Newly formed Sun Life Grepa Financial Inc. (SLGFI) is bullish about its growth prospects for 2012, despite an unfavorable global economic climate.
Naresh Krishnan, president and chief executive officer of SLGFI, said in a briefing last week that there is plenty of market-expansion opportunities for insurance firms in this country.
The company is set to introduce variable, unit-lined insurance products in the market and will increase in its sales force this year, Krishnan said.
“The outlook for business in the Philippines is positive, although there is some caution given what is happening in the global economy,” Krishnan told members of the press. “The country grew much faster than advanced economies last year, and it is expected to sustain that performance this year.”
According to the company CEO, a growing economy may indicate a rise in disposable income levels, boding well for demand and sales of insurance products.
SLGFI, a joint-venture entity of Sun Life Philippines and the Yuchengco Group of Companies (YGC) was formed last October. In the first three months of this year, it will launch variable, unit-linked (VUL) insurance products.
Unlike other insurance products, a VUL product provides a policyholder insurance protection and serves as an investment instrument.
Krishnan said one factor making the business climate in the Philippines favorable for insurers is the low interest rates. He said low yields from bank deposits would encourage fund owners to place their money in higher-yielding investments, such as purchase of VUL.
“The low-interest rate environment is another blessing for the industry,” Krishnan said.
While interest rates were considered relatively low last year, these are expected to drop further this year given the lead made by the Bangko Sentral ng Pilipinas.
Last week, the BSP cut its key policy rates by 25 basis points, a move seen to be followed by a drop in commercial interest rates.
Krishnan has cited other favorable factors in the Philippines such as an economy that continues to grow, despite the crises abroad, and the huge room for market expansion.
Citing industry data, Krishnan said there are only about 2.8 million insurance policies active in the country today, a very small fraction of its 90-million population.
The company has an exclusive bancassurance arrangement with Rizal Commercial Banking Corp., which is owned by the Yuchengcos, and employs 150 bancassurance sales officers based in RCBC branches.