Pru Life sees good year for regular pay insurance

MANILA, Philippines - Life insurance companies that focus on single premiums will find 2014 “a very difficult year.” But life insurers that emphasizes on regular payment premiums will experience “a good year.”

Pru Life of UK chief executive officer Antonio Manuel G. de Rosas explained that 2013 was a strong year for single premiums due to a migration of billions of pesos from the special deposit accounts (SDAs) and the sideway trend of the bourse.

However, the sentiment of the market this year, is that the single premium market is now saturated, the SDA has recovered, and the investing public are moving to pure investment products like mutual funds and unit investment trust fund (UITF).

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.

For the long-term financial health of the insurer, regular pay premiums result in recurring or renewal business as opposed to one-time earnings from the single premium.

“The ones who like the single premium business are the bank partners in the bancassurance joint ventures, since banks are short term if compared to the insurance industry,” De Rosas said in a press briefing yesterday.

Pru Life UK has an agency force of nearly 9,000 which generated 60 percent of total premium income. Last year, it accounted from 71.49 percent of total first year premiums (FYPs) worth P2.513 billion.

Industry forecast from both regulator and the industry is that growth will remain strong albeit weaker than the P170 billion last year.

The insurer has existing brokerage arrangements with several foreign banks but it has not been able to sign any bancassurance joint ventures or partnerships.

A brokerage relationship earns the insurer with commissions and the policy while it brings more fee-based or non-interests earnings for the bank partner.

But the bank partner is not limited to one insurance player, unlike a bancassurance joint venture, which is an exclusive business between one bank and one insurer.

Of the top 10 industry players, three are bancassurance joint ventures and the rest of the field had large agency forces. In fact, these players account for 80 percent of total premiums.

Last year, Pru Life UK reported gross premiums worth P18.5 billion, up 15 percent from P16 billion in 2012. FYP alone rose by 16 percent to P3.5 billion.

Pru Life UK has total assets under management (AUMs) of P47.9 billion, as a result of the variable or unit-linked (VUL) products sold since the late ‘90s. It is the first life insurer to introduce VULs or insurance products laced with investment instruments similar to mutual funds.