insurance (part 1) im jul 10

j u l y 2010

The industry monitor is a monthly publication of the School of Economics of the University of Asia and the Pacific • Pearl Drive, Ortigas Center, Pasig City, Metro Manila, Philippines 1605 • Telephone: 637-0912 to 26; Telefax: 632-7968.

The comments and views expressed in these papers are solely the responsibility of the authors and do not represent any position held by UA&P. These papers may not be distributed in full or in part without prior written authorization.

Acknowledgements: Editing Carmen Valladolid • Layout Rommel B. Casipit • research Glenda Hitosis • design Art & Copy Communication Design Inc. • Printing Inkwell Publishing Co. Inc.

In this issueFeature

2 RecoveringfromglobalrecessionEdwinS.PinedaMaraFlavelRoxasPhoebeLazaroRainierZamoraBrianLintao

News

8 AutomotiveFordstudiesnewautoproductforRP

afterThailandexpansionAutoindustryexpects11%growthin

2010

8 AviationpalistopRPcarrieroperatingfromnaia

8 Bankingbdo,bpibagtopawardsinFinanceAsia

Survey

9 BeverageLocalbottlerisrcCola’sbiggestsellerin

theworld

9 ElectronicsSemiconandelectronicssectorbeing

revitalized

9 HotelsWaterfronthotelssee

25%riseinbookings

9 OilandgasExxonMobilearmarks$500Mforoil

explorationinRP

10 PropertiesEtonPropertiesplansforayintourism

10 ShippingCathayPacifictolaunchfirstround-

the-worldfreighterservice

11 Grossvalueaddedin manufacturing

11 Personalconsumption expenditure

InDUSTRy UPDATES AnD AnAlySES fOR SOUnD BUS InESS PlAnn InG

ApublicationoftheSchoolofEconomics,UniversityofAsiaandthePacific,Philippines

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PHIlIPPInE InSURAnCE InDUSTRy

Recovering from global recession

Edwin s. PinedaSenior Economist

and

mara Flavel roxasPhoebe Lazarorainier ZamoraBrian LintaoGraduate StaffmembersUA&P School of Economics

Theinsuranceindustryoffersdifferentinvestmentinstrumentsthatallowforarangeofbenefits.Invest-mentinstrumentsthatarepopularinthemarketto-dayincludestockorequityinvestments,governmentsecurities (bonds orTreasury bills), pre-need plans,realestate,anddirectlending.

There are three other investment instrumentsknown as pooled funds, which are governed bydifferent regulations and offer distinct features aswell as liabilities, though its products and servicesareessentiallythesame.Thesearemutualfunds,unitinvestment funds (uitfs), and variable universal lifeinsurance(vuls).Wewillalsodiscusstheadvantagesand disadvantages in investing in professionallymanagedfundssuchasthese.

The last two years have been challenging for the insurance business, but the industry’s fundamentals remain sound. First of two parts.

Insuranceinvestmentscontributetoeconomicandsocialdevelopmentintwoways:bystimulatingdemandforgoodsandservices,whichleadstogrowthanddemandfor outputs of economic agents; and by promoting movement of capital and

acceleratingtechnicalprogressandproductioncapacities,therebyincreasingturnover,revenueandprofit.

Insurance in the Philippines TheinsurancebusinessbeganinthePhilippinesbeganwhenLloyd’sofLondonappointedStracham,Murray&Co.,Inc.asitsrepresentativeinthePhilippinesinMarch1829.ItwasalsoonthatyearthattheUnionInsurance Society of Canton appointed Russel andSturgis to work as insurance agents in Manila. In1898,lifeinsurancewasintroducedintothemarketbySunLifeAssuranceofCanada.On8June1906,YekTongLinFire andMarine InsuranceCompany(now Philippines First Insurance Company), thefirst domestic non-life insurance company in thecountry, was established. Four years later, InsularLifeAssuranceCompanyLtd.,thefirstdomesticlifeinsurancecompany,wasinstituted.1

1Sioson,LuisandY.H.Uy,179th Basic Non-Life Insurance Course Textbook,Manila:IIAP,2010,p.7.

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BeforetheInsuranceCommissionwasformed,itwasknownastheOfficeoftheInsuranceCommis-sioner. In 1941 the government agency decided itwasnecessarytoregulatetheinsurancebusinessandformeditsInsuranceDivision,whichbecametheIn-suranceCommissionin1972.TheCommissionreg-ulates the activities of the insurance industryundertheDepartmentofFinance.

