Equity-linked insurance products gain popularity

By Doris C. Dumlao
Philippine Daily Inquirer

Filipinos are gobbling up more equity-laced variable unit-linked (VUL) insurance products in search of better yields given the prevailing low-interest rate environment.

This is also amid expectations that equities will continue to outperform fixed-income instruments for the long haul, driven by robust corporate earnings and a rosy macroeconomic backdrop, said Arleen May Guevara, chief investment officer at The Philippine American Life and General Insurance Co. (Philam Life).

Sharing the view that the Philippines is “still in a sweet spot,” Guevara said that corporate Philippines may grow its earnings by 12-14 percent in 2014.

This is despite the likely drag on earnings by the banking sector, which posted this year large extraordinary gains that will be difficult to replicate next year.

“The fundamentals are there. It still makes sense to invest in the Philippines and participate in that kind of growth,” Guevara said.

She noted that many analysts expect equities to still outperform fixed income instruments, at least in the next two to three years.

For Philam Life, 80 percent of its sales are now coming from VUL and 20 percent from traditional life insurance products. Around 70 percent of its VUL sales consist of equity-laced funds, including the balanced funds.

Eric Nicdao, senior agency manager at Philam Life, said this growing market preference for equity-laced funds reflected investors’ search for better yields.

VUL, a hybrid between a mutual fund and life insurance, becomes variable as investment returns depend on the market performance of the fund where the premium is invested.

With more funds to be unlocked from the Bangko Sentral ng Pilipinas’ special deposit accounts, Philam Life officials said there was great opportunity to look at investment options.

“An individual looking for capital growth should always look for investments that offer returns higher than inflation, to grow their money over time and reach their long-term financial goals,” Nicdao said.

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