MANILA, Philippines--The Ayalas’ Bank of the Philippine Islands plans to team up with British insurance giant Prudential Plc in its bid for the country’s biggest and most profitable insurance group Philippine American Life and General Insurance Co.

Inquirer sources from the financial community said BPI and Prudential were in talks to pool resources to vie for the remaining Philippines assets of beleaguered American International Group, which is paring down assets across the globe.

After recently selling its consumer finance units bundled into AIG Philam Savings Bank to property tycoon Andrew Gotianun’s banking arm East West Bank [read story], AIG is bidding out its crown jewel Philamlife and its remaining subsidiaries as a block.

Sources said the local banking giant chose Prudential because of its strong financial position and strategic positioning in Asia. The British insurer has life and mutual fund operations in 13 markets across Asia. Prudential does business in Asia through Prudential Corp. Asia, which has presence in China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand, Vietnam and the United Arab Emirates.

In the Philippines, Prudential operates the 7th biggest life insurance company in assets—Pru Life Insurance Corp. (Pru Life UK)—which pioneered in this market the variable unit-linked (VUL) insurance products, a hybrid between life insurance and mutual funds. A life insurance product becomes “variable” when the policy value at any time varies according to the value of the underlying investment funds at that time.

“In every market it’s in, Prudential wants to be among the top three players. So this is not a surprise,” an insurance industry expert said.

Prudential chief executive Mark Tucker announced in London in October last year that the British group was interested in AIG’s assets in Asia.

The life insurance businesses of the Ayala and Prudential groups are roughly about the same in terms of asset size at P12 billion each as of end-2007, based on data from the Insurance Commission.

The Ayalas’ insurance business, on the other hand, is folded into BPI, which pioneered bancassurance, or the cross selling of insurance products through a bank. BPI, Southeast Asia’s oldest bank and the third biggest in the Philippines in assets, is seen by stock analysts as a strong bet in bidding for Philamlife’s assets given its strong balance sheet. It has the largest market capitalization among Philippine banks at P118 billion.