MANILA -- The sale of the country?s largest and most profitable insurer, Philippine American Life and General Insurance Co. (Philamlife), may attract top local conglomerates, like the Ayala group and San Miguel Corp., Chinese-Filipino businessmen and big foreign groups in related businesses, according to stock market analysts.

?Decisions of this sort will be made quickly and carefully,? Philamlife?s parent company, American International Group Inc. (AIG), said in a statement.

AIG said it planned to sell off a number of business units to pay off its massive loan from the US government.

?We expect that buyers will recognize the value of these properties, be a good strategic fit and offer the greatest potential for growth, profitability and continuing opportunities for employees,? it said.

Aside from life insurance in the country, AIG has interest in banking (PhilAm Savings Bank), mutual funds (Philam Asset Management Inc.), pre-need (Philam Plans) and non-life insurance (Philam Insurance Co. Inc.).

Philamlife?s life insurance business is its crown jewel with a net worth of P21.4 billion as of end-2007. It has been the dominant market player for the last 60 years.

Even before AIG made a decision to sell, the Yuchengco group had expressed interest in Philamlife.

Analysts said big foreign insurance groups with operations in the Philippines like Sun Life of Canada, Manufacturers Life Insurance Co. (Manulife) and Prudential, a British financial giant, may also want a piece of the action.

On the brink of failure last September, AIG was bailed out when the US government offered it an $85-billion loan in the wake of the credit crisis that saw Lehman Brothers file for bankruptcy protection and Merrill Lynch being sold to Bank of America.

In return for the loan, the US government received warrants to purchase up to 80 percent of AIG.

Problems at AIG did not come from its traditional insurance subsidiaries but from its financial services operations, primarily its insurance of mortgage-backed securities and other risky debt against default.

After getting the loan from the Federal Reserve, AIG said it would focus on its property, casualty and foreign general insurance units, and would work on alternatives for its financial products business and its securities lending program.

The sale of Philamlife, which has consolidated assets of P170 billion, is the most exciting merger and acquisition development to hit the Philippines since 2006, when retail tycoon Henry Sy?s Banco de Oro Unibank merged with Equitable PCIBank after a hostile takeover attempt.

Philamlife president Jose Cuisia Jr. said he would neither organize nor take part in any management buyout (MBO).

?MBO is not an option because the amount involved is too big and I don?t have the funds,? Cuisia told the Philippine Daily Inquirer. ?I have no idea on the timetable (for the sale) because I have not yet discussed with investment banks involved.?

AIG has appointed the Blackstone Group and JP Morgan as its global coordinators for the divestiture program.

AIG said it would ?proceed to divest by favoring brand name, highly rated, financially strong acquirers for its successful businesses.?

Its banking unit in the Philippines, PhilAm Savings Bank is among the assets put on the block, the bank said in a statement on Saturday night. PhilAm Savings Bank is 45-percent owned by AIG Consumer Finance Group and 45 percent by Philamlife.

Joven Reyes, president and CEO of PhilAm Savings Bank, said any sale would not have an impact on customers? deposits or investments.

?(PhilAm Savings Bank) is ready to meet depositors? entitlements to funds and meet its other obligations to its creditors, merchant partners, sales agencies, service providers and business partners as they come due,? Reyes said.

The bank said it was one of AIG and Philamlife?s profitable affiliates with substantial value.

Industry sources told the Inquirer that the Ayala group was among those invited to bid for the Philippine assets of AIG.

Analysts said the Ayalas? Bank of the Philippine Islands (BPI), which pioneered the selling of life insurance products through bank branches in the country, was a strong candidate to take over Philamlife.

?Financial giants like BPI, together with its cash-rich parent Ayala Corp., will surely go for it,? said Alfred Dy, head of research at stock brokerage CLSA Philippines.

Dy said the Ayala group may tie up with its strategic partner, Development Bank of Singapore (DBS), to consider this acquisition opportunity.

?If you look at BPI, it has a strong capital adequacy ratio, low NPL (nonperforming loan ratio) to total loans. The book is very clean. Ayala (Corp.) has also delivered (reduced liabilities in) its balance sheet while DBS also wants to expand in the region.?

He said the Yuchengco group was also a possibility given its main businesses were engaged in insurance (Great Pacific Life Assurance Corp. and Malayan Insurance Co. Inc.) and banking (Rizal Commercial Banking Corp.)

However, Dy said the group had to get some partners to bid for Philamlife.

The Philamlife group is eight times bigger in resources than the combined assets of Grepalife and Malayan.
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Of course, the global insurers like Prudential, Sun Life and Manulife, as well as other foreign groups, could also be interested,? Dy said.

Sun Life is the second biggest life insurer in the country with assets of P66.9 billion, while Manulife has about P20 billion.

Ayala Life Assurance Inc. and Pru Life UK, the local insurance unit of British group Prudential, are of the same size with assets of about P12 billion.

Eric Claudio, market strategist at the Pentacapital group?s Intra-Invest Securities Inc. said San Miguel would also be a strong contender in the bidding for Philamlife.

?It will fit into its strategy because it has been aspiring to be a real conglomerate. And this is an area it doesn?t have yet,? Claudio said.

San Miguel has a stake in Bank of Commerce, but it doesn?t have much in the fund management and insurance side.

?Having so much cash plus the need to expand its scope in financial service, it would be at the top of my list (of bidders). The others already have an exposure in this business and it?s just a matter of expanding market share,? he said.

Claudio said a group like San Miguel might be willing to pay a higher price than the others like the Ayala group ?just to get into the industry in a big way.?

Aside from BPI and San Miguel, Sun Life and Manulife, Philamlife could also attract Henry Sy, John Gokongwei and George Ty, said Joseph Roxas, president of stock brokerage Eagle Equities Inc.

Sy owns Banco de Oro Unibank and China Bank, while Ty owns the country?s largest banking group, Metropolitan Bank and Trust Co. Gokongwei has a small banking unit, Robinsons Savings Bank.

Roxas said the First Pacific group, which owns local telecommunication giant Philippine Long Distance Telephone Co., might also be interested in Philamlife to diversify its local businesses.

An analyst said it would not be good for Philamlife if it were bought by the Yuchengcos because of the controversy involving Pacific Plans.

Pacific Plans Inc., a Yuchengco preneed company selling educational plans, filed for court-assisted rehabilitation in 2005.

Parents holding Pacific education plans staged protest rallies and filed a suit against officials of Pacific Plans Inc. and Rizal Commercial Banking Corp.