Brazil's Unibanco (NYSE: UBB) paid 2.3 times book value for the share of US insurer AIG (NYSE: AIG) in their insurance and pension joint venture now called Unibanco Seguros, local daily Valor Econômico reported, quoting Brazilian analyst reports.
On Thursday (Nov 27), the companies announced that Unibanco would pay US$820mn for the JV, while AIG would pay US$15mn for full control of nearly inactive subsidiary AIG Brasil Companhia de Seguros.
"Everything was signed and paid already," José Rudge, CEO of Unibanco Seguros, told BNamericas, saying no further approval from regulators was necessary for the transaction that ended the groups' crossholding arrangement.
"AIG had 49% of the [combined businesses], including Unibanco AIG and AIG Brasil. Now they have 0% of Unibanco Seguros and 100% of AIG Brasil," he said.
Reports from local investment analysts at Fator Corretora, part of investment bank Banco Fator, and Link Investimentos showed the valuation was significantly higher than those for Brazilian insurers Porto Seguro and SulAmérica, which have been seen at 1.3 and 0.7 times book value respectively.
Given this higher valuation, Unibanco is seen putting a premium on completing this deal in a timely fashion, the paper quoted the Fator analysts as saying.
"Unibanco wanted to resolve this ownership issue with AIG some time ago, but the decision was also strategic," financial daily Gazeta Mercantil quoted Alexis Cavichini, professor at the Federal University of Rio de Janeiro, as saying in reference to the planned merger of Unibanco with Itaú (NYSE: ITU)
"The two banks [combined] will pressure Bradesco [NYSE: BBD], above all in the individual and property segments."
AIG must now also decide what to do with its full ownership in the nearly inactive AIG Brasil Companhia de Seguros. The company recorded only 53.3mn reais (US$23.2mn) in written premiums in 2007 and only 6.47mn in the nine months to September, according to figures from regulator Susep.
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