MetLife buys Alico from AIG for $15bn

AIG has agreed to sell Alico, its international life assurance business, to MetLife for about $15.5bn in cash and shares in a deal that would further reduce its indebtedness to US taxpayers.

MetLife is paying about $6.8bn in cash and the rest in common stock and preferred shares.

Under the terms of the deal AIG, which is 80 per cent owned by the US government, will not be allowed to sell the Metlife shares until at least nine months after the deal has closed.

MetLife expects the transaction to increase its 2011 operating earnings per share by approximately 45 to 55 cents per share. It expects to increase 2011 estimated operating return on equity by 140 to 160 basis points, it said in a statement.

The New York Federal Reserve, which has repeatedly bailed out AIG, stands to receive up to $9bn from the sale.

The Fed is due to receive a further $25bn once the planned $35.5bn sale of AIA, AIG's huge Asian arm, to Prudential of the UK is completed.

If the Fed receives $9bn from the Alico deal and the sale of AIA goes through, AIG would still have to repay $14.4bn under a credit line and $47bn it received from the US Treasury.

The sale of Alico and AIA would mark the end of AIG's history as an international group spanning life and general insurance.

The proposed divestment of Alico to MetLife, which was first reported by the Financial Times in July, had been expected for some weeks but was held up by a last-minute question over tax liabilities.

In order to avoid a future charge, MetLife asked the Internal Revenue Service to confirm that, since Alico sold most of its policies outside the US, it did not have to withhold US taxes on distributions to foreign policyholders.

People close to the situation said that the IRS had sent the companies a letter this week stating that tax would not be an issue.

Alico is headquartered in Delaware but operates in more than 50 countries.

The company, which was founded in China in 1921 and was one of the AIG's first businesses, has more than 19m customers.

The purchase of Alico would boost MetLife's presence outside the US, giving it a stronghold in Asia, one of AIG's strengths.

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