Last Thursday, the Pan-American Life Insurance Group (PALIG), announced the completion of the acquisition of the assets and businesses of American insurance giant MetLife in the Cayman Islands, Costa Rica, Panama, St Lucia and Trinidad and Tobago. For decades, the company that Pan-American acquired in T&T operated as Algico, and Jose Suquet spent much of last Thursday addressing over 500 Algico employees, agents and managers at two separate meetings at the Hilton.
Although clearly tired from spending the day talking to Pan-American’s new employees about the insurer’s vision for them and their company, Suquet is also quietly exhilarated that the conversation with his new staffers went so well. “The title of the presentation was New Beginnings and we were communicating the strategy, strengths and value proposition of Pan-American to customers, distributors, agents and employees,” said Suquet. More specifically, he spoke to the new employees of Pan-American about the company’s growth plans, the strategic rationale for the acquisition and the reasons that the company “presents such a compelling opportunity for our customers employees and agents.”
In taking over the Algico assets and business, Pan-American gets a sales force of 265 agents and managers and 240 employees, which, together with agents and employees in the other territories, means that the US-based company now has 1,300 employees and 3,000 agents and managers worldwide. Pan-American acquired MetLife Algico unit in T&T, along with American Life Insurance Company (Alico) branches in Barbados, Cayman Islands and most of the Eastern Caribbean as well as the Alico operations in Panama and Costa Rica. When Pan-American receives regulatory approval for the rest of the acquisition of MetLife’s businesses in Central America and the Caribbean—which Suquet will come by at the end of the year—the company would have added 15 countries, 350,000 new customers, about US$675 million in assets and US$170 million in revenues (as of 2010). Speaking about the process of receiving regulatory approval in T&T, Suquet said of the Inspector of Financial Institutions, Carl Hiralal, and his team: “They were very efficient, very thorough and very professional and asked all the right questions. It was very important that T&T got improved because this country serves as the hub of the Caribbean. We really could not close the other islands if we did not close Trinidad. “The regulator Mr Hiralal and the staff there are as good as we have seen in any jurisdiction.” For Suquet, the acquisition of the MetLife/Alico assets was a perfect fit for Pan-American—both in terms of the size and the nature of the businesses. Last year, Pan-American’s revenues grew by 9.8 per cent to US$470 million compared with 2010, while its net income for last year was US$30.7 million, which was an 11.5 per cent improvement over 2010. Suquet said Pan-American was chosen by MetLife to acquire its Central American and Caribbean assets—rather than one of the Caribbean insurance giants like Sagicor or Guardian Holdings—because he spotted the opportunity early. “This was my brainchild back in August 2008 when the United States government took over AIG—the parent company of Alico and Algico—it was immediately said that in order to start paying the government back they would have to sell some of their assets or take some companies public.” The US government bailed out AIG to the tune of over US$80 billion in 2008, in a transaction that caused tremors in markets throughout the globe because of the size and importance of AIG, which was the eventual parent company of all of the assets acquired by Pan-American Life.
Suquet said he called AIG and the CEOs of the four companies that were rumoured to be interested in Alico. “I presented to them our logic that they were even much larger companies than Alico and some of these smaller countries would not represent a material event for them. They had to focus their efforts on the much larger countries.” He explained to his counterparts from these much larger insurance companies why Pan-American was the obvious choice to acquire the Alico business in the region. “When MetLife won the bidding process for Alico, we followed up and they were very interested in selling (Central America and the Caribbean),” said Suquet. In March 2010, MetLife Inc announced that it was purchasing Alico for US$15.5 billion in a transaction that gave it beachheads in 47 nations from Peru to Bangladesh. He said MetLife sold the Alico operations in Venezuela and Peru to local partners and decided to keep the operation in Colombia, but was open to the idea of selling the rest of Central America and the Caribbean. Suquet said: “We were the perfect partner because of our experience, our culture internationally and the depth of our management team. And we had the financial wherewithal and the balance sheet strength to pull this off.” He said both parties decided not to disclose the acquisition cost because it was not a material event for MetLife. “As the seller, MetLife has the right to not want to disclose the details and for us it would have made no difference but we had to respect the wishes of the seller,” Suquet said. The Pan-American chairman and CEO described his company as a pure insurance play and said that it maintains a disciplined focus on life insurance and health insurance. “We don’t have a general insurance company. We don’t sell property and casualty and we don’t own a bank,” said Suquet.
Pan-American is different from some insurers in another way: its investments are dominated by fixed income instruments, which comprise 92 per cent of its portfolio. He said the company also does not mark its fixed income portfolio to market, instead opting to leave the unrealised gains or losses on the balance sheet until they are sold. “We happen to be sitting on roughly US$170 million of unrealised gains right now. Our market to book ratio is approaching 113 per cent so we have a tremendous cushion there in case of rising interest rates and the bond portfolio drops in value,” Suquet said. He said the company decided to exit equities, selling 50 per cent of its shares in 2007 and the rest at the beginning of 2008 and later in 2008 because of the volatility of equities. “The issue with equities on the accounting side is that if they are under water, the company has to impair them. Bonds are different as you have certain leeway with bonds as you can go 80 per cent market-to-book if there is a methodology or rationale for why you feel the bond would be okay,” said Suquet. On the issue of the Algico name and branding, Suquet points out that Pan-American, which celebrated its 100th anniversary last year, owns 82 per cent of the company and, therefore, is obliged to call a shareholders’ meeting to discuss those issues. He also said there would be some changes at the top of the organisation. Miguel Sierra, the Pan-American Chief Financial Officer, will be the managing director of Caribbean operations and will be based in Port-of-Spain. Jacinto Martinez will be the new vice president of agency distribution, while Varun Kuarsingh, a Trinidadian with years of international experience, will be the company’s new CFO.
Asked whether Pan-American would be interested in acquiring the traditional portfolios of Clico and British American, Suquet said the company prefers to focus on the integration and growth of the recent acquisitions rather than look for new possible purchases. He also said that the insurance industry in the region was “fragile” because of the damage caused by the collapse of Clico and British American. In a statement last week, Suquet said: “The regions acquired through this transaction greatly expand PALIG’s international revenues further making these markets a priority as the company continues to expand its global footprint. “ In the Caribbean, the Alico/Algico acquired premiums represent 11 per cent of PALIG’s overall premium distribution and 20 percent of its international portfolio, thus making the Caribbean market one of the most important for PALIG. “This transaction aligns with our dedicated focus on our core competencies of life and health insurance. The addition of the MetLife– Alico/Algico business fits perfectly with Pan-American Life’s strategic focus of becoming a leading life and health insurance carrier with international reach for insureds of both our corporate and personal lines,” said Mr Suquet. “Additionally, it ranks PALIG in the top three among life and/or health insurance carriers in nearly all markets in which it competes outside of the United States.”