In this March 19, 2009 file photo, a car speeds past a sign in front of AIG's financial products offices in Wilton, Conn.Stephen Chernin/AP Photo
Taiwan's financial regulator gave conditional approval to AIG's $2.2-billion (U.S.) sale of its Nan Shan Life insurance unit Thursday, bringing the bailed-out insurer closer than ever to wrapping up one of its most tortured asset sales.
The company, looking to pay back the government for a rescue that topped $182-billion, has not been able to seal the Taiwan deal due largely to tight scrutiny from a regulator sensitive to the fate of Nan Shan policy holders, who account for about one-sixth of Taiwan's population of 23 million people.
An earlier deal was rejected last year, forcing AIG to put the unit back on the block. It said it would not seek another buyer if the second attempt fell through. AIG was expected to wind down Nan Shan's operations in that case.
The Financial Supervisory Commission said the buyer, Ruen Chen Investment, must put $6-billion Taiwan dollars ($208-million U.S.) into a custody account, and will not be allowed to borrow money or develop real estate with Nan Shan without approval.
"We have decided to ask Ruen Chen to meet all of the conditions 60 days after they receive our request," the regulator said in a statement, adding the deal will take effect after it has checked whether the conditions have been met.
Ruen Chen Chairman C. T. Cheng told Reuters he is in Shanghai and could not comment immediately as he has not seen the paperwork. Analysts, however, took it as a good sign.
"This is very good. It finally came to an end," said an analyst at a U.S.-based brokerage. "The conditions the FSC has set this time indicate that the FSC wants Ruen Chen to run Nan Shan like a real insurance firm instead of one that's also heavily involved in real estate investments."
However, Ruen Chen's financial advisor on the deal said there is still uncertainty.
"This deal has stirred up so many controversies," Y. T. Tu, chairman of Citigroup Global Markets in Taiwan, told Reuters. "We would not make any comment until the approval is final."
While there has been little open opposition to the sale, Nan Shan's labour unions have renewed protests over a long-standing demand for equal pension rights for non-salaried sales agents, staging small-scale rallies and demonstrations.
In addition, some politicians have complained the buyer group received special treatment from regulators because of close ties between its chairman and that of the Financial Supervisory Commission. The regulator has denied this.
The regulator was forced to issue a statement in March defending its handling of the deal.
AIG, meanwhile, asked staff in April to sign a letter of support, saying it was worried that unspecified "ill-intentioned groups" would hinder the deal. Nan Shan said in a separate statement on Thursday it appreciated the conditional approval, and believed that the quick decision was "in the best interests of Nan Shan policy holders, staff, sales agents and all others involved."
The regulator said it has agreed with Ruen Chen's choice of 30-year Nan Shan veteran Guo Wen-der as new chairman.
The buyer group Ruen Chen is made up of shoe maker Pou Chen , retailer Ruentex and its property affiliate Ruentex Development.
AIG shares rose 48 cents to $27.80, still below the $29 price where the company and the government conducted an $8.7-billion secondary offering in recent days.
Deutsche Bank, one of the bookrunners on that offering, started AIG shares with a "buy" rating on Thursday and said the stock had at least 25 per cent upside. Barclays also initiated coverage with an "equal weight" rating.