Once regarded as the crown jewel of American International
Groups global network, Hong Kongbased AIA Group
survived the near demise of its former parent and is now
thriving as an independent company.
AIA endured some turmoil in the aftermath of AIGs
record $182 billion U.S. government bailout in 2008. As
Asias third-largest insurer and its parents most
marketable subsidiary, AIA was marked for an early disposal by
AIG chairman and CEO Robert Benmosche. But Benmosches
initial attempt to sell AIA to the U.K.s Prudential for
$35.5 billion fell apart in 2010 after months bitter
negotiations over pricing. In October 2010 AIG solved its
dilemma, and AIAs, by floating the insurer through an
initial public offering on the Hong Kong Stock Exchange that
raised $17.9 billion.
The company is now very, very financially sound,
says Arjan van Veen, a Hong Kongbased insurance analyst
at Credit Suisse. It has an AA rating at a time when AA
is difficult to get.
In the six months ending May 31, AIA delivered $1.44 billion
in net income, up 10 percent over the same period a year
Now, the company is looking for acquisitions to accelerate
growth. A retreat from the region by European insurers is
providing the outfit with plenty of opportunities. In October
AIA bought the Malaysian unit of Dutch financial conglomerate
ING Group for $1.73 billion. The deal pushes up AIAs
ranking in the Malaysian insurance market by two places, to No.
1. The transaction followed closely on the heels of AIAs
$109 million acquisition in September of the Sri Lanka unit of
Britains Aviva, which made AIA No. 2 in that market.
We see AIAs recent acquisitions as strategically
sensible, as they highlight its pro-growth strategy, says
Darwin Lam, a Hong Kongbased insurance analyst at
Citigroup. Currently only about half of AIAs
geographical markets are developing markets. By acquiring
insurance assets in Sri Lanka and Malaysia, this will increase
its share in the faster-growing developing markets and hence
uplift AIAs long-term growth potential.
More than AIG, AIA can claim to be the heir of the original
company that American entrepreneur Cornelius Van der Starr
founded in 1919 in Shanghai. American Asiatic Underwriters sold
insurance in China before retreating to its headquarters to the
U.S. in 1949, just as the Peoples Liberation Army was
marching on Shanghai.
The firm renamed itself AIG and continued to expand in Asia,
and globally, to become the worlds largest insurer until
2008, when the global financial crisis almost put it out of
business. AIG has been selling down its AIA stake: In September
the New Yorkbased insurer sold more than $2 billion worth
of AIA shares, bringing its sales to more than $8 billion in
the past 18 months as the group raised money to repay its
AIG is a supportive and excellent shareholder, but
that is the extent of its involvement. AIA is completely
independent," says AIA spokesman Stephen Thomas. AIG still
retains a 13 percent stake in AIA, and all indications are that
it will sell off the remainder.
Outside of Japan and China, AIA is the regions biggest
pan-Asian insurer in terms of assets, with $119 billion as of
May 31. Analysts say the company is poised for further growth.
Despite its recent acquisition payouts, AIA has no debt and is
sitting on $3 billion in cash. That puts the company in an
enviable position to take advantage of the continued withdrawal
by European insurers in the region and make further
acquisitions, says Credit Suisses van Veen.