Performance Report
Board of Directors | History | Mission/Vision

Insurance Operations | Financial Operations | Operating Highlights | SYNTHESIS

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

Although Asian financial institutions had little exposure to the esoteric financial instruments that have sent the world marktets into spiral early 2008, the effect of the global financial crisis for the whole year cannot be overemphasized. To cope with the anticipated effects to the local non-life insurance environment, AFPGEN employed a risk-management approach and aimed to minimize costs and reduce exoenses. AFPGEN upholds its resilient posture by strengthening its insurance and financial operations.

I.  INSURANCE OPERATIONS

Production

Premiums Written at P99.481M, lower by P6.989M or 7% than the P106.470M as of December 2007 and by P39.331M or 28% compared to the P138.812M target as an effect of the unattained production from the following accounts: Individual Market in all lines - P2.267M; PNP Market in all lines - P5.745M; Corporate accounts particularly in PCG Marine Hull - P10.661M; Marine Cargo - P6.000M; PCG Aviation - P4.000M; Comprehensive General Liability - P1.120M and Reinsurance in all lines - P9.379M.

Fire Insurance brought in the bulk of production at 49% or P48.456M followed by Motor Car with 29% or P28.740M. Miscellaneous lines shared 13% or P12.974M and Bonds line contributed 9% or P9.311M.

By market, the AFP brought in P40.545M or 41%, Corporate market contributed P20.469M or 20%, PNP shared P15.687M or 16%, Individual brought in P13.780M or 14%, and Reinsurance accounted P9.000M or 9%.

From the AFP market, the PA brought in P13.870M followed by the PN with P8.187M. The other services brought in the following: PAF - P7.208M; AFPWSSUS – P5.746M and Others – P5.534M.

Others are broken down to: PMA – P0.775M; AFPMC – P2.524M; AFP Housing Authority – P1.028M; PSG – P1.191M and AFP Dental Service – P0.016M.

Premiums contributed by AFPGEN's agents and solicitors amounted to P15.069M or 44% of the total premiums generated from the Non-AFP Individual and Corporate Markets .

Premium Receivables

Premiums Receivables as of December 31, 2009 amounted to P7.019M from the AFP and P6.052M from the PNP.

Breakdown of Receivables from the AFP are as follows: PA - P2.416M; PAF - P0.937M; AFPWSSUS - P3.380M; PN - P0.004M and Others - P0.282M.

Meanwhile, Receivables from the PNP are: PNP Central - P1.415M; NCRPO - P0.843 and PROs - P3.794M .

Losses and Claims

Losses and Claims were recorded at P12.467M. It was lower by P7.525M or 38% from the P19.992 losses/claims in 2007.

Underwriting Income

Underwriting Income climbed to P62.945M or by P11.303M or 22% from P51.642M in CY 2007. The increase is mainly due to higher risk retention management and a lower amount of Losses incurred.

II.  FINANCIAL OPERATIONS

Investment and Other Income

Investment and Other Income realized for the period was P39.891M higher by P17.804M or 81% than the previous year's P22.087M and by P19.891M or 99% compared to the P20.000M target. As cited in previous months, the marked improvement is due to the P4.763M interest income received from the former Pioneer Savings and Loan Bank in June, rise in interest income earned from bonds and time deposit placements due to higher investible funds and income derived from the company's insurance consortia participation.

Expenses

Total Expenses amounted to P86.823M, broken down into P21.447M in Underwriting Expenses and P65.376M in General Expenses.

Underwriting Expenses at P21.447M went down by P7.363M or 26% from the P28.810M as of December 2007. Compared to the P29.055M budget, the Amount is lower by 7.608M or 26%.

General Expenses amounted to P65.376M which rose by P3.421 or 6% from the P61.955M as of December 2007 due to the provision for Impairment Losses of Premiums Receivables and provision for the DOLE case. Compared to the P59.959M budget, the amount was higher by P5.417M or 9%.

Net Income

Net Income realized was recorded at P32.010M, notably exceeding by P24.734M or 340% the P7.276M as of December 2007 due to a higher underwriting income attainment, higher retention risk maanagement, lower loss ratio and the substantial rise in investment and other income earned. This amount was likewise higher by P12.903M or by 67% than the P19.107M target due to the same reason.

Growth/Financial Stability

Total Assets for the period grew to P371.867M or by P20.285M or 6% from the 2007 yearend figure of P351.582M. This is largely due to the increase in current investments and other assets.

Liabilities went down to P109.282M or by P8.824M or 7% from the P118.106M as of yearend 2007.

III. OPERATING HIGHLIGHTS

Increasing Capital Stock to P150M

In response to the call of the Department of Finance and the Insurance Commission to improve the insuring capacity of non-life insurance companies through a competitive level of capitalization, the Authorized Capital Stock of the Company from P100M was increased to P150M, all paid up, which were taken from the unrestricted retained earnings of the company with the resultant fractional shares to be assigned/transferred to the majority stockholder, AFPMBAI.

Participation in Insurance Consortia

AFPGen actively participated in insurance consortia to improve productivity and growth. 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.

Managing Insurance and Financial Risks

AFPGEN controlled and minimized insurance risk through its underwriting strategy, adequate reinsurance arrangements and proactive claims handling. AFPGEN has developed its underwriting strategy to diversify the type of insurance risk accepted. The strategy is geared towards a wide premium base from both commercial and personal lines so that there is a sufficient spread of risks in its book to cushion the adverse effects of catastrophic losses.

Strengthening Audit Mechanisms

To strengthen the company's external and internal audit mechanisms, KPMG International - Manabat San Agustin & Co was desginated as the new External Auditor while the Audit Committee was created consequently the Audit Committee Charter was approved for implementation.

Promoting Corporate Social Responsibility

As part of strengthening the company's advocacy for Corporate Social Responsibility, financial and material donations were given to AFP and PNP and their various units such as P50,000 to the 1st Marine Brigade and 601st Brigade, P98,545.79 worth of medical devices to AFPMC and P50,000 worth of Christmas goodies to AFP and PNP personnel at AFPMC and PNP General Hospital.

Professionalizing Human Resources

In keeping up with the changing times, HR Policies were reviewed and revisited while focusing on increasing the prodictivity of employees as the Human Resources. The morale and welfare of the company's Human Resources were boosted by granting the Productivity and Anniversary Bonuses to all employees. Deserving employees were promoted to key management positions to support their career development. Employees were likewise sent to seminars, trainings, and specialized courses in insurance to further professionalize the Human Resources.

Re-engineering Processes and Procedures

Business processes are continuously re-engineered through constant review of policies and procedures and the enhancement and modification of the Phoenix General Insurance System to suit the peculiarities for weach business process.

IV. SYNTHESIS

Despite the economic challenges which daunted the international and local financial arena for the year, AFPGEN stood resilient by instituting a risk-management approach. Cost and expenses were reduced with the end in view of achieving the projected targets. For the year, Losses and Claims, Underwriting Expenses, and Liabilities were reduced while increasing the Underwriting Income, Investment and Other Income, thus resulting to a remarkably higher Net Income for the year.

With the steadfast confidence led by the Chief of Staff, AFP and the Chief, PNP, AFPGEN continuously finds innovative ways to achieve its vision and mossion and maintains its robust posture by providing the non-life insurance requirements of the military and police personnel, their dependents, and the private sector, as well.

LUDOVICO F FRANCO
President & CEO

[back to top]