Annual Seminar onAnnual Seminar onRegulatory Issues for Regulatory Issues for

Senior Officers of Insurance Senior Officers of Insurance Regulatory AgenciesRegulatory Agencies

Venue: Hotel ITC Kakatiya Sheraton, Venue: Hotel ITC Kakatiya Sheraton, Hyderabad, IndiaHyderabad, India

Date: 14th - 16th November 2005Date: 14th - 16th November 2005

COUNTRY PRESENTATION FOR COUNTRY PRESENTATION FOR THE PHILIPPINESTHE PHILIPPINES

Mr. Antonio E. EnanoMr. Antonio E. EnanoSupervising Insurance SpecialistSupervising Insurance Specialist

Rating Division, Insurance CommissionRating Division, Insurance Commission IC Bldg., 1071 UN Avenue, Manila, IC Bldg., 1071 UN Avenue, Manila,

PhilippinesPhilippines

Republic of the Philippines

A. BASIC DATA

National Name : Republika ng Pilipinas

Capital City : 2003 est.-- Manila, 13,790,900 (metro. area), 10,232,900 (city proper)

Land Area : 115,830 sq mi (300,000 sq km) Archipelago comprising 7,107 islands

Population : 2005-- 85.2 million - (growth rate: 1.8%); birth rate: 25.3/1000; infant mortality rate: 23.5/1000; life expectancy: 69.9; density per sq mi: 759

President : Gloria Macapagal Arroyo First term (2001- 2004); Elected in 2004 for a 6-yr. term no reelection

Monetary unit : Peso Convertion: $ 1 = P 54.69 ( Nov. 11, 2005)Languages : Filipino (based on Tagalog), English (both official); eight major dialects: Tagalog, Cebuano, Ilocano, Hiligaynon or Ilonggo, Bicol, Waray, Pampango, and Pangasinense Ethnicity/Race : Christian Malay 91.5%, Muslim Malay 4%, Chinese 1.5%, other 3% Religion : Roman Catholic 83%, Protestant 9%, Islam 5%, Buddhist and other 3%

Literacy rate : 92.3% (2000)

Economic Summary : GDP/Constant ’85 prices (2004 ) PESOS 318,560 million

Real Growth Rate : 5.9%

Inflation : 7.0%.(Sept. 2005)

Labor force : 35.86 million; agriculture 36%, industry 16%, services 48% (2004 est.). Unemployment : 7.7%.(April 2005)

Arable land : 19%. Agriculture: sugarcane, coconuts, rice, corn, bananas, cassavas, pineapples, fish, mangoes, pork, eggs, beef

NATIONAL INCOMENATIONAL INCOME

(in million pesos)(in million pesos)

(Source: NSCB) (Source: NSCB)

GrowthGrowth

RatesRates

2004 2004

4th Qtr 4th Qtr 2004 2004

4th Qtr 4th Qtr 2003 2003

At Current Prices At Current Prices

Gross National ProductGross National Product 11.411.4 1,484,8091,484,809 1,315,0481,315,048

Gross Domestic ProductGross Domestic Product 11.511.5 1,389,8171,389,817 1,232,1281,232,128

At Constant Prices (1985 prices)At Constant Prices (1985 prices)

Gross National ProductGross National Product 6.26.2 342,537342,537 324,727324,727

Gross Domestic ProductGross Domestic Product 6.16.1 318,560318,560 302,308302,308

NATIONAL INCOME (in million)NATIONAL INCOME (in million)

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

2003 2004

GNP-Cur.

GDP-Cur.

