Low interest rates still dog PhillipLife Assurance
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PHILLIPLife Assurance (PhillipLife) is still burdened with an accumulated loss, despite injecting capital into the business over the past three years.
The loss has been caused by the downturn in interest rates, which has negatively affected the company’s capital adequacy ratio (CAR).
PhillipLife has gradually injected capital to strengthen its CAR since the takeover of Finansa Life Assurance in 2013.
The insurer increased its capital by a further Bt400 million on Monday, taking the registered capital to Bt2.83 billion.
PhillipLife president Prachaya Kulvanichpisit said the downturn in interest rates had eaten into the company’s capital, and that if it had not increased registered capital this week, its CAR would be 135 per cent, while the Office of Insurance Commission required a minimum of 140 per cent.
The company’s CAR now stands at 160 per cent-170 per cent following the latest capital injection, he said.
The capital increase is a guarantee to all stakeholders that PhillipLife remains committed to growth in the Thai life-insurance market, he added.
The company carries an accumulated loss of Bt1.6 billion because the interest-rate down-trend has had a negative impact on its reserve from underwriting.
However, Prachaya believes rates have bottomed out and that if they start to increase again next year, the company could be back in the black.
“For every interest-rate hike of 0.25 percentage point, the company will have a profit of Bt100 million,” he said.
PhillipLife must, however, clear its accumulated loss because the company plans to list on the stock market in the long run, he explained.
The insurer could inject a further Bt200 million if it were essential to do so in the future, as it has already received shareholder approval to consider a capital increase of up to this amount.
Such a move would lift PhillipLife’s CAR to 200 per cent, the president said.
Increasing capital is one means of sustaining the business, but the company also has to improve its distribution channels and seek out overseas investment opportunities in order to drive its return on investment, he stressed.
The current return on investment is 5.5 per cent, which Prachaya said could increase if it were able to unload non-performing assets owned by Finansa.
Moreover, the company will leverage the strength of its parent, Singapore-based Phillip Capital Group, to help provide suitable overseas investment opportunities.
PhillipLife has an investment portfolio of Bt8 billion, of which 4 per cent is overseas.
The company targets overall premium of Bt900 million this year, of which Bt250 million is new premium.
Agents are the main distribution channel for new premium, accounting for 90 per cent, he said, adding that the company will try to drive premium from the online channel and financial advisory services by leveraging Phillip Securities, an affiliate.
Phillip Securities was recently granted a brokering licence to sell both life and non-life insurance products.
In the initial phase of its insurance-brokerage activities, the securities company will sell PhillipLife’s products, before expanding to sell those of other insurers, Prachaya said.
