From left, Philam Life CEO Estelito G. Madrid, AIA Group president and chief executive Mark Tucker, and AIA regional chief executive Gordon Watson.
MANILA, Philippines–Giant insurer AIA Group Ltd. is bullish about improving prospects in the Philippines, and is raring to bounce back to the top of the market, where its local arm Philippine American Life and General Insurance Company (Philam Life) has been doing business since 1947.
Speaking to reporters flown to Hong Kong last week to attend the AIA Group’s 2014 annual results announcement, president and chief executive Mark Tucker revealed that company would make the Philippines among its top six markets, and possibly turn it into one of its three largest markets—just like in the past.
AIA operates in the Philippines through wholly owned subsidiary Philam Life, which joined the group during AIG’s reorganization and AIA’s preparation for its initial public offering at the Hong Kong Stock Exchange five years ago.
Huge potential
But a copy of AIA’s 2014 financial results showed that the Philippines was lumped together with “other markets,” whose value of new business (VONB) as a group slid to $212 million—4 percent down from $220 million in 2013.
Last year, AIA’s top six markets in terms of VONB are Hong Kong, Thailand, Singapore, China, Malaysia and South Korea.
Nonetheless, on the local front, Philam Life remains one of the top players. The latest ranking of local insurance firms by the Insurance Commission for 2013 placed Philam Life as No. 1 in terms of net income, assets and investment at cost. It also ranked second in premium income, net worth, and paid-up capital.
According to Tucker, the company expects both the Philippine life insurance market and its business here to continue to grow amid challenges and opportunities.
The booming economy and rising incomes here augur well for the company. AIA regional chief executive Gordon Watson noted that the individual life insurance penetration in the country stood at a low of 1.1 percent as of last year.
“The Philippines is a great market that has huge potentials,” Watson said.
For Tucker, “the Philippines is growing, but we want it to grow faster.”
Undisputed leader
Watson said Philam Life must be the undisputed leader in the Philippines in terms of profitability, quality and scale for it to also move up among the region’s markets.
“[Philam Life] used to be one of AIA’s biggest businesses, so there’s no reason for it not to become one of our biggest businesses again,” Tucker said.
When asked to provide a timetable for such an ambitious goal, Tucker kidded that they would want it to happen in a “short” period of time.
It may seem to be a tough order for Philam Life, but its interim chief executive Estelito “Bobby” G. Madrid is up to the task.
“It helps that AIA’s confidence in the Philippines is high,” said Madrid.
According to AIA’s 2014 report, its businesses in the Philippines “achieved solid VONB growth with reported results also affected by currency depreciation.”
New agents
The bancassurance channel “performed well in the second half of 2014,” AIA said. “We worked closely with our joint venture partner, Bank of the Philippine Islands (BPI) to focus on expanding the footprint of our in-branch insurance specialists and improving their capabilities.”
The partnership with BPI gave Philam Life access to the bank’s network of more than 800 branches.
Hence, the number of active specialists in bancassurance rose by 49 percent last year, the company said.
According to Madrid, the total number of active agents also grew 18.77 percent in 2014, alongside a 28.7-percent increase in new agents.
Philam Life, Madrid said, is expected to sustain its solid performance in 2015, as the booming economy bolsters not only the bancassurance business but also the traditional channels offering life protection, as well as serving health needs.
In the past, life insurance did not pick up quite as fast due to the lower disposable income of consumers in the country. But the economic growth being enjoyed in recent years has allowed more Filipinos to avail of insurance protection coupled with investment-linked products, Madrid noted.
An eye toward PPP
Recent upward adjustments on tax-exemption caps on workers’ bonuses, which would jack up take home pay, are also a welcome development because of the increase in disposable income, Tucker said.
AIA and Philam Life are also interested in investing in public-private partnership (PPP) projects in the Philippines.
Tucker noted that there remains a need for additional infrastructure not only in the Philippines but also across the region.
In this regard, Tucker said, AIA is on the lookout to finance potential PPP investments.
“Across the region, we continuously see PPP making an increasing impact given the need for infrastructure. This [need] is significant. The nature of our business is that we are a long-term business, so long-term assets are important to us. This is something we look at across the region,” Tucker said.
“We have to find the right vehicle. We can invest in long-term infrastructure,” he added, noting that AIA is an investor in a number of PPP projects outside the Philippines.
As for Philam Life, Madrid pointed out that it had also been involved in infrastructure projects during the 1990s.
Philam Life had participated in the development of the Coastal Road, South Luzon Expressway and Skyway, among other road projects,” Madrid said.