American International Group will sell off some of its Latin America, Central and Eastern Europe operations to Fairfax Financial Holdings Ltd., and the two companies in turn expect to form a strategic partnership to support multinational clients.
The deal, pending regulatory approvals, is worth about $240 million, AIG said. It also represents another major step in AIG’s ongoing push to streamline, divest some assets and return at least $25 billion to shareholders through 2017.
“This partnership marks a significant step forward in achieving the strategic priorities of AIG, as well as Fairfax, AIG President and CEO Peter Hancock said in prepared remarks.
Fairfax Chairman and CEO Prem Watsa noted that its acquisition of some of AIG’s Latin American and Central/Eastern European operations fits with its own expansion strategy.
“The [Latin American] companies are well established in their respective markets with experienced management teams and a disciplined approach to underwriting, and they will significantly expand Fairfax’s footprint in Latin America,” Watsa said in prepared remarks. He added that AIG’s Central/Eastern European operations Fairfax will be acquiring “follows on our recent expansion in Eastern Europe through our previously announced QBE transaction [in 2014] and will accelerate our plans for long-term growth in the region.”
AIG’s agreement with Fairfax, a global property/casualty insurer and reinsurer, is multifaceted. It calls for AIG to sell Fairfax its local commercial and consumer operations in Argentina, Chile, Columbia, Uruguay, Venezuela, and Turkey. As well, Fairfax is also acquiring renewal rights for the portfolio of local business written by AIG’s Central and Eastern European operations in Bulgaria, the Czech Republic, Hungary, Romania and Slovakia. Additionally, Fairfax is assuming AIG’s Central/Eastern European operating assets and employees.
At the same time, Fairfax is becoming the primary strategic multinational network partner slated to serve AIG’s global clients in Latin America, Central and Eastern Europe. AIG will back the effort through reinsurance and claims handling capabilities.
In other words, AIG is streamlining, but not quite leaving either market region. The property/casualty insurance giant said the move furthers its goal of refocusing its efforts in regions that will allow for the most profitable growth for its commercial and consumer insurance divisions. But AIG asserts it will still retain global capacity for its individual and corporate clients that require it.
AIG’s agreement with Fairfax follows its deal earlier in October to transfer about 25,000 auto policies in Brazil to a unit of Porto Seguro SA, another move to reduce its international businesses.