AIG Taiwan Unit Sale Faces Union Hurdles

Article

Bailed-out insurer AIG is facing fresh hurdles in its second attempt to sell its Nan Shan unit in Taiwan, with an unhappy union weighing in against the $2.16 billion deal.

The agreement to sell the unit, Taiwan’s No.3 life insurer, to Ruen Chen Investment, a group of hypermarket chain Ruentex and shoe maker Pou Chen, already faces tough scrutiny from regulators mindful of any impact on Nan Shan’s 4 million policyholders–one-sixth of Taiwan’s population.

Another storm is brewing over pension payments to the insurer’s 30,000 plus sales agents, whom the union says should get the same benefits as regular salaried staff. The union wants Ruen Chen to pay some T$15 billion to T$16 billion ($510 million-$540 million) in pension money to the agents.

That would cost Ruen Chen another 25 percent on top of the purchase price, and is a request that neither it nor AIG are expected to accept.

“We have made it very clear to Ruen Chen about our requests, but there was no positive response from them at all,” said Anita Yang, a union spokeswoman. The two sides met to discuss the issue last week.

Last month the union threatened protests if Ruen Chen didn’t agree to talk about the issue.

“We will continue to fully communicate with union members and try to understand their positions,” said C. T. Cheng, Ruen Chen’s chairman. He declined to elaborate further.

AIG has been trying to sell Nan Shan for some 15 months as part of its plans to help pay back the U.S. government for its $182 billion bailout.

Its first attempt was blocked by Taiwan’s regulators on concerns about the suitability of the previous buyer group, battery maker China Strategic and investment firm Primus Financial.

Some observers have noted that Ruen Chen is also made up of non-insurance companies, meaning it too could fall foul of one of the regulators’ five conditions for a sale: that any buyer must have industry experience.

Ruen Chen submitted its application to regulator, the Financial Supervisory Commission, last week.

AIG issued a statement on Friday denying local media reports that it had given Ruen Chen special treatment in the bidding process.

“AIG did its best to carry out a fair bidding process, and treated all bidders the same way,” the statement said.

“The reason Ruen Chen was successful was that it made clear its ability to meet AIG’s requirements and the Financial Supervisory Commission’s five conditions.”

($1=T$29.5) (Editing by Jonathan Standing and Muralikumar Anantharaman)