Expensive nonlife-insurance policies as house abandons tax-rate cuts

Philippine Insurers and Reinsurers Association (Pira) is no longer hoping the proposed bill on the lowering of tax rate on nonlife-insurance products will ever be enacted under President Aquino. Pira Chairman Michael Rellosa said many of the country’s legislators are already in campaign mode, as indicated by the lack of quorum at the House of Representatives the past few months.

The proposed bill that will lower the tax on nonlife-insurance products had been pending during the 16th Congress, no matter the strong support from Insurance Commissioner Emmanuel F. Dooc.

The tax imposed on nonlife-insurance products in the Philippines is said to be the highest in the world, equal to 24.5 percent of the total premium paid for nonlife-insurance products, and 26.5 percent for fire insurance.

Nonlife-insurance products are levied a 12-percent  value-added tax and another 12.5-percent documentary-stamp tax. Fire insurance is slapped an additional 2-percent fire service tax. On top of these taxes, local governments also impose 0.15 percent up to 0.17 percent in municipal tax for property insurance.

Singapore only imposes a tax of 7 percent on nonlife-insurance policies, while Thailand imposes 11.3 percent.

Finance Secretary Cesar V. Purisima was earlier reported to have opposed the lowering of the tax, although he once supported the proposed 5-percent tax on nonlife-insurance products, which was a compromise with the insurance industry, which earlier proposed for a 3-percent tax.

The lowering of the tax on nonlife-insurance products would have been appropriate with the previous lowering of taxes by the Arroyo administration on life-insurance policies, with the old tax of 5 percent being lowered further to only 2 percent to boost the competitiveness of the country’s life-insurance industry.

Rellosa said the lowering of the tax on nonlife-insurance premium would also have been in line with the government’s new policy of promoting microinsurance as a tool for the financial inclusion of the poor, because most microinsurance products are nonlife-insurance products that provide cover for property loss.

But, as  it turns out, with the shelving of the measure on  nonlife-insurance  products, these were touted as the poor man’s protection against loss of property and income during times of natural calamities.

Such will continue to be levied a very high tax rate of 24.5 percent.

-- Business Mirror

AXA Life Insurance buys Charter Ping An Insurance Corporation

AXA Philippines is acquiring Charter Ping An for Php2.3 billion, marking the consolidation of the Ty family’s life and non-life insurance businesses under one operation. The transaction, which will allow AXA Philippines a joint venture between GT Capital Holdings Inc.,  leading global insurance group  AXA and Metropolitan Bank & Trust Co. to own 100 percent of Charter Ping An, is subject to customary closing conditions, including the receipt of regulatory approvals.

“By consolidating its life and non-life insurance businesses, GT Capital further strengthens its presence in the country’s underpenetrated yet fast growing insurance industry. We will clearly benefit from the global insurance expertise of AXA, the local market knowledge and network of Charter Ping An, and the cross- selling opportunities among our component companies,” said GT Capital chairman Francisco C. Sebastian.

The deal is expected to be completed in the first quarter of 2016, GT Capital said in a disclosure to the Philippine Stock Exchange.

“Until then, all operations of Charter Ping An and AXA Philippines will be business as usual and shall remain separate, as they currently are,” GT Capital said.

The move will allow AXA Philippines, the second life insurance company in the country, to expand into property and casualty insurance.

Charter Ping An is currently the fourth largest non-life insurance company in terms of net premiums written and premiums earned.

AXA Philippines has been operating in the country since 1999, focused on the life insurance business and providing solutions for savings and investments, health, education, income protection, and retirement. It pioneered bancassurance operations in the Philippines, which is the distribution of insurance products through banks.

“We are very excited about this development, as now we can offer our customers a complete suite of protection products. From protecting themselves, their loved ones, their financial hopes and dreams, and now even their hard-earned assets and properties, we at AXA can be more present in their lives, “said AXA Philippines president and CEO Rien Hermans.

“With the entry into non-life insurance, we see AXA Philippines building on the top five position of Charter Ping An and definitely become a major player and be a top three company in a few years,” Hermans added.

AXA is ranked as the number one global insurance brand for seven consecutive years, from 2009-2015. According to the 2015 Fortune Global 500 list, AXA is the 20th largest corporation and 29th in the 2015 Forbes Global 2000 rankings.

For his part, AXA Asia regional CEO Jean-Louis Laurent Josi said the AXA group’s  “close partnership with GT Capital and Metrobank has enabled us to build a strong presence in this high-growth market and this milestone will create new opportunities for further growth, as well as to help enhance the local insurance sector with a wider range of offerings.”

At present, AXA Philippines has more than 630,000 insured. AXA Philippines has more than 2,100 financial advisers in 32 branches and 500 financial executives in over 750 Metrobank and PSBank branches nationwide.

GT Capital is a listed major Philippine conglomerate with interests in banking, property development, power generation, automotive assembly, importation, wholesaling, dealership, and financing, and life and non-life insurance. It is the primary vehicle for the holding and management of the diversified business interests of the Ty family in the Philippines.

