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Buyers Sought For Hartford Steam Boiler

Staff and Wire Reports

October 09, 2008

The Hartford Steam Boiler and Inspection Co., with its downtown Hartford presence and 383 employees, could be sold as its beleaguered parent company seeks to sell units to repay an $85 billion loan from the federal government.

American International Group Inc. hired New York-based investment bank KBW Inc. to find buyers for HSB, said people familiar with the situation who declined to be named because the talks are private. AIG spokesman Joe Norton declined to comment.

A month ago, analysts hadn't expected AIG to sell HSB, founded in Hartford in 1866, because it has been financially successful and fits well with AIG's other commercial lines.

Company representatives in Hartford couldn't be reached for comment late Wednesday.

Now, an auction of HSB, the largest North American equipment-breakdown insurer, signals that Chief Executive Officer Edward Liddy may be planning on dismantling a greater share of AIG than he has outlined. Liddy, named CEO by federal officials, said last week that AIG would revamp into a global property-casualty company by selling life insurance and retirement units.

"AIG has to consider selling things outside of what they first indicated," said Rob Haines, a debt analyst at CreditSights Inc. in New York. "It's an indication of how serious their situation is."

Hartford Steam Boiler was publicly traded when AIG bought it in 2000 for $1.2 billion in stock. The company has 398 employees in Connecticut and 2,486 employees in total.

HSB sells breakdown insurance, covering damage to various mechanical and electrical systems.

It provides property coverage for some of the world's biggest corporations, including General Electric Co., but also sells a product aimed at consumers — insurance that covers mechanical breakdowns and boiler cracking.

AIG, once the world's largest insurer, has already tapped $61 billion, or about 72 percent, of its U.S. credit line, forcing it to accelerate asset sales. The company agreed Sept. 16 to a government takeover after the housing market slump led to three quarterly losses of more than $18 billion.

In other news, after being castigated by lawmakers for hosting a $440,000 conference days after receiving its federal bailout, AIG said it plans to hold another gathering for brokers next week.

Liddy told Treasury Secretary Henry Paulson on Wednesday that the company intends to re-evaluate expenses.

In a letter to Paulson, Liddy said the gathering last week was planned "many months" before the Federal Reserve's loan to AIG. Next week's meeting was also planned before the loan, AIG spokesman Nicholas Ashooh said.

"This sort of gathering has been standard practice in our industry for many years," Liddy wrote.