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Philippines Insurance Report Q1 2009
Business Monitor International, March 2009, Pages: 94
BMI's Philippines Insurance Report provides independent forecasts and competitive intelligence on Philippines's insurance industry.
Although real GDP growth accelerated to 4.6% year-on-year (y-o-y) in Q308 – from 4.4% in the previous three months – we still retain our downbeat view of the Philippine economy. BMI continues to caution that risks to our current 4.3% growth forecast for 2009 remain firmly weighted to the downside, as domestic demand continues to weaken amid slowing remittances and growing economic uncertainty – and the performance of net exports remains lacklustre.
Real GDP growth accelerated from the six-year low of 4.4% y-o-y recorded in Q208 to 4.6% in the July-September period, as a sharp rebound in government spending and the ongoing strength of remittances from Filipinos working overseas helped to compensate for the continuing lacklustre performance of the export sector. However, on a seasonally adjusted sequential basis, economic growth decelerated from 1.9% quarter-on-quarter (q-o-q) to 0.9%, underscoring the fact that downside risks to economic activity still persist and that a further deceleration of growth momentum remains on the cards.
Indeed, one of the main factors explaining the rebound in economic activity in Q308 was the bounce in private consumption, the growth of which accelerated to 4.6% y-o-y from 4.1% in the previous quarter to contribute 3.5% to headline growth. The key driver of this was the ongoing strength of remittances from Filipinos working abroad, which account for approximately 10% of GDP and provide a significant source of income for those still residing in the country. These rose by 17.1% y-o-y in Q308 to US$4.03bn, but with the global economy set to continue decelerating over the coming quarters, we believe that remittance inflows are likely to wane.
The Global Financial Crisis is likely to affect the various segments of the global insurance industry in different ways. In many countries – especially in Europe – the coming recession points to softness in the non-life segment. In many cases, the numbers of policies may fall: there should be downwards pressure on premiums. By contrast, the main problem for the life segment – in almost all countries – is the extreme volatility of financial markets. Over the longer term, though, the fortunes of life insurance will recover – thanks to the secular growth of organised savings in most countries. China, where the larger insurance companies continue to achieve double-digit growth in premium income, is a good example of this. Some particular niches should also do well in the current environment, such as legal liability insurance.
In the Asia Pacific, we profile 23 companies. These are AEGON, AIG, Allianz, Aviva, AXA, Cardif, Fortis, Generali, Groupama, HDI-Gerling, HSBC Insurance, ING Group, Liberty Mutual, Manulife, MetLife, Prudential Financial, Prudential plc, QBE, RSA, Sun Life Financial, The Hartford, Principal Financial Group and Zurich Financial Services.
We also look at various local firms that are active in the region: some of these companies rank, in terms of the premiums that they write, among the largest in the world.
For almost all the countries whose reports we are updating, we are also able to include actual data for calendar 2007: this was not the case for our Q208 reports.
In 2008, total premiums in the Philippines rose by 10% to PHP128,217mn. Non-life premiums rose by 19% to PHP47,498mn, while life premiums rose by 6% to an estimated PHP80,719mn.
Between now and the end of the forecast period, we expect that annual non-life premiums will grow by PHP26,147.62mn, while annual life premiums should fall by PHP1,119.12mn. Growth in non-life premiums should be driven by the general growth in nominal GDP plus a rise in non-life penetration from the current level of 0.57% to 0.75%. Growth in life premiums should be driven by the change in the overall population and a rise in life density from US$19.33 to US$70.00 per capita. BMI’s Insurance Business Environment Rating is 50.9.
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