TAIPEI: American International Group Inc (AIG) has urged firms bidding in the sale of AIG's Taiwan life insurance unit to team up with local companies, six people familiar with the sale have said. AIG believes a Taiwan partner may help secure regulatory approval for the $2 billion deal.

Blackstone Group LP and Morgan Stanley, hired by AIG to manage the sale of Nan Shan Life Insurance Co, sent letters to potential buyers this week asking them to partner with Chinatrust Financial Holding Co or Fubon Financial Holding Co for the next round of bidding, the people said, asking not to be identified because discussions are confidential.

AIG is aiming to sell assets outside the US to repay a $182.5 billion US government bailout. Analysts say the move appears to aim at allaying Taiwanese government concerns about selling Nan Shan to private equity investors. Nan Shan Life is Taiwan's second-biggest life insurer based on total premiums. Taiwan's Financial Supervisory Commission said it wants a buyer of Nan Shan to have experience in insurance.

"It's not that we don't welcome private equity companies," Lu Ting-chieh, the regulator's chief secretary, said in a July 15 interview. "They can partner with companies that have experience."

Nan Shan Life may fetch as much as $2 billion, the sources said.

Bain Capital LLC, Carlyle Group, Primus Financial Holdings Ltd and MBK Partners Ltd are among buyout firms selected to enter into the next round of bidding, the people said. The private equity companies must decide by today who they'll team up with, according to two of the sources.

Cathay Financial Holding Co, Taiwan's largest publicly traded financial-services company, has also expressed interest in Nan Shan and will probably bid alone in the second round, two of the sources said.

"The commission isn't targeting any types of companies, though we have principles on who's taking over Nan Shan Life," said Lu. "They should have experience in life insurance. They can't come in, restructure the company and sell it to take the profit."

Peter Rose, a New York-based spokesman at Blackstone, didn't respond to an e-mailed request for comment outside of regular business hours. Officials at Nan Shan, Morgan Stanley, Bain Capital, MBK Partners, Primus Financial and Fubon declined to comment. Spokespeople at Chinatrust and Cathay Financial didn't immediately reply to calls seeking comment.

AIG, formerly the world's largest insurer, separated Nan Shan from other non-US life insurance assets it's selling.

Nan Shan has 4 million policyholders and an 11 percent market share in terms of total premiums. Burdened with unprofitable policies, it raised $1.45 billion in a rights offer last year to avoid slipping below a regulatory capital requirement. AIG owns 97.5 percent of the unit and Nan Shan's management holds the rest.

Nan Shan Life has a sales force of about 35,000 agents and operates 24 branches and 427 sales offices. It was founded in 1963, qualifying the company to expand into the mainland, which requires overseas insurers to have at least 30 years of operating history. The company had NT$1.5 trillion ($45.5 billion) of assets at the end of April.

AIG agreed to sell the assets of its Taiwanese credit-card operations to Far Eastern International Bank for an undisclosed amount on June 30.

Bloomberg

(HK Edition 07/17/2009 page2)