Monday 27 February 2017

AIG sells stake in loss-making lender

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.

Irish Independent

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