With its parent company scrambling for a stategy to keep afloat, Philippine American Life and General Insurance Co (Philamlife) is set to have its fate determined by as early as October 3. 

While Philamlife executives in the Philippines have repeatedly assured its policy holders and investors that its operations and assets are insulated from the financial troubles of its parent, American International Group Inc. (AIG), the possibilty of new owners buying Philamlife's assets hangs in the background. 

In an interview with CNBC last September 23, AIG's current chairman and chief executive officer, Edward Liddy, announced that he was drafting a list to determine what assets will be sold. He said he would make the list known within 10 days. 

Liddy, however, said in the interview that he hopes to retain the commercial property and casualty business, as well as its Asian operations. 

Philamlife is one of AIG's oldest and more successful overseas investments. 

Interested buyers

With Liddy's announcement, prospective buyers have reportedly started swarming around AIG and Philamlife's local office for a potential deal. 

Of those who have expressed their intentions to buy the Philippine operations, the Yuchengos are the only group that have come out in public. 

Jose Cuisa, Philamlife's president, confirmed the Yuchengco's offer to ABS CBN News: "They have expressed interest like others who have also expressed interest." 

Cuisia said he could not disclose who the others are since their interest to buy Philamlife "was indicated to me in private."

In the end, however, the ultimate decision will be AIG's, not those from Philamlife, Cuisia stressed.  

AIG, once the world's largest insurer, needs to raise cash quickly to repay the $85 billion emergency loan from the US Federal Reserve that allowed it to avoid bankruptcy after taking massive losses on mortgage derivatives. 

It needs to pony up fast as the US central bank has the right to take an almost 80 percent stake at the end of the loan's 2-year term, thus, heavily diluting current shareholders and investors. 

What's more, the loan has been granted at punishingly high rates of more than 8 percent on top of central bank-determined lending rates. 

An indication of the once mighty firm's fall is the worth of the shareholdings of its former chairman and current largest shareholder, Maurice Greenberg, whose combined interest accounts for about 11 percent of AIG's stock. 

When Greenberg left AIG in 2005, his shareholdings were worth about $20 billion. Last week, it was down to roughly $1 billion. 

In other words, the faster AIG's current management and owners could decide what assets to sell to whom and for how much, the quicker it could move forward and and rebuild itself. 

AIG is engaged in four businesses: general insurance, including commercial and personal lines of property and casualty insurance and Transatlantic Holdings Inc. and its mortgage guaranty business; life insurance and retirement; financial services, which includes aircraft leasing, capital markets and consumer finance operations; and asset management, which, among other things, houses a private equity fund with nearly $30 billion under management.

The insurance firm can opt to sell bits or blocks to raise the $85 billion. 

The international life insurance unit, one of AIG's traditional and well-entrenched business in various markets, has been described by investment bank Credit Suisse as one of AIG's "most coveted properties," which, as Businessweek reported last week, "could be auctioned for $24.1 billion post-tax."

Credit Suisse noted that AIG's life insurance units in Taiwan, Hong Kong, and Japan have market share ranging from 7 to 20 percent. 

In the Philippines, Philamlife has a market share of 30 percent. 

Cuisia himself noted that Liddy considered the life insurance unit as AIG's core assets. "In his interview with CNBC, Mr. Edward Liddy did mention that the life operations are part of core assets. But as I said, that was about a week ago when he appeared on CNBC."

Aside from insurance, Philamlife is also engaged in real estate, banking, credit cards, mutual funds, and other businesses. 

Market leader 

Meantime, as the AIG executives burn the midnight oil as they approach their own deadline, some members of the Yuchengco family are said to have travelled to the US to make a pitch for their purchase. 

The Yuchengco family, one of Manila's richest, has been in the insurance industry since the 1930's. Their insurance business has bankrolled their foray into other businesses, including banking, real estate, among others. 

If Yuchengco clinches the Philamlife deal, they will end up owning the undisputed insurance leader in the country--both in the life and non-life business. 

Currently, Philamlife is the venerable market leader in the life insurance sector, while the Yuchengco's Malayan Insurance Co. Inc., has been the number one non-life insurance company for the past 38 years. 

Malayan was established by the Yuchengco patriarch, Don Enrique Yuchengco before the second World War. He named it after the Malay race and as part of the nationalistic atmosphere then. 

As of December 2007, Malayan had total assets of P11.6 billion, which means they now have 15 percent of the market. 

If Malayan would merge its non-life business with Philamlife's, the two will have P17 billion combined assets, which means the Yuchengcos will corner up to 23 percent of the market. 

A merger, however, will mean the Yuchengcos will leapfrog into owning 32 percent of the life insurance sector from its current 2 percent. 

Philamlife's P108 billion assets as of December 2007 represents one-third of the entire sector. 

The Yuchengco group currently has a life insurance arm, The Great Pacific Life Assurance Corporation (Grepalife), but its assets o P7.7 billion puts it as the country's ninth biggest, a a fraction of Philamlife's. -- with a report from Zen Hernandez, ABS-CBN News