Audited Financial Statements

Transcription

QBE Seaboard
Insurance
Philippines, Inc.
Financial Statements
As at and for the years ended December 31, 2014 and 2013
QBE Seaboard Insurance Philippines, Inc.
Statements of Financial Position
December 31, 2014 and 2013
(All amounts in Philippine Peso)
Notes
2014
2013
ASSETS
CASH AND CASH EQUIVALENTS
6
660,321,355
592,792,751
INVESTMENTS
7
408,644,623
328,129,011
LOANS AND RECEIVABLES, net
8
408,884,420
340,780,032
REINSURANCE RECOVERABLE ON UNPAID LOSSES
9
400,421,480
975,739,426
DEFERRED REINSURANCE PREMIUMS
9
108,466,196
107,952,615
DEFERRED ACQUISITION COSTS, net
9
86,277,280
59,785,440
DEFERRED INCOME TAX ASSETS, net
10
38,875,948
32,098,054
PROPERTY AND EQUIPMENT, net
11
16,288,072
12,485,846
OTHER ASSETS
12
25,666,945
16,410,819
2,153,846,319
2,466,173,994
Total assets
LIABILITIES AND EQUITY
RESERVE FOR UNEARNED PREMIUMS
9
523,314,451
417,377,983
RESERVE FOR OUTSTANDING LOSSES
9
775,497,080
1,231,965,428
DUE TO REINSURERS AND CEDING COMPANIES
22
5,685,178
19,569,751
DUE TO RELATED COMPANIES
22
139,677,579
101,221,172
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
13
33,832,286
18,064,255
1,478,006,574
1,788,198,589
Total liabilities
SHARE CAPITAL
1, 14
466,667,000
466,667,000
SHARE PREMIUM
1, 14
71,516,871
71,516,871
CONTRIBUTED SURPLUS
3,14
1,000,000
1,000,000
OTHER RESERVES
15
(2,258,083)
RETAINED EARNINGS
Total equity
Total liabilities and equity
21,680
138,913,957
138,769,854
675,839,745
677,975,405
2,153,846,319
2,466,173,994
(The notes on pages 1 to 56 are an integral part of these financial statements)
Statements of Income
For the years ended December 31, 2014 and 2013
UNDERWRITING INCOME
Premiums, net of returns
Reinsurance premiums
Premiums retained
Increase in reserve for unearned premiums, net
Premiums earned
Commissions earned
Notes
5
UNDERWRITING EXPENSES
Claims and losses, net
Commissions
5
NET UNDERWRITING INCOME
GENERAL AND OPERATING EXPENSES
Salaries, wages and employee benefits
Professional and management fees
Rent and utilities
Telephone and other communication - related expenses
Depreciation
Advertising and promotion
Transportation and travel
Entertainment
Taxes and licenses
Others
5
OPERATING LOSS
OTHER INCOME,NET
Interest (net of amortization of bond premiums)
Others
17
22
18
11
16
19
INCOME (LOSS) BEFORE INCOME TAX
PROVISION FOR (BENEFIT FROM) INCOME TAX
NET INCOME (LOSS) FOR THE YEAR
20
2014
2013
1,009,170,146
(316,441,254)
692,728,892
(105,422,887)
587,306,005
14,904,491
602,210,496
772,185,820
(334,361,035)
437,824,785
(22,088,028)
415,736,757
16,906,428
432,643,185
280,708,049
160,016,947
440,724,996
161,485,500
278,102,304
116,132,931
394,235,235
38,407,950
66,408,338
66,110,431
11,489,115
10,464,094
6,542,952
3,404,438
2,085,005
1,019,000
640,979
664,981
168,829,333
(7,343,833)
38,526,984
29,898,045
5,676,520
2,757,625
1,169,273
1,520,756
1,484,932
853,136
3,167,052
1,871,961
86,926,284
(48,518,334)
12,287,118
(4,680,576)
7,606,542
262,709
9,804,916
24,882,147
34,687,063
(13,831,271)
118,606
144,103
(6,876,101)
(6,955,170)
Statements of Total Comprehensive Income
Notes
NET INCOME (LOSS) FOR THE YEAR
OTHER COMPREHENSIVE LOSS
Item that will not be reclassified to profit or loss
Actuarial loss recognized during the year
Deferred income tax adjustment on actuarial loss
Other comprehensive loss, net of tax
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
15
10
2014
144,103
(3,256,804)
977,041
(2,279,763)
(2,135,660)
2013
(6,955,170)
(863,768)
259,130
(604,638)
(7,559,808)
Statements of Changes in Equity
Notes
Balance at January 1, 2013
14
Share capital
350,000,000
Share
premium
-
Contributed
surplus
Other
reserves
626,318
1,000,000
Retained
earnings
145,725,024
Total
497,351,342
Comprehensive income
Net loss for the year
-
-
-
-
(6,955,170)
-
-
-
(604,638)
-
-
-
(604,638)
(6,955,170)
Other comprehensive loss
Actuarial loss recognized during the year, net of
income tax effect
10,15
Total comprehensive loss for the year
Transaction with owners
Capital contribution from owners
(6,955,170)
(604,638)
(7,559,808)
14
Balance at December 31, 2013
116,667,000
71,516,871
-
466,667,000
71,516,871
1,000,000
21,680
-
-
-
-
-
-
-
-
(2,279,763)
71,516,871
1,000,000
(2,279,763)
(2,258,083)
-
188,183,871
138,769,854
677,975,405
144,103
144,103
Comprehensive income
Net income for the year
Other comprehensive loss
Actuarial loss recognized during the year, net of
income tax effect
Total comprehensive (loss) income for the year
10,15
466,667,000
144,103
138,913,957
(2,279,763)
(2,135,660)
675,839,745
Statements of Cash Flows
Notes
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations
Interest received on cash and cash equivalents
Interest received on staff mortgages and security fund
Final income taxes paid on interest income
from cash and cash equivalents
Corporate income tax paid
Net cash from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of investments in
government securities
Net proceeds from sale of property and equipment
Acquisitions of:
Investments in government securities
Property and equipment
Interest received on investments
Final income taxes paid on investment income
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contribution from owners
NET INCREASE IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS
January 1
Effect of exchange rate changes on cash and cash
equivalents
December 31
2014
2013
21
148,573,408
5,268,587
1,118
21,507,731
4,317,673
5,985
20
(1,027,530)
152,815,583
(966,997)
(18,053,015)
6,811,377
7
171,213,949
10,000
150,465,667
-
7
11
(265,774,406)
(10,345,178)
19,667,111
(1,489,660)
(86,718,184)
(236,076,553)
(13,109,711)
18,223,000
(993,421)
(81,491,018)
20
1, 14
6
-
188,183,871
66,097,399
113,504,230
592,792,751
469,635,924
1,431,205
660,321,355
9,652,597
592,792,751
Notes to Financial Statements
As at and for the years ended December 31, 2014 and 2013
(In the notes, all amounts are shown in Philippine Peso unless otherwise stated)
Note 1 - General information
QBE Seaboard Insurance Philippines, Inc. (the “Company”) was incorporated in the Philippines and
registered with the Securities and Exchange Commission (SEC) on November 15, 1999, to carry on the
business of insurance, other than life insurance. The Company received its Certificate of Authority from the
Insurance Commission of the Philippines (Insurance Commission) in the same year. It commenced
operations on January 2, 2000.
As at January 1, 2013, the Company is 58.996% owned by QBE Asia Pacific Holdings Limited (formerly QBE
International Holdings Limited), a holding company incorporated and domiciled in Hong Kong and
40.996% owned by Alsons Corporation and Unigrowth Resources Development Corporation, domestic
corporations.
On May 21, 2013, QBE Asia Pacific Holdings Limited purchased the shares owned by Alsons Corporation.
Thus, ownership of QBE Asia Pacific Holdings Limited increased from 58.996% to 83.99%.
On October 1, 2013, the Company entered into an agreement with Seaboard-Eastern Insurance Co., Inc.
(“SEI”), a domestic corporation, where the Company obtained an exclusive right to renew the expiring SEI
insurance policies. As part of the agreement, SEI will cease to renew and underwrite new insurance policies
and will run-off its business. On the same date, the Company issued 116,667 new shares, out of the
Company’s unissued shares, to SEI which provided the latter 24.99% ownership in the Company for a total
consideration of P188.2 million. This transaction resulted into the change in the shareholdings of QBE
International Holdings Limited from 83.99% to 59.50% and Unigrowth Resources Development
Corporation from 15.99% to 15.49%.
On December 23, 2013, the Company changed its corporate name from QBE Insurance (Philippines), Inc. to
The Company is 59.499% owned by QBE Asia Pacific Holdings Limited, 24.999% owned by Seaboard
Eastern Insurance Co., Inc. and 15.498% owned by Unigrowth Resources Development Corporation as at
December 31, 2014 and 2013.
The Company’s ultimate parent is QBE Insurance Group Ltd., a company incorporated and domiciled in
Australia.
The Company’s registered office, which is also its principal place of business, is located at the
16th Floor, Equitable Bank Tower, 8751 Paseo de Roxas, Makati City.
The financial statements have been approved and authorized for issuance by the Company’s Board of
Directors on February 5, 2015. There are no material events that occurred subsequent to February 5, 2015
until February 9, 2015.
Note 2 - Summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below.
These policies have been consistently applied to both years presented, unless otherwise stated.
2.1 Basis of preparation
The financial statements of the Company have been prepared in accordance with Philippine Financial
Reporting Standards (PFRS). The term PFRS in general includes all applicable PFRS, Philippine
Accounting Standards (PAS), and interpretations of the Philippine Interpretations Committee (PIC),
Standing Interpretations Committee (SIC) and International Financial Reporting Interpretations
Committee (IFRIC) which have been approved by the Financial Reporting Standards Council (FRSC) and
adopted by the SEC.
The financial statements have been prepared under the historical cost convention, as modified by the
revaluation of available-for-sale financial assets.
The preparation of financial statements in conformity with PFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgment in the process of applying the
Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas
where assumptions and estimates are significant to the financial statements are disclosed in Note 4.
Changes in accounting policy and disclosures
(a) New and amended standards adopted by the Company
The following standards have been adopted by the Company effective January 1, 2014:

Amendment to PAS 32, ‘Financial instruments: Presentation’ on offsetting financial assets and
financial liabilities. This amendment clarifies that the right of set-off must not be contingent on a future
event. It must also be legally enforceable for all counterparties in the normal course of business, as well
as in the event of default, insolvency or bankruptcy. The amendment also considers settlement
mechanisms. The amendment did not have a significant effect on the Company’s financial statements.

Amendment to PAS 36, ‘Impairment of assets’, on the recoverable amount disclosures for nonfinancial assets. This amendment removed certain disclosures of the recoverable amount of cash
generating units which had been included in PAS 36 by the issue of PFRS 13. The amendment did not
have a significant effect on the Company’s financial statements.
Other standards, amendments and interpretations which are effective for the financial year beginning on
January 1, 2014 are not considered relevant and significant to the Company.
(2)
(b) New standards, amendments and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are effective for annual periods
beginning after January 1, 2014, and have not been applied in preparing these financial statements. The
relevant standards applicable to the Company are:

PFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial
assets and financial liabilities. The complete version of PFRS 9 was issued in July 2014. It replaces the
guidance in PAS 39 that relates to the classification and measurement of financial instruments. PFRS 9
retains but simplifies the mixed measurement model and establishes three primary measurement
categories for financial assets: amortized cost, fair value through other comprehensive income (OCI) and
fair value through profit or loss. The basis of classification depends on the entity’s business model and the
contractual cash flow characteristics of the financial asset. Investments in equity instruments are required
to be measured at fair value through profit or loss with the irrevocable option at inception to present
changes in fair value in OCI without recycling. There is now a new expected credit losses model that
replaces the incurred loss impairment model used in PAS 39. For financial liabilities, there were no
changes to classification and measurement except for the recognition of changes in own credit risk in
other comprehensive income for liabilities designated at fair value through profit or loss. PFRS 9 relaxes
the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires
an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to
be the same as the one management actually use for risk management purposes. Contemporaneous
documentation is still required but is different to that currently prepared under PAS 39. The standard is
effective for accounting periods beginning on or after January 1, 2018. Early adoption is permitted. The
Company is in the process of assessing PFRS 9’s full impact at reporting date but initial assessment is the
standard is not expected to have a significant impact on the Company’s financial statements.

PFRS 15, ‘Revenue from contracts with customers’, deals with revenue recognition and establishes
principles for reporting useful information to users of financial statements about the nature, amount,
timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers.
