market report: the philippine non-life insurance industry by ann margaret e. jasmin 1 market report...

1Market Report: The Philippine Non-Life Insurance Industry by Ann Margaret E. Jasmin

marketreport

thephilippines


ourourcountrycountry


thephilippinesThe Philippines is the third largest

English speaking country in the world. In Asia, it is the oldest

democracy and one of only two predominantly Roman Catholic

nations, the other being East Timor. It has a rich history combining

Asian, European, and American influences.

Composed of 7,107 islands, the Philippines is a tropical country with

fascinating landscapes, active volcanoes, splendid beaches, coral

waters, and tropical rainforests.


Official Name: Republic of the Philippines

Capital: Manila

Official Languages: Filipino, English

Total Area: 299,764 km2 (115,739 mi2)

Population: 90.5 million (2008 Est)88,574,614 (2007 Census)

GDP (PPP) $320.384 billion Total (2008 Est)$3,546 per capita

GDP (Nominal) $168.580 billion Total (2008 Est)$1,866 per capita

thephilippines


thephilippines

Home of the World’s No. 1 Pound-for-Pound Boxer


ourourcompanycompanyAviation • Fire • Marine • Misc. Casualty • Motorcar • Personal Accident • SuretyAviation • Fire • Marine • Misc. Casualty • Motorcar • Personal Accident • Surety

Insure To Be Sure.


One of the Flagship Companies

of the Yuchengco Group

79 years of experience

in insurance business

One of the largest in Southeast Asia


financialstrength

PhP 6.192B Gross Premiums (USD 129.0M)

PhP 2.913B Premiums Earned (USD 60.7M)

PhP 4.636B Net Worth (USD 96.6M)

(PhP 48 : USD 1)


Year Malayan PGA BPI/MS Standard Pioneer PhilAm UCPB FedPhoe Mapfre PhilChar2008 129.002007 111.67 61.46 48.54 44.38 40.21 32.71 30.21 28.13 27.71 19.272006 104.58 60.83 44.38 40.63 37.71 30.83 32.29 27.29 24.58 23.13

Gross Premium Written of Top 10 Non-Life Insurance Companies (Y2007)

(in USD millions)

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

Malayan PGA BPI/MS Standard Pioneer PhilAm UCPB FedPhoe Mapfre PhilChar

2008

2007

2006

2008 Industry Figures not yet available

industryleadership


Insurance Commission

#1 non-life insurance company for 38 years now

B++ (Very Good) Rating by A.M. Best

(Re-affirmed in December 10, 2008)

BB (Stable) Rating by Standard & Poor’s DRI

(Re-affirmed in April 21, 2009)

Awarded an ISO 9001:2000 certification

by the Certification International U.K.,

Ltd. in December 2008

industryleadership


The Department of Finance’s Insurance Commission has consistently ranked Malayan Insurance as the number one non-life insurance company (in terms of gross premiums written) for 38 years, with close to 20% market share in the industry, from a field of 87 non-life insurance companies.

Republic of the PhilippinesDepartment of Finance

INSURANCE COMMISSION1071 United Nations Avenue

Manila

No. 1 since 1970

industryleadership


• A.M. Best has recently affirmed Malayan Insurance’s B++(Very Good) Rating

• A.M. Best Co. is the world’s oldest and most authoritative insurance rating and information source.

• Malayan Insurance has a BB (Stable) Rating from Standard & Poor’s (S&P), reflecting its strong market position, especially in fire insurance, as the largest general insurer in the Philippines and sound capitalization relative to risks underwritten.

Top 200 Global Insurers

trackrecord


Certification International U.K., Ltd. has recently awarded Malayan Insurance Co. Inc. an ISO 9001:2000 Certification.

