Insurance investments hit P6.7B in first six months

In the first six months of 2004, the country’s insurance industry invested an estimated P6.7 billion of which a third are actually US dollar-based investments. In the same period last year, insurers invested a mere P2.033 billion due to the poor business climate.

Peso-denominated investments amounted to P4.12 billion while dollar-based reached an estimated P2.6 billion ($46.8 million).

In fact, the reported investments ballooned only in June confirming speculations that investors were only waiting for the results of the national elections before taking the plunge.

Of the total peso-denominated investments in the first six months, half or P2.3 billion were made in June alone. Likewise, the dollar-denominated investments in that period reached $20 million of the total $46.8 million.

Dissecting the June investments, the BPI/MS Insurance Corp. entered into an investment management agreement with the Bank of the Philippine Islands (BPI) estimated to have reached a value of P2 billion.

In the dollar-denominated investment in the same month, life insurance leader Philippine American Life and General Insurance Co. (Philamlife) invested a whopping $20 million on two bond issues.

The first, worth $10 million, is the 7.125-percent senior notes issued by Black and Decker, and the second also for the same amount for 5.95-percent senior note of Lennar Corp.

In the same period last year, the investment climate was so sluggish that the country’s insurance industry, often times outdoing other institutions, invested a mere P2 billion in peso-denominated instruments.

But the US dollar-denominated investment market outperformed its peso counterpart by P400 million or a total of P2.4-billion worth.

Officials of the Insurance Commission (IC) anticipate a better investment climate in the second semester of the year based in the June performance, and the improved investment and business climate.

Medium to long-term investments are critical for life insurers to ensure the presence of funds for various stages of maturities of its policy base.

Majority of the investments are made with fixed-income, low risk instruments like government securities (GS) in both peso-denominated as well as dollar- and euro-denominated instruments. Smaller portions of the investments are made with higher yielding albeit higher risk instruments.

The reported investments are also made with commercial loans or issues issued by blue-chip private sector players or conglomerates. Examples are the five-year US dollar-denominated Universal Robina Corp. (URC) nine-percent notes, the 8.125-percent notes of Ayala Corp., and the Ayala Corp. Eurobond.

For the whole of 2003, peso investments reported were a mere P3.233 billion in various government and private sector products. In 2002, reported investments nearly hit P10 billion.

In 2001, it was recorded at P14.47 billion and P13.15 billion the year before.

Biggest investments in foreign currency-denominated products in recent years, were recorded in 2000 amounting to $134 million while it slightly decreased to $62.7 million in 2001.