Philamlife offers dollar-based pension plan

The peso’s recent advance against the dollar is not hurting sales of dollar-based life insurance products, said an industry executive, who predicted that the peso will remain weak against the dollar in the long term.

Industry leader Philippine American Life and General Insurance Co. (Philamlife) recently launched the Dollar Pension Builder, a life insurance product that is hedged on a stronger dollar. It is also designed to earn net interest of between three and four percent per annum.

Time deposits with commercial banks presently offer interest rate at just over two percent, although, after tax and service charge, the rate comes down to less than two.

The peso has been appreciating versus the dollar in the past three weeks, quoted at P49. 37 to the dollar early this week. At the start of the year, it was trading at more than P50 to the dollar.

"The Philippine economy has not been growing at the same pace as other Asian countries, especially the US and Japanese economies," said Ed T. Vencio, Philamlife vice president for marketing. "The real value of the peso is actually based on the performance of the US economy and the dollar."

However, Vencio admitted that the peso was performing exceptionally well in the past weeks and is expected to continue for the rest of the year, assuming the absence of major man-made or natural tragedies.

He said now is the best time to acquire the dollar-based insurance product, while the peso is appreciating.

Premiums for the unique product are paid in pesos based on the dollar value. The value is set based on the existing value of the peso on the date of premium payment. At the maturity or when a claim is made, payments are made in US dollars.

"It is better than a dollar savings or time deposit in banks because of the guaranteed interest earnings of three to four percent. It is also hedged on the world’s strongest currency and the early completion of premiums when the peso is appreciating makes it a good product both for savings and protection," the Philamlife executive explained.

The peso hit a historical low of about P55 to the dollar in the final days of the Estrada administration. It settled at the P50-51 level since the Arroyo administration took over.