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US-based Pan-American Life (PALIG) recorded last year revenues in excess of US1bn for the first time in its history.
With operations in Costa Rica, Colombia, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Panama, and 13 Caribbean markets, Latin America and the Caribbean was a key driver of revenues for PALIG in 2016.
BNamericas spoke with José Suquet, PALIG's CEO and Chairman, about last year's stellar performance and what to expect from this fast-growing insurer in 2017.
BNamericas: PALIG had a very good 2016 with net income up 38% and revenues climbing 26%. What's behind this strong performance?
Suquet: We usually have very consistent results, which closely match our plan. We call ourselves a portfolio-company because we have different businesses in different geographical zones. It's very uncommon however that our four businesses post such a good performance as in 2016, so our spectacular results reflect the performance in all our lines: US life, US group life, international life, and international group life. All had a splendid year in terms of sales, prices and income.
BNamericas: Was it a big surprise that you surpassed your targets by a lot?
Suquet: Well we surpassed our projection by a wide margin. We expected a good year but not to increase our net income by 38%, so yes it was a surprise. We improved all our indicators, and increased the synergies with Mutual Trust after the merger with them that took place in 2015. Basically the synergies were in our investment portfolio. They had outsourced their investment functions for outside money managers, and we were able to in-source all that, so we not only obtained efficiencies in terms of fees but also increased our investment results significantly.
Also, a most special part for us was the performance of the collective lines: employees' benefits and group life that had a spectacular year.
We had a very good sales results also because we had a better-than-expected retention. We have a very adequate price platform, not cheap, but combined with a very good service, an extended network of suppliers in the region, and a medical management program, [which is] very important for managing the relationship with the client.
The international collective line really was the star: Of the four stars, the international performance was the brightest.
BNamerica: In Latina America and the Caribbean as well?
Suquet: Much more in Latin America. Less so in the Caribbean because we are introducing our brand and we are also changing the technology. When we entered the Caribbean markets in 2012, the technology we acquired was quite old, so we began changing the management system of our group insurance policies, but we had a good year there anyway. We are really pleased with the result in Latin America: all our four lines had a very good 2016, but the group lines in Latin America were the highlight.
BNamericas: Do you believe you can repeat last year's performance in 2017?
Suquet: That is very hard, we are putting on a lot of pressure, but to repeat the same 38% growth would be very hard. First because achieving such a result is very special and also because you have to keep on investing, in infrastructure, in technology, in our main workforce, in order to maintain that level of performance.
For this year our projection is to grow by 10%-15%, but that was our projection in 2016 also and we surpassed it by a wide margin. So we expect solid growth but perhaps something more reasonable.
Suquet: Panama, a small country, is for us number one in revenues. To give you an idea, of the US$1bn in revenues, Panama represents 11.3%, so it is very relevant for us.
But where we see the best growth opportunities are in the larger markets, where we have less penetration: Mexico and Colombia. There we plan to keep on investing to try to capture much more of those markets. Panama, however, has been very important.
Another small region, the English Caribbean, represents 10% of our revenues. Costa Rica, where we began doing business in 2011, reached revenues of over US$50mn last year. We have been very successful in the Costa Rican market.
Remember that insurance was a state monopoly, the INS [Instituto Nacional de Seguros], until the Central America free trade agreement. When Costa Rica opened its insurance market we were the first foreign insurance company [to enter].
BNamericas: Any particular plan for this year that you can share with us?
Suquet: We will continue with a constant strategy focused on life, accidents and health insurance, for the individual and corporate markets. The investment of our resources will be very constant, as we are not changing our strategy, we will not expand for instance into car insurance or to property insurance.
BNamericas: The insurance industry is of course linked with the economic performance of the countries, some of which are not going through a good period in Latin America.
Suquet: I see opportunities, because the US economy, it seems, will continue improving. GDP growth was below 2% for the past many years, but this year there is a chance of surpassing that, and I believe it will have an effect in the countries close to the US, and it would have a positive impact in the countries where we operate. The US is the largest commercial partner for these countries.
We see the possibility of a change in Ecuador that would help the economy, and of course Panama, Panama continues growing, it has enjoyed growth rates of 7%-10% the last 10 years.
The Mexican peso has improved these last days, I haven't followed the Colombian peso latest moves, but in these two countries things are working and they will offer a lot of opportunities.
So I'm optimistic, you have to be realistic but based on optimism. This will be the first year in a long time with tailwind in the US economy and we will have many factors helping us, [including] less regulations and bureaucracy.