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The Actuary The magazine of the Institute & Faculty of Actuaries

AIG sells commodity index to UBS in a bid to restructure the business

AIG Financial Products Corp (AIG-FP), AIG’s controversial investment banking arm at the centre of its difficulties in 2008, has completed the sale of its commodity index business to the equities business of UBS Investment Bank. The business consists of a range of securities derived from the Dow Jones-AIG commodity index, including the rights to that index.

“AIG has realised value from the sale of a profitable business unit, AIG-FP, in connection with the ongoing unwind of AIG-FP’s businesses and portfolios,” said Gerry Pasciucco, AIG-FP chief operating officer. UBS will pay $15m initially, plus additional payments of up to $135m over the following 18 months, based on the future earnings of the purchased business. Approximately 13 AIG-FP employees involved with the commodity index business are joining UBS in connection with the sale.

The deal, first announced in January, is part of the New York-based insurance giant’s restructuring plans. It is the 10th transaction AIG has closed and one of 11 asset sale agreements it has reached in the past few months. AIG has received $182.5bn in financial support from the US government since September. In order to repay part of the loan, the company is selling off a number of business units.