Yuchengcos preparing bid for Philamlife
By Doris Dumlao
Philippine Daily Inquirer
First Posted 20:14:00 09/28/2008
Filed Under: Economy, Business & Finance
THE YUCHENGO GROUP of companies is keen on making a bid for the country’s biggest insurance company -- Philippine American Life and General Insurance Co. -- if the beleaguered American International Group Inc. puts its profitable Philippine unit on the auction block soon.
Great Pacific Life Assurance Corp. chair and former Bangko Sentral ng Pilipinas Governor Gabriel Singson said top officials of Grepalife and sister company Malayan Insurance Co. Inc. met Friday morning to discuss the pooling of resources to get a crack at buying the much larger Philamlife -- if AIG decides to include it among the offshore assets to be unloaded as part of its global restructuring.
“If AIG decides to sell stocks in Philamlife, we will be interested, together with Malayan Insurance,” Singson said in an interview on Friday. “I’m sure there are many (other groups interested in Philamlife).”
Yuchengco scion Helen Yuchengco-Dee was set to fly to New York this week, Singson said. He did not rule out the possibility of exploratory talks with AIG, which recently obtained an $85-billion lifeline from the US government.
Founded in 1954, Grepalife is the first insurance company to be established from scratch after World War II. Malayan, which is bigger than Grepalife in assets, is a leading non-life insurer in the country.
Philamlife is the country’s biggest insurance company with consolidated assets of P170 billion and equity of P49.5 billion as of end-2007. It generated revenues of P36.7 billion last year, up 14 percent from a year ago.
Asked by the Inquirer about the matter, Philamlife president Jose Cuisia Jr. said that while he was “flattered” by the interest from the Yuchengco group, he stressed that he was not authorized to make any statement. He had said that any talks about the sale of AIG’s assets in the Philippines was “speculative.”
The head of AIG Asia-Pacific is set to visit the Philippines this week and the market is eagerly awaiting clues on which assets may be sold as part of the group’s divestment program given a continuing global financial turmoil rooted in the US property downturn. Its assets in the Philippines, which include insurance, mutual funds, banking and pre-need businesses, have drawn a lot of interest from various groups.
“When AIG starts disposing of its assets and business, it will shrink the company and the question now is, are they going to sell their shares in Philamlife?” Singson said.
“In the case of Philamlife, it’s a fully owned subsidiary of AIG and (former central bank) Gov. Cuisia is correct legally when he said that assets of Philamlife are different from AIG, investments are in good, safe investments. They have a different personality,” Singson said.
The former BSP chief said it was possible that AIG was not likely to sell assets in Asia as a block, which should give the Yuchengco group the chance to make a pitch in case assets were sold on a per-country basis. He said the Yuchengco group of companies would pool financial resources to bid for these assets.
“You can quote us that we’re interested if it will be offered for sale,” he said.
Singson, who had been a central banker for more than 40 years and was BSP governor when the Asian currency crisis broke out in 1997, said the $700-billion bailout package being worked out by the US government would help the federal state make money in the long run.
He said saving distressed financial institutions, even at the initial expense of taxpayers, would eventually redound to the public good. Such a package, he stressed, was meant not to help shareholders but to save the creditors and their clients -- such as the insurance policyholders in the case of AIG.
“I think (American billionaire) Warren Buffet is right. In the long run, government will make money. As long as you buy the assets at a reasonable market price, the value of that asset will go up every year by at least 6 or 7 percent because it’s a fire-sale,” Singson said.
He said the US government could fund the bailout by issuing 10- or 20-year debt paper at an interest rate of 3.5-4 percent.
“While they are paying 3.5-4 percent, their assets are improving (in value) by 6-7 percent each year,” he said.
In the case of the Philippines, he said the country had seen worse times -- particularly during the debt crisis years of the 1980s when the country was shut out from the global debt markets.
“The most uncertain here is how long will this crisis last. Have we reached the worst or not? There may be some domino effect,” he said.
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