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With the American Insurance Group’s (AIG) definitive agreement with Prudential PLC for the sale of American International Assurance Group Ltd. (AIA), the Philippine subsidiary, Philippine American Life and General Life Insurance Co. (Philam Life), said that it is still "business-as-usual" and that there will be "no changes" to the policies they currently have.

"We would like to assure (our customers) that it is business-as-usual for us and that our focus will continue to remain on our customer. We will continue to provide (our customers) with products and services that meet your needs now and into the future. There are no changes to the policies (our customers) have with us and we will honor all policyholder obligations," Trevor Bull, Philam Life president and CEO said.

On March 1, AIG announced a definitive agreement for the sale of AIA, one of the world’s largest pan-Asian life insurance companies, to Britain’s Prudential for approximately $35.5 billion.

This includes approximately $25 billion in cash, $8.5 billion in face value of equity and equity-linked securities, and $2.0 billion in face value of preferred stock of Prudential, subject to closing adjustments.

The transaction has been approved by the boards of directors of both AIG and Prudential, and is expected to close by the end of 2010.

Bull said that Philam Life, as a member of the AIA Group, is part of the acquisition.

In a letter obtained by Malaya Business Insight to its policyholders, Bull said that this move has surprised many.

"However, in considering two strong alternatives including an initial public offering, the sale of AIA to Prudential realizes value on a faster track and with more certainty to repay US taxpayers faster and reduce AIG’s debt," Bull said.

AIA is one of the world’s largest pan-Asian life insurance companies while Prudential is a leading multinational financial services provider.

"This transaction will help accelerate both companies’ growth in Asia, one of the world’s fastest growing markets for financial services products. We view this business combination as a win-win for all parties – for AIA, AIG, Prudential, and Philam Life," Bull added.

According to AIG, the cash portion of the proceeds from the sale, the largest to date in AIG’s ongoing restructuring efforts, will be used to redeem preferred interests with a liquidation preference of approximately $16 billion held by the Federal Reserve Bank of New York (FRBNY) in the special purpose vehicle formed to hold the interests in AIA, and to repay approximately $9 billion under the FRBNY Credit Facility.

AIG intends to monetize the $10.5 billion in face value of Prudential securities over time, subject to market conditions, following the lapse of agreed-upon minimum holding periods.

All net cash proceeds from the monetization of these securities will be used to repay any outstanding debt under the FRBNY Credit Facility.

Bob Benmosche, AIG president and CEO, said that this transaction, "the most significant milestone to date in our ongoing effort to repay taxpayers, also gives us greater flexibility to move forward with AIG’s restructuring and focus on enhancing the value of our key insurance businesses, which will benefit all stakeholders."

"Combining Prudential, which has long been committed to enhancing its profile in Asia, and AIA, a remarkable Asian franchise, will create an unrivalled life insurance powerhouse in Asia, one of the world’s fastest growing markets. This transaction assures AIA of a well-respected, highly-rated, financially strong partner in which its management, customers, employees, agent sales force, and distribution partners can have confidence. Indeed, in undertaking this transaction, both we and Prudential are committed to preserving the AIA brand and the unique strengths of each of our sales forces, which is key to capitalizing on AIA’s long term potential," Benmosche concluded.

Founded 160 years ago, Prudential is a leading international financial services provider.

AIG said that the transaction includes all of the companies of the AIA Group operating in 15 geographical markets across Asia Pacific, including the company’s international network of more than 320,000 agents and approximately 23,500 employees serving the holders of more than 23 million in-force policies and the more than 10 million participating members of its clients for group life, medical, credit life coverage, and pension products.

AIA’s purchase would be one of the largest overseas deals to date for a British firm and makes Prudential one of the biggest insurers in Asia.

Hong Kong-based AIA is regarded as AIG’s Asian crown jewel, a 90-year-old business that manages more than $60 billion of assets and provides coverage to about 20 million customers, or close to a third of AIG’s total customer base.

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