Grepalife eyes 30% growth in premiums

MANILA, Philippines - The outcome of its 2010 performance has prompted Grepalife Financial to predict a 30-percent growth in total premium income this year.

Last year, Grepalife produced total premium income amounting to P3.6 billion, 56.5 percent higher than the P2.3 billion realized in 2009.

“It is definitely achievable,” Victor P. Quisumbing, president and chief executive officer of Grepalife Financial said. Grepalife ranked ninth overall among the 32 industry players in 2009.

All official and private forecasts point to strong economic growth in 2011 ranging from a conservative five percent to a bullish seven percent.

Likewise, the market remains very liquid as reflected by the P1.2 trillion parked in the special deposit accounts (SDA) offering at best four percent interest. It is managed by the Bangko Sentral ng Pilipinas (BSP), but the amount is not plowed into the system.

Fund managers defined SDA investors as still risk adverse, and must be seduced into higher yielding investment instruments that finds its way into the country’s capital markets.

Quisumbing pointed to the single-pay life insurance products, which accounts for the biggest share of Grepalife’s total premium income.

Of the total premium income recorded in 2010, single-pay traditional policies amounted to P1.44 billion or roughly 40 percent of total premiums.

“The market is extremely liquid, preferring to pay out policies rather than in tranches in the case of regular or traditional products,” he said.

The country’s penetration rate is said to be in the 13 to 14 percent last year, with just nine percent coming from privately-produced life insurance policies. The rest are government-sponsored such as the Government Security and insurance System (GSIS) and the Social Security System (SSS).

Regular premiums amounted to P1.17 billion or 32 percent share of total premiums. First year regular premiums amounted to P310 million or 42.8 percent higher than the P217 million sold in 2009.

The life insurance company of the Yuchengco Group of Companies does not market the variable product or the life insurance policy which is investment-laced.

Total group business accounted for roughly 27 percent share of total business. From P733 million in 2009, it increased to P989 million growing by 34.9 percent year-on-year.

“Our group business remains among the leaders in the group insurance business,” Quisumbing said.

Looking forward, the country’s life insurance industry must deal with a lot of challenges.

Immediately, there is the P125-million minimum paid-up capital required by the Insurance Commission (IC) and the Department of Finance (DOF). The deadline is on March this year. It will increase to P175 million next year.

Then there is the need to make adjustments in the light of low interest rates for fixed income or bonds. Majority of the investments allowed by law for insurers are in fixed income instruments.

The low interest rate environment prevailing today may force many insurers to re-price products upwards, but risk pricing themselves in an already not too receptive public.

The finance department is likewise urging the insurance industry to consolidate further in the light of the full implementation of the Asean Free Trade Agreement (AFTA) in 2015.

That would mean the entry of global and regional insurance firms with higher capital, huge resources, extensive expertise and technology-backed infrastructure that may run roughshod over the local players.

“We have to be prepared for this eventuality,” Quisumbing said, adding that he personally knows of the interest being shown by foreign players.