GNP-Fixed

GDP-Fixed

NATIONAL INCOME (% g.r.) NATIONAL INCOME (% g.r.) (Source:NSCB)(Source:NSCB)

FYFY

2004 2004 FYFY

2003 2003 FYFY

2002 2002

G N P (constant ’85) G N P (constant ’85) 6.2 6.2 5.5 5.5 4.5 4.5

G D P G D P 6.1 6.1 4.5 4.5 4.4 4.4

Net Factor Income from Net Factor Income from Abroad Abroad

8.5 8.5 18.9 18.9 5.1 5.1

NATIONAL INCOME NATIONAL INCOME

0

2

4

6

8

10

12

14

16

18

20

GNP-con. GDP NET FACT

2002

2003

2004

(% growth)

By Industrial OriginBy Industrial Origin FYFY

2004 2004 FYFY

2003 2003 FYFY

2002 2002

AgricultureAgriculture 5.1 5.1 3.9 3.9 3.3 3.3

IndustryIndustry 5.2 5.2 3.0 3.0 3.7 3.7

ServicesServices 7.1 7.1 5.9 5.9 5.4 5.4

National Income

0

1

2

3

4

5

6

7

8

2002 2003 2004

Agriculture

Industry

Services

By Expenditure SharesBy Expenditure Shares FYFY

2004 2004 FYFY

2003 2003 FYFY

2002 2002

Personal Consumption Personal Consumption Exp.Exp.

5.8 5.8 5.1 5.1 4.1 4.1

Government Government ConsumptionConsumption

0.33 0.33 -2.8 -2.8 2.4 2.4

Capital FormationCapital Formation 9.5 9.5 4.8 4.8 -3.5 -3.5

ExportsExports 14.1 14.1 3.3 3.3 3.6 3.6

Imports Imports 5.9 5.9 10.3 10.3 4.7 4.7

-4

-202468

10121416

2002 2003 2004

Per. Cons

Govt Cons

Capital

Exports

Imports

•Agricultural production 5.1 growth rate from 3.9 with gov’t. infrastructure, financial and technical support.

•Industry and services rose at 5.2 and 7.1 percent respectively, with support from domestic and foreign demand.

•Consumer spending strong due to the growth in rural incomes.

•Money remittances from overseas foreign workers grew 11 % and bolstered spending.

•Exports of goods and services expanded at 14 percent.

•Tourist arrivals 23.6 percent and reached 1.8 million in 2004. •Call center 35,000 seats in 2004 employing 56,000 agents from 20,000 seats in 2003

•Government supported micro, small and medium enterprises.

Areas of Economic Growth in 2004

Areas of Concern -

•Fiscal position, although still weak, is improving. The 2004 national government fiscal deficit ended at P 186.1 billion.

•Unemployment shall be reduced to generate 10 million jobs the next 6 years.

•Low Foreign Investment - The government is also addressing the key bottlenecks to investment in the Philippines

•Lastly, the government is keen on addressing the problem of corruption

In Million PesosIn Million Pesos GrowthGrowth FYFY

20042004FYFY

20032003

A. LifeA. Life 3 %3 % 41,413.1041,413.10 40,207.8040,207.80

B. Non-LifeB. Non-Life 3 %3 % 28,654.7428,654.74 27,793.8927,793.89

Total Total 3 %3 % 70,067.8470,067.84 68,001.6968,001.69

Combined life and non-life premium

INSURANCE INDUSTRY in 2004

COMBINED LIFE & NON-LIFE PREMIUMCOMBINED LIFE & NON-LIFE PREMIUM

0.00

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

30,000.00

35,000.00

40,000.00

45,000.00

2003 2004

Life

Non-Life

Non-Life - Gross PremiumNon-Life - Gross Premium

Class – in million PesosClass – in million Pesos% Growth% Growth 20042004 20032003

Fire & Allied PerilsFire & Allied Perils 2.402.40 11,054.48 11,054.48 10,795.04 10,795.04

Marine & AviationMarine & Aviation 2.06 2.06 3,441.95 3,441.95 3,372.53 3,372.53

MotorMotor 2.632.63 7,897.31 7,897.31 7,694.58 7,694.58

OthersOthers 5.555.55 6,261.00 6,261.00 5,931.74 5,931.74

TotalTotal 3.103.10 28,654.7428,654.74 27,793.8927,793.89

0

2,000

4,000

6,000

8,000

10,000

12,000

2003 2004

Fire/Allied Perils

Marine/Aviation

Motor

Others

Gross Premium – Non-Life

Non-Life – NET PREMIUMNon-Life – NET PREMIUM

Class – in million PesosClass – in million Pesos % % GROWTHGROWTH 20042004 20032003

