Performance Report
Board of Directors | History | Mission/Vision

Insurance Operations | Financial Operations | Operating Highlights | Conclusion

I n t r o d u c t i o n

In CY 2007, sustained favorable economic conditions such as stable interest rates and a strong peso, a resilient agriculture sector, vibrant industry and services sector plus election-related spending and intensified infrastructure investments resulted in the impressive growth of the economy by 7.3% GDP (Gross Domestic Product), the highest in 31 years.

Notwithstanding seemingly insurmountable challenges predominated by the mandated increase in the capitalization and net worth levels of all insurance companies, the insurance industry appeared to perform reasonably well.

imilarly, as it continued to prevail over difficulties in its operating environment in 2007, AFPGen upheld its operational and financial strength.

I.  INSURANCE OPERATIONS

Production

Premiums Written totaled P106.470M, higher by P13.677M or 15% than the previous year's P92.973M. The improvement in premium production performance came from reinsurance business and in Miscellaneous Lines specifically Marine Hull and Aviation Insurance.

Fire Insurance brought in the bulk of production at 48% or P50.770M followed by Motor Car with 28% or P29.667M. Miscellaneous lines shared 15% or P15.985M and Bonds at 9% or P10.048M.

By market, the AFP brought in P35.635M or 33%, Individual Market generated P34.043M or 32%, PNP contributed P19.190M or 18% and Reinsurance brought in 17% or P17.602M.

From the AFP market, the PA brought in P13.343M followed by the PN with P7.452M. The other services brought in the following: AFPWSSUS – P5.833M, PAF – P4.195M, and Others – P4.812M.

thers are broken down as follows: PMA – P0.765M; AFPMC – P2.405M; AFPHA/HB – P0.657M; PSG – P0.969M; and AFP Dental Service – P0.016M.

Losses and Claims

Losses and Claims were recorded at P19.992M, rising by P4.158M or 26% from the P15.834M in 2006. The main component of the increase is the P10.70M provision made for probable liability of the company with the Philippine National Oil Company Shipping and Transport Corporation for a Bidder's Bond issued. Excluding this provision, Losses and Claims would have significantly dropped to P9.292M or by P6.542M or 41% from the amount incurred in 2006.

Underwriting Income

Despite the rise in Losses and Claims, Underwriting Income climbed to P51.642M or by P4.355M or 9% from the P47.287M in CY 2006. The increase is mainly due to the improvement in premium generation during the year.

II.  FINANCIAL OPERATIONS

Investment and Other Income

Investment and Other Income earned in CY 2007 was P22.087M, up by P0.153M or 1% from the P21.934M of the preceding year. Given the prevailing period of low interest rates for bank placements, t he increase is mainly due to revenues obtained from the company's participation in insurance consortia, notably, the Home Development Mutual Fund (HDMF) and UNITRANS at P2.462M and P1.578M, respectively.

Operating Expense

Operating Expenses during the year reached P61.955M, up by P3.568M or 6% from the P58.387M in 2006. The increase is largely attributable to the recognition of impairment losses on investment made with the AFP Theater and uncollected accounts from the Public Safety and Security Administration (PPSA) and Philippine National Police (PNP) which were charged under Operating Expenses.

Net Income

Net Income realized was P7.277M which managed to increase by P0.110M or 2% from the P7.167M in 2006. The improvement may be negligible but if the P10.70M loss provision for the Bidder's Bond Claim by PNOC Shipping and Transport Corp was not recognized Net Income would have been posted at P17.977M, which would have translated to a substantial improvement in Net Income by P10.810M or by 151% over the level attained in CY 2006.

GROWTH/FINANCIAL STABILITY

Total Assets stood at P351.582M, higher by P29.910M or 9% from the 2006 year-end figure of P321.672M due to higher deferred reinsurance premiums and insurance balances receivable.

Liabilities posted at P118.106M rising by P21.557M or 22% from the P96.549M in 2006 mainly as an effect of higher amounts for reserve for unearned premiums, losses and claims payable and accounts payable.

Stockholders' Equity grew to P233.476M or by P8.353M or 4% from the P225.123M in 2006.

OPERATING HIGHLIGHTS

Change in Management

In December 2007, a new administration under Rear Admiral Ludovico F Franco AFP (Ret), was ushered in as he assumed the presidency after Mr Fiorello S Adriano retired in the preceding month. In June 2007, Commo Antonio C Lalisan, PCG (Ret) took over as Executive Vice-President and General Manager (EVP/GM) several months after MGen Cicero L Castellano, AFP (Ret) resigned from the position. The new team of leaders brought expectations of sustained if not enhanced operational accomplishments for AFPGen in 2008 and onwards.

Increase in Capital Stock to P150M

In response to the call of the Department of Finance for the strengthening of insurance companies through a competitive level of capitalization to improve their insuring capacity, the increase of the company's capitalization from One Hundred Million Pesos (P100M) to One Hundred Fifty Million Pesos (P150M) through the declaration of stock dividend in the amount of Fifty Million Pesos (P50M) to its stockholders on record as of December 31, 2007 was proposed and accordingly approved by the Insurance Commission. A ll non-life insurance companies are obliged to meet the prescribed minimum paid-up requirements of P125 million, P175 million and P250 million by yearends 2009, 2010 and 2011, respectively.

Participation in Insurance Consortia

AFPGen continued to take part in the undertakings of insurance consortia in order to improve revenues. It maintained its active membership with the Universal Insurance Transport and Accident Agency Solutions, Incorporated (UNITRANS) Consortium and the Home Development Mutual Fund (HDMF) Fire Insurance Pool.

Automation Project

The customization and enhancement of the Phoenix General Insurance System, the company's automation project for its core business processes remained a priority project during the year.

Sale of AFPGen Christmas Card 2007 with Personal Accident Insurance

Also a means of boosting revenues, the AFPGen Christmas Card with Personal Accident Insurance were aggressively marketed at the latter part of the year. The Christmas Card Personal Accident Plan conveys the season's greeting and provides up to P10,000.00 worth of benefits in case of accidental loss of life, limbs and sight within the coverage period of one year to its recipients. Approximately, 43,000 cards were sold.

Other Contributions to the AFP / PNP and the Community

Aside from the prompt payment of claims, AFPGen continued to fulfill its corporate social responsibilities. It extended financial and material donations to the AFP and PNP and their various units. Also, under the Prompt Payment Program for the AFP and PNP, office equipment and supplies were granted. The company also continued to give modest financial and material donations in support of the activities and projects of civic and social organizations.

Human Resource Administration, Training and Development

Employees were sent to seminars, training programs and specialized courses in insurance. Likewise, employee compensation and benefits were promptly granted.

C o n c l u s i o n

AFPGen's overall performance in another challenging year remained favorable. Aware of the ever-increasing and more arduous challenges ahead, it will maintain an upbeat posture to ensure not only its survival and viability but also greater service, productivity and growth.

ith the unwavering confidence and steadfast support of the military and police organizations led by the Chief of Staff, AFP and Chief, PNP, the military and police personnel and their dependents, AFPGen will endeavor to stand firm to its mission of service and security in the years ahead.

LUDOVICO F FRANCO
President

[back to top]