Business Context and Reporting Period
This Form 8-K filing by American International Group, Inc. (AIG) reports on significant asset dispositions completed or scheduled for completion in late 2010. The report date is October 29, 2010, with the signature date of November 4, 2010.
Key Financial Metrics and Transactions
AIA Group Limited Initial Public Offering
- Date: October 29, 2010
- Transaction: Completion of IPO for 8.08 billion ordinary shares of AIA Group Limited (AIA).
- Gross Proceeds: Approximately $20.51 billion.
- Retained Interest: AIG retained approximately 33% of AIA's outstanding shares.
- Valuation: Fair value of AIG's retained interest was approximately $11.8 billion as of October 29, 2010.
- Accounting Impact: AIG will deconsolidate AIA in the fourth quarter of 2010; AIA is not presented as a discontinued operation as of September 30, 2010.
American Life Insurance Company (ALICO) Sale
- Closing Date: November 1, 2010
- Total Consideration: Approximately $16.2 billion.
- Net Cash Consideration: $7.2 billion (includes a $400 million upward purchase price adjustment).
- MetLife Common Stock: 78,239,712 shares.
- MetLife Participating Preferred Stock: 6,857,000 shares (convertible into 68,570,000 common shares).
- MetLife Equity Units: 40,000,000 units with an aggregate stated value of $3.0 billion.
Material Changes and Restrictions
AIA Lock-Up Periods: AIG is precluded from selling any remaining AIA shares until October 18, 2011, and more than half of its remaining shares until April 18, 2012.
ALICO Monetization: AIG intends to monetize MetLife securities over time, subject to market conditions and minimum holding periods. The MetLife equity units are held in escrow for 30 months to secure indemnity obligations.
Pro Forma Information: Unaudited pro forma financial statements are provided as Exhibit 99.1, reflecting the transactions as if completed on June 30, 2010 (balance sheet) and January 1, 2009 (income statement).
Outlook, Risks, and Contingencies
- Market Risk: Monetization of MetLife securities is subject to market conditions.
- Indemnity Risk: Equity units from the ALICO sale serve as collateral for indemnity obligations owed to MetLife; escrow release depends on the resolution of pending claims.
- Dividend Rights: MetLife participating preferred stock is entitled to dividends equivalent to common stock on an as-converted basis prior to conversion.
Investor Verification Checklist
- Verify the exact timing of AIA deconsolidation in Q4 2010 financial statements.
- Review Exhibit 99.1 for unaudited pro forma condensed consolidated financial statements.
- Monitor the status of MetLife shareholder approval required for the conversion of participating preferred stock.
- Track the release schedule of the 30-month escrow period for ALICO equity units.
- Confirm the specific terms of the lock-up agreements regarding AIA share sales.