Fire & Allied PerilsFire & Allied Perils 8.788.78 4,911.544,911.54 4,514.864,514.86

Marine & AviationMarine & Aviation 1.061.06 1,613.251,613.25 1,596.341,596.34

MotorMotor 4.304.30 7,458.087,458.08 7,150.807,150.80

OthersOthers 11.3511.35 4,121.634,121.63 3,701.453,701.45

TotalTotal 6.736.73 18,104.5018,104.50 16,963.5516,963.55

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2003 2004

Fire/Allied Perils

Marine/Aviation

Motor

Others

Net Premium – Non-Life

Non-Life - Net Incurred ClaimsNon-Life - Net Incurred Claims

Class – in million PesosClass – in million Pesos Loss RatioLoss Ratio 20042004 20032003

Fire & Allied PerilsFire & Allied Perils 46.4446.44 1,522.751,522.75 1,197.521,197.52

Marine & AviationMarine & Aviation 36.00 36.00 515.41515.41 423.78423.78

MotorMotor 105.81105.81 7,149.037,149.03 3,928.55 3,928.55

OthersOthers 42.8242.82 1,287.321,287.32 1,129.971,129.97

TotalTotal 72.37 72.37 10,474.5110,474.51 6,679.826,679.82

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2003 2004

Fire/Allied Perils

Marine/Aviation

Motor Car

Ohers

Net Incurred Claims – Non-Life

(In-Million Pesos)

Net Income – Non-LifeThese sectors experienced:

Income(in million pesos)

%Increase

2004 2003

Underwriting gain /(loss)

4.15 4,849.4 4.656.0

Investment Income 5.67 1,999.7 1,895.4

Operating expenses - 01.03 4,787.4 4,837.2

Income Taxes 20.27 2,061.7 1,714.2

Net Income 22.22 1,867.4 1,527.8

0

1000

2000

2003

2003

2004

Net Income – Non-Life (In Million Pesos)

Net worth – Non Life The financial structure of the non-life sector revealed:

In Million Pesos % Increase 2004 2003

Assets 1.83 65,554.0 64,373.1

Liabilities - 1.77 30,952.80 31,502.60

Net worth 5.26 34,601.2 32,870.5

0.00

10,000.00

20,000.00

30,000.00

40,000.00

50,000.00

60,000.00

70,000.00

2004 2003

Assets

Liabilities

Networth

Net Worth – Non-Life

Life Premium(in million pesos)

% growth

2004% dis.

2004 2003% dis.

2003

Ordinary 1.69 86.73 35,916.4 87.84 35,320.4

Group 1.25 13.27 5,496.7 12.16 4,887.4

Total 2.99 100 41,413.1 100 40,207.8

Life Premiums – In Million Pesos

LIFE PREMIUMLIFE PREMIUM(in millions)(in millions)

0.00

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

30,000.00

35,000.00

40,000.00

2003 2004

Ordinary

Group

2004 Life Premium Distribution

86.73%

13.27%Ordinary Life

Group Life

Kind of Payment Amount Percent distribution

Death benefits 3,985.3 20.85

Surrenders 4,146.5 21.70

Policy Dividends 3,969.9 20.77

Matured policies 2,662.1 13.93

Supplementary Contract 2,292.8 12.00

Others 2,053.0 10.7

Total 19,109.6 100.00

Life Sector – Benefits

Life Sector – Benefits Life Sector – Benefits

Death21%

Surrender21%

P. Dividend21%

Matured14%

Sup. Con.12%

Others11%

Death

Surrender

P. Dividend

Matured

Sup. Con.

