Underwriting Success

ll it takes is a glance at Esther Tan to know she is no ordinary woman. She carries about her the aura of a victor – someone who saw, came, and conquered. And hers is not yet a closed saga as she is still very active as the top honcho of Sun Life of Canada Philippines Inc. (Sun Life Philippines), the country’s second leading life insurance company.

Starting as an agent in October 1981, her initial sales broke Sun Life’s worldwide records – 130 new clients in one month – from a rookie at that. It earned her the opportunity to join Sun Life’s prestigious worldwide leaders’ conference in Rome which took others two years to qualify. Her record remains unsurpassed to this day.

She was promoted to the position of Unit Manager in January 1983 and, from then on, surfed through four other promotions before becoming the sales and marketing director of Sun Life Philippines in January 1991 – nine years after she joined the company. After another nine years of climbing the corporate ladder, her dedication to her work and outstanding people skills propelled her to Sun Life Philippines’s top post where she still continues to shine to this day.

Tan has more work than her predecessors. It is under her stewardship that the group diversified Philippine operations into wealth management, and quite recently into the manufacture and distribution of pre-need plans to cater to the needs of the broader market. Thus, aside from serving as the President and Chief Executive Officer of Sun Life Phils. (the life insurance company), Tan is also the concurrent Chairman of its subsidiaries, Sun Life Asset Management Company Inc. and Sun Life Financial Plans Inc. (the pre-need plans company).

Sun Life Phils. belongs to the Sun Life Financial groupof companies. The international conglomerate headquartered in Canada is one of the highest rated insurance companies, with an AA+ rating from Standard & Poor’s for financial strength and a triple A rating from Duff & Phelps for claims paying ability. It has assets under management totaling C$359 billion (US$277billion) at end-2003.

2003: Sun Life’s Banner Year As Yet

In terms of net income and return on equity (ROE), last year was the most profitable year in Sun Life’s 109 years of foothold in the country. The life insurance business posted a 42 percent growth in net income, reaching P2.1 billion versus 2002’s P1.4 billion. ROE on local statutory basis is at 41 percent. Revenues amounted to P12.9 billion, a four percent increase over previous year’s level. Investment income totaled P4.1 billion, up by 14 percent despite the volatility of the equities market. Assets stood at P42.8 billion, an increase of 22 percent over 2002.

For the group’s asset management company, fund sales was up by 30 percent to P2.6 billion; revenues amounted to P65.6 million, or a growth of 49 percent, and total assets under management grew by 57 percent to a total of P5.0 billion.

Sun Life Financial Plans Inc., meantime, is one of the fastest growing pre-need companies in the country. It ranked 8th in terms of last year’s performance in spite of it being launched only three years ago, and all that has been organic growth – not through acquisition. The company ended 2003 with revenues of P146 million, or a 57 percent increase over previous year’s, while trust funds rose to P207 million, a growth of 92 percent.

Sun Life Philippines is in fact the most profitable across all Sun Life subsidiaries in Asia. It is providing Asian operations the capital for growth.

THE INTERVIEW:

Esther Tan: There are only two ways to generate cash - it’s you at work, or your money at work

An interview with Philippine Business reveals Esther Tan’s wealth of knowledge in the industry she’s in – and more importantly, her secrets to success.

How would you describe the country’s insurance industry in terms of profitability and competition?

The insurance industry outlook remains upbeat since Filipinos are mostly under-insured. Only 20 percent of the population have any incidence of insurance. And the country’s per capita spending on life insurance – or what we call “life insurance density” – is only US$9 against Asia’s average of US$128, and the world’s average of US$247. There is still a lot of room for growth.

However, even as our economy has been registering stable growth rates, statistics reveals that virtually only 29 percent of Filipino families, with five members on the average, can afford to purchase any form of individual life insurance. That part of the population which may be considered as insurable belongs to the affluent and upper middle income group, and accounts for roughly 65 percent of total household income.

Also, competition is fierce owing to the influx of foreign players following the industry’s liberalization in 1995. This is despite the fact that of the 19 that came into the country, only ten are left. And from a high of 42 companies - both foreign and local - what is left now is a total

of 35. Still, we have 34 other companies in the arena within a market where total premium is less than one percent of GDP compared to the 5.8 percent average in Asia and 4.8 percent average worldwide. Growth in Asia is fueled by both China and India which registered a staggering 62 and 14 percent growth, respectively.

How about the mutual funds industry?

At this stage, we call the mutual funds industry a green field. There are only 18 funds available in the country today. Of which only three or four are really active. At the top would be the Ayala Fund, the Philam Fund, and the Sunlife Fund. There is also the GSIS Kabuhayan Fund, but that of course is government. In the private sector, the top funds are basically the first three I mentioned.

How is the behavior of the Filipino toward insurance or investment plans changing over the years?

We are more sophisticated now. With internet, technological sophistication, news at the touch of the finger tips, we are all wired to know what’s happening with the world around us.

If I were to compare insurance selling then and now: during my time, there was less shopping around. Prospects have faith in your company and take your word for it. But with so many new product offerings because of the advent of the other big players, customers now have more choices – more providers to do business with. Customers think with their feet: they go to the provider that gives them more value for their money.

Will insurance plan continue to be a relevant part of the Filipino’s investment scheme?

Very much so. I have always said that unless and until the day we have a contract ‘upstairs’ and know when we will meet our Creator, insurance will continue to be relevant. Or in more practical terms, as long as somebody loves somebody, there will be a need for insurance.

Think of it this way - there are only two ways to generate cash: it’s you at work, or your money at work, meaning through investment.

Not all of us are born with a silver spoon - maybe only the top one percent. The remaining 99 percent all need to protect their earning capacity. What is a better instrument than an insurance contract? So, it is imperative that Filipinos come to realize the importance of a life insurance plan even before thinking of investing. Protecting that earning capacity is first and foremost, only to be followed by wealth accumulation and management. 

Do you anticipate a change in the face of insurance especially in relation to some bad experiences in specific type of plans (e.g. education plans)?

No, not in the insurance industry. We are very well regulated by the Insurance Commission (IC). Our insurance commissioner, Atty. Eduardo Malinis, is very good at his job. His commission conducts regular audits and ensures that liabilities are properly reserved. Also, before we can launch any product, they closely examine product submissions prior to approval to ensure that the public is well protected.

Companies offering education plans and the rest of the pre-need industry are regulated by a different entity – the Securities and Exchange Commission. The deficiency in trust funds has been their main difficulty, but I don’t see the life insurance industry facing that problem. We have not heard in the longest time of any life insurance company falling into bad times or insolvency. There’s been a discussion for quite some time for the pre-need industry to be regulated by the Insurance Commission, but that seems to have not progressed yet. It will be good for the pre-need companies to be regulated by IC as well. This is because SEC has so many things under its wings. What the pre-need industry needs is a little bit more attention in terms of monitoring, etc.

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