The Sy family, one of Manila's richest, is joining the fray of elite groups eyeing a stake in the country's most profitable insurance company.

The disclosure of holding company, SM Investments Corporation (SMIC), to the stock exchange on Monday confirmed rumors that the Sy family has been interested in Philippine American Life and General Insurance Co. (Philamlife), a market leader, which was put on the auction block since October 3.

In its disclosure, SMIC said that the group, together with a foreign partner, are interested in acquiring Philippine American Life and General Insurance Co. (Philamlife) and its subsidiaries to the tune of at least $500 million.

“The business empire of retail and mall magnate Henry Sy is prepared to join financial forces with foreign partner to purchase Philamlife group of companies that comes with a flood price of at least $500 million,” SMIC said.

Earlier estimates of industry sources and analysts put Philamlife's insurance business at about $200 million. But it has eight other subsidiaries engaged in diverse businesses ranging from pre-need plans, bancassurance, healthcare, banking, credit cards, asset management, property and casualty insurance, property management and development, to business process outsourcing.

Whether Philamlife will be sold as a block or as separate units has yet to be decided.

The proceeds will be used to settle an expensive aggregate lifeline loan of $123 million of Philamlife's parent company, American international Group (AIG), from the US government. These loans saved AIG from bankruptcy after a non-core unit incurred subprime-related losses.

Philamlife, the country's market leader in the life insurance sector for 60 years and was considered AIG's "crown jewel" in Asia, has consolidated assets of P170 billion in 2007.

Considered too big for a single local group to digest and afford, the potential bidders are expected to forge partnerships or form consortiums with other foreign investors.

The Sy group said they will pursue Philamlife with a foreign partner.

“Tessie Sy-Coson pointed out that to be financially equipped to bid for Philamlife, BDO or SMIC, whichever will be the entity used in the quest, will have to do it through a joint venture with a foreign partner,” SMIC said.

AIG has commissioned investment firms Blackstone and JP Morgan to handle the coordination and disposition of the global sales, including Philamlife.

Third interested party

The Sys are the third Manila-based family with business conglomerates with a banking arm that have expressed interest in Philamlife.

Earlier, the Yuchengco and Ayala families have already publicly admitted that Philamlife, an undisputed market leader in the life insurance sector, is a tempting opportunity to jumpstart their own insurance businesses.

The Ayala's own the profitable and financially strong Bank of the Philippine Islands (BPI), which pioneered the selling of life insurance products through bank branches in the country and is considered a strong candidate to take over Philamlife.

Ayala group also has strong ties with foreign groups, including Development Bank of Singapore (DBS), which might be interested to expand its presence and business in the region.

The Yuchengcos, on the other hand, own Rizal Commercial Banking Corp.. The bank is one of the country's top ten largest but it has failed to win previous bids to gobble other banking assets during the heydays of mergers and acquisition in the industry.

The Yuchengcos, however, are the market leader for almost 4 decades in the non-life insurance sector, through Malayan Insurance Corp..

Together with its life insurance arm, Great Pacific Life Assurance Corp., Yuchengco's aggregate insurance assets is just one-eighth of the entire Philamlife group.

Besides, Yuchengco's past handling of its troubled pre-need company, Pacific Plans Inc., has triggered angry clients holding unrealized pre-need education plans to continue hounding the Yuchengcos by thrashing their reputation.

Perfect fit

The Sy's cash rich and fast growing SM Group seems to have an edge over others since it already has an existing partnership with Philamlife in the bancassurance business.

The Sy's banking arm, Banco de Oro (BDO), is already selling Philam insurance plans through its branches.

BDO has a stake in one of Philamlife's subsidiaries, Philam Equitable Life Assurance Co., a bancassurance business which BDO acquired when the Sy group bought a controlling stake in Equitable PCI Bank, which had a 5 percent minority interest in Philam Equitable.

The 2006 merger of BDO and Equitable Bank edged out the Ayala's Bank of the Philippine Islands as the country's second largest lender.

BDO has assets of P677 billion and a nationwide network of 657 branches.

The Sys have been aggressive in scaling up their banking assets to complement their cash rich retail business. The Sys control the SM chain of malls, which has been strategically positioned to take advantage of a consumption-led economy based on almost $15 million remittances sent home by about 8 million Filipinos working overseas.

Aside from Philam Equitable , the Sys also own Generali Pilipinas, a minority player.

Tessie Sy-Coson, who basically calls the shots at SMIC and BDO, told reporters earlier that they would want to deepen their relationship with Philamlife.

Other parties

Meantime, other big foreign insurance groups with operations in the Philippines like Sun Life of Canada, Manufacturers Life Insurance Co. (Manulife) and Prudential, a British financial giant, may likewise be eyeing the opportunity to clinch the Philamlife deal.

Sun Life is the second biggest life insurer in the country with assets of P66.9 billion, while Manulife has about P20 billion.

Philamlife chief, Jose Cuisia Jr., has said that he has personally received inquiries from about 10 local and foreign groups after Philamlife was declared among the assets being sold by AIG.

Nonetheless, other prospective foreign buyers could go directly to the US office of AIG or its investment bankers in-charge and by-pass the Philippine office all together.

Some have said potential foreign buyers could cherrypick from AIG's insurance units in Taiwan, China and Hong Kong where insurance business is considered more lucrative.

Earlier, AIG said potential bidders must pass three criteria: a strong reputable brand name, financial strength, and that there should be a strategic fit. (abs-cbnNEWS.com/Newsbreak)

RELATED STORIES
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•(Update) Ayala group expresses interest in Philamlife stake
•Yuchengco's bid for Philamlife: The cost of reputation
•Groups eyeing Philamlife have own banks
•Philamlife assures it is insulated from parent AIG's woes
•Philamlife may have new owners this week
•AIG to divest stake in Philamlife

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