Revenue is recognized when a customer obtains control of a good or service and thus has the ability to
direct the use and obtain the benefits from the good or service. The standard replaces PAS 18 ‘Revenue’
and PAS 11 ‘Construction contracts’ and related interpretations. The standard is effective for annual
periods beginning on or after January 1, 2017 and earlier application is permitted. The Company is in the
process of assessing the full impact of PFRS 15 at reporting date but the initial assessment is the standard
is not expected to have a significant impact on the Company’s financial statements.
There are no other standards, amendments or interpretations that are effective beginning on or after
January 1, 2014 that are expected to have a material impact on the financial statements of the Company.
2.2
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with banks and other short-term
highly liquid investments with original maturities of three months or less.
(3)
2.3 Financial assets
2.3.1 Classification
The Company classifies its financial assets in the following categories: fair value through profit or loss, loans
and receivables, held-to-maturity and available-for-sale. The classification depends on the purpose for
which the financial assets were acquired. Management determines the classification of its investments at
initial recognition. The Company has no financial assets under fair value through profit or loss category
during and as at reporting periods.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. The Company’s loans and receivables include cash in banks and short-term
investments included as part of cash and cash equivalents and receivables arising from insurance and
reinsurance contracts and accrued interest and other receivables included as part of loans and receivables
(Notes 6 and 8).
Trade receivables with average credit term of 90 days are measured at the original invoice amount (as the
effect of discounting is immaterial), less any provision for impairment.
Held-to-maturity securities
Held-to-maturity securities are non-derivative financial assets with fixed or determinable payments and
fixed maturities that the Company’s management has the positive intention and ability to hold to maturity.
If the Company were to sell other than an insignificant amount of held-to-maturity assets, the entire
category would be tainted and reclassified as available-for-sale. The Company’s financial assets under
held-to-maturity securities are presented as part of Investments in the statement of financial position
(Note 7).
Available-for-sale securities
Available-for-sale securities are non-derivatives that are either designated in this category or not classified
in any of the other categories. The Company’s financial assets under available-for-sale securities category
which mainly include proprietary club shares are presented as part of Investments in the Company’s
statement of financial position (Note 7).
2.3.2 Recognition and measurement of financial assets
Financial assets are recognized in the statement of financial position, when, and only when, the Company
becomes a party to the contractual terms of the instrument.
Loans and receivables are measured initially at fair value and subsequently measured at amortized cost less
provision for impairment. Held-to-maturity and available-for-sale securities are initially recognized at fair
value plus transaction costs. Held-to-maturity financial assets are subsequently measured at amortized cost
using the effective interest method. Available-for-sale financial assets are subsequently carried at fair value.
Changes in the fair value of financial assets classified as available-for-sale are recognized in equity as other
comprehensive income. Dividends on available-for-sale equity instruments are recognized in the statement
of income as part of other income when the Company’s right to receive the payment is established.
(4)
The determination of fair value of quoted investments is based on current bid prices. If the market for a
financial asset is not active (and for unlisted securities), the Company establishes fair value by using
valuation techniques commonly used by market participants. These include the use of recent arm’s length
transactions, and reference to other instrument that are substantially the same.
2.3.3 Impairment of financial assets
The Company assesses at each reporting date whether there is objective evidence that a financial asset or a
group of financial assets is impaired. A financial asset or a group of financial assets is impaired and
impairment losses are incurred only if there is objective evidence of impairment as a result of one or more
events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has
an impact on the estimated future cash flows of the financial asset or group of financial assets that can be
reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors is experiencing
significant financial difficulty, default or delinquency in interest or principal payments, the probability that
they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a
measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions
that correlate with defaults.
(a) Financial assets carried at amortized cost
For financial assets carried at amortized cost such as loans and receivables and held to maturity securities, the
Company first assesses whether objective evidence of impairment exists individually for receivables that are
individually significant, and collectively for receivables that are not individually significant using the criteria
above. If the Company determines that no objective evidence of impairment exists for an individually assessed
receivable, whether significant of not, it includes the asset in a group of financial assets with similar credit risk
characteristics and collectively assesses those for impairment. Receivables that are individually assessed for
impairment and for which an impairment loss is or continues to be recognized are not included in a collective
assessment of impairment.
For purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar
credit risk characteristics (i.e., on the basis of the Company’s credit rating process that considers asset type,
industry, geographical location, collateral type, past-due status and other relevant factors).
Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being
indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets
being evaluated.
The amount of loss is measured as the difference between the asset’s carrying amount and the present value
of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the
financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount
of the loss is recognized in profit or loss. If a loan or held-to-maturity investment has a variable interest
rate, the discount rate for measuring any impairment loss is the current effective interest rate determined
under the contract. As a practical expedient, the Company may measure impairment on the basis of an
instrument’s fair value using an observable market price.
(5)
If, in a subsequent period, the amount of impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognized (such as an improvement in the
debtor’s credit rating), the reversal of the previously recognized impairment loss is recognized in profit or
loss. Reversals of previously recorded impairment provision are based on the result of management’s
update assessment, considering the available facts and changes in circumstances, including but not limited
to results of recent discussions and arrangements entered into with customers as to the recoverability of
receivables at the end of the reporting period. Subsequent recoveries of amounts previously written-off are
credited against operating expenses in profit or loss.
(b) Financial assets carried at fair value
The Company assesses at the end of each reporting period whether there is objective evidence that a
financial asset or a group of financial assets is impaired.
For debt securities, if any such evidence exists the cumulative loss – measured as difference between the
acquisition cost and the current fair value, less any impairment loss on that financial asset previously
recognized in profit or loss – is removed from equity and recognized in profit or loss. If, in a subsequent
period, the fair value of a debt instrument classified as available for sale increases and the increase can be
objectively related to an event occurring after the impairment loss was recognized in profit or loss, the
impairment loss is reversed through the statement of income.
For equity investments, a significant or prolonged decline in the fair value of security below its cost is
considered an indicator that an asset is impaired. Generally, the Company treats ‘significant’ as 20% or
more and ‘prolonged’ as greater than 12 months. If any such evidence exists the cumulative loss – measured
as the difference between the acquisition cost and the current fair value, less any impairment loss on that
financial asset previously recognized in profit or loss – is removed from equity and recognized in profit or
loss. Impairment losses recognized on equity instruments are not reversed through the statement of
income. Increases in fair value after impairment are recognized in other comprehensive income.
2.4 Financial liabilities
2.4.1 Classification
The Company classifies its financial liabilities in the following categories: (a) at fair value through profit or
loss (including financial liabilities held for trading and those that are designated at fair value) and (b) at
amortized cost. The classification depends on the purpose for which the financial liabilities were incurred.
Management determines the classification of its financial liabilities at initial recognition.
(i) Financial liabilities at fair value through profit or loss
This category comprises two sub-categories: financial liabilities classified as held for trading, and financial
liabilities designated by the Company as at fair value through profit or loss upon initial recognition.
(6)
A financial liability is classified as held for trading if it is acquired or incurred principally for the purpose of
selling or repurchasing it in the near term or if it is part of a portfolio of identified financial instruments that
are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking.
Derivatives are also categorized as held for trading unless they are designated and effective as hedging
instruments. Financial liabilities held for trading also include obligations to deliver financial assets
borrowed by a short seller.
The Company does not have financial liabilities at fair value through profit or loss as at December 31, 2014
and 2013.
(ii) Other liabilities at amortized cost
Financial liabilities that are not classified as at fair value through profit or loss fall into this category and are
measured at amortized cost.
The Company’s due to reinsurers and ceding companies, due to related companies and accounts payable
and accrued expenses (excluding taxes payable and defined benefit plan liability) are classified under this
category.
2.4.2aRecognition and measurement of financial liabilities
Financial liabilities are initially recognized on trade date and measured at fair value plus transaction costs
for all financial liabilities not carried at fair value through profit or loss. These financial liabilities are
subsequently measured at amortized cost using the effective interest method.
2.5 Derecognition of financial instruments
Financial assets are derecognized when the right to receive cash flows from the financial assets has expired
or where the Company has transferred substantially all the risks and rewards of ownership. Financial
liabilities are derecognized when they have been redeemed or otherwise extinguished.
2.6 Offsetting of financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of financial position
when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle
on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must
not be contingent on future events and must be enforceable in the normal course of business and in the
event of default, insolvency or bankruptcy of the Company or the counterparty.
(7)
2.7 Property and equipment
Property and equipment are stated at historical cost less accumulated depreciation and impairment.
Historical cost includes expenditure that is directly attributable to the acquisition of the assets.
Subsequent costs of repairs and maintenance are included in the asset’s carrying amount or recognized as a
separate asset, as appropriate, only when it is probable that future economic benefits associated with the
item will flow to the Company and the cost of the item can be measured reliably. All other repairs and
maintenance are charged to profit or loss during the financial period in which they are incurred.
Depreciation is calculated using the straight-line method to allocate the cost of an asset less its residual
value over its estimated useful life, as follows:
Transportation equipment
Computer equipment
Furniture, fixtures and equipment
5 years
3 to 5 years
2 to 5 years
Leasehold improvements are amortized based on the useful lives of the assets or the lease term, whichever
is shorter.
Major renovations are depreciated over the remaining useful life of the related asset or the date of the next
major renovation, whichever is sooner.
The assets’ residual values and useful lives are reviewed, and adjusted as appropriate, at each reporting
date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount. The recoverable amount is the higher of an asset’s
fair value less costs to sell and value in use.
An item of property and equipment is derecognized upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal proceeds and the carrying amount of the item) is
included in profit or loss in the period the item is derecognized.
Gains and losses on disposals are determined by comparing the proceeds with carrying amount and are
included in the statement of income.
2.8 Input value added tax (“VAT”)
Input VAT is carried at face amount or at nominal amount less allowance for impairment loss, if any.
The Company reviews its excess input Value-Added Tax (“VAT”) at each reporting date to assess whether an
allowance for losses should be recognized in profit or loss. The level of this allowance is evaluated by
management on the bases of factors that affect the recoverability of the balance. These factors include, but
are not limited to, age of balances, refundability of the excess input VAT and procedural due process.
Input VAT is derecognized when there is a legally enforceable right to apply the recognized amounts against
the related liability within the period prescribed by the relevant tax laws.
(8)
2.9 Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The Company classifies its fair value measurements using a fair value hierarchy that reflects the significance
of the inputs used in making the measurements. The fair value hierarchy has the following levels:
•
•
•
quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2); and
inputs for the asset or liability that are not based on observable market data (that is, unobservable
inputs) (Level 3).
The appropriate level is determined on the basis of the lowest level input that is significant to the fair value
measurement.
The fair value of financial instruments traded in active markets is based on quoted market prices at the
reporting date.
A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer,
broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly
occurring market transactions on an arm’s length basis. The quoted market price used for financial assets
held by the Company is the current bid price. These instruments are included in Level 1.
The fair value of assets and liabilities that are not traded in an active market (for example, over-the-counter
derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of
observable market data where it is available and rely as little as possible on entity specific estimates. If all
significant inputs required to fair value an instrument are observable, the asset or liability is included in
Level 2. If one or more of the significant inputs is not based on observable market data, the asset or liability
is included in Level 3.
The Company has no financial instruments that fall under the Level 3 category as at December 31, 2014 and
2013.
The Company’s available-for sale securities fall under Level 2. Specific valuation techniques used to value
financial instruments under level 2 include quoted market prices or dealer quotes for similar instruments.
The fair value of a non-financial asset is measured based on its highest and best use. The asset’s current use
is presumed to be its highest and best use.
(9)
The Company uses valuation techniques that are appropriate in the circumstances and applies the
technique consistently. Commonly used valuation techniques are as follows:
• Market approach - A valuation technique that uses prices and other relevant information generated by
market transactions involving identical or comparable (i.e., similar) assets, liabilities or a group of assets
and liabilities, such as a business.
• Income approach - Valuation techniques that convert future amounts (e.g., cash flows or income and
expenses) to a single current (i.e., discounted) amount. The fair value measurement is determined on the
basis of the value indicated by current market expectations about those future amounts.
• Cost approach - A valuation technique that reflects the amount that would be required currently to
replace the service capacity of an asset (often referred to as current replacement cost).
The fair value of financial and non-financial liabilities takes into account non-performance risk, which is the
risk that the entity will not fulfill an obligation.
2.10 Impairment of non-financial assets
Other non-financial assets that are subject to depreciation and amortization, such as property and
equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the
asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less cost to sell or value in use. For purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
flows (cash-generating units). Impairment loss or reversal is recognized in the statement of income.
