Ayala, GSIS interested in Philamlife
By Daxim Lucas, Doris Dumlao
Philippine Daily Inquirer
First Posted 03:27:00 10/08/2008
Filed Under: Insurance, world financial crisis, Crisis, Financial & Business Services, Mergers - Acquisitions - Takeovers, Company Information
Conglomerate Ayala Corp. is interested in acquiring Philippine American Life and General Insurance Co. (Philamlife), which has been put up for sale by its US-based parent firm.
State-run pension fund Government Service Insurance System (GSIS) also wants a piece of Philamlife, the country’s largest and most profitable insurance company.
Separate sources said Philamlife’s ailing parent, American International Group (AIG), had set an initial asking price of $2 billion — about P95 billion — for the Philamlife group of companies.
That amount is roughly twice the book value — what is left after subtracting liabilities and “intangibles” from the amount of assets. The sources said it represented the initial bargaining position of AIG and would likely be negotiated down, given prevailing market conditions and the urgent need for AIG to dispose of assets to pay its $85-billion bailout from the US government.
Philamlife president and chief executive Jose Cuisia Jr. said on Monday that there were about 10 prospective suitors for the insurance firm, which he said remained financially sound.
Apart from Ayala and the GSIS, only the Yuchengco group of Chinese-Filipino tycoon Alfonso Yuchencgo has publicly expressed interest in Philamlife.
Ayala chairman and chief executive Jaime Augusto Zobel de Ayala on Tuesday described AIG and Philalmlife as “exceptional institutions” that have “served this country for many years” even if they have fallen on hard times. “It just makes sense that the Ayala group would be interested.”
“Obviously, if there are opportunities that crop up, we will always be interested,” Zobel said at the annual CEO Conference of the Management Association of the Philippines.
“The financial services arena has always been of great interest to us,” he added. “If you look at BPI [the Ayala group’s Bank of the Philippine Islands] and Ayala’s history, [we] have over the last two or three decades been part of the consolidation that’s taking place in the industry.”
The group also includes the insurance company Ayala Life.
The Philamlife group has interests in mutual funds and banking (PhilAm Savings Bank), pre-need plans, “bancassurance” (a special arrangement that allows sale of insurance products in bank branches), healthcare, credit cards, property management and development, and business process outsourcing as well as life insurance and property and casualty insurance.
GSIS president Winston Garcia said the pension fund was “looking at the numbers” and studying an opportunity to invest in some of the assets of Philamlife.
Garcia said there was a need for the GSIS to explore new investments and scout for higher returns given the “limited” opportunities in the stock market and even the fixed-income securities market.
“We’re looking at the value of this company. We’ve made some inquiries,” Garcia said in an interview with Philippine Daily Inquirer.
Philamlife has about P143 billion worth of underwritten insurance contracts with an estimated one million policyholders. Data from the Insurance Commission show it had P108 billion in assets and a net worth of P21 billion at the end of 2007.
Cuisia said the Philamlife group had a net worth of about P49 billion.
The group has about 1,500 employees.
Last year, Philamlife reported a net income of P2.56 billion.
Cuisia has said he expects the company to sell for more than its P21-billion net worth, although this will ultimately depend on the level of interest of the prospective buyers, the prevailing market conditions, and the urgency with which AIG needs to sell assets around the world to help pay its loan from the US government.
On the sidelines of the CEO Conference, Brian Murray, AIG managing director for research in Asia, said the disposition of assets, including Philamlife and its affiliates, would take place in the next six to nine months.
But he said AIG hoped to complete the divestment “sooner rather than later.”
Garcia said the GSIS would not necessarily want to gobble up Philamlife lock, stock and barrel. “We can look for a partner and we can do this through a joint venture,” he said.
The GSIS may also participate in a consortium that would acquire Philamlife, without taking a majority stake.
“We don’t invest in companies to manage them,” Garcia said. “We prefer a passive role.”
Garcia said Philamlife or some of its subsidiaries would fit with GSIS interest in reinsurance.
The GSIS has a stake in publicly listed National Reinsurance Corporation of the Philippines (PhilNare), of which Garcia is chairman.
Garcia said the GSIS would not bid if AIG’s asking price would be too high. “I’m not sure if they can still sell at a premium at this kind of global economy,” he said.
When asked how much the GSIS was willing to shell out for Philamlife, he said it would depend on the opportunity.
Analysts say others that may be interested on Philamlife are the beverage, food and packaging group San Miguel Corp., which is entering fields outside of its traditional businesses; any of the Chinese-Filipino tycoons, such as mall magnate Henry Sy, diversified tycoon John Gokongwei and banking magnate George Ty; and global insurance companies with Philippine operations: Sun Life of Canada, Manufacturers Life Insurance Co. (Manulife), and British giant Prudential Plc. Edited by INQUIRER.net
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