Sun life of Canada, the second-biggest life insurer in the country, has dropped out of the race to acquire Philippine American Life and General Insurance Co. (Philamlife) but maintained its goal to become the leading local player by 2010.

Separately, the chief of the state-run pension fund Government Service Insurance System (GSIS) said Wednesday the GSIS was no longer keen on joining the bidding, citing unreasonable valuations.

“This is a year of further consolidation,” Sun Life Financial Philippines chief executive Henry Herrera said in an interview with the Philippine Daily Inquirer on Wednesday.

Herrera said that from day one that Philamlife’s parent American International Group (AIG) announced plans to sell assets after getting a lifeline from the Federal Reserve Bank of New York, Sun Life had taken a look at assets across the region.

“In the Philippines, combining Philamlife and Sun Life would be more than 50 percent” in terms of market share, he said. “It wouldn’t be healthy. In other countries, it would be subject to antitrust laws.”

As there was no anti-trust law in the Philippines, Herrera said Sun Life had participated in the first phase of the bidding for Philamlife but has not pursued its interest further. In the end, he said the company would like to maintain its more than 20-percent level of return on equity in the Philippines and make best use of capital.

Sun Life is Philamlife’s closest rival in the Philippines, reporting total assets of about P67 billion for the life insurance business in 2007 against the AIG unit’s P108 billion.

Even without having to acquire Philamlife’s assets, Herrera said Sun Life was on track with its goal to be the leading player in the country. Last year, Sun Life was estimated to have generated P50 billion in first-year premium from life insurance, about P46 billion in gross sales from mutual funds and P4 billion in gross sales in pre-need plans.

“The key measure for us is in the new business because it’s this first-year premium that determines future size,” Herrera said.

Wealth management is seen as a key area of growth for the company. In the future, the target is to generate at least 40 percent of its business from mutual funds and 60 percent from life insurance. But he said it would be a big challenge to overtake Bank of the Philippine Islands (BPI), which is currently the biggest player in the mutual funds industry.

BPI has P29 billion in assets under management while Sun Life has about P12.7 billion.

Meanwhile, GSIS president Winston Garcia said Philamlife officials were “asking for the moon.”

Philamlife set its book value at P36 billion, Garcia said. He noted that this amount was too big for a company whose parent firm has suffered from financial losses.

Garcia described Philamlife as “arrogant”, citing what he called stringent requirements set by its officials on how potential buyers could conduct a due diligence.

He said PhilamLife required interested parties to first make an initial offer, which should not be lower than the P36-billion book value, before being allowed to do a due-diligence audit of Philamlife’s books. With editing by INQUIRER.net