Whileallkindsofinsurancearealikeinthattheyrequire for their successful operation a groupingof risks, they are different as to the nature of riskscovered.Inthisrespect,thechiefdifferencebetweenlife and non-life insurance is that in the latter thecontingencyinsuredagainstmayormaynothappen,and in thegreatmajorityofcasesdoesnothappen.Inlifeinsurance,theeventagainstwhichprotectionisgranted—untimelydeath—isaneventualcertainty.Itisnecessarytherefore,ifalifeinsurancepolicyistoprotect the insured during his lifetime, not only toprovideagainst the riskofdeatheachyear,butalsoto accumulate an adequate fund for thepurpose ofmeetinganabsolutelycertainclaimthatwilleventuallyoccur.

The Insurance Industry, under Group 670, isknown as “Insurance and Pension Funding ExceptCompulsory Social Security,” as defined in thePhilippine Central Product Classification (nscb,2006). There are three subclasses under this mainindustry: life insurance (subclass 6701), pensionfunding/fundmanagement(subclass6702),andnon-life insurance (subclass 6703). The first deals withlife insurance with or without savings and includesthe investment of funds. The second includes theprovision of retirement incomes and involves theinvestmentoffunds.Thethirdisabouttheinsuranceandreinsuranceofnon-lifebusinessessuchasmotorvehicle,fireandrelatedperils,marine,casualty,suretyandothers.

Products and servicesLife insurance A life insurance policy is a contractbetween thepolicyowner and the insurer inwhichthe insurerpromises topay a sumofmoney to theinsured’s beneficiaries upon the occurrence of theindividual’sdeathorotherevents.Therearetwotypesoflifeinsurancecontracts:(1)protectionpolicieswhichsimplypayoutalumpsumtotheinsured’sbeneficiary

upontheinsured’sdeath,and(2)investmentpoliciesinwhichthepremiumspaidarealsoinvestedfortheinsured.Therearethreekindsofinvestmentpolicies:wholelife,universallife,andvariablelife.

Protectionpoliciesprovidetwotypesofservice.Abasiclifeinsurancepolicyprotectsthepolicyholderfor a number of years (usually ranging from 1 to30). In term life insurance, there are also no cashvalues attached to thepolicy soone cannotborrowfromtheaccumulatedpremiumspaid.Ontheotherhandawhole lifepolicy,whichprotectstheinsuredforthedurationofhislifetime,hasacashvalue.Aninsurancecompanyinvestspremiumpaymentsonawholelifepolicyinbondsorstocks,etc.,andthuscanlend the policyholder funds from his reserves.Thiskindofpolicyusuallycomesatahigherpremium.Awholelifepolicyhasafixedpremiumbuttheinsuredhasnocontroloverthemodeinvestmentusedbythecompany.

Under a universal life policy, the insured canswitch fundsbetween insurance and savings aswellasusehissavingstopayforhispremiums.Thekindof policy that has been getting the most attentionlatelyisthevariableuniversallife(vul)policy,wheretheinsuredhascontrolovertheinvestment,whetherintostocks,bondsormutual funds.Generally,vulsprovidecashvaluesanddeathbenefitsdependingontheinvestmentportfolio.Thecashvalueofavariablelife policy is not guaranteed, and the policyholderbears that risk. However, by choosing among theavailablefundoptions,thepolicyholdercancreateanasset allocation thatmeetshisorherobjectives andrisk tolerance. Good investment performance willlead to higher cash values and death benefits; poorinvestment performance will lead to reduced cashvaluesanddeathbenefits.

Non-life insurance Thefourtopgeneralinsurancepolicies used by Filipinos are motor car insurance,casualty,fire,andmarineinsurance.

Property insurance covers losses from fire, theftandsomeweatherdamage.Someformsofpropertyinsuranceincludefloodinsurance,fireinsurance,andearthquakeinsurance.

Therearetwowaystoinsureproperty:asa“namedperil,”wherethe insured listsdownactualcausesoflosstobecoveredbythepolicy,orbyan“openperil”policy,whichcoversallcausesoflossnotspecifically

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excludedbythepolicy.Someexclusionsinopenperilpolicies are damages caused by earthquake, flood,terrorism,andwar.