Others

Net Income – Life Sector These sectors experienced:

Income(in million pesos)

%Increase

2004 2003

Underwriting 308.9 (2,064.2) (504.7)

Investment 17.08 18,651.0 15,929.6

Operating expenses -4.51 9,552.5 9,983.2

Net Income b/ tax 29.25 7,034.3 5,441.7

Income Taxes paid 9.59 (93.7) (85.5)

Net Income 29.5 6,940.6 5,356.2

0.00

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

6,000.00

7,000.00

Net Income2003 2004

NET INCOME – Life Sector

Net worth- Life Sector The financial structure of the life sector revealed:

In Million Pesos % Increase 2004 2003

Assets 15.2 240,042.7 208,366.4

Liabilities 20.9 182,805.50 151,180.4

Net worth 0.08 57,237.2 57,186.0

0

50,000

100,000

150,000

200,000

250,000

2003 2004

Assets

Liabilities

Net Worth

Net Worth - Life Sector

C. PROFESSIONAL REINSURERS’ SECTOR Reinsurance Premiums Written

The reinsurance sector comprising of two (2)domestic professional reinsurers accounted forP 2,603.0 million in premium volume for 2004, a slight decrease in comparison with the P 2,612.3 million in 2003, with three (3).

However, this sector wroteP 214.1 million premium on business accepted from overseas which was lower than the 2003 premium of P 253.6.

2598

2600

2602

2604

2606

2608

2610

2612

2614

2004 2003

Premium

Reinsurance Sector – Premium Income

Net Income – Reinsurance These sectors experienced:

Income(in million pesos)

%Increase

2004 2003

Underwriting 153.5 129.5

Investment 250.2 224.2

Operating expenses 214.5 183.9

Net Income b/tax 189.2 169.4

Income Taxes paid 0.6 14.2

Net Income a/tax 21.52 188.6 155.2

0

50

100

150

200

2003 Incr. 2004

2003Incr.

2004

Reinsurance – Net Income

D. The Philippine Market Structure

Here is a chart of the Philippine Market Structure for the last two year 2003 and 2004. We are

fortunate to include herein incomplete data for 2005 because licensing of insurance companies

and intermediaries are done on July 1 of every year.

2005 2004 2003

Number of Licenced Companies 128 137 141

Composite 3 4 4

Domestic 3 3 3

Foreign (locally incorporated) - 1 1

Life 29 34 32

Domestic 24 22

Foreign (locally incorporated) 9 10

(Branch Operation) 1

Non-Life 94 97 102

Domestic 87 91

Foreign (locally incorporated) 5 6

(Branch Operation) 5 5

Professional Reinsurers – Doms. 2 2 3

Sales Agencies and

Technical Services2004 2003

Ordinary Agents 40,762 33,121

General Agents 619 403

Variable Life Agents 857 650

Insurance Brokers 127 127

Reinsurance Brokers 43 43

Public Adjusters 2 2

Independent Adjusters 59 59

Accredited Actuaries 45 42

Resident Agents 62 65

Non-Life Company Underwriters 527 534

E. Government’s Supervision of Insurance

Office Name: Insurance Commission IC Bldg., 1071 UN Avenue

Ermita, Manila

Insurance Commissioner- Ms. Evangeline C. Escobillo

Telephone- 063 2 523-84-61 to 70e-mail- oic@i-manila.com.ph

F. CONCLUSION

The Philippine insurance industry continues to thrive despite adverse factors affecting the Philippine economy, to mention a few are:

1-Volume of premiums is a function of economic activity.Government’s fiscal problem slowdowns industry’s resultsaffecting insurance needs. 2-Philippines lies in Pacific rim of fire, hence susceptible to volcanic eruptions and earthquakes limiting retention capacity of insurers.

3-The industry feels they are over-taxed, hence there is always the clamor for legislated reduction of existingtaxes or do away with double taxation on premiumsand insurance business corporations. 4-In the light of globalization and competition, insuranceclients may be forced to get coverage in foreign lands, especially marine covers.

5-Although the budget costs of supervision gets higherevery year, the quantity and quality of output are affected because of low salaries of employees in the government sector.

Thank you everybody for your Thank you everybody for your wonderful attention.wonderful attention.

Melbourne Zoo -2004