AIG American International Group Inc

By Ezequiel Minaya and Leslie Scism 

Vail Resorts Inc. said it would buy the ski operations of Stowe Mountain Resort in northern Vermont for about $50 million from the real-estate business of insurance giant American International Group Inc.

Vail Resorts will acquire Stowe's ski business, related infrastructure and machinery and summer season on-mountain attractions. AIG will retain ownership of most of the Spruce Peak base area, including Stowe Mountain Lodge, Stowe Mountain Club and future development rights.

Broomfield, Colo.-based Vail has a strategy of purchasing and improving ski areas near urban centers as way of increasing visitors. The Stowe transaction would give the company a foothold in the populous northeast market.

Christopher Agnew, managing director at MKM Partners, said Vail is building an attractive network of resorts and that "this east coast presence taps into the huge markets in Boston and New York, and those customers will come out west as well."

Last year, Vail struck a deal to buy Canadian ski-resort operator Whistler Blackcomb Holdings Inc. for roughly 1.4 billion Canadian dollars. Earlier, Vail acquired the Wilmot Mountain ski resort in Wisconsin, roughly 65 miles north of Chicago.

For its latest reported quarter, Vail said unseasonably warm weather in November had damped early results, causing them to be below company and Wall Street expectations. Still, the company said colder temperatures and snowfall improved later in the month and noted that November represented a "relatively small portion" of ski season revenue.

Stowe has been part of AIG since the 1940s. Real estate ownership isn't unusual in the insurance industry, with many of the bigger insurers keeping a small slice of their investment portfolios in property. It is a way to diversify their risk, and go for longer-term gains than they can get with the high-quality bonds that typically predominant.

The Stowe ski resort stands out, however, as it is has played a role in the company's history over the years, as a vacation spot for AIG's athletic managers. The company's involvement was the idea of the company's founder, Cornelius Vander Starr. Though he hadn't taken up skiing until his mid-40s, he had an "enthusiasm for sport and an interest in real estate," according to "The AIG Story" by longtime AIG Chief Executive Maurice R. "Hank" Greenberg, who left the insurer in 2005 and also was an avid skier.

According to an article on Stowe's website written by a local historian and longtime ski-patrol member, in 1943 Mr. Starr and his wife visited Stowe and the executive was disappointed at having to wait in line for two hours for a ride up the single chair.

Mr. Starr "offered to put up 51% of the funds for another lift," the website says. "Thus began AIG's involvement in Stowe which eventually led to their ownership of the resort," the site says.

AIG has been in the real-estate business since 1987 and built the group into one of the world's largest property investors, with about $25 billion in assets before the financial crisis.

The transaction is the latest move by AIG to narrow its focus to core property-casualty and life-insurance businesses. The company is using proceeds from many of the divestitures to finance an ambitious two-year plan to return $25 billion to shareholders through stock repurchases and dividends. As of early February, AIG was more than halfway to the goal.

The divestiture program began as an effort to repay U.S. taxpayers for a nearly $185 billion bailout during the 2008-09 financial crisis. AIG fully repaid the government by the end of 2012, and had shrunk to about half it precrisis size in terms of total assets on its balance sheet. Even as it shrank, AIG remained one of the world's biggest sellers of insurance to businesses, by market share.

Now, Chief Executive Officer Peter Hancock is trying to sell additional businesses, reduce expenses and make changes in the insurance-product mix in a bid to boost profitability. The management team is trying to satisfy activist shareholders Carl Icahn and John Paulson, who in 2015 publicly called for AIG to break into smaller pieces. Last year, Mr. Paulson and a representative of Mr. Icahn joined AIG's board.

Earlier this month, Mr. Hancock's plan suffered a setback when fourth-quarter results badly disappointed, in large part because of an unexpectedly large $5.6 billion boost to the company's property-casualty claims reserves. The company also announced that two profitability targets set for accomplishment by year-end wouldn't be achieved then.

In another real estate deal, AIG Global Real Estate announced in November it had completed the sale of the International Finance Centre Seoul to Brookfield. Terms of the transaction weren't disclosed.

Write to Ezequiel Minaya at ezequiel.minaya@wsj.com and Leslie Scism at leslie.scism@wsj.com

(END) Dow Jones Newswires

February 21, 2017 13:18 ET (18:18 GMT)

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