2.11 Share capital; Share premium; Contributed surplus
Common shares are classified as equity.
Share premium includes consideration received in excess of par value on the issuance of share capital.
Contributed surplus represents contributions by shareholders to the Company in compliance with the
requirements of the Insurance Code at the time of formation of the Company.
2.12 Insurance contracts
Recognition and measurement
Short-term insurance contracts
These contracts include casualty, property, marine and motor insurance contracts.
For all these contracts, premiums written for direct and assumed reinsurance business are recognized as
revenue (earned premiums) proportionally over the period of coverage using the 365th method. The portion
of premium received on in-force policies that relates to unexpired risks at reporting date is reported as
reserve for unearned premiums. Premiums are shown before deduction of commission.
(10)
Costs that vary with, and are primarily related to, the acquisition of new and renewal insurance contracts
such as commissions (net of reinsurance commissions) are deferred and charged to expense in proportion
to premium revenue recognized. Unamortized acquisition costs are shown in statement of financial position
as deferred acquisition costs.
Claims and loss adjustment expenses are charged to income as incurred based on the estimated liability for
compensation owed to contract holders or third parties damaged by the contract holders. They include
direct and indirect claims settlement costs and arise from events that have occurred up to reporting date
even if they have not yet been reported to the Company. The Company does not discount its liabilities for
unpaid claims. Liabilities for unreported and unpaid claims are estimated using the input of assessments for
individual cases reported to the Company and statistical analyses for the claims incurred but not reported
(IBNR), and to estimate the expected ultimate cost of more complex claims that may be affected by external
factors (such as court decisions).
Reinsurance
The Company cedes reinsurance in the normal course of business. Arrangement is made in both ways either
in a facultative or treaty agreement. Amounts recoverable from reinsurers that relate to unpaid losses and
claims and loss adjustment expenses are reported as reinsurance recoverable on unpaid losses in the
statement of financial position. Reinsurance payables are reported as due to reinsurers. Reinsurance
commissions are deferred and deducted from the applicable deferred acquisition cost and amortized over
the premium revenue recognition period.
Receivables and payables related to insurance contracts
Receivables and payables are recognized when the right to receive payment is established or when the
obligation becomes due. These include amounts due to and from agents, brokers and insurance contract
holders.
If there is objective evidence that the insurance receivable is impaired, the Company reduces the carrying
amount of the insurance receivable accordingly and recognizes that impairment loss in profit or loss. The
Company gathers the objective evidence that an insurance receivable is impaired using the same process
adopted for loans and receivables. The impairment loss is also calculated under the same method used for
these financial assets. These processes are described in Note 2.3.3.
Salvage and subrogation reimbursements
Some insurance contracts permit the Company to sell (usually damaged) property acquired in settling a
claim (i.e., salvage). The Company may also have the right to pursue third parties for payment of some or all
costs (i.e., subrogation).
Subrogation reimbursements are also considered as an allowance in the measurement of the insurance
liability for claims and are recognized in other assets when the liability is settled. The allowance is the
assessment of the amount that can be recovered from the action against the liable third party.
Liability adequacy test
The Company carries out liability adequacy testing as required by PFRS 4 to ensure the adequacy of the
insurance contract liabilities.
(11)
The insurance liabilities are valued in a realistic and consistent manner based on historical experience. It is
ultimately the responsibility of the Company’s Board of Directors and senior management to place an
appropriate valuation on the insurer’s liabilities, after considering actuarial and other advice.
Under the terms of a Management Agreement with a related company, the Board of Directors receives
written advice on the valuation of the Company’s insurance liabilities from a suitably qualified and
experienced Actuary (the “Actuary”).
Insurance liabilities include both the Company’s reserve for unearned premiums and reserve for
outstanding losses.
Reserve for outstanding losses relate to all claims incurred at reporting date, whether or not they have been
reported to the Company. The provision for outstanding claims is determined after consultation with the
Actuary. The outstanding claims assessment takes into account the statistical analysis of past claims,
allowance for IBNR, recoveries and future interest and inflation factors.
The value of the insurance liabilities (both for reserve for unearned premiums and reserve for outstanding
losses) reported by the Company will be the aggregate of the liabilities determined for each class of
business.
2.13 Employee benefits
Retirement plan
The Company has a funded, non-contributory defined benefit plan covering all of its employees. A defined
benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on
retirement, usually dependent on one or more factors such as age, years of service and compensation.
The liability recognized in the statement of financial position in respect of defined benefit retirement plan is
the present value of the defined benefit obligation at the end of the reporting period less the fair value of
plan assets. The defined benefit obligation is calculated annually by independent actuaries using the
projected unit credit method. The present value of the defined benefit obligation is determined by
discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are
denominated in the currency in which the benefits will be paid, and that have terms to maturity
approximating the terms of the related retirement obligation. In countries where there is no deep market in
such bonds, the market rates on government bonds are used.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are
charged or credited to equity in other comprehensive income in the period in which they arise.
Past-service costs are recognized immediately in profit or loss.
(12)
Share-based compensation
Equity-settled
The Company has an equity-settled, share-based compensation plan which is granted by the ultimate
parent. The fair value of the employee services received in exchange for the grant of the instruments is
recognized as an expense. The total amount to be expensed over the vesting period is determined by
reference to the fair value of the instruments granted, excluding the impact of any non-market vesting
conditions. The fair value of each instrument is expensed evenly over the period between grant and vesting
dates. Non-market vesting conditions are included in assumptions about the number of instruments that
are expected to become exercisable. At each reporting date, the entity revises its estimates of the number of
options that are expected to become exercisable.
Cash-settled
The Company measures the services acquired and the liability incurred at the fair value of the liability. Until
the liability is settled, the entity shall remeasure the fair value of the liability at each reporting date and at
the date of settlement, with any changes in fair value recognized in profit or loss for the period.
Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or
whenever an employee accepts voluntary redundancy in exchange for these benefits. The Company
recognizes termination benefits when it is demonstrably committed to either: terminating the employment
of current employees according to a detailed formal plan without possibility of withdrawal; or providing
termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due
more than 12 months after the reporting date are discounted to present value.
Profit-sharing and bonus plans
The Company recognizes a liability and an expense for profit-share incentive scheme based on a formula
that takes into consideration the combined operating ratio which correlates to the profit. The Company
recognizes a provision where contractually obliged or where there is a past practice that has created a
constructive obligation.
2.14 Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are
classified as operating leases. Payments made under operating leases (net of any incentives received from
the lessor) are charged to profit or loss on a straight-line basis over the period of the lease.
2.15 Dividend distribution
Dividend distribution to the Company’s shareholders is recognized as a liability in the Company’s financial
statements in the period in which the dividend declaration is approved by the Company’s Board of Directors
and the Insurance Commission.
(13)
2.16 Foreign currency transactions and translation
Functional and presentation currency
Items included in the Company’s financial statements are measured using the currency of the primary
economic environment in which the entity operates (the “functional currency”). The Company’s financial
statements are presented in Philippine Peso, which is the Company’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into Philippine Peso using the exchange rates prevailing at the
dates of the transactions or the valuation where items are remeasured. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the translation at the year-end exchange rates
of monetary assets and liabilities denominated in foreign currencies are recognized in statement of income.
Non-monetary items measured at historical cost denominated in a foreign currency are translated at
exchange rates as at the date of initial recognition. Non-monetary items in a foreign currency that are
measured at fair value are translated using the exchange rates at the date when the fair value is determined.
2.17 Interest and other income
Interest income
Interest income, which is presented gross of the tax paid or withheld, is recognized in the statement of
income on a time-proportion basis using the effective interest method.
Other income
Other income is recognized in the statement of income when the Company’s right to receive payment is
established.
2.18 Expenses
General, operating and other expenses are recorded in the period in which they are incurred.
2.19 Income tax
Current income tax
Income tax payable on profits, based on the applicable tax law, is recognized as an expense in the year in
which profits arise.
(14)
Deferred income tax
Deferred income tax is provided in full, using the liability method, on temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the financial statements. Currently
enacted tax rates are used in the determination of deferred income tax.
Deferred income tax assets are recognized on deductible temporary differences arising from investments in
subsidiaries, associates and joint arrangements only to the extent that it is probable the temporary
difference will reverse in the future and there is sufficient taxable profit available against which the
temporary difference can be utilized.
Deferred income tax assets are recognized for all deductible temporary differences, carry-forward of unused
tax losses (net operating loss carryover or NOLCO) and unused tax credits (minimum corporate income tax
or MCIT) to the extent that it is probable that future taxable profits will be available against which the
temporary differences can be utilized. Deferred income tax liabilities are recognized in full for all taxable
temporary differences.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset and
when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation
authority on either the taxable entity or different taxable entities where there is an intention to settle the
balances on a net basis.
Deferred income tax expense or credit included in Provision for income tax is recognized for the changes
during the year in the deferred income tax assets and liabilities.
2.20 Related party relationships and transactions
Related party relationship exists when one party has the ability to control, directly, or indirectly, through
one or more intermediaries, the other party or exercise significant influence over the other party in making
financial and operating decisions. Such relationship also exists between and/or among entities which are
under common control with the reporting enterprise, or between and/or among the reporting enterprise
and its key management personnel, directors, or its shareholders. In considering each possible related party
relationship, attention is directed to the substance of the relationship, and not merely the legal form.
2.21 Subsequent events (or Events after the reporting date)
Post year-end events that provide additional information about the Company’s position at the reporting
date (adjusting events) are reflected in the financial statements. Post year-end events that are not adjusting
events, if any, are disclosed when material to the financial statements.
Note 3 - Risk and capital management
3.1 Risk management
The Company's core business is the underwriting of risk and it has developed processes and internal
controls to identify and manage risks in all key areas of risk exposure. It has a risk management framework
that is aimed at reducing uncertainty and volatility, which provides a consistent approach to managing risk
across the organization and optimizes risk and more effectively allocates capital and resources by assessing
the balance of risk and reward.
(15)
The Board of Directors annually approves a comprehensive risk management strategy (RMS) and a
reinsurance management strategy (REMS) that deal with all of the significant business risks, risk tolerances
and the selection, approval and monitoring of reinsurance risks.
The broad risk categories incorporated in the risk management framework are insurance risk and financial
risk.
3.1.1
Insurance risk
The risks inherent in any single insurance contract are the possibility of the insured event occurring and the
uncertainty of the amount of the resulting claim. By the very nature of an insurance contract, these risks are
random and unpredictable. In relation to the pricing of individual insurance contracts and the
determination of the level of the outstanding claims provision in relation to a portfolio of insurance
contracts, the principal risk is that the ultimate claims payments will exceed the carrying amount of the
provision established.
Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative
variability about the expected outcome will be. In addition, a more diversified portfolio is less likely to be
affected across the board by a change in any subset of the portfolio. The Company has developed its
insurance underwriting strategy to diversify the type of insurance risks accepted and within each of these
categories to achieve a sufficiently large population of risks to reduce the variability of the expected
outcome.
The Company uses reinsurance, both facultative and treaty, to manage its insurance risk to acceptable levels
and to protect its capital. Treaty reinsurance is arranged on behalf of the Company by the technical division
of a related company in Australia and includes risk in excess of loss and catastrophe coverage.
The effect of such reinsurance arrangements in 2014 is that the Company should not suffer total net
insurance losses of more than P17.2 million (2013 - P16.8 million) on a per risk basis and P34.5 million
(2013 - P33.7 million) on a catastrophe loss through any one event.
(a) Casualty insurance contracts
(i) Frequency and severity of claims
The frequency and severity of claims can be affected by several factors. Estimated inflation is also a
significant factor due to the long period typically required to settle these cases. The Company manages
these risks through its underwriting strategy, adequate reinsurance arrangements and proactive claims
handling.
The underwriting strategy attempts to ensure that the underwritten risks are well diversified in terms of
type and amount of risk, industry and geography.
Underwriting limits are in place to enforce appropriate risk selection criteria. For example, the
Company has the right not to renew individual policies, it can impose deductibles and it has the right to
reject the payment of a fraudulent claim. Insurance contracts also entitle the Company to pursue third
parties for payment of some or all costs (i.e., subrogation).
(16)
The concentration of insurance risk before and after reinsurance by geographical location in relation to
the direct casualty insurance premiums is summarized below.