Vehicleinsurancecalculatesitsprobabilityanalysisthrough auto insurance risk selection, a processby which the car insurance company evaluates theinsurability of an individual and what insurancepremium to charge. The insurance premium isdeterminedbasedonregulationssetbythegovernmentor from actuarial studies pertaining to incidence ofaccidents and natural disasters (i.e., “acts of God”).Premiumscanvarydependingonmanyfactorsthatarebelievedtohaveanimpactontheexpectedcostoffutureclaims.Thesefactorsincludecarcharacteristics,coverageselected,theprofileofthedriverandusageofthecar.

Casualty insurance covers liabilities and losseswhich are caused by unexpected accidents. It isdesignedforcasesliketerroristattacks,burglary,fraudandotherunforeseenoccurrences.

Marineinsuranceprovidesprotectionagainstlossordamageofcargo,terminals,ships,andanyformoftransportbywhichcargoistransferred.

There are specialized policies offered by marineinsurance. Some of these are new building riskinsurance, yacht insurance and war risks insurance.Newbuildingriskcoversriskofdamagetothehullwhile it isunderconstruction.Yacht insurancemaycoversmallervesselssuchasfishingvesselsandyachts,and include liability coverage. Some kinds of hullinsurancedonotcovertherisksofsailingintoawarzone, while some charge additional premiums toprotectagainstlossinawarzone.Anincreasedvaluepolicyprotectstheshipowneragainstthedifferencebetweentheinsuredvalueandthemarketvalueofthevessel.

Industry structureLife insurance AsofNovember2008,therewere121licensedinsurancecompanies,9firmslessthanthoseregisteredin2007and2006(see Table 1).Thedecreasemaybeattributedtothenon-reissuanceoflicenses,ortothemergerofsomeinsurancecompanies.

table 1 • A shrinking numberno. of insurance companies

List of firms �008 �007 �006 �005

no. of licensed companies 121 123 130 132

Composite 3 3 3 3

life insurance 31 32 33 33

non-life insurance 85 87 93 94

Professional reinsurers 1 1 1 2

Source of basic data: Insurance Commission (IC), 2009

Since the industryhas recentlyaddednewproductslikeinvestmentpolicies,itcomesagainstcompetitionfrom other industries that provide similar productsandservices.Inthefinancesector,forinstance,newinvestmentinsuranceproductscompetewithmutualfunds,trustfundsandpublicpensions.Mutualfundsarepooledfundsofindividualsandinvestorsusedtoinvestinstocks,bonds,equities,andthemoneymarket.Trustfundsarethosemanagedbyatrusteeforatrustorinfavorofabeneficiarybyinvestingsavingsintothemoneymarket.Publicpensionsaregovernment-ownedandcontrolledinsurancecorporations,andhencearenot regulated by the Insurance Commission (ic).ThesearetheGovernmentServiceInsuranceSystemandSocial SecuritySystem.Bothprovide insurancebenefits, medicare, and others to government andprivatesectoremployees,respectively.

Thetotalfinaldemandofthisindustryispositive;the industry sustains the demand of the economy.A largepercentageofdemandcomes frompersonalconsumption expenditure of individual consumers,garnering a total of 106.45%. This shows thata significant portion of industry growth may beattributed to individualpolicyholders.Exports andimportscontribute4.95%and11.40%,respectively(see Table 2).

table � • Consumers spend more on insuranceComposition of total final demand

output Percentage (%)

PCE 31,374,202.60 106.45

GGCE 0.00 0.00

GfCf 0.00 0.00

CS 0.00 0.00

E 1,458,435.00 4.95

M -3,358,839.00 -11.40

TfD 29,473,798.60 100.00

Source: National Statistical Coordination Board (NSCB)

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The life insurance industry acquires group policiesfrom the following: restaurants, bars and othereating and drinking places (26.3%); air transport(6.6%);andrealestateactivitieswithownedorleasedproperty(6.3%).Thetotalintermediateinputofthisindustryis8,213,923whileitstotalprimaryinputis21,504,243.ThisshowsthelifeinsuranceindustryisaprimaryinputindustrysinceTPIisgreaterthanTII

(see Table 3).

table � • Composition of total intermediate input

top � industries input flow Percentage (%)