ISO 9001:2000 is an internationally-known model for a well- planned quality management system, a foundation for organizations seeking

disciplined and controlled processes to help achieve customer satisfaction and continual improvement.

trackrecord


ourourindustryindustry

non-non-lifelife

15

527 552 579 599591

3%5%

7%

-2%

3%

-

100

200

300

400

500

600

700

2003 2004 2005 2006 2007

in U

SD m

illio

ns

-4%

-2%

0%

2%

4%

6%

8%

Industry GPW Growth

5-yr CAGR = 3.2%

Data based on IC Annual Report (2008 figures not yet available)

grosspremiumswritten

16

growth of industry gpw by line2003 2004 2005 2006 2007 CAGR

Fire -1% 3% -2% 0% 2% 0.5%Marine -4% 15% 24% -29% -1% -0.7%Motor Car 6% 4% 7% 4% 4% 4.9%PA,Cslty,Engg 13% 3% 13% 3% 5% 7.8%Surety -1% 10% 1% 26% 9% 8.6%


17

3%

47%

-15%

31%

-14%

19%

-2%3%

45%

30%

7%5%3%

11%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

2001 2002 2003 2004 2005 2006 2007

Growth Sum Insured

Growth GPW

in USD millions 2001 2002 2003 2004 2005 2006 2007Sum Insured 150,918 219,341 323,443 273,888 355,638 465,407 401,172 GPW 431 511 527 552 591 579 599

GPW/SI 0.29% 0.23% 0.16% 0.20% 0.17% 0.12% 0.15%

industry sum insured vs gpw


18

0.59% 0.54% 0.52% 0.46%

3%

5%

7%

-2%

11%

13%

12%11%

10%

0.43%

3%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

2003 2004 2005 2006 2007

GDP Growth

GPW Growth

Penetration Ratio

\

in USD millions 2003 2004 2005 2006 2007Gross Premiums Written 527 552 591 579 599 Gross Domestic Product 89,925 101,491 113,290 125,680 138,569 Insurance Penetration 0.59% 0.54% 0.52% 0.46% 0.43%

insurance penetration (based on gpw)gpw vs gdp growth


19

In %

13% 13% 16% 12% 11%

31% 30% 30%32% 33%

18% 18% 18% 19% 20%

32%35%36% 34%33%

4%4%3%3%3%

2003 2004 2005 2006 2007

Surety

Cslty,Engg, PA

MotorCar

Marine

Fire

in USD millions

190 195 191 192 197

66 74 94 67 67

161167

179186 194

9496

109112 11816

17

18 22 24

2003 2004 2005 2006 2007

industryportfoliomix


20

527552

591 579 599

285313 332

359384

54%

62%

64%

56%57%

-

100

200

300

400

500

600

2003 2004 2005 2006 2007

48%

50%

52%

54%

56%

58%

60%

62%

64%

66%

GPW NPR Retention Ratio

industryretentionratio


in U

SD

mil

lio

ns

21

2002 2003 2004 2005 2006 2007

Fire 27% 31% 34% 35% 35% 39%Marine 29% 38% 37% 33% 46% 49%Motor Car 89% 89% 91% 91% 99% 99%PA,Cslty,Engg 53% 53% 53% 53% 53% 53%Surety 90% 93% 95% 93% 83% 91%TOTAL 50% 54% 57% 56% 62% 64%

industry retention ratio by line


22

273

301323

347

375

118136 137

157 16643%

45%

42%

45%

44%

-

50

100

150

200

250

300

350

400

2003 2004 2005 2006 2007

41%

41%

42%

42%

43%

43%

44%

44%

45%

45%

46%

46%

NPE Losses Incurred Loss Ratio

industrylossratio


in U

SD

mil

lio

ns

23

2002 2003 2004 2005 2006 2007

Fire 26% 35% 40% 30% 52% 40%Marine 33% 24% 22% 33% 33% 33%Motor Car 54% 54% 55% 52% 47% 53%PA,Cslty,Engg 38% 38% 42% 44% 47% 31%Surety 27% 14% 20% 15% 20% 42%TOTAL 43% 43% 45% 42% 45% 44%

industry loss ratio by line


24

43.3% 45.2% 42.3% 45.3% 44.4%

17.2%15.5%

20.1% 19.9%

43.1% 40.2%41.0%

39.2% 42.0%

17.3%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

2003 2004 2005 2006 2007

Loss Ratio Acq Cost Ratio Exp Ratio

103.6%98.9%102.6% 104.6% 106.2%

*2007 Expense Ratio includes Investment Expenses

industrycombinedratio



2006 2007 REDUCTION

LIFE INSURANCE CO. 33 32 1

NON LIFE INSURANCE CO. 93 87 6

COMPOSITE CO. 3 3 0

REINSURANCE CO. 1 1 0


number of insurance companies/reinsurance firms in the philippines


currentcurrentissuesissues


S&P early this month maintained its “stable” outlook for the Philippine insurance industry after it down-graded its outlook for most insurance markets in the Asia-Pacific region.

