TAIPEI: Today may prove decisive for the future of Taiwan's largest insurance company as four competing suitors for the company are scheduled to submit final bids in the sale of Nan Shan Life, American International Group's (AIG) richest Asian asset.

AIG, once one of the world's biggest insurers, has been struggling to raise capital after it needed bailout money from the US government to stay afloat.

It is by no means certain whether the sale will ever be completed, or whether AIG will be able to get a desirable return. Several issues could sink the deal.

Many observers consider the asking price, in the neighborhood of $2.5 billion, too high.

Sources in Taiwan and Hong Kong said AIG failed earlier this year in a bid to sell Nan Shan Life, because prospective purchasers considered the price well above market value.

AIG could sell Nan Shan for $1.2 billion-$1.3 billion as Nan Shan could record losses in 2009 and 2010, after reporting a loss of NT$46.7 billion ($1.4 billion) in 2008, said a source with direct knowledge of the deal. The source declined to be identified as the bidding process is confidential.

A second major obstacle continues to plague the potential sale - the growing dispute between Nan Shan and its 30,000 sales agents over an employee pension fund.

Nan Shan Life's agents want the entire NT$14 billion pension fund returned to them.

"The company's now agreed to allow us to jointly manage the fund, but we want the money to be returned to us. It's our money after all," said Grace Feng, a spokeswoman for the agents' union.

The agents have complained that under existing plans only 27 percent of that fund would be returned to them once the sale is complete.

Taiwan's regulatory agency already has cautioned that the pension fund dispute must be resolved before new ownership can step in.

"We can only begin talking about other issues when Nan Shan has dealt with the pension problem in a manner that is acceptable to all parties involved," said Huang Tien-mu, director general of the insurance bureau at Taiwan's Financial Supervisory Commission.

Questions also have been raised concerning two of the four partnership expected to take part in the bidding.

Regulatory issues could derail the bid by Hong Kong-based Primus Financial, which has teamed up with Hong Kong battery maker China Strategic in an effort to buy Nan Shan.

Some observers believe regulators may fear the potential that the Primus bid be backed by mainland investors as Taiwan's financial sector remains tightly controlled and is not among the industries that have been opened to cross-Straits investment.

But the issue doesn't seem to bother Primus, founded by former top Citi (CN) Asia banker Robert Morse.

"We are very confident we'll be approved. We have no mainland shareholder money," said Wing-fai Ng, Primus' co-chief executive, in an interview in Taipei.

He also said in an interview with Reuters that it would invest $500 million into Nan Shan and keep its staff, Taiwan's No 2 sales force with 38,000 agents.

The company also planned to list Nan Shan Life in Taiwan in three years if it won the bid, and then in Hong Kong and the United States, which would turn Nan Shan into a global brand, according to Ng.

Reports attributed to industry sources said recently that a second partnership between the private equity firm Bain Capital and Taiwan's largest credit card issuer, Chinatrust, may be in doubt. Sources said Bain Capital is no longer interested in pursuing the purchase of Nan Shan Life. There has yet to be an announcement that the two partners intend to withdraw their bid.

The other two bidders are the Carlyle Group which is paired with Fubon Financial and Cathay Financial, Taiwan's largest equity firm, which is bidding on its own.

Agencies

(HK Edition 08/28/2009 page2)