The Yuchencgco Group of Companies (YGC) is looking at acquiring a part or all of the Philippine American Life Insurance Company (Philamlife), the local arm of American Insurance Group (AIG), which was recently effectively bought by the U.S. government through a bailout of $ 85 billion by the Federal Reserve. AIG was one of the biggest victims of the U.S. sub-prime mortgage crisis and resulting property downturn, which sunk investment bank Lehman Brothers. YGC is one of the largest and most diverse conglomerates in the country, with investments in banking, insurance, transportation, education and construction. The group is headed by Ambassador Alfonso Yuchengco.
AIG is the world’s largest insurer and was deemed “too large to fail”. However, it is expected to announce a massive restructuring any time now. In an official statement, the Fed said it intends to “facilitate a process under which AIG will sell certain of its businesses in an orderly manner, with the least possible disruption to the overall (U.S.) economy.” This presumably means its overseas assets would be first to go.
According to the Inquirer, the head of AIG Asia-Pacific is set to visit the Philippines this week and the market is eagerly awaiting clues on which assets may be sold as part of the group’s divestment program. Its assets in the Philippines, which include insurance, mutual funds, banking and pre-need businesses, have drawn a lot of interest from various groups.
YGC jumped the gun on the other major players in the insurance and finance industries with its aggressive response to unfolding events. Reports say that Yuchengco scion Helen Yuchengco-Dee is set to fly to New York this week to begin exploratory talks with AIG. The buyout of Philamlife would be a major coup should YGC manage to pull it off. Philamlife is the country’s biggest life insurance company and is highly profitable, with revenues of P36.7 billion last year, up 14 percent from a year ago. YGC owns Malayan Insurance Company, the Philippines’ largest non-life insurer. With Philamlife in its fold, YGC would dominate the industry.
But while AIG might be eager to shed its less profitable ventures, it is less clear whether it would want to let go of a prize like Philamlife. Other companies will also be very attracted to Philamlife and this could spark a bidding war.
One thing is sure, though. AIG’s dismantling will create a number of opportunities for expansion and growth on the part of those ready and willing to boldly pursue a good deal when they see it.