MANILA, Philippines - The Philippine American Life and General Insurance Co. (Philamlife) is expecting a strong surge in new business this year with the introduction of its newest and unique variable unit linked (VUL) life insurance product.
A VUL is a life insurance product spiced up with an investment feature.
Prime Yield HWM 2019 Fund is the latest addition to Philamlife’s basket of life insurance products, and it is the first VUL product in the market with a high-water mark (HWM) or highest daily value lock-in feature. In other words, only the upswings and the highest net asset value per unit (NAVPU) reached historically is considered upon maturity.
“It will contribute significantly to our new business this year as we are looking at an additional 10 to 15 percent in new business,” Ariel G. Cantos, Philamlife senior vice president and chief agency officer, said in an interview.
That means an additional P400 to P700 million in new business from the first-of-its-kind VUL. From available data, new business in 2007 was placed at P7.4 billion, and P4.7 billion the year before.
Last year, Philamlife registered gross premiums of P17.9 billion and a net income of P3.3 billion. That was lower than the P22.7 billion in 2007 and P19.6 billion in 2006.
The poor performance of premium sales in the country was due to the poor economic conditions brought about by the US-originated credit crisis. Nevertheless, Philamlife’s performance last year was still good enough to retain leadership in the country’s life insurance industry.
Prime Yield is a regular-pay, dollar-denominated life insurance product with investment qualities, as well as accident and health coverage.
It is a 10-year fund that must be held till maturity, and with a minimum investment of only $500 annually.
Cantos explained that Prime Yield has access to global investment opportunities, handled by professional fund managers that would otherwise be available only to large investors. The investments are placed in a diversified portfolio of seven global equities and bonds.
The investment strategy for the new VUL is periodically adjusting the investments to fit the current and future financial goals of the client.
“The more time your investment has to mature, the more weight will be placed on more aggressive assets to take advantage of the higher potential returns. As your investment nears its maturity date, the funds will be shifted towards safer investments to minimize fluctuations in its value,” the Philamlife senior vice president explained.
Cantos added that the new VUL uses market volatility in favor of the investor, which likewise allows top-ups or additional investments over the 10-year period.
Prime Yield differs from a mutual fund in that mutual funds are marked-to-market, meaning the NAVPU upon redemption applies. While for Prime Yield, the best net asset value within the 10-year period applies upon maturity.
Among Philamlife’s prime targets are the overseas Filipinos and high-valued individuals as both sectors have easy access to US dollars. “We also reach out to returning Filipinos while we exert effort to connect with the families and beneficiaries of the overseas Filipinos,” he added.
Philamlife is now allied to the American International Assurance Co. Ltd. (AIA) after its former principal the American International Group (AIG) – sold its majority stake in AIA to the US government by placing it in a special purpose vehicle (SPV) as part of its repayment to the billions of dollars bail-out program.
Last year, AIA reported $60 billion in assets and $23 billion in premium income. It has a policyholder base of 20 million across the region.