AIA kicks off IPO pre-marketing

City A.M. Reporter
American International Group Inc will hold at least a 30 per cent stake in its Asian life insurance business, AIA Group Ltd, for a year after AIA's listing next month, the IPO term sheet showed.

AIA began pre-marketing for the IPO to gauge demand and is expected to set a price range in coming weeks.

Two brokers, Bank of America-Merrill Lynch released research reports on AIA on Monday with an average top-end valuation of $38.8bn (£24bn).

The two brokers are among the 11 book runners for the IPO, which is set to be the biggest ever insurance float.

The bullish valuations for AIA compare with the $35.5bn which Prudential Plc first offered for AIA in March. The insurer had then asked AIG to cut the price to $30.4bn, but it was turned down, leading to the termination of the agreement.

AIA's share offering is expected to raise about $15bn, which will help its parent AIG return part of the aid it received from the US government during the financial crisis.

"While AIA has recovered from a trough caused by the AIG events, it is unclear whether its brand equity has been affected and if it can replicate its success with the new premium generation, agency recruitment and persistency," Bank of America, said in a report which Reuters obtained from fund managers.

AIG is yet to decide the exact stake it will sell in AIA, but some bankers have said that the U.S. insurer will cut its holding by about 50 per cent.

AIA was likely to sign up cornerstone investors during pre-marketing, ahead of its scheduled listing on 29 October, sources have previously told Reuters.

The cornerstone investors would be subject to a lock-in period of six months, the term sheet showed.

AIA's management team is in advanced talks with several Middle Eastern and Asian sovereign funds to sell cornerstone stakes in AIA, which is the next major step in AIA's listing process.

Over the weekend, AIG said AIA would likely post a pre-tax operating profit of at least $2bn for the fiscal year ending in November.

That compares with $1.84 billion it earned in 2009.

AIG, nearly 80 percent owned by the U.S. government, is disposing of assets to repay taxpayers who committed $182.3 billion to prop up the insurer during the financial crisis.
AIA would be unable to sell new shares within six months of listing, the term sheet showed.