – were already tight given it represented a maximum discount of only 0.5% to the stock’s Friday close. Still, the US insurer was able to price the shares flat to Friday’s close at HK$13.46, making it Hong Kong’s tightest secondary block trade this year in terms of discount to prevailing stock price.
The offer price was 2.9% higher than AIG’s last sale in April when it sold 740 million PICC P&C shares at HK$13.08 each.
Saturday’s sale ended AIG’s 13 years as a shareholder in in PICC P&C; it intially subscribed for 1.1 billion shares through the company’s Hong Kong IPO at a cost of $258 million. The US insurer has made a profit of about $1.44 billion in the PICC P&C investment following four separate follow-on offerings to clean up its stake since March last year.
Proceeds from the PICC P&C selldown could provide capital for the US insurer's massive share buyback programme. Last month, AIG chief executive Peter Hancock said the group would buy back $3 billion of stock on the back of a 6.3% increase in second-quarter earnings.
The share repurchase was part of AIG’s commitment to return $25 billion of capital to shareholders by the end of 2017. The US insurer has been cutting jobs and selling other assets in order to fulfil such commitment.
Apart from PICC P&C, AIG also sold US mortgage insurance company United Guaranty Corporation in a $3.4 billion deal last month.