Paul Clarkson, S&P credit analyst focusing on the Philippine insurance industry, said the stable outlook on the country’s life and non-life insurers was retained given their efforts to hike their capital amid tough economic conditions.

RP Insurance Industry ‘Stable’

28

Capitalization Requirements

The industry may be impacted by the capital hike requirement for non-life insurance companies

Year of Compliance

Minimum Statutory Net

Worth

Minimum Paid-up Capital

Minimum Statutory Net

Worth

Minimum Paid-up Capital

2006 P 100M P 50M P 100M P 50M2007 P 150M P 75M P 150M P 75M2008 P 200M P 100M P 150M P 75M2009 P 250M P 125M P 200M P 100M2010 P 350M P 175M P 250M P 125M2011 P 500M P 250M P 350M P175M

DOF Order 27-06 (issued in 2006) DOF Order 26-08 (issued in 2008)

29

Failure to meet the RBC Ratio requirements under Insurance Memorandum Circular 7-2006 shall result in the corresponding Action/Control Event(s)

Capital hike will still be implemented in conjunction with the risk-based capital (RBC) requirements

RBC Ratio Event Course of Action

100 % RBC 125% Trend TestLinear extrapolation if next year’s ratio < 100%. If so, move to Company Action Event. Stress Test to be required.

75 % RBC 100 %Company Action

Company required to submit RBC plan and financial projection and implement the plan.

50 % RBC 75 %Regulatory Action

IC authorized to examine company and issue Corrective Orders.

35 % RBC 50 %Authorized Control

IC authorized to take control of the company.

RBC 35 %Mandatory Control

IC required to take control of the company.

30

Motorcar Third Party Compulsory Insurance • LTO implements memorandum designating GSIS as sole provider of CTPL for motor vehicles …

– despite temporary restraining order based on petition by a non-life insurance workers’ group• Arguments for GSIS

• Lower fees, greater convenience for car owners• Curb proliferation of fake CTPL insurance• Capture correct taxes

• Arguments against GSIS and in favor of PIRA-administered Cover Authenticating Facility (CoCAF)• Capability for speedy and efficient processing of claims• Creation of a monopoly• Government involvement in private business

31

Insurance Taxes• New tax provisions affecting the insurance industry

+ Positive• Additional exemption in computing MCIT:

– Cost of facilities such as depreciation, supplies, rental of equipment– Inspection & medical fees– Interest expense on investment income not subject to final tax

• Reduction in documentary stamp tax (DST) from 12.5% (P0.50 for every P4 premiums) to 0.25% (P0.50 for every P200 premiums) for PA&Health– Negative

• Imposition of P15 DST on Certificates of Insurance• Investment income realized from funds held subject to gross receipts tax

32

Competitive LandscapeReduction in number of companies from

93 in 2006 to 87 in 20072 local companies were not renewed their

Certificates of Authority 2 others were placed under conservatorship, due to

capital or MOS deficiencies1 foreign company, Aviva, pulled out of the market2 companies merged (merger of BPIMS and FGU)

Non-life insurance industry remains overcrowded

33


93 in 2006 to 87 in 2007Non-life insurance industry remains

overcrowdedIntense competition characterized by rate-

cutting and rising intermediary compensation

34


93 in 2006 to 87 in 2007Non-life insurance industry remains

overcrowdedIntense competition characterized by rate-

cutting and rising intermediary compensation

Low insurance penetration of less than 1%--there is still a huge untapped market potential


thank you!

market report: the philippine non-life insurance industry by ann margaret e. jasmin 1 market report...

Documents

nonlife insurance company

nonlife insurance companies

ann margaret

insurance business

philippines slide

authoritative insurance

industry figures

market report t