AIG spin-off to benefit Cyprus operations

— S&P analysts favour deal —

American International Group’s decision to turn its property-general insurance business into a new company, so that it can sell shares of the firm to the public, is seen as benefiting the Group’s Cyprus operations.
The new company will be called AIU Holdings and will be a separate corporate entity, distinct from AIG and complete with its own board of directors. The move comes as part of AIG's bailout deal with the U.S. federal government.
Rating agencies including A.M. Best and Standard & Poor's said the company's financial strength rating would remain unchanged. The rating analysts said they look positively on the move and the financial strength rating of “A (Excellent)” and issuer credit ratings of “a” are unchanged for the property-casualty companies involved in the spin-off.
S.J. Zevlaris Management Ltd., the local representatives of American Home Assurance Company, one of the largest general insurance companies of Cyprus, will also make the move and be part of the new AIU Holdings Group.

Capital
Analysts said while capital and surplus will remain unchanged, “the quality of capital in these subsidiaries is expected to improve as these investments in AIG affiliates will be exchanged for high-quality, liquid assets of equal value.”
Under the agreement, the domestic and foreign property-casualty subsidiaries of AIG will be placed in a special purpose vehicle and AIG will purchase from AIU Holdings its equity interests in certain AIG affiliates.
The companies involved in the unit being spun off include AIG Commercial Insurance Canada, Audubon Indemnity and Insurance, AIG Casualty and American Home Assurance Company (which also includes its Cyprus branch).
Once the procedure is completed by year-end, AIU Holdings will have the global reach needed by today’s multinational companies and an exceptional understanding of local markets with over 500 products and services and operations spanning over 130 countries, according to industry analysts.