Beleaguered insurance firm American Insurance Group announced this week the sale of a Hong Kong business to China Construction Bank and an India business to MphasiS, as well as a further unwinding of AIG Financial Products.
China Construction Bank will buy the Hong Kong-based consumer finance business of AIG, AIG Finance, for $70 million in cash, plus the repayment of intra-group indebtedness and deposits of approximately $557 million.
AIG Finance has a credit card business as well as a restricted-licence bank in Hong Kong. As of June 30, AIG Finance had more than 500,000 customers, total net loan receivables of HK$4.8 billion ($619 million) and HK$1 billion of retail deposits.
"We strongly believe that the acquisition will benefit us in the growth and diversification of our consumer loan portfolio, and will serve as an excellent platform for growing our credit card business," said Charles Ma, president and chief executive officer of CCB (Asia), in a written statement.
Deutsche Bank advised AIG on the sale.
Meanwhile, in India, Bangalore-based MphasiS has signed a deal to buy AIG's unit, AIG Systems Solutions (AIGSS), for an undisclosed consideration. The company provides back-office support to AIG companies worldwide from locations in Chennai and Kolkata.
Gopinathan Padmanabhan, who heads the application-services business unit at MphasiS, told media the deal will be all-cash and funded internally.
MphasiS earns 39% of its revenues from clients in the financial services and insurance industries, and said the deal will strengthen its position in this industry segment "with a significantly enhanced insurance solutions portfolio".
MphasiS added that the challenges facing insurers -- consolidation, regulatory changes and shrinking margins -- provide a good opportunity for the 800-strong team at AIGSS to win more business from insurance companies by offering industry-specific solutions.
Analysts have speculated that to sweeten the deal AIG would have guaranteed not to migrate the captive business it currently provides its India unit to another provider for a defined period of time. This kind of transaction structure has become common in M&A deals in the outsourcing sector in India, most recently when Citi sold different parts of its India outsourcing unit to Tata Consultancy Services and Wipro.
The deals in Asia were announced on the same day as AIGFP, an AIG subsidiary based in London, sold its energy and infrastructure investment assets for more than $1.9 billion. Gerry Pasciucco, AIGFP chief operating officer termed the sale "a significant milestone in the ongoing process of winding down AIGFP's business".