Insurance companies post flat total premium income in 2016

THE INSURANCE industry’s total premium income was flat in 2016, amid the continued decline in sales of life insurers and the poor performance of local equities in the latter half of the year, the head of the Insurance Commission (IC) said.

Preliminary data based on quarterly reports submitted by the life and non-life companies to the IC showed the industry’s total income from premiums for 2016 stood at P231.883 billion, 0.29% up from the P231.203 billion posted during the same period in 2015. This was also below the regulator’s target of P280-P300 billion worth of premiums for 2016.

Insurance Commissioner Dennis B. Funa on Thursday attributed the flat growth to the continuous decline in premiums of life insurers last year anchored on a drop in the Philippine stock market during the fourth quarter of 2016.

“What contributed to the 0.29% increase is the decline in the premium production of the life sector,” he said in a press conference in Manila. “Majority of the top players in the life sector posted a decrease in their respective premium income.”

The life insurance sector’s total premiums slid 3.04% to P182.793 billion in 2016 compared to 2015’s P188.531 billion. Mr. Funa also attributed this to the drop in the premium production in variable life insurance products – which are allocated in the local stock market -- and single premiums.

The Insurance Commissioner also blamed the industry’s flat performance to the Philippine stock exchange’s “unimpressive performance,” particularly in the fourth quarter of 2016.

“We [saw] a nose dive in the component index… and although it recovered slightly in the last trading day in 2016, overall it was a nose dive. So the stock market experienced a lot of volatilities in 2016,” Mr. Funa said.

Meanwhile, non-life insurance companies continued to grow last year as their net premium income climbed 16.24% to P41.6 billion compared to the P35.8 billion recorded in 2015.

“So whatever decline there was in the life sector it was slightly offset by the increase in the non-life sector,” Mr. Funa said.

He noted seven non-life insurers posted “a significant increase in their net premiums written ranging from 56.21% to 182.65%... contributing to the overall increase in the non life sector.”

Of the seven non-life firms, Mr. Funa said three recorded an “abrupt increase” in their net premiums written for health and accident business, which includes mobile insurance policies and accidental death benefits.

The rise in net premiums written was also attributed to an “18.93% in motor business, motor vehicles comprise 50.86% in the total premiums written of the nonlife sector,” Mr. Funa said.

Meanwhile, net premiums from mutual benefit associations ( MBAs) or microinsurance providers in 2016 reached P7.5 billion, 8.78% higher from the previous year’s P6.9 billion.

The insurance sector’s net worth, meanwhile, jumped 18.29% to P271.2 billion in 2016, from the P229.3 billion recorded in 2015. This after the IC implemented a mandatory increase in minimum net worth requirement to P550 million by December 2016 as well as a rise in the paid-up capital of some insurers.

Republic Act 10607 or the Amended Insurance Code mandated new life and non-life insurance companies are mandated to have P1 billion in paid-up capital when they set up shop here.

Existing insurers were required to have a net worth of P250 million by June 2013, P550 million by December 2016, P900 million by December 2019 and P1.3 billion by December 2022.

Likewise, total assets in the sector jumped 11.38% to P1.3 trillion in 2016 from 2015’s P1.2 trillion on the bank of the life sector’s jump in net assets and an increase from the industry’s total investments.

Life insurers’ total assets, which comprise 81% of the industry’s total assets, hit the P1 trillion mark after it grew 11.94% to end 2016 with a record high of P1.069 trillion from the previous year’s P955.2 billion.

Total investments also grew to P1.140 trillion last year, 10.22% higher from P1.035 trillion in 2015.

However, insurance penetration rate for 2016 decreased to 1.60% in 2016 from 1.75% in 2015 “because the increase in GDP (gross domestic product) is greater than the increase in total premium production,” Mr. Funa said.

Insurance penetration is the premium volume as a share of GDP or contribution of the insurance sector to the Philippine economy. It is the ratio of the premiums generated over the GDP of the economy.

Despite the decrease, more Filipinos were insured at 47.8 million, 14% higher from 41.9 million individuals in 2015.

While market penetration rate, which measures the ratio of individuals with life insurance coverage issued by life insurance companies and MBAs, rose to 46.32% in 2016, 12.24% higher from 2015’s 41.27%. —