AIA Group Ltd. (1299), the third-largest Asia-based insurer by market value, jumped the most in 11 months in Hong Kong trading after former parent American International Group Inc. (AIG:US) sold $2 billion of shares at a premium to yesterday’s closing price.
AIA advanced 6.8 percent, the sharpest increase since Oct. 6. The stock closed at HK$28.10, the highest in more than four months and 6 percent above the HK$26.50 price at which AIG sold the shares yesterday.
AIG, recipient of a U.S. bailout in 2008, cut its stake in the Hong Kong-based insurer to 13.7 percent after selling 591.9 million shares, according to an AIA statement to the city’s stock exchange today. The shares closed at HK$26.30 yesterday.
AIA repositioned itself as an independent after losing business during the global financial crisis because of ties to AIG, which would have collapsed without government aid. AIG Chief Executive Officer Robert Benmosche, 68, is seeking to wind down the U.S. stake in the insurer four years after a bailout that swelled to $182.3 billion.
“The size of the offering is smaller than widely expected,” Darwin Lam, a Hong Kong-based analyst at Citigroup Inc., said in a report dated yesterday, noting AIG sold only about a third of AIA shares it still owned. “We believe the AIG overhang remains, though reduced, and may continue to cap share price upside in the near term.”
AIA has delivered eight straight quarters of growth in the value of new business under CEO Mark Tucker, who was hired by Benmosche in July 2010.
AIG may be slowing the pace of AIA sales in hopes that the shares will rise and it will receive more cash in the future, said Meyer Shields, an analyst at Stifel Nicolaus & Co.
“AIG appropriately has a sense of urgency to get out from under the Treasury ownership,” Shields said. “They also want to keep shareholder interests in mind.”
AIG cut its AIA holdings to 33 percent in the IPO, which raised about $20.5 billion and priced the shares at HK$19.68. The U.S. insurer raised $6 billion more in March through AIA sales, with shares priced at HK$27.15.
AIG has raised funds through sales of non-U.S. insurance units, a consumer lender and an asset manager and reduced the Treasury’s holdings (AIG:US) to 53 percent from 92 percent. AIG said it may acquire $5 billion of its shares from the Treasury Department.
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