HONG KONG: AIU Holdings Inc plans to separate from parent American International Group (AIG) within a year and is considering an initial public offering (IPO) as an option to meet this objective, AIU regional president for Southeast Asia Leslie Mouat said.

He did not say if the potential listing is to be made in the Hong Kong market or in another bourse in the region.

But he disclosed during an interview with China Daily that up to 20 percent of the company may be offered for sale to the public.

AIU is the rebranded general and commercial division of AIG, a US-based global financial services conglomerate bailed out by Washington following massive losses incurred in some soured investments.

Mouat cited the need for AIU to distance itself and split from its parent.

"The problem of AIG is isolated to one operation called the Financial Products Division, which employs 400 people. Unfortunately, it is impossible to separate the issue of that one department from the rest of the group's businesses, which are fully capitalized, extremely sound and extremely profitable," he said.

AIG has about 4,000 subsidiaries that employ some 116,000 people globally. The group, including AIU, which employs 44,000, serve 40 million individual and commercial clients in over 130 countries and jurisdictions.

"How am I going to tell our customers worldwide that I am fine, not to worry? It is very difficult to do that when you hear all the stuff about AIG," Mouat said.

Like AIU, AIA, an Asia-focused life insurance sibling of the former's, is also trying to distance itself from AIG, he said.

Under a plan announced in early March, AIU Holdings will serve as the holding company for AIG's Commercial Insurance, Foreign General Insurance and Private Client Group units.

It will have its own brand identity, and will be run by an independent management team that will report to a separate board of directors.

The move is to assist AIG in preparing for the potential sale of a minority stake in the business, which ultimately may include an IPO, AIG said in a statement announcing the spinoff plan.

"After the separation, we will come up with a new name, a new brand and a new logo, but it will actually remain the same organization that has been around here for about 90 years, with the same value, same discipline in underwriting ...all the good things will still be there," he said.

"We will not need to report to AIG for any decisions made. We will treat AIG just like any other shareholders although AIG will remain the majority shareholder of AIU," he said.

He said AIU's business remained robust despite a spate of challenges, citing some key operational figures in the Southeast Asia region, for example.

AIU's revenue from the region in the first quarter of this year was just 4 percent lower compared with the previous year while revenue for the second quarter is expected to decline 7 percent year-on-year, he said.

"I am frankly delighted" about the performance, given the adverse publicity that affected AIG and the extremely difficult economic time AIU is facing in the region, he said.

He also revealed that AIU's customer retention rate this year in the region remained high at around 94 percent.

He said customers remain loyal to AIU as they understand it and know its financial strength.

He said AIU remains very profitable and is backed by $38 billion of shareholder equity.

While AIG reported a $62 billion loss for the final quarter of last year, AIU generated a $2.1 billion operating income for the year, he noted, adding that AIU did not receive a single cent of bailout money.

Mouat said after the announcement of AIU's split from its parent, his problem won't be with AIG any more but with regional economic challenges that every other operator also faces.

(HK Edition 05/09/2009 page5)