After weathering the worst global financial crisis in history in 2008-2009, the Peruvian economy posted excellent economic results in 2010 with approximately nine percent growth. Although expansion in 2011 is expected to moderate somewhat, the country will continue an upward trend and offer opportunities to well positioned companies like Pacifico Seguros, one of Peru’s premier insurance providers.
A brief look at 2010’s figures for the Peruvian insurance industry shows exceptional year-on-year (YoY) growth.
This represents the tip of the iceberg, particularly considering the country’s low insurance penetration levels (1.5 percent of GDP compared to 3.2 percent and 2.1 percent for regional peers Chile and Colombia respectively). In 2010, the Peruvian Insurance industry grew 33 percent YoY with total direct premiums close to $2,622m. The Property and Casualty lines reported approximately $1,200m in direct premiums – which represents an 11 percent increase YoY – while the Health and Life segments registered premium growth above 20 percent and 60 percent respectively with regard to last year. In this scenario, the sector’s earnings exceeded $200m, posting an increase in excess of 40 percent YoY.
The context from 2011 and on will offer a host of opportunities for companies that are willing and able to put the client first. Pacifico Seguros, a subsidiary of Credicorp created in 1943 to serve Peru’s insurance needs, has taken on this challenge and is working side-by-side with its clients to help them understand and manage their risks.
To work effectively with its insured, Pacifico has developed a five-pillar framework (see box opposite) to govern interactions with customers. This client-based focus has led Pacifico to step up the game for innovative customer service. Improving on a familiar concept in the fast food business, the firm offers a 30 minutes or it’s free proposition: Pacifico guarantees SOAT policy delivery (Statutory Auto Liability Insurance) in 30 minutes or less or the client receives free coverage as long as he or she owns the vehicle. The company also backs its auto claims service pledge with a bonus: an advisor will arrive at the scene in 15 minutes or less or the client receives a $200 certificate to use on Pacifico products. Other added-value services include aero-medical evacuation, which is covered under Pacifico’s most comprehensive health plans. Initiatives like these are unrivaled on the local scene and reverberate positively throughout the company’s business lines, making Pacifico’s value propositions palpable to its clients.
The company’s efforts over the last five years have positioned Pacifico as the “top of mind” insurance alternative. Executives at the country’s major companies prefer Pacifico for all their insurance needs. This is reflected in local perception polls, including the Chamber of Commerce of Lima’s latest survey of executives, which named Pacifico “best insurance provider” in every category. Market studies conducted in 2010 by Ipsos Apoyo, the local affiliate of an international market research firm, confirm this perception reporting that Pacifico is the public and business leaders’ insurer of choice.
To build a solid operating foundation, Pacifico has implemented a framework for Enterprise Risk Management to manage risks holistically and seize opportunities that are in line with the company’s strategy. The firm also shares risk with world-class reinsurers: Lloyds of London, Munich Re, Swiss Re and Gen Re, among others. All of these companies provide Pacifico with invaluable expertise and guidance.
Currently, the company’s risk management approach focuses on strict compliance with regulation to protect stakeholders. Pacifico is adapting its risk-based capital measures to contemplate Solvency II requirements and is the only company in the Peruvian market to comply with the Sarbanes-Oxley Act. This ensures that Pacifico has adequate reserves, good corporate governance and transparent financial disclosure.
Pacifico’s risk management focus and its five-principle framework for customer relations have generated exceptional results. An analysis of the last five years’ net income shows that Pacifico’s compound annual growth rate (CAGR) was a significant 57 percent. In terms of direct premiums, a comparison of figures for 2005 and 2010 indicates a CAGR of 24 percent (from $359m in 2005 to $714m in 2010). A YoY assessment indicates that the company’s net income was $55m, which represents a 12.8 percent increase over the $49.2m reported in 2009. The loss ratio in 2010 was 66.3 percent, which compares favourably to the 65.2 percent in 2009. The combined ratio for the same period was 94.9 percent (96.9 percent in 2009).
These efforts have allowed Pacifico Seguros to become one of the region’s most solid and well-respected companies. In fact, two of the most prestigious international rating agencies, Moody’s and Fitch, have awarded Pacifico Seguros an investment grade rating. Additionally, many multi-national corporations trust Pacifico to cover their local insurance needs and act as a fronting insurer for their global programs.
To remain globally competitive, Pacifico is in the process of implementing an integration strategy with closely related businesses. Along these lines, the company has recently purchased two major clinics in Lima and one in the provinces as well as a full-service medical assistance provider. All of these efforts reflect Pacifico’s commitment to putting its customers first.
Looking ahead, the company’s strategy focuses on growth in personal lines through multi-channel distribution and enhancing its role as a financial planner. In the business segment, the emphasis will be on providing industry-specific risk management advisory services. Pacifico is aware of the need to increase penetration in the provinces, where the demand for insurance products is expected to grow as the country moves towards a more decentralized economic model. This will allow the company to extend the benefits of insurance to a more diverse and underserved client base.
Pacifico’s five-pillar framework
Build long-term relations
– Offer easy-to-understand, competitively priced products through the most productive and accessible sales channels.
Specialise in risk management
– Help clients understand and manage their risks
– Apply a disciplined approach to underwriting by leveraging the knowledge of staff certified by the American Institute for Chartered Property Casualty Underwriters and the Chartered Insurance Institute
Pay claims in a fair and timely way
– Process claims fairly and quickly, keeping the clients’ best interests in mind
Strive for excellence in customer service
– Consistently exceed client expectations with the support of simple and lean processes and cutting-edge IT platforms
Offer financial solidity
– Use sound and robust financial practices
– Give clients peace of mind: all the company’s financial obligations are backed by Pacifico as part of Credicorp
