American International Group has struck a deal to sell its Taiwan life insurance unit for $2.15 billion, marking its largest disposal of a unit since a government bailout saved it from collapse last year.

The deal is a key step for AIG in it's effort to repay U.S. taxpayers after the government injected $80 billion in taxpayers' money into the firm but the insurer faces two more major sales processes in Asia and others across the globe.

The Nan Shan sale involves two little-known buyers, one a start-up financial group run by a former Citigroup banker, and the other an obscure, publicly traded Hong Kong holding company with a market value of $111 million.

Still, the agreement is likely to bring a sigh of relief to the AIG camp, as at one point it looked liked the Nan Shan process would not succeed.

On Tuesday, Primus Financial, the firm founded by Citi's former Asia investment banking head, together with China Strategic Holdings, agreed to buy AIG's Nan Shan Life, ending a five-month auction that involved private equity firms and local financial groups.

Nan Shan, a top 3 Taiwan insurer, has assets of $46.4 billion and employs 36,000 sales agents in Taiwan and has a market share of 10 percent with its 4 million customers.

Primus will own around 20 percent of the business and China Strategic <0235.HK> 80 percent, according to the companies.

The sale of Nan Shan allows AIG to check one business off its list of units to sell in its fund raising efforts.

Hong Kong-based life insurer AIA is seeking a more-than $2 billion initial public offering and sources said American Life Insurance Co, which generates half its revenue in Japan, is could fetch $5 billion in an IPO.

Both companies have also attracted acquisition interest, though nothing has materialized yet.

China Strategic, whose major businesses include battery production and securities investments, had said it planned to raise about HK$7.8 billion ($1.01 billion) to fund a possible joint acquisition.

The deal priced Nan Shan at about 1 time price to book, which is fair when you compare 1.9 times for Cathay Financial <2882.TW> and Fubon Financial <2881.TW>, and 1 time for smaller rival Shin Kong Financial <2888.TW>, said Dexter Hsu, an analyst at JP Morgan in Taiwan on Tuesday.

An executive from Deutsche Bank, which is Primus' financial advisor, told Reuters that Primus would be using bank loans to pay up to 35 percent of the $2.15 billion. The remainder will be paid for using Primus' and China Strategic's equity, said the executive, who asked not to be named due to the sensitivity of the issue.

First Commercial Bank and Taiwan Cooperative Commercial Bank in Taiwan are arranging a NT$20 billion (around $588 million) loan for Primus to back its purchase of Nan Shan, according to Thomson Reuters LPC.

FCB and Taiwan Cooperative are expected to each prefund NT$10 billion (around $294 million) of the loan before Primus settling the Nan Shan transaction.


Earlier this year, Primus co-chief executive Wing-fai Ng said in an interview with Reuters that Primus plans to use Nan Shan as a base to expand to Hong Kong, Malaysia and Japan. Morse and Ng will be co-CEOs of Primus Nan Shan.

Some analysts and bankers involved in the deal said putting a valuation on the AIG's Taiwan life insurance unit was difficult.

The pricing is tricky. If you just look at the book value of Nan Shan, then the acquisition price is at a 30 percent discount, said Pandora Lee, an analyst with UBS.

The agreement marks the end of an auction that spanned several months and involved multiple bidders, including private equity firms, such as the Carlyle Group. Primus had been competing in the end with Chinatrust Financial <2891.TW>.

Morgan Stanley advised AIG on the process.

(Additional reporting by Rachel Lee and Chyen Yee Lee in TAIPEI and Parvathy Ullatil in HONG KONG; Editing by Valerie Lee)