Lower premium income seen in 2014

MANILA, Philippines - Total premium income of the country’s life insurance industry is forecast to fall below the targeted P200 billion set by the Insurance Commission (IC) for 2014.

AXA Philippines chief executive officer Rien Hermans pegs premium income to settle between P135 billion to P150 billion.

The more optimistic places it at nearly equal the P171 billion achieved in 2013, but better than the P120.3 billion in 2012.

Philippine Prudential Life Insurance Co. Inc. (Philippine Prudential) president and chief executive officer Gregorio D. Mercado believes that it can still approximate the 2013 performance.

“While the first three month performance fell significantly, there is still three quarters and the industry tends to perform better in the second semester of the year,” Mercado said.

In the first quarter of 2014, total premiums fell nearly 31 percent, or from P44.6 billion last year to P30.8 billion.

Single premiums went up from P12 billion in first quarter of 2013 to around P30 billion, but down some P14 billion this year.

Sun Life Financial (Philippines) Inc. president and chief executive officer Rizalina G. Mantaring expects 2014 to be a difficult year for the country’s life insurers. “The target P200 billion in premiums may be difficult to achieve but we still have to see how the industry performs in the second quarter,” Mantaring said.

Meanwhile, Hermans estimates that single premiums will close the year at a worse case volume of P65 billion, a far cry from the P107 billion in 2013.

Single premiums or single pay premiums are life insurance products laced with an investment instrument.

It is the popular form of variable unit-linked (VUL) insurance products, which are mainly investment instruments with insurance protection.

All single pay premiums are sold through the bancassurance distribution channels, that is, through the branch network of partner banks.

He said that after the extraordinary sale of single premiums in 2013, it would fall to 30- to 60-percent of the previous year’s level.

The exceptional sale last year was prompted by the forced migration of billions of pesos worth of special deposit accounts (SDAs) due to the prudential measures of the Bangko Sentral ng Pilipinas (BSP).

Since SDAs are basically fixed income investments, a large chunk found its way to single premiums through the bancassurance partnerships of banks and insurers.

But at the same time, banks and their trust departments as well as mutual funds offered investment options, which mimicked SDAs.

Money market trust or mutual funds, for example, offered not only similar interest rates but also short and swift redemption procedures.

Insurers likewise explained that the low interest rate regime continued to make the equities or securities market more attractive, which enticed domestic investors to return to the stock market.

The equity or security market offered higher returns albeit with more volatility.