It was the first time the government made its position clear on the auction of Nan Shan. Yesterday was the deadline for submitting letters of intent for bidding.

"Nan Shan has almost 50 years of history in Taiwan, and it has many clients," said Huang Tian-mu, head of the Insurance Bureau of the FSC, which has been mostly reticent on Nan Shan's sale. "We hope the new owner will have a good, capable financial management team and will keep the concept of 'sustainable growth' in mind, just so the interest of its clients will be protected."

He further said the FSC has relayed this message to Nan Shan's U.S. parent corporation, AIG. "We hope AIG understand Nan Shan's importance and significance for the Taiwanese people," he said.

He stressed the FSC "does not welcome" buyers who only care about short-term interest. When asked if this means the government doesn't want to see private equity fund bidders, Huang said the FSC is not the seller and will not approve or disapprove who enters the bid.

"Yet, we do have the authority to approve the final transaction," he said. "For those who want to buy it for a year and then sell it, they will not conform to the FSC's idea of this sale and will not be welcome."

It was speculated four major private equity funds have entered the bid, namely Carlyle Group, Primus Financial Holdings Ltd., MBK Partners Ltd. and KKR & Co.

AIG, formerly the world's largest insurer, is selling assets outside the U.S. to repay a US$182.5 billion government bailout. The insurer's bailout includes a US$60 billion credit line from the Federal Reserve, a US$70 billion investment from Treasury and US$52.5 billion to fund two vehicles to retire credit-default swaps and a securities-lending program.

With 46 years of history, Nan Shan is owned 97.5 percent by AIG and the rest by its own management. It is the island's second biggest life insurer after Cathay, with 4 million policyholders and 11 percent market share in total premiums. By February, its net worth was NT$86.737 billion, with total asset at over NT$1.5 trillion by the end of April, the local United Evening News reported yesterday.

Possible Bidders Besides the above-mentioned private equity funds, it was speculated five other parties have submitted their letters of intent, including the I-Mei Group, the Ruentex Group, Cathay Financial Holding, Fubon Financial Holding, and Chinatrust Financial Holding.

The possible nine bidders only completed the very first step of the auction. As they all signed notes of confidentiality, their names will not be revealed until the official bidding stage begins.

After yesterday's submission of letters of intent, the bidders will have to conduct field works and speak with various people in Nan Shan's management. This will take about two to three months, analysts said, adding the final bidders will be no more than five.

Of the possible bidders, Chinatrust Financial would benefit the most from the acquisition, industry analysts said, since it does not have an insurance unit under it. China Life, a life insurer, is a family business of the Koos and is not a firm listed under Chinatrust Financial.

At the same time, since Chinatrust does not have an insurance unit, most Nan Shan workers would have their jobs secured, analysts said. Things would be different if Nan Shan was bought by Cathay or Fubon, which already has an insurance unit, they said.

For Cathay, acquiring Nan Shan may not be all that important since it is No. 1 in the insurance market already, analysts said. Cathay Life already has total asset of NT$2.38 trillion, double the NT$1.5 trillion of Nan Shan. With Cathay United Bank's NT$1.349 trillion, Cathay Financial has total asset of NT$3.7 trillion, a figure hard to be surpassed.

For Fubon, buying Nan Shan would directly challenge Cathay's position to be No. 1 in the insurance industry. After buying ING Life, Fubon's life insurance unit has nearly NT$1 trillion in total asset. Analysts are now watching whether Fubon has enough cash at hand to purchase Nan Shan, they said.

Ruentex's head Yin Yen-liang, meanwhile, had held stakes in a major life insurance firm before and has his connections in the insurance circle. However, it is expected the FSC will still favor the sale to a financial-related group. Ruentex is a construction group.