AIA CEO says AIG shareholding overhang no issue

American International Group Inc's (AIG.N) remaining shareholding in AIA Group Ltd after its listing is not of concern to investors, AIA CEO Mark Tucker said on Sunday, as the mega offer enters its home stretch.

AIA, which aims to raise up to $20.5 billion through an Hong Kong initial public offering (IPO), said it plans to sell up to 8.08 billion shares in an indicative range of HK$18.38-19.68 each, setting it on course to be the third-biggest IPO ever.

Tucker, who has about 17 years experience of running life insurance business in Asia, was named AIA CEO in a surprise move in July replacing Mark Wilson. Tucker is credited with building rival Prudential plc's (PRU.L) Asia business.

"There has been an incredibly enthusiastic response to this," Tucker told Hong Kong media via video conference about the AIA IPO. Shortage of time was the only issue he was grappling with, Tucker quipped.

"If we could add another add another 20 hours to a day, that would be perfect," Tucker said, flanked by -- Christopher Wei, group chief marketing officer, Jon Nielsen, regional chief financial office, and John Chu, group chief investment officer.

Some analysts have said that bailed-out insurer AIG's stake in AIA could be an overhang on AIA. Even if AIG exercises all its options under the offer, it would be left with a 33 percent stake in AIA which it cannot sell for one year.

"This is not a concern. AIG are clear in terms of their divestment..., this is not an issue in any of the conversation that we have had," Tucker, 52, said from San Francisco.

"AIG comes into this an enthusiastic and supportive shareholder. AIG are very supportive of allowing AIA to be able to run the company for the benefits and value of all of shareholders," Tucker said in his first media conference since taking over as the CEO.

Retail Offer

AIA's retail offer opens on Monday, and the IPO is scheduled to be priced on October 21. The shares would start trading on October 29. A Reuters poll released last week said that AIG was likely to price the offer at HK$19.14 each, well above the mid-point range.

Tucker aims to grow the business organically as opposed to through acquisitions. "We have enormous headroom here," he added.

The offering will also help bailed-out insurer AIG to pay back part of the aid it received from the U.S. government during the financial crisis.

Still, Tucker will have to do a lot of work to expand its business in China. "AIA currently has access to 1/3 of China's total life insurance premiums and a population of over 200 million people. We believe we can grow market share by penetrating second and third tier cities," he said.

AIA expects strong demand for accident and health products, given the lack of state funded safety net, rising longevity and increasing need for health care products.

AIA has more than 23 million in-force policies and over 300,000 agents. It earns only about 8 percent of premiums from bancassurance, under which insurers use the branch networks of banks to sell their products.

"Bancassurance is a key growth opportunity for us. Our goal is here is a major increase in premium and profit growth from bancassurance over the few years," Tucker added.

Citigroup Inc (C.N), Deutsche Bank AG (DBKGn.DE), Goldman Sachs Group Inc (GS.N) and Morgan Stanley (MS.N) are the joint global coordinators.

[Source: By Denny Thomas, Reuters, Hong Kong, 17Oct10]

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