AIG's Three Most Attractive Assets

Under the terms of an $85 billion government bailout, American International Group(AIG Quote)AIG must sell off assets to pay back the loan over two years. A few of AIG's 71 insurance subsidiaries stand out and likely will garner the best prices and most enthusiastic buyers. Three of them, all multibillion-dollar divisions, are the pick of the litter, according to a review of capitalization, earnings and investment portfolios.

Lexington Insurance Co. is domiciled in Delaware and primarily sells fire insurance but also offers allied lines coverage, inland marine, liability, medical malpractice and homeowners. With $15 billion in assets, $4.7 billion in capital and $6.6 billion in annual premiums, the company has a very strong regulatory risk-based capital ratio of 4.91 -- more than twice of what is required.

The company's investment portfolio is clean, with only $454 million in mortgage-backed securities and no junk bonds as of year-end. It earned $1 billion on its underwriting business in 2007 and another $278 million in the first quarter. Likewise, its investment portfolio earned it $552 million in 2007 and another $81 million in the first quarter. With a B- (Good) TheStreet.com Financial Strength Rating, Lexington is an asset for which AIG could easily find a buyer.

National Union Fire Insurance Co. of Pittsburgh sells primarily liability coverage but also offers health, commercial auto, workers comp and inland marine for total annual premiums of $5.5 billion. It is very well capitalized, with a regulatory risk-based capital ratio of 4.04. It has $34 billion in assets and $12 billion in capital.