IG places AIU Holdings into special unit

Insurer American International Group Inc. said Monday it placed its AIU Holdings operations into a special unit ahead of a previously planned spinoff of the business.

Kristian Moor was named president and CEO of AIU Holdings, which will eventually become a separate firm from AIG.

In April, New York-based AIG said it would spin off AIU Holdings, which includes commercial insurance, foreign general insurance and private client group businesses, into a separate firm as part of its restructuring plan to help repay a government bailout.

In September, the government provided AIG with an $85 billion rescue package amid the mushrooming credit crisis. In return, the government took about an 80 percent stake in AIG. Since then, the government has provided additional rounds of support. AIG’s available loan package now totals $182.5 billion, though it has not tapped all of the funds.

AIG has been selling assets, cutting costs and planning to spin off multiple operations as it looks to repay the government.

Aside from AIU Holdings, AIG has also said it would place two life-insurance subsidiaries ? American International Assurance Co. and American Life Insurance Co. ? into special-purpose vehicles ahead of planned spinoffs. SPVs are entities sometimes set up ahead of the split or sale of a unit to separate its operations from the parent company. After setting up a special-purpose vehicle, AIG could still have the option of selling the operations to another investor or launching initial public offerings for shares in the businesses.

Even though AIG could retain majority stakes in each of the spinoffs, separating the units allows them to create different management teams to operate the firms.

The spinoffs also allow AIG to separate the still-performing businesses from a parent company whose brand is likely hindering business. Being able to rebrand some of the operations while cashing in a portion of their market value could help further stabilize business while paying off the government loan.

Copyright 2009 The Associated Press.