Woodbury Acquisition on AIG Cards

Zacks

In an effort to provide enhanced services to its clients, SunAmerica Financial Group, Inc, a subsidiary of American International Group, Inc. (AIG) entered into a strategic alliance to acquire Woodbury Financial Services, Inc., an operating subsidiary of The Hartford Financial Services Group, Inc. (HIG).

The deal is expected to consummate by the end of this year, subject to the approval of the regulatory bodies. However, other details related to the deal remain undisclosed officially.

As per Reuters, Hartford will receive $90 million pursuant to this acquisition. Also, it will receive an additional $25 million as payment for dividend towards Woodbury Financial Services only on fulfillment of certain conditions.

AIG expects to merge Woodbury Financial Services with Advisor Group, a part of SunAmerica Financial that comprises independent broker dealers. The 1,400 advisors of the to-be acquired company will become a part of 4,800 independent financial advisors of SunAmerica Financial. Woodbury Financial Services will also benefit from AIG’s technology, support and opportunities to expand.

The news of the acquisition comes on the heels of an announcement made by Hartford early this year, where it revealed its interest in divesting and was on the lookout for such opportunities as it intends to focus more on its property insurance business.

Hartford intended to divest its Individual Life and Retirement Plans segments along with Woodbury Financial Services. Woodbury, which is an indirectly-held, wholly-owned retail broker-dealer subsidiary, is included in the Individual Life segment’s distribution network.

Going forward, the situation looks positive for AIG. It has successfully paid off its debt obligations under the Maiden III securities portfolio, which were created in 2008 to rescue the company from a financial downturn.  Presently, it has only $30 billion remaining of its loans worth 182.3 billion. Also, it has successfully reduced the treasury’s stake and government intervention in the company.

The company is relentlessly striving to improve its operational efficiency by divesting, repaying loans and issuing notes to bring about capital flexibility and improve its credit profile. The share prices of AIG are also following an upward trend. It has gained almost 4% in a week’s time to close at $31.27 on July 31.

AIG is scheduled to release its second quarter results after the closing bell on August 2, 2012. The Zacks Consensus Estimate pegs the second quarter earnings at 60 cents, down approximately 16% over the year-ago quarter. It currently retains a Zacks #2 Rank, which translates into a short-term Buy rating.

Also, Hartford is expected to announce its second quarter 2012 financial results today after the market closes. According to the Zacks Consensus Estimate, the company is expected to report operating earnings of 48 cents a share. The company broke-even in its prior-year quarter.

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