MANILA, Philippines—The plan of US-based insurance giant American International Group to sell local unit Philippine American Life and General Insurance Co. (Philamlife) will not affect its ability to pay claims, Philamlife president and chief executive Jose Cuisia Jr. said Monday.

“We would like to assure our policyholders there is no reason for them to worry, to feel their investments are at risk,” Cuisia said. “We have managed our investment portfolio prudently and conservatively.”

Philamlife, the leading insurance company in the Philippines, has received offers from about 10 foreign and local investors, Cuisia said.

It has about P143 billion worth of insurance contracts with more than one million policyholders.

Cuisia said the “financial issues pertaining to our parent company AIG do not affect our ability to pay claims and underwrite new policies.”

AIG, one the big firms on Wall Street badly hit by the property downturn and the credit crunch in the United States, recently received an $85-billion loan from the US government. On Friday, it said it would focus on its main insurance operations and put the rest of its businesses up for sale to repay the loan.

Among other AIG Asian assets up for sale are three of Japanese life insurance businesses (Alico Japan, AIG Edison Life Insurance Co. and AIG Star Life Insurance Co.) and AIG Retail Bank in Thailand.

According to data from the Insurance Commission, Philamlife had total assets of P108 billion and a net worth of P21.4 billion as of end-2007. The company reported a net income of P2.56 billion last year. It has 1,500 employees.

Aside from life insurance, mutual funds and banking (Philam Savings Bank), the Philam group has interests in pre-need plans, “bancassurance” (sale of insurance products through bank branches), health care, credit cards, property and casualty insurance, property management and development as well as business process outsourcing for a total of P170 billion in assets.

Among the local groups expected by analysts to bid for Philamlife are Ayala Corp. together with its banking arm Bank of the Philippine Islands, beverage and food group San Miguel Corp., such Chinese-Filipino tycoons as Henry Sy, John Gokongwei, George Ty and Alfonso Yuchengco, and global insurance rivals with Philippine operations — Sun Life of Canada, Manufacturers Life Insurance Co. (Manulife) and British financial giant Prudential Plc.

The Yuchengco group is so far the only one that has publicly declared interest in Philamlife. It made its intention known even before AIG made the decision to sell. Cuisia declined to comment on it.

Cuisia said he expected Philamlife to fetch a price higher than book value. “I might say the interest expressed is not only from local groups but also international,” he said. “However, I can’t disclose the names because these groups have expressed interest in private and have required me to keep them in confidence.”

Some private equity groups were also interested in Philamlife.

Insurance Commissioner Eduardo Malinis assured clients of Philamlife that his office would require the buyer of the insurance firm to honor all existing policies as they were originally written.

“We are on top of this,” he said. “We will see to it that the rights of policyholders will be properly enforced.”

Ahead of a news briefing, Cuisia met Philamlife employees and other stakeholders to give assurance that any change of ownership would neither disrupt the groups’ operations nor compromise clients’ investments.

Cuisia also sent letters to clients, agents, brokers, advisors and other partners to assure that AIG would scrutinize the groups offering to buy out Philamlife.

While it was previously “unimaginable” that Philamlife could be owned by a local group, Cuisia said the auction could be “positive” for the Philippine market.

“This is an opportunity for local groups within the Philippines to win a trophy-company like Philamlife, which has been the industry leader in the past 60 years,” Cuisia said.

In his letter, Cusia said: “AIG is seeking top-rated, financially strong brand names with the capability to continue Philamlife’s legacy of leadership, strength, stability and dedication to its policyholders, employees, agents, partners, shareholders and other stakeholders.”

“Please be assured that we will continue to work with the regulatory authorities to ensure that the divested assets will remain financially sound,” he said.

Finance Secretary Margarito Teves, whose office oversees the Insurance Commission, said the sale of Philamlife would have a “net positive impact” on the domestic insurance industry.

“We anticipate the sale to result in a stronger institution that would provide improved services and greater protection to the Filipino public,” Teves said.

He said Philamlife, as market leader, could very well pay claims and underwrite new policies given its capital strength.

As required by Philippine regulators, Cuisia reaffirmed that the bulk of Philamlife’s investments was in marketable Philippine government securities, prime local corporate bonds, while a small percentage was in blue-chip stocks listed on the Philippine Stock Exchange.

As a result, the insurance policies are “safe and fully backed up by the financial strength of Philamlife,” he said.

Cusia said there had been no significant termination of insurance contracts even when news about AIG’s woes broke out a few weeks ago.

In a separate letter to investors, Philamlife’s mutual funds subsidiary, Philam Asset Management Inc. (PAMI), assured them of its strength and adequate capitalization. Pami manages P22 billion worth of funds.

“Each of the PAMI-managed mutual funds is an investment company registered with the Philippine Securities and Exchange Commission with separate and distinct board of directors.” PAMI said.

Cuisia said he was surprised by the AIG announcement on Friday night to sell its Philippine assets. “Since we’re part of foreign life operations, we thought being a core asset we will be retained,” he said. “But I guess in the mathematics of it, if they have to pay $60 billion (out of the $85-billion lifeline that AIG has drawn), they have to sell some of the assets to generate that kind of money that will be used to pay the obligations to the Federal Reserve Bank [of New York].”

The two investment banks engaged by AIG to handle the sale — JP Morgan and Blackstone Group — will determine the process and decide whether Philamlife would be sold as one group or as different units, Cuisia said.

Cuisia said he personally preferred that the buyer would acquire Philamlife lock, stock and barrel. “I think there’s a value selling it as a group,” he said, noting however that if there was a strong interest in Philamlife, and not in others, investment bankers would decide how to unlock better values.

Cuisia’s deputy, Michel Khalaf, said, “I think AIG has set out pretty clear criteria on who the potential bidders or new owners will be. There are three criteria: One, it has to be a strong reputable brand name. Two, it has to be an institution that is strong financially. Three, there has to be a strategic fit as far as providing the employees and the stakeholders of the company with continuing growth potential and continue the legacy of Philamlife.”

He said that if these criteria were applied to some of those rumored to be interested, automatically you can draw your own conclusion as to whether that interest is serious or will be considered.” With reports from Michelle V. Remo and Reuters; with editing by INQUIRER.net