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AIA is a valuable asset

When the troubles at AIG blew out of proportions i told alot of friends who were worried that the worst case scenario for AIA holders might not materialize as i believe alot of insurance powerhouses will eye this piece of business as a good addition to their existing empire.

It would seem that Prudential, another favorite in Singapore that likes to “tok” carrot-heat consumers are eyeing this piece of meat:

LONDON -(Dow Jones)- Prudential PLC (PRU.LN) shares rose sharply Monday following weekend press reports that it is interested in buying parts of troubled U.S. insurer American International Group Inc.’s (AIG) life-insurance business in Asia.

The Sunday Times and the Sunday Telegraph reported without citing sources that Prudential is in talks with two strategic investors to take a 20% stake in the company and help mount a $15 billion bid for the AIG business in Asia.
Prudential is being advised by UBS AG (UBS) and Credit Suisse Group (CS), the reports said.

A Prudential spokesman declined to comment on the reports. Prudential Chief Executive Mark Tucker is expected to comment on his Asian expansion plans after the release of sales figures on Tuesday.

Credit Suisse declined to comment, while a spokesperson for UBS in London couldn’t immediately be reached for comment.

At 1124 GMT, its shares were up 13% or 35 pence at 305 pence, outperforming the FTSE100 index which was up 1.6%.

Fox-Pitt Kelton analyst Raghu Hariharan noted that any capital to be raised as part of an AIG deal is unlikely to come from the current shareholders.
“The route Prudential is taking is that it’s trying to get investors or sovereign wealth funds in. It’s not from the existing investor base,” he said.

Panmure Gordon analyst Barrie Cornes said “an audacious bid for AIG’s Asian operation would be a huge coup if it were to come off.”

AIG’s operation in Asia “is of a similar size and quality to Prudential’s and we believe that such a deal would be hugely positive and transformational for Prudential, should it be able to carry it off,” Cornes said.

Any deal could have some complications, however.

AIG Chief Executive Edward Liddy, appointed recently after AIG’s near- collapse, said earlier this month that AIG will sell only a minority stake in American International Assurance, or AIA. AIA is AIG’s Asian life-insurance business and is considered the main acquisition target.

“The minority stake is an issue, isn’t it? So I’m not sure if this is a done deal,” said FPK’s Hariharan.

“The logic behind buying a minority stake is unclear. I’m not sure if buying that stake is a preferred route,” he said.
“Prudential has a strong business in Asia and they could just pick the customers who are leaving AIG. But if somebody else is buying the AIA assets to become a bigger competitor, then Prudential might have to defend its position as well,” Hariharan said.

Among the other big U.K. insurers, only Aviva PLC (AV.LN) could perhaps muster enough strength to launch a bid for AIG’s Asian assets, “but only by a long shot,” said Hariharan.

Besides Aviva and Prudential, “nobody else has the huge interest or the ability to drive synergies in Asia,” he said.

Aviva may have some capital to mount an acquisition, “but they have a pretty stiff divided and earnings target,” Hariharan said.

Under its “One Aviva, twice the value” business strategy, the company aims to double its 2007 earnings-per-share of 49.7 pence by 2012.

“It’s a bit more difficult, but they would have to do some capital raising as well if they would go and buy other assets. I don’t know if U.K. investors would be happy to fund such a thing,” Hariharan said.

Already, Aviva looks out of the picture as CEO Andrew Moss said he is shying away from acquisitions amid the credit crunch.

“In 2008, we will stay away from any deals while waiting to see how the situation evolves. We prefer to keep our funds,” Moss said in a report in France’s La Tribune newspaper on Oct. 6.

Outside the U.K., French insurer Axa SA (AXA) has said it is interested in AIG’s Asian assets.
Company Web site: www.prudential.co.uk
-By Vladimir Guevarra, Dow Jones Newswires; +44 (0) 20 7842 9486, [email protected]

And so is Manulife it seems:

By Kevin Bell
Oct. 20 (Bloomberg) — Manulife Financial Corp., Canada’s biggest insurer by assets, may be hampered in its bid to buy parts of American International Group Inc. by a need to shore up its own reserves amid the financial crisis, the Globe and Mail reported.

Manulife’s executives are devoting their attention to the company’s segregated fund and variable annuities business, which may be weakening the firm’s ability to mount a bid, the newspaper said, citing unidentified people.

Manulife must increase its reserves to cover potential shortfalls when stock markets decline. The firm’s priority has been to reassure investors that it’s coping with its exposure to equities, the Globe said.

Chief Executive Officer Dominic D’Alessandro assured analysts last week that Manulife’s appetite for takeovers has not been impaired, the newspaper said.
To contact the reporter on this story: Kevin Bell in Toronto at [email protected]

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