AIG sells stake in loss-making lender
Published 12/08/2010 | 05:00
American International Group (AIG) yesterday agreed to sell a majority stake in its consumer lender to Fortress Investment Group, getting rid of a unit that posted about $1.7bn (€1.32bn) in operating losses since 2008 and accumulated more than $17bn in debt.
Fortress will take an 80pc stake in American General Finance (AGF) with AIG retaining the rest, according to a statement yesterday that didn't disclose terms.
AIG will book a pre-tax loss of about $1.9bn on the deal, according to a filing from the New York-based insurer, which previously valued the unit at about $2.4bn.
"The business has been pressured for some time, it was clearly non-core to AIG," said Jonathan Hatcher, a Jefferies Group desk analyst and former Federal Deposit Insurance Corporation bank examiner.
"I don't think the market believed AGF was worth $2.4bn given everything that has happened in the sector."
Financial companies are scaling back consumer-lending operations after funding dried up for the businesses. Wells Fargo, the fourth-biggest US bank by assets, said last month it would cut 3,800 jobs and close its consumer-finance branch network.
Citigroup announced in June that it would close 376 branches and cut as many as 720 jobs at CitiFinancial lending businesses in the US and Canada.