Thursday, 5 March 2009

Philamlife folded into AIG unit

US parent revises restructuring strategy
BusinessWorld Online
http://www.bworldonline.com/BW030509/content.php?id=001

STRUGGLING American International Group, Inc. (AIG) has folded Philippine American Life and General Insurance Company (Philamlife) into a major Asian unit as part of a revised restructuring strategy meant to avert a divestment of its crown jewels at fire sale prices.

In a statement released Wednesday night, AIG said Philamlife "will be retained and made part" of Hong Kong-based American International Assurance Company, Ltd. (AIA), its most lucrative asset in the region.

AIG announced on Monday that AIA, together with Delaware-based American Life Insurance Co. (ALICO), would operate independently from AIG through a restructuring program that will allow the Federal Reserve Bank of New York access to equity ownership.

Under that new plan, AIA and ALICO will be put in trusts. The arrangement serves as partial repayment, to the tune of some $26 billion, for a credit line the Fed extended the US insurer last year.

The path charted for Philamlife effectively means the auction of the unit has been shelved.

Edward M. Liddy, chairman and chief executive officer of AIG, told CNBC that the trust arrangement would save the US insurer from selling its profitable business units at fire sale prices.

Reports have claimed that bids for Philamlife had fallen short of AIG’s asking price.

"AIA said it was appropriate at this time to include Philamlife in the new AIA structure as the rest of AIA is being separated from AIG and positioned as an independent operation," the statement read.

AIA President Mark Wilson said the revised plan would benefit Philamlife policyholders, including its employees and agents. There was no mention of possible management changes.

"The Philippines is a very important part of the AIA Asian landscape. We are confident that there will be benefits for Philamlife’s customers, employees and agents from being fully integrated into Asia’s leading insurance company," Mr. Wilson said in the statement.

Philamlife President and CEO Jose L.Cuisia, Jr. said the integration would boost the firm’s business.

"Joining the AIA group of companies, subject to regulatory approvals, will provide Philamlife with access to the resources and Asia-wide network of the region’s market leader," the statement quoted him as saying.

AIA has a network of 250,000 agents and 20,000 employees across 13 markets. It serves over 20 million customers in the region.

Philamlife, the country’s largest insurer, has consolidated assets of P170 billion and a net worth of P49.5 billion.

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