Record breaking year expected for insurance industry
After the country’s insurance industry generated over P56 billion in total premium income in the first three months of 2015, industry players are anticipating a record-breaking year.
That bullish sentiment would be reinforced when Insurance Commissioner Emmanuel F. Dooc releases the second quarter performance results.
“Initially, the data for the April to June period indicates total premium income registering over P50 billion, meaning we are on track to surpassing the P200-billion ceiling this year,” Dooc said.
Traditionally, the industry generates larger premiums in the second semester of the year.
2013 was the banner year for the Philippine insurance industry, racking in total premium income worth P198 billion. Last year, it slipped to P188 billion due to a weaker sale of single pay premiums by the life insurers.
“We are keeping our fingers crossed that 2015 will outperform and exceed the record year of 2013,” Dooc said.
Sun Life Financial president and chief executive officer Rizalina G. Mantaring expects the second semester will outdo the first six months of 2015. “We expect the second semester to be better than the same period last year, so that total industry premiums for 2015 outperforms 2014,” Mantaring said.
In the second semester last year, premiums generated by the life insurers amount to less than P100 billion, while the first semester performance was worth P66 billion.
AXA Philippines president and chief executive officer Rien Hermans likewise echoes Dooc and Mantaring’s view on a record-breaking year.
He forecasts single pay premiums sale to outdo 2014 by 40 percent.
“Total regular premium will grow slightly slower by about 16 percent to the vicinity of P88 billion. This means that I do expect that the market will breach the P200-billion total premium income barrier,” Hermans said.
Generali Philippines president and chief executive offi cer Renato Vergel de Dios said single pay premiums, bancassurance, and the country’s equity markets relate to each other.
“If there is no dramatic equity market correction before the end of the year, single premium sales will cause total premiums to exceed 2013. Insurance sales are healthy all over and I would tend to concede this early that 2015 would be a record year for the industry,” Vergel de Dios said.
Generali Philippines will soon take a separate road after letting go of its partnership with BDO Unibank Inc.
After all the regulatory requirements fulfilled, BDO Life Assurance will be rolled out of the delivery room. But reports also indicate that Generali Philippines will remain in the country under its principal, Generali Spa of Italy.
In the past two years, single pay premiums accounted for more than half of new business. For some insurers with bancassurance partners, single premiums accounted for nearly 80 percent of total.
But bancassurance will account for a bigger share of premiums sale, single pay or regular.
Bancassurance is the biggest distribution platform for the life insurance business, and in turn, contributes to the bank’s bottomline via fee-based income, aside from others.
Mantaring said that bancassurance operations were extremely strong in the first half but historically they have slowed down in the second, particularly in the fourth quarter, as banks balance the sale targets they have to meet in their various products.
“Bancassurance sales also tend to be more vulnerable to market conditions than agency sales, and we have seen the market turn more volatile. Still, this should be a good year for bancassurance,” she added. Sun Life has a bancassurance joint venture company with the Rizal Commercial Banking Corp.
The AXA Philippines chief executive likewise sees bigger and bigger contributions from the bancassurance arrangements. After all, AXA has been benefitting from its productive partnership with the Metropolitan Bank & Trust Co.
The same reason why new players look for partners with bancassurance arrangements.
FWD Philippines entered the Philippine market and ultimately forged an alliance with the Security Banking Corp.
And if Security Bank president Alfonso L. Salcedo Jr. is to believed, FWD Philippines will be pulling some surprises with the bancassurance partnership.
Meanwhile, Ageas Life of Belgium sign a bancassurance accord with East West Banking Corp. earlier this year, and Samsung Life of Korea is looking for a life insurance partner.
Dooc admitted a number of foreign players have been paying his office a visit, inquiring about putting up a local business, and merger & acquisition is reportedly in the horizon.
“They are also looking for partnerships with local banks with scale, similar to what Ageas Life achieved,” he admitted.
Dooc confided that the search is not only limited to the life sector but also the non-life insurance segment.
Meanwhile, Michael F. Rellosa, chairman of the Philippine Insurance and Re-insurance Association as well as president and chief executive officer of Fortune General Insurance Corp. said the non-life insurance industry will outdo itself this year, barring any natural catastrophes.
“The recent spate of heavy rains and thunder storms did not create too much of a problem, the scale of Typhoon Yolanda. Thus we expect a good second semester,” Rellosa said.
In the past two years, insurance uptake for property, fire, personal accident, and the like, has increased.
But the PIRA chairman admitted that it was still below expectations in terms of the retail market.
“It is the corporates that are buying catastrophe perils (insurance policies),” he lamented.
The non-life insurers do not see an influx of foreign players similar to their counterparts in the life sector.
Rellosa said that the country’s nonlife industry is heavily taxed making it unattractive to foreign players.
“Perhaps if taxes are lowered and we become more competitive vis-a-vis our neighbor then there could be some interest,” he said.
But consolidation of the non-life insurance industry is in the horizon. The minimum paid-up capital of P500 million and the new risk-based capital framework gets fully implemented by 2016.