Casualty
Amount
Insurance risk distribution
Luzon
Visayas
Mindanao
Total
Gross
202,487
82%
13%
5%
100%
2014
2013
(Amounts in Thousands)
Net of reinsurance
Gross
125,072
94,410
Net of reinsurance
62,003
77%
19%
4%
100%
94%
4%
2%
100%
91%
6%
3%
100%
(ii) Sources of uncertainty in the estimation of future claim payments
Claims on casualty contracts are payable on a claims occurrence and claims made basis. The Company
is liable for all insured events that occurred during the term of the contract, even if the loss is discovered
after the end of the contract term. As a result, liability claims are settled over a long period of time and a
larger element of the claims provision relates to IBNR.
The estimation of IBNR is generally subject to a greater degree of uncertainty than the estimation of the
cost of settling claims already notified to the Company, where information about the claim event is
available. IBNR claims may not be apparent to the insured until many years after the event that gave
rise to the claims has happened. For casualty contracts, the IBNR proportion of the total liability is high
and will typically display greater variations between initial estimates and final outcomes because of the
greater degree of difficulty of estimating these liabilities. The Company has ten years of data to give
greater degree of confidence.
In estimating the liability for the cost of reported claims not yet paid, the Company considers any
information available from loss adjusters and information on the cost of settling claims with similar
characteristics in previous periods. Large claims are assessed on a case-by-case basis or projected
separately in order to allow for the possible distortive effect of their development and incidence on the
rest of the portfolio. The estimation of ultimate liability is completed by the Actuary.
Where possible, the Company adopts multiple techniques to estimate the required level of provisions.
This provides a greater understanding of the trends inherent in the experience being projected. The
projections given by the various methodologies also assist in estimating the range of possible outcomes.
The most appropriate estimation technique is selected taking into account the characteristics of the
business class and the extent of the development of each accident year.
(b) Property insurance contracts
For property insurance contracts, climatic changes give rise to more frequent and severe extreme
weather events (for example, river flooding, typhoons, etc.) and their consequences. For certain
contracts, the Company has also limited the number of claims that can be paid in any policy year or
introduced a maximum amount payable for claims in any policy year.
(17)
The Company has the right to reprice the risk on renewal. It also has the ability to impose deductibles
and reject fraudulent claims. These contracts are underwritten by reference to the commercial
replacement value of the properties and contents insured, and claim payment limits are always included
to cap the amount payable on occurrence of the insured event. Cost of rebuilding properties, of
replacement or indemnity for contents and time taken to restart operations for business interruption
are the key factors that influence the level of claims under these policies. The greatest likelihood of
significant losses on these contracts arises from storm or flood damage.
the direct property insurance premiums is summarized below.
Property
Amount
Luzon
Visayas
Mindanao
Total
Gross
320,247
71%
24%
5%
100%
2014
2013
Net of reinsurance
Gross
143,517
340,125
Net of reinsurance
119,581
75%
18%
7%
100%
69%
23%
8%
100%
70%
21%
9%
100%
Property claims are analyzed separately for its exposures and risk accumulation. This is estimated
within the definition of the CRESTA zone exposures. The shorter settlement period for these claims
allows the Company to achieve a higher degree of certainty about the estimated cost of claims. The
Actuary provides reasonable estimates of the ultimate cost of claims using the Company’s past
experience and recognized estimation techniques.
(c) Marine insurance contracts
Marine insurance contract covers marine cargo, hull, liability and aviation. All marine insurance
policies issued are covered by reinsurance program.
Vessel’s marine liability coverage is referred to as Protection and Indemnity insurance (P&I). The
Company also has freight forwarders liability and marine PI.
Other marine liability insurance contract is ship repairer’s liability where yards are located in the
Philippines only. The type of risks that the Company had written tends to have low attrition losses but
could have high severity.
(18)
For marine claims, marine adjusters and surveyors make valuations and recommendations for the
estimated loss reserves which include direct expenses to be incurred in settling claims, the expected
subrogation value and other recoveries. The Company takes all reasonable steps to ensure that it has
appropriate information regarding its claims exposures. The Actuary provides reasonable estimates of
the ultimate cost of claims using the Company’s past experience and recognized estimation techniques.
the direct marine insurance premiums is summarized below.
2014
Marine
Amount
Luzon
Visayas
Mindanao
Total
Gross
322,865
82%
14%
4%
100%
2013
Net of reinsurance
Gross
262,672
308,844
83%
15%
2%
100%
73%
21%
6%
100%
Net of reinsurance
227,693
73%
24%
3%
100%
(d) Motor insurance contracts
Motor insurance contracts are underwritten by placing underwriting limits to enforce appropriate risk
selection criteria. For example, the Company has the right not to renew individual policies, it can
impose deductibles and it has the right to reject the payment of a fraudulent claim. Insurance contracts
also entitle the Company to pursue third parties for payment of some or all costs
(i.e., subrogation). All motor insurance policies issued are covered by reinsurance program.
The Company started to offer motor insurance in 2013.
Claims on motor insurance contracts are payable on a claims occurrence and claims made basis. The
Company is liable for all insured events that occurred during the term of the contract.
The Company makes valuations and recommendations for the estimated loss reserves which include
direct expenses to be incurred in settling claims, the expected subrogation value and other recoveries.
The Company takes all reasonable steps to ensure that it has appropriate information regarding its
claims exposures. The Actuary provides reasonable estimates of the ultimate cost of claims using the
Company’s past experience and recognized estimation techniques.
(19)
the direct motor insurance premiums is summarized below.
2014
Motor
Amount
Luzon
Visayas
Mindanao
Total
Gross
163,571
86%
11%
3%
100%
2013
Net of reinsurance
Gross
161,468
28,807
86%
11%
3%
100%
81%
13%
6%
100%
Net of reinsurance
28,548
81%
13%
6%
100%
3.1.2 Financial risk
The Company’s activities expose it to a variety of financial risks: fair value interest rate risk, credit risk,
liquidity risk and currency risk.
The Company is exposed to financial risk through its financial assets, financial liabilities, reinsurance assets
and insurance assets and liabilities. In particular, the key financial risk is that the proceeds from its
financial assets are not sufficient to fund the obligations arising from its insurance contracts.
Interest rate risk
Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate because of the
changes in interest rate. Cash flow interest rate risk is the risk that future cash flows of a financial instrument
will fluctuate because of changes in market interest rates.
The Company’s investments in government securities which are held to maturity bear fixed interest rates and
are carried at amortized cost. As such, the Company is not exposed to significant fair value interest risk and
cash flow interest rate risks.
Short-term insurance liabilities are not directly sensitive to changes in market interest rates as they are
undiscounted and contractually non-interest bearing.
Credit risk
The Company’s exposure to credit risk arises mainly from potential default of counterparties and borrowers.
Key areas where the Company is exposed to credit risk pertain to the amounts due from the following:




reinsurers in respect of claims recoveries,
insurance contract holders,
insurance intermediaries, and
investments and cash in banks
The Company structures the levels of credit risk it accepts by placing limits on its exposure to a single
counterparty, or groups of counterparty, and to geographical segments. Such risks are subject to an annual or
more frequent review.
(20)
Reinsurance is used to manage insurance risk. This does not, however, discharge the Company’s liability as
primary insurer. If a reinsurer fails to pay a claim for any reason, the Company remains liable for the payment
to the policyholder. The creditworthiness of reinsurers is considered on an annual basis by reviewing their
financial strength prior to finalization of any contract.
The QBE Group Security Committee (GSC), which directs the QBE Insurance Group’s reinsurance placement
policy that is communicated to all global operations, assesses the creditworthiness of all reinsurers and
intermediaries by reviewing credit grades provided by rating agencies and other publicly available financial
information. GSC also receives details of recent payment history and the status of any ongoing negotiations
between Group companies and these third parties. This information is used by GSC to update the reinsurance
purchasing strategy and this is communicated to the Company on a quarterly basis.
Individual operating units maintain records of the payment history for significant contract holders with whom
they conduct regular business. The exposure to individual counterparties is also managed by other
mechanisms, such as the right of offset where counterparties are both debtors and creditors of the Company.
Internal audit makes regular reviews to assess the degree of compliance with the Group procedures on credit.
Exposures to individual policyholders and groups of policyholders are collected within the ongoing monitoring
of the controls associated with regulatory solvency. Where there exists significant exposure to individual
policyholders, or homogenous groups of policyholders, a financial analysis is carried out by the Company.
The financial analysis of reinsurers that is conducted at Group level produces an assessment categorized by
Standard & Poor’s (S&P) rating (or equivalent when not available from S&P) as follows:
At December 31, 2014
Reinsurance recoverable
on unpaid losses
Due to reinsurers and
ceding companies
Net assets (liabilities)
bearing credit risk
(21)
A+
423
AA-
3
Not
A
BBB
rated
368
-
-
Related
parties
Total
399,627
400,421
(48)
(15,691)
-
813
(461)
9,702
(5,685)
375
(15,688)
368
813
(461)
409,329
394,736
Reinsurance recoverable
on unpaid losses
Due to reinsurers and
ceding companies
Net assets (liabilities)
bearing credit risk
A+
A-
1,241
1,079
(1,647)
(449)
(406)
630
Not
AABBB
rated
-
-
-
(14,913)
(521)
(457)
(14,913)
(521)
(457)
Related
parties
Total
973,419
975,739
(1,583)
971,836
(19,570)
956,169
In 2014 and 2013, the Company’s short-term deposits are placed in foreign banks and local commercial or
universal banks of high credit rating.
The Company’s held-to-maturity investments consist mainly of investments in Philippine Treasury bills and
bonds issued by the Republic of the Philippines with rating of BBB by S&P as at December 31, 2014
(2013 - BBB-).
The table below shows the aging of loans and receivables which are collectible within one year.
Receivables arising from insurance
and reinsurance contracts
Due from contract holders
Due from agents, brokers
and intermediaries
Due from reinsurers
Other loans and receivables
Other receivables
Accrued interest receivable
Total loans and receivables
(22)
Gross
Amount
Neither past
due nor
impaired
(1 - 90 days)
Past due but not impaired
(91 - 180
(over 181
days)
days)
Impaired
10,945,922
215,069,223
6,092,063
158,270,507
2,155,185
26,438,538
2,425,907
28,598,748
272,767
1,761,430
179,566,900
141,621,520
18,307,106
18,372,487
1,265,787
807,540
5,794,819
412,184,404
807,540
5,794,819
312,586,449
46,900,829
49,397,142
3,299,984
Receivables arising from insurance
and reinsurance contracts
Due from agents, brokers
and intermediaries
Due from reinsurers
Other receivables
Total loans and receivables
Gross
Amount
Neither past
due nor
impaired
(1 - 90 days)
Past due but not impaired
(91 - 180
(over 181
days)
days)
Impaired
11,115,138
5,403,459
2,334,400
3,377,279
-
164,930,830
159,861,132
140,600,742
140,109,853
20,894,662
16,517,568
2,821,808
3,026,488
613,618
207,223
334,409
5,359,364
341,600,873
334,409
5,359,364
291,807,827
39,746,630
9,225,575
820,841
There was no collateral held on the above loans and receivables.
Liquidity risk
The Company is exposed to daily calls on its available cash resources mainly from claims arising from shortterm insurance contracts. Liquidity risk is the risk that cash may not be available to pay obligations when due
at a reasonable cost. Management sets limits on the minimum proportion of maturing funds available to meet
such calls and on the minimum level of borrowing facilities that should be in place to cover maturities, claims
and surrenders at unexpected levels of demand.
Net insurance claim liabilities as detailed in Note 9 are expected to be settled mainly within two years. Due to
reinsurers, ceding companies and related parties are settled within the premium warranty period as stipulated
in the insurance contract which normally covers one year. Accrued expenses have a contractual maturity date
within 12 months. The amounts disclosed in Notes 13 and 22 are the contractual undiscounted cash flows.
Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant.
The table below analyzes the financial liabilities of the Company as at December 31:
Due to reinsurers and ceding companies
Due to related companies
Accounts payable and accrued expenses,
excluding taxes payable, employee value plan and
defined benefit plan liability
Total financial liabilities
(23)
2014
5,685,178
139,677,579
2013
19,569,751
101,221,172
14,280,111
159,642,868
7,748,799
128,539,722
Details of the accounts by maturity follow:
Investments
Reinsurance recoverable on unpaid losses
Security deposits under other assets
Total financial assets
Investments
Security deposits under Other assets
(24)
Up to 1 year
Over 1 up
to 3 years
Total
660,321,355
259,370,345
408,884,420
400,421,480
-
149,274,278
2,450,218
660,321,355
408,644,623
408,884,420
400,421,480
2,450,218
1,728,997,600
151,724,496
1,880,722,096
Up to 1 year
Over 1 up
to 3 years
Total
5,685,178
139,677,579
-
14,280,111
-
14,280,111
159,642,868
-
159,642,868
Up to 1 year
Over 1 up
to 3 years
5,685,178
139,677,579
Total
592,792,751
175,166,204
340,780,032
975,739,426
-
152,962,807
2,106,816
592,792,751
328,129,011
340,780,032
975,739,426
2,084,478,413
155,069,623
2,239,548,036
Up to 1 year
Over 1 up
to 3 years
2,106,816
Total
19,569,751
101,221,172
-
19,569,751
101,221,172
7,748,799
-
7,748,799
128,539,722
-
128,539,722
Currency risk
The Company’s exposure to foreign exchange risk arises primarily from its US dollar (US$) denominated cash
and cash equivalents, receivables, liabilities and other accounts. The Company minimizes its exposure to any
significant foreign exchange rate risk by generally investing in assets denominated in the same currency as
insurance and reinsurance liabilities.
