No ‘mutualization’ for Philamlife
AIG hard-pressed to raise cash
By Doris Dumlao
Philippine Daily Inquirer
First Posted 04:01:00 10/09/2008
Selling shares of the country’s biggest and most profitable insurance company, Philippine American Life and General Insurance Co. (Philamlife), to its more than one million policyholders instead of to institutional buyers is not an option, company president and chief executive Jose Cuisia Jr. said Wednesday.
Cuisia was asked at the Management Association of the Philippines’ global CEO forum whether it was possible to pursue “mutualization,” a restructuring in which policyholders become eligible to receive stocks in direct proportion to the revenue the company makes from each of them.
He noted that Philamlife’s parent company, American International Group, was selling assets worldwide, including Philamlife and its affiliates, to pay off an $85-billion lifeline from the Federal Reserve Bank of New York.
“At this point, what’s important for AIG is while there will be an orderly and professionally managed process, they will also try to raise funds as quickly as possible because they have to pay these very expensive loans from the Federal Reserve,” Cuisia said.
“A mutualization will take a very, very long time so that’s probably out of the question,” he noted.
Philamlife has about P143 billion worth of insurance contracts with more than a million policyholders in the Philippines.
Cuisia declined to comment whether the reported $2-billion asking price of AIG for the Philamlife group was a fair valuation.
That price is double the group’s consolidated net worth of about $1 billion, or P49.5 billion.
“Because we’re in a very sensitive situation, I can’t confirm or deny,” Cuisia said.
He said the process of selling AIG’s assets had yet to start. “Nobody has been invited yet,” he said.
Cuisia said about 10 local and foreign groups had expressed interest to buy Philamlife’s assets— not including those that had gone straight to JP Morgan and The Blackstone Group, AIG’s financial advisers on the disposition.
He said he would likely meet with these investment banks sometime next week. “I’m sure they will ask our inputs and recommendation but at the end of the day AIG and Federal Reserve will decide,” he said.
Cuisia said he would not speculate on how long the disposition process could take place. “Certainly it’s not going to happen in one month,” he said.
According to data from the Insurance Commission, Philamlife’s life insurance business alone had P108 billion in assets and a net worth of P21.4 billion as of end-2007. It has a staff of 1,500. It recorded a net income of P2.56 billion last year.
The company 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, for a total of P170 billion in assets. Edited by INQUIRER.net
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