AIG Continues Asia Restructuring as Filipino Operations Become Part of the AIA Group

Following the recent restructuring of the Hong Kong-based American International Assurance Co. Ltd., another Asian unit of the credit-troubled American International Group Inc. [18540], Philippine American Life and General Insurance Co. [84311], will be retained and made part of the newly formed AIA group.

According to AIA, “it was appropriate at this time to include Philamlife in the new AIA structure as the rest of AIA is being separated from AIG and positioned as an independent operation.”

Jose L. Cuisia Jr., Philamlife’s president and chief executive officer, said in a statement that, “Philamlife is and has historically been a strong business.” He said Philamlife is a leading life insurer in the Philippines with the widest network of offices, largest number of agents and most extensive portfolio of products and services among the country's life insurers.

He added that joining the AIA group (subject to regulatory approvals) “will provide Philamlife with access to the resources and Asia-wide network of the region’s market leader.”

AIA’s president, Mark Wilson, said “the Philippines is a very important part of the AIA Asian landscape.” He added that the group is also “confident” that there will be benefits for Philamlife’s customers, employees and agents from being fully integrated into Asia’s leading insurance company, which will “further improve the structure and business of Philamlife.”

In late January, AIG and certain of its Filipino subsidiaries, including Philamlife and AIG Consumer Finance Group Inc., entered into a share sale agreement with Philippines-based East West Banking Corp. for the bank to acquire all of the shares of AIG PhilAm Savings Bank Inc., PhilAm Auto Finance & Leasing Inc. and PFL Holdings Inc.

According to Philamlife, the combined assets of the two parties are expected to total 63 billion Philippine pesos (US$1.3 billion). East West Bank will become the sixth-largest credit card issuer in the Philippines in terms of cards in force, and the sixth-largest in terms of card receivables.

The share sale transaction is subject to regulatory approval and is expected to close in the second quarter of 2009, said Philamlife in a statement.

AIG PhilAm Savings Bank is a subsidiary of Philamlife as well as an indirect subsidiary of AIG, providing credit cards, automobile loans, deposits, priority banking and trusts through its nine branches in the Philippines.

Operating in the Philippines for more than 60 years, Philamlife is the largest and most diversified insurance company in the country, offering a range of life and general insurance products that provide income protection, education, investments, health, personal accident solutions, as well as property/casualty coverage to more than 1 million individual and corporate policyholders through its more than 200 offices and sales agencies nationwide, according to the company.

Its affiliate business includes financial services in pre-need plans, bancassurance, health care, banking, credit cards, asset management, property/casualty insurance, property management and development, as well as business process outsourcing.

In 2007, Philamlife recorded gross revenue of 36.7 billion pesos, representing growth of 14% from the previous year. It also recorded consolidated gross premiums of 22.7 billion pesos, up 15.9% from 2006; while its gross benefits and claims totaled 6.6 billion pesos, up 25% from 2006.

During 2007, Philamlife generated new business from life insurance operations of 7.4 billion pesos, up 57.6% from 2006. It also recorded consolidated assets of 170 billion pesos and stockholders’ equity of 49.5 billion pesos in 2007.

Apart from the Philippines, other AIG Asia life operations have also taking actions to reaffirm their financial stability as well as their presence in their own countries.

In Vietnam, AIG Life Insurance (Vietnam) Co. Ltd., a 100% foreign-owned life insurance company with its head office in Ho Chi Minh City, said in a statement that it remains a subsidiary of the AIA despite AIG's moves to restructure its business operations.

In South Korea, earlier reports cited AIG Life insurance’s spokesperson saying the company will be de facto a separate, independent entity from AIG Group, and the Korean subsidiary will also plan to change the company name soon.

AIG Life entered the Korean market in 1987 in the name of ALICO Life Insurance. It currently operates 32 agency branch offices and 23 full-service agency branch offices in Seoul, as well as other cities across the country.

For the nonlife sector, AIG said it intends to form a general insurance holding company, including its commercial insurance group, foreign general unit, and other property/casualty operations, to be called AIU Holdings Inc., with a board of directors, management team and a brand distinct from AIG.

According to AIG, the forming of AIU will “assist AIG in preparing for the potential sale of a minority stake in the business, which ultimately may include a public offering of shares, depending on market conditions.”

Following this move, Singapore-based American Home Assurance Singapore, a general insurer of AIG, said in local reports that AHA will also be part of AIG's AIU Holdings.

AHA is one of the leading providers of consumer and commercial insurance in Singapore, with more than 2 million policies in force. As at Dec. 31, 2007, AHA generated more than S$402 million (US$259 million) in gross written premiums.

admin(By Rebecca Ng, Hong Kong news editor: [email protected])