The Big Picture
The Philippines managed to achieve slight growth by the end of Q4 2018 despite heavy inflation in Q3 that used a slump in some sectors.
The Philippines Statistics Authority marked GDP growth at 6.1% at Q4, which is significantly below targets cited by the country’s economic managers.
Overall for the entirety of 2018, PSA pegged GDP full-year growth at 6.2% and still below previously mentioned targets.
According to ING, GDP expansion in Q4 slowed likely because of higher inflation combined with greater borrowing costs.
The PSA cited the industry sector for having the fastest growth with at 6.9%. The services sector followed with 6.3% growth, and then agriculture at 1.7%.
Other growth drivers in Q4 include construction, trade, personal and household goods, car repair, and other services.
Q4 Net Primary Income (NPI) grew by 0.9 percent. Meanwhile, Q4 Gross National Income (GNI) went up by 5.2 percent
Year-on-year, GNI grew by 5.8 percent, while NPI posted a 3.7 percent growth.
The Philippines’ projected population for Q4 2018 is at 107.0 million and based on that, per capita GDP went up by 4.4 percent while GNI per capita grew 3.6 percent. Per capita Household Final Consumption Expenditure (HFCE) rose by 3.8 percent.
The Insurance industry in 2018
[All figures in millions of pesos; as of September 2018]
According to the Insurance Commission, the Philippines’ insurance industry’s assets went up by 0.87 percent, from 1,535,84.2 in 2017 to 1,595,221.5 in 2018.
Total liabilities also went up to 1,230,658.9 in 2018 compared to 1,215,441.4 in 2017. This represents a 1.25 percent increase.
The insurance industry’s net worth dipped by 0.57 percent in 2018. In 2017, total net worth was posted at 320,402.8; this went down slightly to 318,532.6 in 2018.
Total paid-up capital and guaranty fund in 2018 was at 52,801.5, which is slightly up from 50,171.9 in 2017, by 5.24%
Investments in 2018 totaled 1,300,189.5; this is down by 0.60% from 1,308,048.2 in 2017
Total premiums for 2018 were at 218,912.1 which is up by 18.0% from 185,514.8 in 2017.
The insurance industry’s total benefits payment/losses incurred in 2018 also went up to 75,663.6 from 68,255.3 in 2017. This was an increase of 10.85%.
Total net income went down by 19.36% from 27,855 in 2017 to 22,461.3 in 2018.
Life insurance in 2018
Total assets for life insurance went down by 0.54% in 2018, dipping to 1,242,900.7 from 1,249,593.2 in 2017.
Total liabilities in 2018 went down to 1,035,864.4 from 1,042,197 in 2017, representing a decrease of 0.61 percent.
Meanwhile, total net worth in 2018 went down slightly by 0.17% to 207,036.3 from 207,396.2 in 2017.
Total paid up capital for 2018 was at 21,521.1 which is up by 11.32% compared to 2017 which was at 19,332.0
Total investments 2018 went down to 1,140,257.1 compared to 1,160,169.2 in 2017. This represents a dip of 1.72%.
Total premiums 2018 were at 174,154.6, which is up by 20.39% from 144,663.8 in 2017.
Total net income 2018 was at 16,397.5 which is down by25.34% from 21,963.9 in 2017
Non-life insurance in 2018
Total assets for non-life insurance grew by 5.16% in 2018 at 222, 680.3 up from 211,752.1 in 2017
Total liabilities 2018 also went up to 145,008, higher by 14.15% compared to 2017, which was posted at 127,028.5
Total net worth 2018 went down to77,672.3 by about8.32% compared to 2017, which was posted at 84,723.6
Total paid-up capital 2018 rose by 1.32% at 30,339 compared to 29,945.1 in 2017
Total investments 2018 went up to 84,135.4, about 3.32% higher compared to 2017, which was at 81,420.1.