The table below summarizes the Company’s US dollar denominated assets and liabilities at December 31:
2014
2013
Assets
Investments
Receivables
Total assets
Liabilities
Reserve for outstanding losses
Due to a related company
Accounts payable and accrued expenses, excluding taxes payable
and defined benefit plan liability
Total liabilities
Net foreign currency denominated assets
Philippine peso equivalent
US$ 3,396
2,581
2,310
8,287
US$ 2,522
1,304
2,211
4,046
10,083
3,726
(1,106)
1
2,621
US$ 5,666
P 253,384
5,293
(113)
20
71
5,271
US$ 4,812
P 213,653
The exchange rate as at December 31, 2014 is P44.72 per US$1.00 (2013 - P44.40 per US$1.00).
At December 31, 2014, if the currency had weakened/strengthened by 4.1% (2013 - 5%) against the US dollar
with all other variables held constant, the effects on income before tax and equity are as follows:
US dollar denominated
Assets
Liabilities
Net
(25)
Change in
currency
+/-4.1%
+/-4.1%
Effect on income
US dollar
before tax in
amount
Philippine peso
US$ 8,287
P 15,320
2,621
4,845
P 10,724
3,392
US$ 5,666
P 7,332
P 10,475
Effect on
equity
US dollar denominated
Assets
Liabilities
Change in
currency
+/-5%
+/-5%
Effect on income
US dollar
before tax in
Amount
Philippine peso
US$ 10,083
P 22,315
5,271
11,666
Net
US$ 4,812
P 10,649
Effect on
equity
P 15,621
8,166
P 7,455
A sensitivity analysis was performed on the US dollar denominated assets and liabilities. The fluctuation rate
in 2014 of +/-4.1% (2013 - +/-5%) is based on the historical movement of US dollar year-on-year.
3.1.3 Fair value of financial assets and liabilities
The following table sets forth the carrying values and estimated fair values of financial assets and liabilities
recognized as at December 31:
Investments
Reinsurance recoverable on
unpaid losses
Security deposits under Other
assets
2014
Carrying Value
660,321,355
408,644,623
408,884,420
(26)
2013
Carrying Value
592,792,751
328,129,011
340,780,032
Fair Value
592,792,751
329,123,354
340,780,032
400,421,480
400,421,480
975,739,426
975,739,426
2,450,218
1,880,722,096
2,450,218
1,884,895,022
2,106,816
2,239,548,036
2,106,816
2,240,542,379
2014
Carrying Value
Due to reinsurers and ceding
companies
Accounts payable and accrued
expenses, excluding taxes
payable, employee value
plan and defined benefit
plan liability
Fair Value
660,321,355
412,817,549
408,884,420
Fair Value
2013
Carrying Value
Fair Value
5,685,178
139,677,579
5,685,178
139,677,579
19,569,751
101,221,172
19,569,751
101,221,172
14,280,111
159,642,868
14,280,111
159,642,868
7,748,799
128,539,722
7,748,799
128,539,722
3.1.4 Capital management
The Company’s objectives when managing capital are:



to comply with the minimum capitalization requirement, Margin of Solvency (MOS) and Risk-Based
Capital (RBC) Model set by the Insurance Commission;
to safeguard the Company’s ability to continue as a going concern so that it can continue to provide
security for its policyholders, returns for shareholders and benefits for other stakeholders; and
to maintain a strong capital base to support the development of its business.
The Company’s capital is equal to equity as shown in the statement of financial position.
The Company maintains a certain level of capital to ensure solvency margins in excess of regulatory
requirements are maintained which, in turn, protect its policyholders.
Externally Imposed Capital Requirements
To ensure compliance with these externally imposed capital requirements, it is the Company’s policy to assess
its position, at least on a quarterly basis, against set minimum capital requirements. The Company elevates
any requirement for additional capital infusion to its shareholders to address any foreseen capital deficiency.
President Benigno S. Aquino III has signed Republic Act No. 10607, the Amended Insurance Code (the Code),
into law effective September 20, 2013. Among the more significant provisions of the Code, domestic insurance
companies are required to maintain a minimum statutory net worth of P250 million by
June 30, 2013; P550 million by December 31, 2016; P900 million by December 31, 2019; and, P1.3 billion by
December 31, 2022.
The Company is compliant with the minimum statutory net worth as at December 31, 2014 and 2013.
Margin of Solvency Requirements
The Code grants the Insurance Commissioner the power to prescribe solvency requirements based on
internationally accepted solvency frameworks. Since the Insurance Commissioner has not prescribed new
solvency requirements, the margin of solvency requirements of the previous insurance code was followed. The
previous Code states that a non-life insurance company doing business in the Philippines shall maintain at all
times MOS equal to P500,000 or 10% of the total amount of its net premiums written during the preceding
year, whichever is higher. The MOS shall be the excess of the value of its admitted assets (as defined under the
Insurance Code), exclusive of its security deposits over the amount of its liabilities, reserve for unearned
premiums and reinsurance reserves in the Philippines. Reserve for unearned premiums determined in
accordance with the same Code for purposes of MOS (24th method) in 2014 amounts to P341,560,663
(2013 - P248,602,383).
The MOS level is monitored by the Company’s management, employing the procedures based on the
guidelines developed by the Insurance Commission.
(27)
In the accompanying financial statements, the PFRS net reserve for unexpired premiums as at
December 31 follows:
Reserve for unearned premiums
Deferred reinsurance premiums
Net reserve for unearned premiums
2014
523,314,451
108,466,196
414,848,255
2013
417,377,983
107,952,615
309,425,368
The estimated amounts of non-admitted assets as at December 31 as defined in the Insurance Code consist of
the following:
Property and equipment, net
Deferred income tax assets, net
Other assets
2014
59,217,885
10,869,923
41,358,999
12,775,197
124,222,004
2013
52,300,641
8,756,079
34,581,105
16,211,183
111,849,008
The 2014 and 2013 Annual Statements of the Company have not yet been approved by the Insurance
Commission. The final amount of the 2014 and 2013 MOS can be determined only after the accounts of the
Company have been examined by the Insurance Commission specifically as to admitted and non-admitted
assets as defined in the Insurance Code.
Risk-Based Capital Framework
The Insurance Commission is expected to issue a revised RBC framework following international standards in
accordance with the amended Insurance Code. While the revised RBC framework is still under study and
evaluation by the Insurance Commission (IC), the Company calculated its RBC ratio following IC
Memorandum Circular No. 7-2006.
Insurance Commission Memorandum Circular No. 7-2006 provides for the risk-based capital framework for
the insurance industry to establish the required amounts of capital to be maintained by the companies in
relation to their investment and insurance risks. Every insurance company is required annually to maintain a
minimum RBC ratio of 100% and not fail the trend test. Failure to meet the minimum RBC ratio shall subject
the insurance company to the corresponding regulatory intervention which has been defined at various levels.
The RBC ratio shall be calculated as Net worth divided by the RBC requirement. Net worth shall include the
Company’s paid-up capital, contributed and contingency surplus and unassigned surplus. Revaluation and
fluctuation reserve accounts shall form part of Net worth only to the extent authorized by the Insurance
Commission.
(28)
The following table shows how the RBC ratio was determined by the Company:
Net worth
RBC requirement
RBC Ratio
2014
612,886,046
349,892,402
175%
2013
561,370,156
440,537,999
127%
As at December 31, 2013, the Company’s RBC ratio was 127%, affected by the Cebu-Bohol earthquake and
Typhoon Yolanda (Haiyan) claims in fourth quarter. Given the significant claims recoverable from
reinsurers arising from these catastrophe events, the Company’s captive insurer has agreed to advance
reinsurance recoverable payment for the Typhoon Yolanda (Haiyan) claims. As at March 31, 2014, the
Company's RBC ratio improved to 147% partly due to a P223.7 million (USD 5 million) advance collection
from its outstanding reinsurance recoverable account.
Based on the IC Circular 7-2006, the Company maintained the minimum RBC ratio of 100% and the
Company was solvent at all times during the year. From August 2013, the Company has adopted the
valuation basis pursuant to Section 219 of the new Insurance Code for solvency reporting.
Note 4 - Critical accounting estimates, assumptions and judgments
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates
will, by definition, seldom equal the related actual results. Estimates and assumptions used in preparing the
financial statements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below.
4.1 Critical accounting estimate
The ultimate liability arising from claims made under insurance contracts (Note 9)
The estimation of the ultimate liability arising from claims made under insurance contracts is the Company’s
most critical accounting estimate. There are several sources of uncertainty that are inherent in the method of
estimation of the liability that the Company will ultimately pay for such claims. The Actuary provides
reasonable estimates of the ultimate cost of claims using the Company’s past experience and recognized
estimation techniques. The Company considers that it is impracticable to disclose with sufficient reliability the
possible effects of sensitivities surrounding these actuarial assumptions. The carrying values of liability arising
from claims made under insurance contracts (reserve for unearned premiums and outstanding losses) as at
December 31, 2014 amount to P1.30 billion (2013 - P1.65 billion).
(29)
4.2 Critical accounting judgment
Classification of held-to-maturity securities (Note 7)
The Company follows the guidance of PAS 39 in classifying non-derivative financial assets with fixed or
determinable payments and fixed maturity as held-to-maturity. This classification requires significant
judgment. In making this judgment, the Company evaluates its intention and ability to hold such investments
to maturity. If the Company fails to keep these investments to maturity other than for the specific
circumstances - for example, selling an insignificant amount close to maturity - it will be required to reclassify
the entire class as available-for-sale. The investments would therefore be measured at fair value, not amortized
cost. If the entire class of held-to-maturity securities is tainted, the fair value in 2014 would increase by
P4.0 million (2013 - P1.0 million) with a corresponding entry in the fair value reserve in equity.
Impairment of loans and receivables (Note 8)
The provision for impairment of receivables is based on the Company’s assessment of the collectibility of
payments from its debtors. This assessment requires judgment regarding the ability of the debtors to pay the
amounts owed to the Company and the outcome of any disputes. Any change in the Company’s assessment of
the collectibility of receivables could significantly impact the calculation of such provision and results of its
financial performance. Total receivables subjected to this assessment are shown in Note 8. The Company’s
impaired accounts, which are fully provided by allowance for impairment losses, as at December 31, 2014
amount to P3.3 million (2013 - P0.82 million). Management believes that the remaining loans and receivables
as at December 31, 2014 are fully recoverable.
Recognition of deferred income tax assets (Note 10)
Management reviews at each reporting date the carrying amounts of its deferred income tax assets. The
carrying amount of deferred tax assets is reduced to the extent that the related tax assets cannot be utilized
due to insufficient taxable profit against which the deferred income tax assets will be applied. Management
believes that sufficient taxable profit will be generated to allow all of the deferred income tax assets to be
utilized.
