Insurers’ investments hit P3.7-B

The investment climate for financial institutions has been sluggish if not downright pathetic, that the country’s insurance industry, often times outdoing other institutions, has had to content with a mere P1.9 billion in the first four months of the year.

However, investments in foreign currency-denominated instruments nearly overtook the peso-denominated investments with at least P1.84-billion in both US dollar and euro currencies, an industry first incidentally.

Majority of the investment instruments were issued by the national government reflecting the kind of investment climate prevailed from January to April this year.

It was in January that the insurers invested in peso-denominated instruments amounting to P912 million carried mainly by three of the biggest life insurance firms in the country.

Insular Life Assurance Co. Ltd. bought P500 million in fixed and floating rate notes issued by port operator Asian Terminals Inc. (ATI). For the same issuer, Sun Life of Canada (Philippines) Inc. acquired P300 million worth of both fixed and floating notes.

Manufacturers Life Insurance Co. Inc. (Manulife Phils.) in the same month invested P200 million in fixed rate sovereign notes of the Republic of the Philippines (ROP). Taking the cue, Zurich General Insurance Philippines Inc. bought P75 million worth of the same issue.

Still in the first month of the year, insurers aggressively gobbled up dollar-denominated investments instruments to fund their dollar-denominated life policies, which has been attracting more and more investors seeking both financial and life protection.

Since 2002, insurers have introduced dollar-based life insurance policies with investment features. One of the more popular products was the one-time premium payment dollar-based policy.

Five insurers invested a total of $15.8 million worth of dollar-denominated instruments led by Insular Life with $5 million worth of ROP global bonds with nine-percent interest rate due to mature in 2013. Another $5 million was infused by Sun Life on the same issue.

New York Life Insurance (Philippines) Inc. also placed their bets on dollar-denominated instruments amounting to $5 million although this was spread out on three ROP issues with varying maturity periods and interest rate earnings level.

Malayan Insurance Co. Inc. acquired US-dollar denominated fixed rate note ROP issue worth $500,000. Perla Compania de Seguros Inc. put their money worth $298,510 on a subordinated note issued by the Metropolitan Bank and Trust Co. (Metrobank).

And for the first time, insurers are buying euro-denominated investment instruments to the tune of 2.2 million euros last February. One euro is equivalent to P63.42.

Three insurers – First Nationwide Assurance Corp., Malayan Reinsurance Corp., and Malayan Zurich Insurance Co. Inc.– invested similar 750,000 euros and all three were for the ROP bonds with maturities on September 2004 and December 2006.

Insurers and other financial institutions remained limited to the number and variety of investment instruments after four months into the year.

"Business has been at the doldrums, and practically no one in the private sector is raising funds in the local market," they said. "If there was, it was too limited."

In the month of April alone, all investments were made on foreign currency denominated instruments. A total of $12.1 million and 2.0 million euros were fulfilled.

Beneficial PNB Life Insurance Co. Inc., subsidiary of the Philippine National Bank (PNB), acquired a total of $5.6 million from three ROP bonds. Manulife put their thick wallet with the US government bonds due for maturity in 2008 and 2009 worth $5 million.

Yuchengco-led Great Pacific Life Assurance Corp. (Grepalife) was one of the few insurers able to invest their US dollars with private sector initiatives. It placed $310,344 on a dollar-denominated bond issued by Subic Power Corp., and another $200,000 with a dollar-denominated bond issue AC International Finance Ltd.

After making investments through Metrobank, Perla Compania de Seguros placed $800,000 with the ROP 2013 global bonds.

The country’s insurance industry invested at least P7.466-billion in the first nine months of the year with US dollar-denominated transactions accounting for a third of the total. The final accounting has not yet been released.

Insurers invested a total of $50.22-million in various dollar-denominated investment packages, or roughly P2.611-billion of the total.

In July alone, insurers invested some $24.1-million in dollar-denominated bond floats while making a mere P190-million in peso-denominated investments. Behind the investments were sister companies Malayan Insurance Co. Inc. ($11-million), Malayan Reinsurance Corp. and Malayan Zurich Insurance Co. ($4-million each), and Tokio Marine Malayan Insurance Co. ($2-million).

The Philippine American Life and General Insurance Inc. (Philamlife) alone invested $6-million on a high yield reserve asset (HYRA) facility offered by Hong Kong Shanghai Banking Corp. (HSBC) in the same year.