Generali gears up for growth in Phl market

MANILA, Philippines - Generali Philippines is gearing up for growth challenges in 2014 with its joint venture partner BDO Unibank Inc. (BDO).

Generali is a bancassurance partnership among three financial giants – Assicurazioni Generali of Italy, one of the world’s largest insurance companies; Jerneh Asia Berhad of Malaysia, a specialist insurer in the marine, industrial, and engineering fields; and BDO, the Philippines’ largest bank.

Foremost among these challenges is increasing its share of fee-based income or its share in earnings from sale of premiums through the branch network of BDO.

Last year, the insurer accounted for roughly three percent of the bank’s fee-based income.

Generali Philippines president and general manager Renato Vergel de Dios said that it is somewhere in the five-percent vicinity this year, increasing to 10 percent next year.

“Trading gains have been shrinking for most banks, including BDO, which means greater reliance on recurring and new earnings from corporate and retail business,” Vergel de Dios said.

Sale of bancassurance products through BDO is basically regular pay traditional protection life insurance and the popular variable unit-linked (VUL) products. “We refrained, and will continue to avoid single premiums, as it does not contribute to retained and recurring earnings,” he added.

Single premiums are one-time sale and payment of VULs, which are extremely popular as an investment option.

Vergel de Dios noted that sales started strong in 2013 but tapered off toward the second semester. But the difference was that they continued to record stronger sale than industry by simply avoiding single premiums, and taking advantage of the migrating investments in special deposit accounts (SDAs).

“The market ran out of steam in the second half of the year, which was largely fueled by single premiums,” he said. “When the market was growing at 81 percent, we only grew 51. In the second half when the market was growing by just 11, we were still up by 40 percent.”

Another noticeable factor, was the introduction or re-introduction by the trust department of the banks or fund managers of the money market funds, which was linked with the VULs. The traditional investment instruments for VULs are the equity, fixed income and balanced funds.

Since the investors in SDAs are generally conservative, the money market-linked VULs was the natural attraction.

The Generali chief executive reasoned that it avoided crowding the investment market since BDO has the largest unit investment trust fund (UITF) portfolio.

Meanwhile, Generali and BDO Private Bank, another member of the SM Group of Companies, entered into an agreement recently.

BDO Private Bank caters to the high net worth individual and some segments of the mass affluent.

“We will offer their clients a basket of insurance products which will soon include protection products attuned to estate planning,” Vergel de Dios pointed out.

The bancassurance joint venture has access to nearly 800 BDO branches, not to mention the rest of the SM affiliates. It has 510 financial advisers (FAs) that are located in the bank branches

Generali offers products and services, including individual life insurance, group life and medical, auto and home insurance, small and medium business protection, as well as commercial property insurance.