Two groups qualify for accreditation for vehicle insurance

Two insurance consortia are poised to bag deals for the country‘s public utility vehicles (PUVs), sealing their foothold over a market that will likely exceed 400,000 units in three years due to online ride-hailing applications.

“Four consortia filed for accreditation yesterday and two of them submitted complete documents based on our approved instructions: those led by Passenger Accident Management and Insurance Agency, Inc. (PAMI) and SCCI Management and Insurance Agency Corp.,“Land Transportation Franchising & Regulatory Board (LTFRB) Chairman Winston M. Ginez told the House Committee on Metro Manila Development yesterday at the House of Representatives.

PAMI‘s lead insurance company is UCPB General Insurance Company, Inc. while SCCI is with Allied Banker‘s Insurance Corp.

“Two other groups wanted to participate, but their boxes weren‘t opened because of incomplete documents. These are managed by Paramount General Insurance Corp.; and High Definition Technologies, Inc.,“he added.

Mr. Ginez added that they can file a motion for reconsideration within five days.

PUVs and online-based transport providers should have insurance but it can only be provided by firms that are accredited under the 2015-2018 Passenger Personal Accident Insurance Program (PPAIP).

“The number of units is around 400,000. It might also exceed [that level] because the number of TNVS (Transportation Network Vehicle Service) is increasing,“Mr. Ginez said in an interview in the same venue.

“It depends on the consortia‘s marketing skills and how they will operate [to attract clients]. It‘s a free market,“he added.

The LTFRB board increased the death benefit of a passenger, driver or conductor to Php200,000 from Php150,000, “as well other benefits for bodily injury.“It also hiked each consortium‘s claim fund to Php40 million from Php30 million.

“This is to ensure that all claims for death benefits and other injuries will be paid by LTFRB‘s accredited insurance providers even if the latter‘s operations will not be able to honor such claims,“the agency said in a statement yesterday.

It said there will be no increase in premiums for all PUVs, except buses. The accreditation process is to ensure that all passengers are covered by reputable insurance companies ready to meet whatever claims arise, Mr. Ginez said.

The enhanced 2015-2018 LTFRB PPAIP will take effect on Nov. 17.

-- Business World

EastWest gets okay for insurance brokerage

Last July, EastWest gets SEC okay for insurance brokerage, and has secured another requisite approval to set up its planned wholly owned non-life insurance brokerage subsidiary. East West Insurance, a wholly owned subsidiary of East West Banking Corporation, will primarily engage in the business of non-life insurance brokerage.

EastWest Bank said this subsidiary will be separate from its planned joint venture life insurance firm. Also, the Bangko Sentral ng Pilipinas (BSP), the country’s central bank, has approved the initial equity investment of East West Banking Corporation (PSE:EW) in the proposed joint venture with Ageas Insurance International.

Last May, the listed lender announced that it has entered into a joint venture agreement with Belgium-based insurer Ageas Insurance International N.V. (Ageas) to up a new life insurance company in the Philippines which is seen starting operations by the end of the year.

The aim is to build the premier Bancassurance business in the Philippines offering tailor-made insurance solutions to the customers of EW Bank supported by high quality service and state-of-art technology.

The insurance business will benefit from EW Bank’s fast growing customer base. With more than 400 branch stores, the bank has the 7th largest distribution network amongst banks in the Philippines, the bank said in a statement.

Ageas will contribute its proven Bancassurance skills and best practices from its successful businesses in Asia and Europe.
“We have always viewed Bancassurance as an integral part of our business model. We see it as a necessary ingredient to have complete product offerings for the financial services needs of our target market segments. Specifically, the consumer and middle market corporate segments. We are pleased to partner with Ageas, one of the major insurance providers in the world,” said Tony C. Moncupa Jr., President and CEO of EW Bank, during the signing of the agreement earlier.

“The potential is huge given that the current Life insurance penetration rate of around 1.5% is one of the lowest in Asia. We are very pleased to be a partner to EW Bank which has a strong management and clear ambition to grow. We are convinced that together we can deliver another successful partnership in Asia,” Gary Crist, CEO of Ageas Asia was quoted as saying.

The new insurance company to be named EastWest Ageas Life, subject to the requisite regulatory approvals, will enable EastWest Bank to offer life insurance products to its customers and increase its revenue base and market share, the listed lender said in an earlier disclosure to the Philippine Stock Exchange.

The initial paid-in capital of the joint venture will be Php2 billion and EastWest will hold 50% minus one share, while Ageas will hold 50% plus one share. EastWest Bank said it will get approximately 50% income share from the life insurance company, it said.

The partnership will be for a 20-year exclusive distribution agreement, EastWest Bank said.

EastWest Bank posted a net income of Php2.073 billion in 2014, which is almost flat compared to the Php2.056 billion it posted in 2013 as lower trading gains dragged on its profit.