In the following interview, Mario Ventura, general manager of Protect SecurityInsurance Company, talks about the growth of the company, as well as the SBS measure for credit life insurance.
What have been the reasons for the growth of private income insurance?
It is very interesting what has happened with private income insurance. These are one of the main causes of the growth of the insurance market this year. What has been happening is that the product has become very attractive. Initially it arose as a reaction from insurers to the withdrawals of AFP funds with the Law of 95.5, but as they have had greater distribution, clients have become more familiar with it and a kind of recommendation has been generated among clients in the high segment. who have savings. More and more funds are entering not only from the AFPs, but from sales of properties, shares and personal assets as a source of diversification and search for profitability.
That is, said insurance falls within the category of wealth management…
Yes, it is a product of the wealth advisory sphere and not only of the insurance sphere itself. That explains the almost 100% growth it has had this year. Protecta is also part of this trend, since it commercially offers its clients and new clients these rentals.
How do these insurances operate?
When one makes an investment in life insurance or in a mutual fund or in the AFP itself, it has volatility, which is why the share value is calculated. This volatility generates anxiety in some types of less sophisticated clients or those who have a lot of assets committed. However, private income has zero volatility. Although there is still a portfolio of bonds and other investment assets behind it, the insurer guarantees a return. Then, the client in their policy receives a schedule with recurring or fixed monthly payments, so they do not have to worry about the volatility of the value of the underlying (asset in which they invest) or an eventual default. That is, if a bond goes into loss and does not pay, the insurer has to assume that loss and does not pass it on to the client.
According to the SBS, the marketing of Protecta’s private income products has grown more than 160%. What does it obey?
We have a base of more than 3,000 clients, more than S/1,200 million in reservations in this product and, in reality, we even have recurring clients. These are due to several factors: one is the service and another is the appropriate profitability and low risk profiles. This is a product with guaranteed returns. Unlike a life annuity, this is like a ‘lego’, because one can choose a series of characteristics, such as terms, currencies, the way of receiving the income, optional insurance coverage, etc. This universe of flexibility, together with good advice, profitability and zero volatilities, has allowed Protecta to get ahead of this trend. We have more or less 15% of the market. We are the third company in private rentals, despite being a younger brand, which will be celebrating 17 years in the market.
What size funds and terms are we talking about?
These products have average tickets per client or per policy above between US$100 thousand and US$200 thousand. There are also clients who have US$50 thousand and US$20 thousand. Diversification is a concept that should be on all the investments a person makes. No matter how good the company, the product and everything, it is always good to diversify. Therefore, it is recommended that between 50% and 70% of the portfolio be invested in private income; That another proportion could perhaps be in stocks if the person is risk tolerant and a little in short-term liquidity, that is, in banking or similar. Our sales force responsibly explains it that way to customers. It is not about selling for the sake of selling, but what is sought is sustainability and taking care of the brand name through responsible advice, which is aligned with the best interests of the saver.
How have the other insurance businesses fared?
The strategy has been very consistent in the sense of gaining scale, digitizing the company, making processes efficient and generating profitability, precisely to finance growth. And that is what has happened. Seven years ago we were a company with S/900 million in assets and S/80 million in equity. Today we are a company with S/4,300 million in assets and S/320 million in equity, and we sell 5 times more than 7 years ago. We sell almost S/700 million. This growth has been based on maintaining an important position in annuities, where we are the second operator, growing in private income and diversifying into mass products. And today we are developing the deployment of the commercial branch at the national level.
Who supports Protecta Security?
We have Grupo Security as our main shareholder, which is a financial services group that has been in the market for more than 30 years and that, in addition, is now being incorporated via merger into another larger group, with which we are going to be part of a multinational financial services group valued at more than US$3 billion and with assets of almost US$40 billion. That will happen towards the second quarter of next year. We have great support from our controlling shareholder and also from the founding shareholder: the ACP Group, which has more than 50 years in the market. They are two groups that have demonstrated a long-term view. In 17 years Protecta has never distributed a dividend. Even shareholders have made cash capital contributions.
The SBS has established that, except for mortgages, credit lien insurance will be optional for the rest of the credits. What would be the impact?
What has happened in the case of credit life insurance is that, as there are certain captive relationships between the financial entities and the linked insurers, an environment has been generated where the intermediation margins of the product tend to be, on average, high, which which has attracted the attention of the regulator. Up to this point, the regulator’s reaction is totally correct. Now, I believe that the solution that the regulator is giving is not ideal, because we are a country with a very low level of insurance. The solution is to generate greater competition, and competition can be generated in different ways, but it is not the path of optionality.
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