Metrobank enters the fray for AIG's Philamlife

The Philippine bank is the latest contender for one of the jewels in AIG's Asian crown, joining a group of potential bidders that includes several of the country's largest companies.
Metrobank Group, the Philippines' largest bank in terms of assets, last week formally announced its intention to take over Philippine American Life and General Insurance Company (Philamlife), making it the latest participant in the race for American International Group's (AIG) Asian assets.

AIG is selling off chunks of its Asian business û as well as some of its other overseas businesses û in order to pay back the money it has received from the US government to ride out the financial crisis. The credit line was originally estimated at $85 billion but announcements earlier this month suggest it could now extend to $123 billion. AIG is being advised on the sell-downs by Blackstone and J.P. Morgan.

As the largest insurer in the Philippines, Philamlife is considered to be one of AIGÆs most valuable concerns in the region. As of December 31, 2007, it had a net worth of $1 billion, as well as $3.4 billion worth of assets. Philamlife's president, Jose Cuisia Junior, has reassured policyholders that the events surrounding its parent company have not affected its ability to pay claims and underwrite new policies.

Antonio S Abacan Jr, Metrobank's vice chairman, said in a statement that Philamlife's business is a good fit with the companies in the Metrobank Group. Metrobank already owns part of the Philippines' second largest insurer, Philippine AXA Life, a joint venture between Metrobank and Global AXA Group, which has a 22% market share.

This is more than a deal relating to insurance. Metrobank's thrift banking subsidiary, Philippine Savings Bank (PSBank), is also looking to buy Philam Savings Bank, and its credit card arm, Metrobank Card Corp, is interested in acquiring Philam's card business.

Since AIG announced in early October that it intended to divest its interests in the Philippines, several of the country's largest companies have registered an interest in the business. The Sy family, headed by retail tycoon Henry Sy, has declared it is interested in taking over the insurer along with a foreign partner. The Sy family would do so via either SM Investments Corp (SMIC) or Banco De Oro Unibank (BDO).

Meanwhile, the Bank of the Philippine Islands has announced plans to raise up to $307 million worth of capital and has described Philamlife as an "interesting acquisition prospect".

In a business update call recorded on earlier this month, Edward Liddy, chairman and CEO of AIG, gave some details of the sell-off plan: "We have a couple of life operations ex the United States. The one IÆm really referring to there is AIA [American International Assurance]. ThatÆs just a spectacular business. We want to retain a majority interest in that if at all possible and we would flex the size of any minority interest that we would sell.ö He went on to describe the businesses that were up for sale as "spectacular operations".

AIG had entered a number of markets to ensure it had a presence in countries expected to deliver high growth into the future, given that the potential for penetration of insurance in emerging markets is considerably higher than in the developed world. AIG is now being forced to sell the same assets to meet the terms of its bailout package. The long-term impact may be an AIG with both its balance sheet and its growth prospects considerably reduced.
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