(30)
Note 5 - Results of operations by product type
The results of operations by product type are as follows:
Property
Reinsurance premium
Premiums retained
Increase in reserve for unearned
premium, net
Premiums earned
Commissions earned
Underwriting income
Gross claims incurred
Reinsurance recoveries
Commissions
Underwriting expenses
Net underwriting income
General and operating expenses
Operating loss
Other income, net
Income before income tax
Provision from income tax
Net income for the year
(31)
320,247
(176,730)
143,517
(17,820)
125,697
4,926
130,623
221,908
(250,940)
(29,032)
(47,565)
(76,597)
54,026
For the year ended December 31, 2014
Casualty
Marine
Motor
202,487
322,865
163,571
(77,415)
(60,193)
(2,103)
125,072
262,672
161,468
(14,358)
110,714
5,189
115,903
(46,764)
8,470
(38,294)
(32,173)
(70,467)
45,436
(20,025)
242,647
4,789
247,436
(281,164)
121,159
(160,005)
(48,308)
(208,313)
39,123
(53,220)
108,248
108,248
(54,134)
757
(53,377)
(31,971)
(85,348)
22,900
Total
1,009,170
(316,441)
692,729
(105,423)
587,306
14,904
602,210
(160,154)
(120,554)
(280,708)
(160,017)
(440,725)
161,485
(168,829)
(7,344)
7,607
263
(119)
144
Property
Reinsurance premium
Premiums retained
Increase in reserve for unearned
premium, net
Premiums earned
Commissions earned
Underwriting income
Gross claims incurred
Reinsurance recoveries
Commissions
Underwriting expenses
Net underwriting income
General and operating expenses
Operating loss
Other losses, net
Loss before income tax
Benefit from income tax
Net loss for the year
340,125
(220,544)
119,581
16,007
135,588
3,729
139,317
(1,096,008)
943,237
(152,771)
(56,686)
(209,457)
(70,140)
Casualty
Marine
Motor
94,410
308,844
28,807
(32,407)
(81,151)
(259)
62,003
227,693
28,548
8,802
70,805
5,441
76,246
(14,516)
257
(14,259)
(16,190)
(30,449)
45,797
(22,653)
205,040
7,736
212,776
(266,617)
156,900
(109,717)
(42,051)
(151,768)
61,008
(24,244)
4,304
4,304
(1,355)
(1,355)
(1,206)
(2,561)
1,743
Total
772,186
(334,361)
437,825
(22,088)
415,737
16,906
432,643
(1,378,496)
1,100,394
(278,102)
(116,133)
(394,235)
38,408
(86,926)
(48,518)
34,687
(13,831)
(6,876)
(6,955)
Note 6 - Cash and cash equivalents
The details of the account at December 31 are as follows:
2014
Cash in bank and on hand
Cash on hand
Cash in bank
Philippine Peso
US Dollar
Short-term placements
Philippine Peso
US Dollar
2013
40,000
15,000
204,480,048
79,634,342
170,707,250
19,959,654
303,950,695
72,216,270
660,321,355
310,084,790
92,026,057
592,792,751
Cash in bank earns interest at prevailing bank deposit rates.
The Philippine Peso and US Dollar short-term placements have maturities of 60 days or less and have annual
interest rates ranging in 2014 from 0.60% to 1.25% (2013 - 0.80% to 3.05%) and 0.05% to 1.4%
(2013 - 0.05% t0 0.20%), respectively.
(32)
Note 7 - Investments
The account at December 31 consists of:
Available-for-sale securities
2014
408,476,623
168,000
408,644,623
2013
327,961,011
168,000
328,129,011
2014
2013
408,476,623
408,476,623
270,082,306
57,878,705
327,961,011
Available-forsale securities
168,000
168,000
168,000
Total
251,110,794
236,076,553
(150,465,667)
4,302,175
(12,894,844)
328,129,011
265,774,406
(171,213,949)
(14,044,845)
408,644,623
Details of held-to-maturity securities as at December 31 follow:
Philippine government bonds
Philippine Peso
US Dollar
Movements in the account are as follows:
January 1, 2013
Additions
Maturities
Revaluation adjustments
Amortization of premiums
December 31, 2013
Additions
Maturities
Amortization of premiums
December 31, 2014
Held to
maturity
securities
250,942,794
236,076,553
(150,465,667)
4,302,175
(12,894,844)
327,961,011
265,774,406
(171,213,949)
(14,044,845)
408,476,623
Government securities classified as held-to-maturity securities at December 31, 2014 amounting to
P392 million (2013 - P248.5 million) are deposited with the Philippine Bureau of Treasury in accordance with
the provision of the Insurance Code as security for the benefit of the policyholders and creditors.
Annual interest rates of these investments in 2014 range from 1.63 % to 9.13% (2013 - 6.3% to 9.1%). The fair
value of above held-to-maturity assets in 2014 is P413 million (2013 - P329 million).
(33)
Note 8 - Loans and receivables, net
The details of the account at December 31 are as follows:
2014
Receivables arising from insurance and reinsurance contracts
Due from agents, brokers and intermediaries
Due from reinsurers
Less: Allowance for impairment losses
Total receivables arising from insurance and reinsurance
contracts
Other receivables
Total other loans and receivables
Total loans and receivables, net
2013
215,069,224
179,566,900
10,945,921
405,582,045
3,299,984
164,930,830
159,861,132
11,115,138
335,907,100
820,841
402,282,061
335,086,259
807,540
5,794,819
6,602,359
408,884,420
334,409
5,359,364
5,693,773
340,780,032
Movements in allowance for impairment are as follows:
At January 1
Provision for (reversal of) impairment loss during the year
At December 31
2014
820,841
2,479,143
3,299,984
2013
1,321,899
(501,058)
820,841
Note 9 - Insurance liabilities and reinsurance assets
The details of the accounts at December 31 are as follows:
2014
On reported claims
On IBNR claims, gross of reinsurance
Total gross insurance liabilities
On reported claims
On IBNR claims
Total reinsurance assets
Insurance liabilities, net
(34)
2013
723,306,080
52,191,000
775,497,080
523,314,451
1,298,811,531
920,786,733
311,178,695
1,231,965,428
417,377,983
1,649,343,411
390,850,480
9,571,000
400,421,480
108,466,196
508,887,676
789,923,855
700,339,732
275,399,694
975,739,426
107,952,615
1,083,692,041
565,651,370
The gross claims reported, the claims and loss adjustment expenses and the liability for IBNR are net of
expected recoveries from salvage and subrogation. The amounts for salvage and subrogation at the end of
2014 and 2013 are not considered significant. The movements in these insurance liabilities and reinsurance
assets are shown below:
Gross
Reported claims
920,787
IBNR claims
311,178
Total at January 1
1,231,965
Claims and loss adjustment expenses
Cash (paid) collected for
claims settled in the year
(617,949)
Movement in liabilities
arising from:
Current year claims
321,944
Prior year claims
(161,791)
Net exchange differences
1,328
(456,468)
Total
775,497
Reported claims
723,306
IBNR claims
52,191
Total at December 31
775,497
(35)
2014
Reinsurance
(700,340)
(275,399)
(975,739)
Net
Gross
220,447
239,015
35,779
22,204
256,226
261,219
454,893
(163,056)
(35,373)
155,928
(130)
575,318
(400,421)
(390,850)
(9,571)
(400,421)
286,571
(5,863)
1,198
118,849
375,076
332,456
42,620
375,076
(418,761)
576,931
801,565
11,011
970,746
1,231,965
920,787
311,178
1,231,965
2013
Reinsurance
(86,388)
(4,120)
(90,508)
Net
152,627
18,084
170,711
222,456
(196,305)
(452,717)
(647,677)
(7,293)
(885,231)
(975,739)
(700,340)
(275,399)
(975,739)
124,214
153,888
3,718
85,515
256,226
220,447
35,779
256,226
Accident year claims development table - gross
Reporting year
2005
2006
Estimate of ultimate claims cost
At end of reporting year
59,198
125,774
One year later
48,571
155,413
Two years later
49,915
180,228
Three years later
73,530
170,142
Four years later
69,568
138,560
Five years later
69,702
134,432
Six years later
69,718
137,018
Seven years later
69,716
135,897
Eight years later
69,592
133,205
Nine years later
69,592
Movement in accident
year claims estimate
(2,692)
Cumulative claims
69,592
133,205
Accident year claims paid
(69,592)
(133,205)
Accident year outstanding
claims at fixed FX rates
Accident year outstanding claims at closing FX rates
(36)
2007
66,444
73,707
79,019
79,825
79,895
83,205
83,440
80,882
(2,558)
80,882
(80,882)
-
2008
2009
2010
2011
309,633
763,390
54,659
116,608
255,077
866,640
56,100
142,375
242,492
743,487
49,718
165,731
243,262
726,994
50,452
151,495
242,897
801,412
43,280
242,592
777,138
240,269
(2,323)
240,269
(240,269)
-
(24,274)
777,138
(777,138)
-
(7,172)
43,280
(43,250)
30
(14,236)
151,495
(129,010)
22,485
2012
2013
2014
Total
118,749
102,264
99,615
-
1,308,800
1,093,824
-
432,360
-
3,355,615
2,793,971
1,610,205
1,495,700
1,375,612
1,307,069
530,445
286,495
202,797
69,592
(2,649)
99,615
(98,149)
(214,976)
1,093,824
(714,419)
432,360
432,360
(60,249)
161,480
3,121,660
(2,346,163)
379,405
372,111
1,466
775,497
775,497
Reporting year
2004
2005
36,955
59,198
One year later
59,839
48,571
Two years later
75,733
49,915
Three years later
69,456
73,530
Four years later
43,368
69,568
Five years later
89,236
69,702
Six years later
50,389
69,718
Seven years later
49,554
69,716
Eight years later
49,651
69,592
Nine years later
49,651
Movement in accident year
claims estimate
(124)
Cumulative claims
49,651
69,592
(49,651) (69,592)
(37)
2007
2008
2009
2010
2011
125,774
66,444
309,633
763,390
54,659 116,608
155,413
73,707
255,077
866,640
56,100 142,375
180,228
79,019
242,492
743,487
49,718 165,731
170,142
79,825
243,262
726,994
50,452
138,560
79,895
242,897
801,412
134,432
83,205
242,592
137,018
83,440
135,897
-
2012
2013
Total
118,749
102,264
-
1,308,800
-
2,960,210
1,759,986
1,586,323
1,413,661
1,375,700
619,167
340,565
255,167
119,243
49,651
(1,121)
135,897
(133,205)
(16,485)
102,264
(86,636)
1,308,800
1,389,508
1,308,800
3,009,830
(178,217) (1,777,865)
2006
2,692
235
83,440
(80,882)
2,558
(305)
242,591
(239,192)
3,399
74,418
801,412
(777,268)
24,144
734
23,356
50,452 165,731
(39,643) (123,579)
10,809
42,152
15,628
1,130,583
1,231,965
1,231,965
Accident year claims development table - net
Reporting year
2005
37,557
One year later
30,731
Two years later
32,632
Three years later
37,426
Four years later
34,769
Five years later
34,888
Six years later
34,894
Seven years later
34,893
Eight years later
34,770
Nine years later
34,770
claims estimate
Cumulative claims
34,770
(34,770)
-
(38)
117,458
114,051
94,379
87,985
75,171
75,243
74,863
73,144
71,660
-
2008
2009
2010
2011
44,990
80,351
170,835
43,787
98,045
80,646
75,793
221,331
43,365
101,791
85,194
69,954
211,204
37,701
118,750
84,057
70,324
209,995
38,512
105,796
83,834
70,173
208,962
30,786
82,970
69,581
204,556
83,233
67,663
80,659
-
(1,484)
71,660
(71,660)
(2,574)
80,659
(80,659)
2006
-
2007
-
(1,918)
(4,406)
67,663 204,556
(67,663) (204,556)
-
-
(7,726)
30,786
(30,786)
-
2012
2013
2014
Total
96,503
86,527
84,699
-
277,229
311,465
-
280,561
-
1,247,316
1,065,700
734,513
634,095
503,695
467,238
260,653
188,696
106,430
34,770
(12,954)
105,796
(91,107)
(1,829)
84,699
(83,210)
34,236
311,465
(186,431)
280,561
280,561
(46,697)
281,906
1,272,615
(897,539)
14,689
1,489
125,034
233,864
375,076
375,076
Reporting year
2004
2005
34,875
37,557
One year later
38,470
30,731
Two years later
34,147
32,632
Three years later
34,636
37,426
Four years later
26,310
34,769
Five years later
72,925
34,888
Six years later
30,468
34,894
Seven years later
30,379
34,893
Eight years later
30,476
34,770
Nine years later
30,476
claims estimate
(123)
Cumulative claims
30,476
34,770
(30,476)
(34,770)
(39)
2006
2007
2008
2009
2010
2011
117,458 44,990
80,351
170,835
43,787
98,045
114,051 80,646
75,793
221,331
43,365 101,791
94,379 85,194
69,954
211,204
37,701 118,750
87,985 84,057
70,324
209,995
38,512
75,171 83,834
70,173
208,962
75,243 82,970
69,581
74,863 83,233
73,144
(1,719)
263
73,144 83,233
(71,660) (80,658)
1,484
2,575
(592)
(1,033)
69,581
208,962
(67,703) (204,454)
1,878
4,508
811
38,512
(27,952)
10,560
2012
2013
Total
96,503
86,527
-
277,229
-
1,001,630
792,705
683,961
562,935
499,219
335,607
223,458
138,416
65,246
30,476
16,959
118,750
(85,674)
(9,976)
86,527
(71,693)
277,229
277,229
(89,918)
281,819
1,021,184
(764,958)
33,076
14,834
187,311
256,226
256,226
Gross
At January 1
Increases during the year
Releases during the year
At December 31
417,378
425,915
(319,979)
523,314
2014
Reinsurance
(107,953)
(39,331)
38,818
(108,466)
2013
Net
Gross
Reinsurance
Net
309,425
382,144
(94,807)
287,337
386,584
301,405
(86,096)
215,309
(281,161) (266,171)
72,950
(193,221)
414,848
417,378 (107,953)
309,425
Deferred acquisition costs, net
At January 1
Costs deferred during the year
Amortization, net
At December 31
2014
59,785,440
107,610,159
(81,118,319)
86,277,280
2013
53,344,769
105,667,174
(99,226,503)
59,785,440
Note 10 - Deferred income tax assets, net
The movements on the net deferred income tax assets are as follows:
At January 1
Credited to profit or loss
Credited to equity
MCIT
At December 31
2014
32,098,054
2,398,584
977,041
3,402,269
38,875,948
2013
21,796,302
8,836,519
259,130
1,206,103
32,098,054
Deferred tax assets and liabilities based on maturity are as follows:
2014
Deferred income tax assets
Amount expected to be recovered within 12 months
Amount expected to be recovered after 12 months
Deferred income tax liabilities
Amount expected to be settled after 12 months
(40)
2013
37,776,791
1,099,157
38,875,948
32,016,007
118,338
32,134,345
38,875,948
(36,291)
32,098,054
The details and movements in deferred tax assets, net during the year are as follows:
IBNR
Claims
At January 1, 2013
Credited (charged) to
income
Credited to equity
MCIT
Credited (charged) to
income
Credited to equity
MCIT
(41)
Unrealized
foreign
exchange,
net
5,425
13,426
5,309
10,734
2,052
12,786
Accruals
not currently
deductible
and other
differences
Allowance
for
impairment
losses on
financial
assets
MCIT
NOLCO
(Amounts in thousands)
-
Defined
benefit
plan
(asset)
liability, net
Actuarial
gains
recognized
directly in
OCI
Change in
reserve for
AFS
financial
assets
109
(296)
27
21,796
259
-
8,837
259
27
1,206
32,098
Total
2,528
577
(3,974)
-
(1,271)
-
(150)
-
-
8,953
-
(30)
-
9,452
1,257
427
1,206
8,953
79
94
744
-
16
-
-
2,399
1,351
1,171
401
-
95
977
940
27
977
3,402
38,876
(908)
8,544
1,206
3,402
4,608
9,354
(37)
Details of the Company’s NOLCO follow:
Year Incurred
2014
2013
Year of Expiry
2017
2016
Applied NOLCO
Tax rate
Recognized deferred income tax asset
2014
1,337,667
29,844,814
31,182,481
31,182,481
30%
9,354,744
2013
29,844,814
29,844,814
29,844,814
30%
8,953,444
In compliance with the Tax Reform Act of 1997, the Company shall pay the MCIT or the normal income tax,
whichever is greater. Any excess of the MCIT over the normal income tax shall be carried forward annually
and credited against the normal income tax for the next three succeeding taxable years.
