Some AIG units in California could fetch high bids
The firm's profitable businesses in the state include 21st Century Insurance and International Lease Finance, which owns more than 950 commercial airliners.
Bargain hunters could snag some good deals by buying parts of troubled American International Group Inc.'s profitable subsidiaries in California and around the world, market analysts predicted Wednesday.
Top-earning units that could be up for grabs in the state include 21st Century Insurance Co. of Woodland Hills, the state's seventh-largest automobile insurer, and International Lease Finance Corp. of Century City, which owns more than 950 commercial airliners.
AIG also is the No. 1 provider of workers' compensation insurance in California, controlling about 11% of the market with $726 million in premiums written in 2007.
"There are a lot of assets that could be sold," said J. Robert Hunter, insurance director for the Consumer Federation of America. "The federal government could make money on this deal."
But no sale would be approved unless state regulators were sure that "consumers receive the protections they deserve," California Insurance Commissioner Steve Poizner said Wednesday.
An $85-billion loan from the Federal Reserve bought New York-based AIG time to right itself financially, at least partially by selling off valuable assets over the next two years. All decisions, however, must be approved by the U.S. government, which took an 80% stake in the $1-trillion conglomerate.
Individual units could be sold if they fetch high prices or kept because of their strong cash flow, experts said.
Insurance industry observers are sure there will be a sell-off of some of AIG's life, property and commercial insurance units. But aviation experts remain less certain about the fate of the company's giant aircraft leasing business.
Steven Udvar-Hazy, the co-founder of the unit who sold it to AIG in 1990 for $1.3 billion, is reportedly scrambling to put together investors to buy back the firm. International Lease Finance gives AIG a strong cash flow from a fleet worth more than $50 billion. Most of the planes are leased to foreign airlines.
Even though it has only 170 employees, International Lease Finance posted net income of $604 million on revenue of $4.73 billion in 2007.
Some analysts said that the government might push to keep the unit because of the much-needed cash flow and the value of the aircraft assets, which can be used as collateral to borrow more money. But selling the unit is also compelling because it could fetch $8 billion to $14 billion, according to various estimates by analysts. The number of potential buyers is small amid the current economic environment, analysts said, but one strong suitor has emerged.
