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AIG May Sell U.S. Auto Insurance Business to Zurich (Update1) By Hugh Son and Zachary R. Mider Feb. 10 (Bloomberg) -- American International Group Inc., the insurer divesting units to repay a government loan, is in talks to sell an auto unit to Zurich Financial Services AG, two people familiar with the situation said. A formal agreement for 21st Century Insurance, which sells auto policies over the Internet, hasn’t been reached, said the people, who declined to be identified because talks are private. The unit was valued at about $1.9 billion when New York-based AIG bought the minority stake it didn’t already own in 2007. The sale may be the largest since AIG announced in October it would dismantle itself to repay a federal loan. AIG is selling businesses including U.S. life insurance and a plane- leasing unit to repay the government loan that saved it from bankruptcy in September. The insurer was overwhelmed by bad bets tied to U.S. housing and has posted about $43 billion in net losses over four quarters. The deal may make Zurich, which owns Farmers Group Inc., the largest auto insurer in California, according to 2007 data from the National Association of Insurance Commissioners. Zurich would also add customers in New Jersey, Florida and Pennsylvania. Zurich Chief Executive Officer James Schiro has said he wants to increase sales in the eastern U.S. Christina Pretto , an AIG spokeswoman, and Sean Kevelighan of Zurich declined to comment. To contact the reporters on this story: Hugh Son in New York at hson1@bloomberg.net ; Zachary R. Mider in New York at zmider1@bloomberg. net . Last Updated: February 10, 2009 15:57 EST

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