American International Group Inc received a $1 billion commitment from Kuwait Investment Authority for the IPO of its Asian life insurance unit, according to a source, the first major investment inked before the roughly $15 billion share sale launches.
AIA Group Ltd is aiming for an overall value of around $30.5 billion after listing, according to another source, on a par with what UK insurer Prudential Plc had last offered for AIA in its failed take-over bid earlier this year. KIA, the country's sovereign wealth fund, is among the major global institutions that have signed up as cornerstone investors ahead of AIA's IPO. The sources had direct knowledge of the matter but were not authorised to speak publicly as the deal has yet to launch.
AIA's IPO is set to start on Tuesday, with shares expected to start trading on October 29. The issue is likely to be among the world's largest ever IPOs, and follows the record breaking July deal from the Agricultural Bank of China Ltd, which raised $21.9 billion in Hong Kong and Shanghai.
AIA's planned listing comes after a take-over attempt by Prudential collapsed in May over price disagreements. Prudential later dropped the offer to $30.4 billion just before the bid failed, a target sources later cited as the likely top end of the IPO valuation range.
Prudential's initial $35.5 billion bid for AIA was pitched at 1.67 price to embedded value. Embedded value is a measure commonly used to gauge the value of insurance companies that includes the present value of future profits from long-term insurance contracts. Ultimately, the IPO price and its valuation is determined by the company and its underwriters, who gauge the specific embedded value figure that mutual fund investors are comfortable with, hoping to find a number that encourages the best demand.