The details of the Company’s MCIT are as follows:
Year of Payment
2014
2013
Year of Expiry
2017
2016
2014
3,402,269
1,206,103
4,608,372
2013
1,206,103
1,206,103
Note 11 - Property and equipment, net
The details of the account at December 31 follow:
Transportation
equipment
Computer
equipment
Furniture,
fixtures and
equipment
Cost
Additions
Additions
Disposals
2,855,239
1,054,464
3,909,703
57,860
3,967,563
3,664,873
3,760,843
7,425,716
3,617,804
11,043,520
1,237,499
154,464
1,391,963
17,724
1,409,687
5,363,747
8,139,940
13,503,687
6,651,790
(5,363,747)
14,791,730
13,121,358
13,109,711
26,231,069
10,345,178
(5,363,747)
31,212,500
Accumulated depreciation
Depreciation
Depreciation
Disposals
2,855,239
52,723
2,907,962
220,536
3,128,498
3,287,398
408,550
3,695,948
1,929,422
5,625,370
1,069,566
110,530
1,180,096
115,305
1,295,401
5,363,747
597,470
5,961,217
4,277,689
(5,363,747)
4,875,159
12,575,950
1,169,273
13,745,223
6,542,952
(5,363,747)
14,924,428
Net book value
December 31, 2013
December 31, 2014
1,001,741
839,065
3,729,768
5,418,150
211,867
114,286
7,542,470
9,916,571
12,485,846
16,288,072
(42)
Leasehold
improvements
Total
Note 12 - Other assets
Input value-added tax (VAT) (net of Output VAT
payable)
Creditable withholding taxes
Security deposits and prepayments
Security fund
Documentary stamp tax fund
2014
12,692,114
2013
8,222,093
9,914,362
2,829,056
199,635
31,778
25,666,945
3,857,148
4,100,165
199,635
31,778
16,410,819
The security fund pertains to the deposit maintained in compliance with Sections 365 and 367 of the
Insurance Code. The amount of such fund is determined by and deposited with the Insurance Commission to
pay benefits, which might remain unpaid, against insolvent insurance companies.
Note 13 - Accounts payable and accrued expenses
Note
Accrued expenses
Documentary stamp tax payable
Withholding taxes payable
Defined benefit plan liability
Municipal taxes payable
Other creditors
15
2014
14,467,131
5,764,723
5,425,186
3,451,646
2,325,115
2,398,485
33,832,286
2013
7,930,346
4,715,831
2,264,920
141,006
1,354,471
1,657,681
18,064,255
The Company’s accrued expenses include accrued professional fees, bonus and other employee benefits and
provision for general expenses.
Note 14 - Share capital; Contributed surplus; Retained earnings
The Company’s total authorized capital is P500 million consisting of 500,000 common shares with a par
value of P1,000 each. As at December 31, 2014 and 2013, shares issued and outstanding aggregate to
466,667.
As discussed in Note 1, on October 1, 2013, the Company issued 116,667 new shares, out of the Company’s
unissued shares, to SEI for a total consideration of P188 million. As a result of this transaction, share
premium amounting to P71.5 million was recognized in the accounts.
Contributed surplus represents contributions by shareholders to the Company in compliance with the
requirements of the Insurance Code at the time of formation of the Company.
(43)
Note 15 - Retirement benefit obligation
The Company has a funded, non-contributory defined benefit plan covering all of its regular employees.
Under the plan, qualified officers and employees are entitled to retirement benefits when they reach the
normal retirement age of 60 years or early retirement age of 55 years and have completed at least 5 years of
continuous service. Normal and early retirement benefits consist of a lump sum benefit equivalent to one
month’s final pay for every year of service. The plan also provides late retirement, death, disability and
voluntary separation benefits. The plan is administered by a local bank as trustee.
The amounts recognized in the accounts in relation to retirement benefits, as a result of the Company’s
adoption of PAS 19R, the revised standard on employee benefits, as at and for the years ended December 31
are as follows:
2014
2013
Statement of financial position
Defined benefit plan liability (included under Accounts payable
and accrued expenses)
3,451,646
141,006
Charge to profit or loss for:
Retirement benefit expense (included under Salaries, wages
and employee benefits)
1,890,527
537,140
Charge to other comprehensive income for:
Remeasurements of defined benefit plan
Deferred income tax effect
Remeasurements of defined benefit plan, net of tax
3,256,804
(977,041)
2,279,763
863,768
(259,130)
604,638
The amounts recognized in the statement of financial position at December 31 are determined as follows:
Present value of funded obligations
Fair value of plan assets
Defined benefit plan liability
(44)
2014
7,691,939
4,240,293
3,451,646
2013
6,666,286
6,525,280
141,006
The movements in defined benefit plan liability (asset) for the years ended December 31 are as follows:
At January 1, 2014
Current service cost
Interest expense (income)
Present value Fair value of plan Defined benefit plan
of obligation
assets
liability (asset)
6,666,286
(6,525,280)
141,006
1,883,054
1,883,054
353,313
(345,840)
7,473
2,236,367
(345,840)
1,890,527
Remeasurements:
Return on plan assets, excluding amounts
included in interest expense (income)
Loss from change in financial assumptions
Experience losses
2,846,261
75,406
2,921,667
Contributions:
Employers
Plan participants
Payments from plan:
Benefit payments
At January 1, 2013
Current service cost
Interest expense (income)
335,137
335,137
335,137
2,846,261
75,406
3,256,804
-
(1,200,000)
(636,691)
(1,200,000)
(636,691)
(4,132,381)
7,691,939
4,132,381
(4,240,293)
3,451,646
Present value Fair value of plan Defined benefit plan
of obligation
assets
liability (asset)
4,911,870
(5,531,772)
(619,902)
768,912
768,912
127,793
(359,565)
(231,772)
896,705
(359,565)
537,140
Remeasurements:
Return on plan assets, excluding amounts
included in interest expense (income)
Loss from change in demographic assumptions
Loss from change in financial assumptions
Experience losses
Employer contributions
158,731
1,066,973
(367,993)
857,711
6,666,286
6,057
6,057
(640,000)
(6,525,280)
6,057
158,731
1,066,973
(367,993)
863,768
(640,000)
141,006
The significant actuarial assumptions were as follows:
Discount rate
Salary growth rate
Expected average remaining working lifetime
(45)
2014
5.0%
7.0%
24
2013
5.3%
5.0%
24
Discount rate
The discount rate was determined in accordance with the Financial Reporting Standard Council
[FRSC] approved Q&A 2008-01(Revised) document, which mandates that discount rates reflect
(a) benefit cash flows and (b) use of zero coupon rates, even though theoretically derived.
The procedure of bootstrapping was applied to the PDST-R2 benchmark government bonds as of
December 31, 2014 and 2013 to arrive at the theoretical zero coupon yield curve. These derived rates were
then used to compute the present value of the expected future benefit cash flows across valuation years.
Finally, the single-weighted discount rate was calculated as the uniform discount rate that produced the
same present value.
Future salary increases
This is the expected long-term average rate of salary increase taking into account inflation, seniority,
promotion and other market factors. Salary increases comprise of the general inflationary increases plus a
further increase for individual productivity, merit and promotion. The future salary increase rates are set by
reference over the period over which benefits are expected to be paid.
Demographic assumptions
Assumptions regarding mortality experience are set based on published statistics and experience in the
Philippines.
An analysis of the sensitivity of the defined benefit plan liability to changes in the weighted principal
assumptions is shown below:
Discount rate
Salary growth rate
Impact on defined benefit plan liability
Change in
Increase in
Assumption
assumption
+/- 1%
(2,683,995)
+/- 1%
4,273,698
Decrease in
assumption
4,317,342
(2,712,367)
The above sensitivity analyses are based on a change in an assumption while holding all other
assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may
be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial
assumptions, the same method (present value of the defined benefit obligation calculated with the
projected unit credit method at the end of the reporting period) has been applied as when calculating the
retirement liability recognized within the statement of financial position.
The methods and types of assumptions used in preparing the sensitivity analysis did not change
significantly compared to the previous period.
(46)
Plan assets at December 31 comprise:
(Amounts in thousands)
Government bonds (unquoted)
Total
2014
Amount
%
2,807
66.2%
1,433
33.8%
4,240
100.0%
2013
Amount
%
4,320
66.2%
2,205
33.8%
6,525
100.0%
The plan is being administered by a trustee-bank which is authorized to invest the fund as it deems proper.
The Company’s transactions with the retirement fund for the years are limited to contributions. The fair
value of the plan assets approximates their carrying value as at December 31, 2014 and 2013.
Through its defined benefit plan, the Company is exposed to a number of risks, the most significant of which
are detailed below:

Changes in bond yields - A decrease in government bond yields will increase plan liabilities, although
this will be partially offset by an increase in the value of the plans’ bond holdings.

Life expectancy - The majority of the plans’ obligations are to provide benefits for the life of the
member, so increases in life expectancy will result in an increase in the plans’ liabilities.
The retirement plan has no specific matching strategy between the plan assets and the plan liabilities.
The expected maturity analysis of undiscounted retirement benefit payments follow:
Retirement benefits
Retirement benefits
Less than a year
1,657
Less than a year
3,049,200
Over 5 years
4,485,348
Over 5 years
27,073
Total
4,487,005
Total
3,076,273
Note 16 - Interest income
The account for the years ended December 31 consists of interest earned from the following:
Mortgage and salary loans
(47)
2014
7,120,208
5,165,792
1,118
12,287,118
2013
5,123,302
4,675,629
5,985
9,804,916
Note 17 - Salaries, wages and employee benefits
The details of the account for the years ended December 31 are as follows:
Salaries and wages
Employee benefits and training costs
Temporary staff expenses
2014
51,417,322
10,782,119
4,208,897
66,408,338
2013
30,133,786
8,171,136
222,062
38,526,984
Key management personnel’s compensation and short-term benefits amount to P12.1 million
(2013 - P14.2 million).
