Still growing strong

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

IN 2016, the local insurance industry showed great improvements in most, but not all, financial indicators. Based on the reports by insurance companies that were submitted to the Insurance Commission, the industry’s total assets rose 11.38%, from P1.2 trillion to P1.3 trillion, about 81% of which came from life insurers. Total investments climbed 10.22%, from P1.035 trillion in 2015 to P1.140 trillion in 2016.

Its net worth went up to P271.2 billion from P229.3 billion, an increase of 18.29%. This jump was to a large extent due to the implementation of the Republic Act 10607, or the Amended Insurance Code, which required life and non-life insurance companies already operating in the country to have at least P550 million in net worth by 2016, and an increase in paid-up capital of some insurers.

Income from premiums in 2016 did not grow at the same double- digit pace. It increased only 0.29%, from P231.203 billion to P231.883 billion, which was way below the Commission’s total premium income target of at least P280 billion for 2016. Insurance Commissioner Dennis B. Funa pointed finger at the decline in premiums of life insurance companies, which were affected by the weak performance of the Philippine stock market during the fourth quarter.

In a press conference held last February, Mr. Funa explained, “What contributed to the 0.29% increase is the decline in the premium production of the life sector. Majority of the top players in the life sector posted a decrease in their respective premium income.” From P188.531 billion in 2015, life insurers’ total premiums fell 3.04% to P182.793 billion last year. Mr. Funa noted that the stock market was beset by volatilities, and, despite the component index recovering a bit in the last trading day of 2016, “overall it was a nose dive.”

Fortunately, non-life insurance companies posted a 16.24% growth in net premium income from P35.8 billion to P41.6 billion. “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 mentioned that some of the net premiums written of a few non-life insurers ballooned by as much as 182.65%. An 18.93% upsurge in the motor business contributed to the rise in net premiums written, while motor vehicles accounted for 50.86% of the total premiums written of the non-life sector, according to Mr. Funa.

Insurance penetration rate — the premium volume as a share of gross domestic product (GDP) or, in other words, the contribution of the insurance industry to the Philippine economy — came down a bit, from 1.75% in 2015 to 1.60% in 2016. This was because “the increase in GDP is greater than the increase in total premium production,” Mr. Funa said.

In the first three months of 2017, the insurance industry posted large increases in assets (22.26% to P1.4 trillion), net worth (35.85% to P292.95 billion), paid-up capital (14.35% to P47.7 billion) and investments (21.35% to P1.237 trillion). Even its premiums grew 19.51% to P57.035 billion. Life insurance companies managed to post P44.08 billion worth of premiums from January to March of this year, an increase of 14.19% from P38.36 billion recorded in the comparable period of 2016. The net premiums written, meanwhile, of non-insurance companies increased 19.4% from P9.12 billion to P10.89 billion, thanks to the higher premiums generated from motor and fire business.

Mr. Funa was quoted as saying the following when he was asked by reporters if insurers could sustain the premium growth rate for the rest of 2017. “I think so, because the economy has improved or will be improving from that of last year... As you know, there will be a substantial increase in infrastructure budget. So I’m very hopeful and positive.”

He also predicted that the downward spiral in equities in the third and fourth quarters of 2016, which negatively affected life insurance companies, whose variable life insurance products are allocated in the local stock market, might not happen again. But he was careful not to entirely rule out the possibility of instability in the market. “So there could be some volatilities and equities affecting the variable life [ products], but I don’t think it will be the same as last year,” the Insurance Commissioner said. —