HONG KONG: Cash-strapped American International Group (AIG) said it will accelerate steps to spin off its Asian life insurance unit, American International Assurance (AIA), through an initial public offering (IPO) in an Asian bourse.

The global insurer did not specify the market or bourses where it will conduct its planned share sale, but its statement fuelled a flurry of speculation that Hong Kong will be a likely venue, especially with AIG's avowed desire to further expand its operations on China's mainland.

Following AIG's collapse in September last year over soured investments, the US government pledged to provide a bailout package of $182.5 billion to prop up the global insurer. It is now under pressure to raise money to pay off some of its debts and sustain its operations.

A pedestrian walks past a local American International Assurance Company Limited (AIA) office building in Hong Kong. AFP

In a statement, AIG chairman and chief executive officer Edward Liddy said the company "will accelerate steps to position the AIA Group as an independent entity and seek a public listing on an Asian stock exchange for the group, depending on market conditions and subject to regulatory approval."

"At this stage, we believe that a public listing for AIA would be in the best interests of all stakeholders, including US taxpayers, policyholders, employees and distribution partners," he added.

AIG hired Blackstone Group LP for advice on a proposed restructuring of its Asian unit and an IPO.

Analysts expect Hong Kong to be a top choice for an AIA IPO, as the city is an ideal gateway for AIA's expansion into the mainland.

KGI Asia research head Ben Kwong said a public offering by AIA in Hong Kong is likely to draw a strong response from investors considering the insurer's track record in the local insurance market and its strong customer base here.

"The response, however, will depend on the timing of the deal, as well as the offering price," he said.

Very few large insurance firms list on the Hong Kong bourse and AIA's share sale will be "unique" in this sense, he added.

Echoing Kwong's view, Sun Hung Kai Financial Group strategist Castor Pang said Hong Kong is ideal for an AIA IPO, especially because the insurer is committed to expanding further its business on the mainland.

"Despite the stiff competition that it faces from top insurers on the mainland, AIA's prospects in China remain robust, considering its solid track record and the wide variety of its financial products," he said.

Hong Kong-based AIA has been operating in Asia for 90 years. The insurer currently has around 250,000 agents and 20,000 employees across 13 geographical markets in the Asia Pacific.

Mark Wilson, AIA's president and chief executive officer, said the public listing represents a clear and formal roadmap for the company's independence from its parent.

"Our ability to weather the economic turbulence demonstrates the strength of our operations, confidence of our customers, and support of our distribution partners," Wilson said in a statement.

(HK Edition 05/19/2009 page16)