AIA Philippines expects volatile market until next year on US recession fears

AIA PHILIPPINES Life and General Insurance Co., Inc. is expecting the volatility of the stock market to last until next year amid lingering recession concerns and elevated borrowing costs in the United States.

“What I can say is that it’s [going to] be really volatile. We know that there’s an upcoming recession in the US, but in the Philippines, we do not foresee any. What we see now, at least based on the patterns, usually the stock market goes up before a recession,” AIA Philippines Interim Chief Investment Officer Princess B. Balingit said in an interview on the sidelines of a media roundtable on Thursday.

However, she added that the market impact of the potential mild recession would only be benign as the country is more reliant on the movements of neighboring countries’ economies.

“With regard to the Philippines, we’re mostly tied to our nearby countries like China. We’re really banking on the increased consumption of China, which could really help us out in the Philippines,” she said.

While the US Federal Reserve no longer forecasts a recession, there are still chances of a mild recession in the US in the first quarter of next year, Ms. Balingit said, citing laggard economic data such as in the labor market.

Fed Chair Jerome H. Powell said on Wednesday that the central bank’s staff no longer forecast a US recession, and “we do have a shot” for inflation to return to target without high levels of job losses, Reuters reported.

“So the staff now has a noticeable slowdown in growth starting later this year in the forecast, but given the resilience of the economy recently, they are no longer forecasting a recession,” he said.

Ms. Balingit added that the Fed’s “higher for longer” stance on interest rates would also affect the market. She added that the Fed will likely do a “one and done” and keep its current rate for the rest of the year.

The Federal Reserve raised interest rates by a quarter of a percentage point on Wednesday as Mr. Powell said the economy still needed to slow and the labor market to weaken for inflation to “credibly” return to the US central bank’s 2% target.

The hike, the Fed’s 11th in its past 12 meetings, set the benchmark overnight interest rate in the 5.25%-5.5% range, a level last seen just before the 2007 housing market crash and which has not been consistently exceeded for about 22 years.

The US central bank has hiked rates by a cumulative 525 basis points since it began its tightening cycle in March last year.

Ms. Balingit noted that the market would still be driven by the financial sector and easing inflation.

“In the Philippines, we still see the financial industry prepping up our whole stock market. We see the earnings of banks and it’s what has been causing the uptick in the stock market in the past days or weeks,” she said.

AIA Philippines in the first quarter launched AIA+ Signature, a life insurance plan that guarantees benefits and cash payouts equal to 10% of a plan’s face amount.

The payouts can be claimed starting at the end of the fifth or sixth year of the plan, then every two years after, Ms. Balingit said during the media roundtable.

The premiums for AIA+ Signature will depend on the plan holder’s age, with a cheaper premium for younger holders, AIA Philippines Chief Agency Officer Tim E.M. Crisologo said.

The plan has a minimum face amount of P500,000, he added.

AIA+ Signature also provides double guaranteed life insurance and maturity benefits, as beneficiaries of the plan holder will receive a cash benefit equal to 200% of the plan’s face amount in the event of an untimely death, AIA Philippines added in a statement on Thursday.

Alternatively, if plan holders reach the age of 100 or the plan’s maturity, they will be entitled to receive 200% of the plan’s face amount.

AlA A+ Signature also features flexible payment terms and non-guaranteed dividends, the company said.

Investors may choose between five, 10, or 20 years to pay, allowing plan holders to budget their payments accordingly.

“At the same time, the product has non-guaranteed dividends which will be provided yearly [if any], determined by AlA based on the company’s performance and earnings,” AIA Philippines said.

While not guaranteed, the dividends can be accumulated over time and can be withdrawn whenever the plan holder chooses, Mr. Crisologo noted.

The product also has optional add-ons, including total and permanent disability (TPD) and personal accident (PA) coverage.

TPD offers total coverage for bodily injury or disease before the plan holder reaches the age of 65. PA provides an additional 100% benefit if the accident is due to public transportation or acts of nature, whichever comes first, before the plan holder reaches age 75.

AIA Philippines’ premium income stood at P3.88 billion at end-March, down by 75.28% from P15.68 billion at end-2022, data from the Insurance Commission showed. — Aaron Michael C. Sy