MANILA, Philippines - Seemingly unperturbed by a looming increase in their required capital, the country’s insurers managed to post strong growth in their bread-and-butter premium income this year.
As of end-September, the industry’s aggregate premium income reached P82.5 billion, just P3 billion short of equaling the entire 2011 level of P85.6 billion.
With this, Philippine Life Insurance Association (PLIA) president George D. Mercado – the president and chief executive officer of Philippine Prudential Life Insurance Co. – said they expect to attain or even surpass the P100-billion premium target this year.
He attributed the record growth in the first nine months to the improving economic conditions, greater financial literacy and protection awareness, aggressive growth of the industry’s agency force, better partnerships through bancassurance, and heightened investment appetite among clients.
IC Commissioner Emmanuel Dooc said he even remains bullish the sector would tally total premium income of P115 billion.
Since 2009, total premium income has grown by over 20 percent.
However, the insurance industry – made up of life, non-life and re-insurance firms – has grappled with financial issues since the start of the year.
The Insurance Commission (IC) has set the minimum paid-up capital for the industry at P175 million as of end-2012.
But the Department of Finance – which oversees the IC – has ordered insurance companies to build up their capital on a staggered basis to at least P1 billion by 2020, citing this would protect consumers from the risk of firms collapsing due to their inability to service claims.
The same order has mandated insurers to boost their minimum paid-up capital to P250 million – from P175 million – by end-2012; P400 million by 2014; P600 million by 2016; P800 million by 20128; and P1 billion by 2020.
In fact, several players have been waylaid by the mandated increases in working capital, coupled with the prevailing low interest rate environment and higher re-insurance costs.
At the start of the year, there were 117 players (83 non-life, 29 life, four composite - both life and non-life- and one re-insurer. By the last quarter, their number went down to 102, as non-life insurers dropped to 68.
Dooc noted however that the lower half of the industry’s players should be contributing significantly in the coming years in terms of premium income and net income.
“I would like to see the lower half of the players account for a more significant share.”
In the past years, the top five players accounted for over 50 percent of total premiums. Add the next five and that already accounts for more than 80 percent of the total.
The top 10 players in the life industry in 2011 are: Sun Life; Philippine American Life and General Insurance Co. (Philam Life); AXA Philippines; Prulife of the UK (Philippines) Inc.; Insular Life Assurance Corp.; BPI-Philam (the bancassurance joint venture between Philam Life and the Bank of the Philippine Islands); Manulife Philippines; Sunlife Grepa (the bancassurance joint venture between Sun Life and the Rizal Commercial Banking Corp.); United Cocolife; and Generali Pilipinas (the joint venture between BDO Unibank Inc. and Generali Spa).
Embattled sector
‘Embattled’ best describes the non-life sector as it has shrunk from 83 firms to just 68 in just a year.
Dr. Pedro P. Benedicto Jr., president of the Philippine Insurance and Re-insurance Association (PIRA), said the increasing number of natural catastrophes in the past two years have taken its toll on the industry.
The low interest rate environment has resulted in returns of just five percent on average. The industry, after all, is required by law to invest heavily on government securities, which are safer but offer low returns.
“The non-life sector is governed by various factors including losses (claims), acquisition and administration costs, margins for profits, and market forces,” Benedicto explained.
He noted that due to the unprecedented number of major catastrophes in the past years, re-insurance premiums had been jacked up as the global re-insurance market had been taking a hit.
Nonetheless, the PIRA president is looking at a seven to 10 percent growth this year in premiums earned.
At the end of the third quarter this year, premiums earned reached P15.5 billion. In 2011, premiums earned amounted to P22.1 billion.