Eligible employees of the Company are able to participate in a reward scheme provided by the QBE Group.
Since 2006, that scheme has provided eligible employees with the cash value of the volume weighted
average market price of QBE shares traded in the Australian Stock Exchange at the time of offer of the
reward, with the provision that it will be paid to eligible employees after three years from the date of offer,
provided that they remain employees of the Company. The liability is restated at the volume weighted
average market price of QBE shares as at year-end. In 2014, the cash value is recognized as an expense at
the time of offer and included in the accrued employee benefits and training costs of P187,017
(2013 - P181,547) in respect of the scheme.
The Company has 67 employees as at December 31, 2014 (2013 - 47 employees).
Note 18 - Leases
In October 2010, the Company entered into a two-year non-cancelable lease agreement covering its office
premises and parking spaces from November 1, 2010 to December 31, 2012, which is renewable upon mutual
agreement of the Company and the lessor. The said agreement provides a 5% increase annually. In
December 2012, the Company renewed the above lease arrangement for a period of one year commencing on
January 1, 2013 to December 31, 2013. The lease was further extended from January 1, 2014 to
September 30, 2016. Under the terms of the lease, the Company paid security deposit equivalent to three
months rent amounting to P341,553 which is recorded under Other assets, refundable at the end of lease
term.
In September 2013, the Company has signed two three-year non-cancelable lease agreements covering its
additional office premises and parking spaces from October 1, 2013 to September 30, 2016, which are
renewable upon mutual agreement of the Company and the lessor. Under the terms of the leases, the
Company paid security deposits equivalent to three month rent amounting to P1,108,013 which are recorded
under Other assets, in the statement of financial position, and refundable at the end of lease term.
The Company provides furnished residence for a key company officer under lease agreement from
August 2013 to August 2015 renewable upon mutual agreement by the Company and the lessor. The
Company paid security deposit equivalent to two months rental amounting to P220,500 which is recorded
under Other assets, refundable at the end of lease term. This lease was pre-terminated in June 2014, the
Company paid the pre-termination fee, including the security deposit, amounting to P732,170, which is
booked under Rent and utilities.
(48)
The Company also has operating lease agreements covering its branches within the Philippines for a period
of two to ten years, renewable at the Company’s option at such terms and conditions which may be agreed
upon by both parties. These lease agreements include provision for rental rate escalations including payment
of security deposits and advanced rentals amounting to P598,152 which is booked under Other assets.
Rental expense under Rent and utilities in the statement of income charged to operations for the year ended
December 31, 2014 amounts to P9.9 million (2013 - P5.1 million).
The future minimum rental payments for the above leases are as follows:
Year
2014
2015
2016
2017
2014
8,818,402
6,736,239
1,200,623
16,755,264
2013
6,654,419
6,987,148
5,456,589
19,098,156
2014
3,028,409
(2,993,969)
(2,479,143)
10,000
(2,245,873)
(4,680,576)
2013
13,246,803
4,196,224
501,062
6,938,058
24,882,147
Note 19 - Other (expenses) income
The details of the account for the years ended December 31 are as follows:
Note
Unrealized foreign exchange gain, net
Realized foreign exchange (loss) gain, net
(Provision for) recovery of impairment loss
Gain on disposal of fixed assets
Others
8
Other expenses consist mainly of regulatory charges for 2014. Other income in 2013 relates mainly to the
reversal of prior year excess provisions amounting to P7.2 million, as a result of subsequent actual
settlement of obligation.
Note 20 - Income taxes
The details of provision for income tax included in the statement of income for the years ended December 31
are as follows:
Deferred income tax
Final tax
(49)
Note
10
2014
(2,398,584)
2,517,190
118,606
2013
(8,836,519)
1,960,418
(6,876,101)
The tax on the Company’s income before income tax differs from the theoretical amount that would arise
using the Company’s principal tax rate for the years ended December 31 as follows:
2014
262,709
78,813
(1,168,609)
1,208,402
118,606
Income (loss) before income tax
Tax calculated at 30%
Interest and other income subject to final tax
Non-deductible expenses (income)
Provision for (benefit from) income tax
2013
(13,831,271)
(4,149,381)
(979,260)
(1,747,460)
(6,876,101)
Note 21 - Cash generated from operations
The details of cash generated from (used in) operations for the years ended December 31 are as follows:
Notes
Income (loss) before income tax
Adjustments for:
2014
262,709
2013
(13,831,271)
Depreciation
Provision for (recovery of) impairment loss
Interest income, net of amortization
11
8
16
6,542,952
2,479,143
(12,287,118)
1,169,273
(501,062)
(9,804,916)
Gain on sale of property and equipment
Unrealized foreign exchange gain, net
19
19
(10,000)
(3,028,409)
(13,246,803)
(6,040,723)
(36,214,779)
(68,789,356)
575,187,765
(43,517,897)
(877,937,728)
(513,581)
(26,491,840)
(12,658,394)
(13,145,842)
(6,440,671)
(8,793,251)
105,936,468
(455,139,992)
(13,884,573)
35,233,870
959,734,544
(19,810,474)
Accounts payable and accrued expenses
38,456,407
12,511,227
40,946,495
(8,546,536)
148,573,408
21,507,731
Operating loss before changes in operating
assets and liabilities
Changes in operating assets and liabilities
(Increase) decrease in:
Other assets
Increase (decrease) in:
Cash generated from operations
(50)
Note 22 - Related party transactions
The following transactions are carried out with related parties:
a.
In the ordinary course of its business, the Company cedes reinsurance business under treaty and
facultative ceding contracts with fellow subsidiaries. For efficiency purposes, QBE Insurance
(International) Limited (QBEI), an affiliate based in Australia, handles collection of premiums from and
pays reinsurance claim recoveries to the Company and related companies in QBE Group in respect of the
global non-proportional reinsurance treaties arranged by QBE in Australia, but is not the reinsurer for
those treaties.
b. The Company entered into an agreement with QBEI on November 20, 2009 for the latter to provide
management services in exchange for fees payable to QBEI subject to the terms of the agreement. The
terms of the supply of the management services have been set out in the Service Agreement. The
agreement remains in force, unless terminated by the parties.
c.
The Company, in the ordinary course of business, reimburses expenses to QBEI for international broker
billings and training costs.
d. The Company has an existing consultancy agreement with a stockholder of SEI to provide advisory and
allied services as may be needed for a period of 3 years from October 1, 2013 to September 30, 2016.
e.
Details of related parties’ outstanding balances related to the above transactions are summarized as
follows:
Due (from) to reinsurers and ceding companies
(51)
2014
(9,701,922)
139,677,579
129,975,657
2013
2,625,819
101,221,172
103,846,991
f.
Details of amounts discussed in (a), (b), (c) and (d) covering transactions and balances as at and for the
years ended December 31 are as follows:
As at and for the year ended
December 31, 2014
Fellow subsidiaries
ceded
Commissions
Reinsurance claims
recoveries received
Reimbursement of
expenses
Management fees
Consultancy fees
As at and for the year ended
December 31, 2013
Fellow subsidiaries
ceded
Commissions
Reinsurance claims
recoveries received
Reimbursement of
expenses
Management fees
Consultancy fees
(52)
Transactions
(Charges to
P&L)
Outstanding
balance
[Due from
(Due to)]
294,054,388
9,477,121
(501,037,894)
-
438,383,649
396,041,366
14,898,439
3,956,499
55,115,481
3,200,000
Transactions
(Charges to
P&L)
Terms and conditions
- Unguaranteed and
unsecured
- Non-interest bearing
- Payable in cash on
demand
(28,935,628)
(129,975,657)
Outstanding
balance
[Due from
(Due to)]
311,310,274
14,120,614
(367,959,217)
-
222,455,885
288,707,589
2,726,964
(12,994,966)
16,571,995
800,000
(11,600,397)
(103,846,991)
Terms and conditions
- Unguaranteed and
unsecured
- Non-interest bearing
- Payable in cash on
demand
Provision for
impairment
losses
during the
year
Allowance
for
impairment
losses
-
-
-
-
-
-
-
-
Provision for
impairment
losses
during the
year
Allowance
for
impairment
losses
-
-
-
-
-
-
-
-
g.
Directors’ remuneration
The total remuneration of the directors recorded under Professional and management fees follows:
December 31, 2014
December 31, 2013
Transactions
(Charges to
P&L)
300,000
Outstanding
balance
[Due from
(Due to)]
-
Transactions
(Charges to
P&L)
810,000
Outstanding
balance
[Due from
(Due to)]
-
Terms and
conditions
-
Provision for
impairment
losses
during the
year
-
Allowance
for
impairment
losses
-
Terms and
conditions
-
Provision for
impairment
losses
during the
year
-
Allowance
for
impairment
losses
-
Note 23 - Reconciliation of net income (loss) under PFRS and net income (loss)
under Statutory Accounting Practices (SAP)
___________
PFRS varies in certain respects from SAP prescribed by the Insurance Commission. A reconciliation of the
net income (loss) under PFRS and the net income (loss) determined under SAP are as follows:
PFRS net income (loss) for the year
Add (deduct):
Difference in reserve for unearned premiums, net
Net income (loss) under SAP
(53)
2014
144,103
(1,283,710)
2,251,793
1,112,186
2013
(6,955,170)
(6,440,670)
(10,953,028)
(24,348,868)
Note 24 - Supplementary information required by the Bureau of Internal Revenue (BIR)
The following information is presented for purposes of filing with the BIR and is not a required part of the
basic financial statements.
Below is the additional information required by RR No. 15-2010:
i. Output value-added tax (VAT)
Output VAT declared and the related revenues for the year ended December 31, 2014 consist of:
Gross amount of
revenues
Output VAT
Subject to 12% VAT
Zero-rated
Exempt
Total
622,639,386
77,422,970
309,107,790
1,009,170,146
74,839,229
74,839,229
Zero-rated premiums are premiums earned from PEZA-registered entities pursuant to BIR RR No. 16-2005,
as amended while exempt premiums are reinsurance premiums pursuant to BIR RR No. 4-2007.
Gross premiums above are based on premiums, net of returns in the statement of income.
ii. Input VAT
The movements of input VAT for the year ended December 31, 2014 follow:
Beginning balance
Add: Current year’s domestic purchases/payments for:
Capital goods subject to amortization
Services lodged as domestic purchases
Claims for tax credit/refund and other adjustments
Total input VAT
Amount
12,803,394
891,140
26,862,695
(21,530,349)
19,026,880
Unamortized input VAT on capital goods subject to amortization are included as part of prepayments in
Other assets in the statement of financial position.
(54)
iii. Documentary stamp tax
Documentary stamp taxes paid as at December 31, 2014 consist of:
Amount
87,003,238
Non-life insurance policies
For non-life insurance policies, these documentary taxes are reimbursed by policyholders. The accrued
documentary stamp tax as at December 31, 2014 amounts to P5,764,723.
iv. All other local and national taxes
All other local and national taxes paid for the year ended December 31, 2014 consist of:
Amount
380,050
201,454
38,443
10,500
7,029
2,500
503
500
640,979
Insurance Commission license and permits
Documentary stamp tax
Mayor’s permit
Community tax
Land Transportation Office license and permits
Barangay clearance
Fire service tax expense
Annual VAT registration fee
The above local and national taxes are charged to taxes and licenses under general and operating expenses.
There were no other accrued taxes and licenses as at December 31, 2014.
v. Withholding taxes
Withholding taxes paid/accrued as at December 31, 2014 consist of:
Withholding tax on compensation
Expanded withholding tax
Final withholding tax
Fringe benefit tax
(55)
Paid
14,704,439
16,408,734
16,424,925
887,094
48,425,192
Accrued
1,270,359
2,653,340
1,501,487
5,425,186
Total
15,974,798
19,062,074
17,926,412
887,094
53,850,378
vi. Tax assessments
Taxable years 2013 and 2012 are open tax years. The Company has not received any Final Assessment Notice
(FAN) as at December 31, 2014.
vii. Tax cases
The Company has no outstanding tax cases under preliminary investigation, litigation and/or prosecution in
courts or bodies outside the BIR as at December 31, 2014.
(56)

Audited Financial Statements

Transcription

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