FOR PUBLISH

      

FOR MY PUBLISH GROUPMATES

        In the light of the recent unprecedented stock market volatility, and its impact on the share prices of every company, many of the people are now thinking twice if they are going to invest their money in insurance to secure their future. Many are afraid that what happened to AIG and Philam Life will happen to other insurance companies. It made people think that if it happened to AIG, then it would also happen to other much smaller companies. In these difficult circumstances, some insurance companies’ strengths are highlighted.

           

I got a chance interview my auntie, Myrna Reyes, who works for one of the insurance companies here in the Philippines. It was a short but knowledgeable interview. She was kind enough to explain to me things that I did not understand and never heard of.

           

I first asked her if the number of people buying insurance lessened. She told me that compared to the figures before, the people were know hesitant if they should be buying insurance with the market’s current situation. Although the numbers have dropped, but not enormously, their agents are still able to ‘sell’.

 

Mrs. Reyes also told me that if there are people who are uncertain in buying insurance policies, there are also risk-takers. They buy insurance at a very low rate so that when the market stabilizes then the interest rates will also go up. She explained to me that most insurance today are now tied-in with interests, they are invested in other companies.

 

Instead of selling the usual insurance policies, they are selling “traditional life insurance”. With the traditional life insurance, “the policy holders are more guaranteed and protected. They are guaranteed to get a certain amount in the future.” She said that “With the current market, it is much safer to ‘invest’ your money in insurance, rather than to ‘invest’ your money in banks. In banks you are not guaranteed of anything. If you pull out your investments you do not gain anything, and sometimes you even lose.”

           

“Did the economic crisis directly affected the company you are working for”, I asked her. She said that in some ways the economic crisis in the United States have affected their company but not directly. She told me that their company, in spite of the current market situation, still has an “AAA” rating (Standard & Poors Agency standards), they are one of the only two in the world to hold that rating.

 

My auntie said that, “Our company remains conservatively reserved, has a high quality balance sheet and strong leading franchises around the world.” She also said that, “Since quarter end, equity markets have deteriorated further which will have an unfavorable impact on the company’s capital ratios unless these markets recover. The company continues to manage its regulatory capital, however, it has no plans to issue common equity.” She told me that their company has reduced its security lending activities in light of heightened market uncertainty.

           

            I also asked her if people are now converting their insurance plans to cash. She answered that there are few people who are already thinking of converting their insurance plans into cash. But she said that they assure them that their company is “fully self-funded”.

 

She said that since their company is under the insurance commission, their policy holders are rest assured that whatever happens they will get something because their the company “businesses generate enough cash flow to sustain operations without being dependent on the commercial paper markets or other short-term funding arrangements.” She also emphasized that since they under the insurance commission, the rules are much stricter than those companies who are not under the commission.