Total gross premiums written 2018 is posted at 66,321.1. This is higher by 11.06% compared to 59,717.4 in 2017
Total net premiums written 2018 amounted to 36,829.8, higher by 7.34% compared to 34,310.2 in 2017.
Total premiums earned in 2018 rose by 7.70% to 34,474.1 compared to 2017 which was posted at 32,009.
Total losses incurred in 2018 also rose to 15,832.7 up from 14,462.6 in 2017, going up by about 9.47%.
Total net income in 2018, went down to 2,128.8, compared to 2,759.9 in 2017, a dip of 22.87%.
MBAs (Mutual Benefits Associations) in 2018
Mutual benefits associations gained 12% in total assets in 2018, posting this at 83,640.5, compared to 74,498.9 in 2017.
Total liabilities went up to 49,785.5 in 2018, compared to 46,215.9 in 2017, representing a 7.73% increase.
Total fund balance went up in 2018 by 19.70% at 33,854, higher than in 2017 which was posted at 28,283.
Total guaranty fund rose to 941.4 in 2018, up by 5.21% from 894.8 in 2017.
Total investments in 2018 is at 75,797, which is 14.06% higher compared to 66,450.9 posted in 2017.
Total contributions/premiums in 2018 rose to 7, 927.7, which is higher by 21.20% compared to 6,540.8 in 2017.
Total benefits payments/expenses increased in 2018 by 9.67%, posting at 4,683.2 compared to 2017 which was at 4,270.2
In 2018, the MBAs had a higher total net surplus at 3,935, which is 25.67% higher than in 2017, which was 3,131.2.
The automotive industry experienced slower sales in Q4 with a downturn of 5.7% in November 2018.
Figures consolidated from the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) and the Truck Manufacturers Association (TMA) show 31,258 total unit sales total for that month.
This represents a 23.4% drop in sales compared to 40,799 total units sold in November 2017.
Total sales volume for the entire automotive industry (in the first 11 months of 2018) went down by 14.4%.
Passenger car sales declined by 2.62%, which totaled 9,197 units and represented 29.42% of the market.
Two of the most significant developments in the insurance industry are related to new regulations.
First, the Insurance Commission is implementing phased increases in risk-based and minimum capitalization requirements, along with more stringent reserving standards.
All (re) insurers are expected to comply with an increasing minimum net worth from PHP 550m ($11m) in 2016; going up to PHP 900m ($18m) in 2019; and ultimately, to PHP 1.3b ($26m) in 2022.
Second, there’s the forthcoming introduction of the new global insurance accounting standard, IFRS17, which takes effect in 2021.
The benefits of these regulations include:
- Strengthening the solvency of insurance companies; and
- Creating a regionally competitive Philippine insurance industry that is compliant with global best practices.
At the same time however, Philippine insurance companies would be facing significant challenges in the course of complying with these regulations.
For example, since 2016 there have been 11 local insurance companies either shut down by the Insurance Commission, or voluntarily surrendered their licenses. This was because they were unable to meet the capital requirements.
More local insurance firms potentially face the same fate unless they manage to acquire adequate capitalization.
There were also other changes in regulations by the Insurance Commision that have an impact on MAPFRE and the insurance industry as a whole. These include:
Strengthening AMLA (CL no.2018-48; CL no.2018-60) - This helps promote good governance in the insurance industry. It actually makes the industry as a whole more aligned with the policies of MAPFRE HQ.
Allowing BPO activities except for functions directly related to doing insurance business (CL No.2018-72) - this helps MIIC increase its flexibility as an organization. We can now focus more on our core competencies and speed up our business process.
Allowing insurance aggregators (CL No.2018-51) - this legalizes insurance price comparison sites; it helps promote compliance with mandated tariff rates.
Standardizing brokers agreement (advisory 13-2018) and revising penalties for breached rates(CL No.2018-67) - this regulation mandates intermediaries to share payment of penalties with insurers.