Restaurants, bars, canteens and other eating and drinking places

515,710.40 26.3

Air transport 846,736.50 6.6

Real estate activities with own or leased property and contract basis

542,027.60 6.3

Total intermediate input 8,213,923 100

Source: NSCB

table � • Composition of primary input

input input flow Percentage (%)

Compensation 2,503,092 11.64

Depreciation 467,192 2.17

Indirect taxes-subsidies 198,522 0.92

Operating surplus 18,335,436 85.26

Total primary inputs 21,504,243 100.00

Source: NSCB

As for the industry’s total primary input, a hugepercentageisallottedtooperatingsurplus,garnering85.26%.Thisshowsthatthelifeinsuranceindustryis capital-intensive rather than labor-intensive. Theindustry is also subject to many different kindsof taxes—premium taxes, documentary stamptax, interest income, and vat, to name a few—making it hard to lower costs of insurance policies(see Table 4).

Advantages and disadvantagesSomeadvantagesofinvestinginlifeinsurance:(1)Lifeinsuranceprovidesprotectionagainstlossofincomecausedbydeath;(2)premiumcostscanbefixedtomeetpersonalfinancialneeds; (3) the policy accumulates a cash value thatyoucanborrowagainst,althoughloansmustbepaidback with interest or your beneficiaries will receivereduced death benefits; (4) you can borrow againstthe policy’s cash value to pay the premium or usethecashvaluetoprovidepaid-upinsurance;(5)the

policy’s cashvaluecanbe surrendered in totalor inpartforcashorconvertedintoanannuity(Permanent Life Insurance,2009).

It is also important to consider the risks ofinvesting in life insurance even if the advantagesoutweigh the disadvantages: (1) Required premiumlevelsmaymakeithardtobuyenoughprotectionasitgetsmoreexpensive;(2)itmaybemorecostlythanterminsuranceifyoudon’tkeepitlongenough;(3)investmentearningsmayeitherbepositiveornegative(Permanent Life Insurance,2009).

Non-life insurance There were 123 insurancecompaniesthatwereauthorizedtoopenaninsurancebusiness in2007-2008.The insurance industrywascomposed of 32 life, 87 non-life, 1 professionalreinsurerand3compositecompanies.TheInsuranceCommissionalsograntedauthorizationto19mutualbenefitassociations(mba)and5trustsforcharitableuses(see Table 5).

table 5 • Authorized insurance companiesAs of December 2007

Classification of company

direct insurersLife

non-life

Professionaltotal

Composite reinsurers

A. Domestic 2 23 80 1 106

B. foreign

locally incorporated 1 8 4 13

Branch 1 3 4

Total 3 32 87 1 123

Source: ic

Thenumberofinsurancecompaniesdecreasedto123in2007from130in2006.BerkleyInternationalLife Insurance Inc. andTravelers’ Life Assurance ofthePhilippinesfailedtoapplyforarenewaloflicensethat year. Acropolis Central Guaranty CorporationandCathayInsuranceCompanyInc.wereputunderconservatorship, while fgu Insurance Corporationmergedwithbpi/msInsuranceCorporation.TheassetsofavivaGeneralInsurancePte.Ltd.weretransferredto bpi/ms. Royal International Insurance HoldingsLtd.,on theotherhand,was removed fromthe listbecause it is now managed by the Federal PhoenixAssuranceCompanyInc.Othercompanieschangedtheirnames(see tables 6 and 7).

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table 6 • Companies registered under new names

�006 �007

COOP life Assurance Society of the Philippines (ClASP)

COOP life Insurance Mutual Benefit Services (ClIMBS)

Pramerica life Insurance Company, Inc.Manulife China Bank life Assurance Corporation

first Guarantee life Assurance Company, Inc.

first life financial Company, Inc.

nippon life Insurance Company of the Philippines

Great life financial Assurance Corporation

Source: Annual reports of the IC

table 7 • intermediaries and other technical support entities no. of licenses issued, 2007

sales/technical group new renewal total

Ordinary agents 11,936 24,051 35,987

life 9,992 15,438 25,430

non-life 1,944 8,613 10,557

General agents 11 221 232

life 3 32 35

non-life 8 189 197

Variable life agents 3,194 1,640 4,834

Brokers 2 123 125

Insurance 0 93 93

Reinsurance 2 30 32

non-life underwriters 35 440 475

Resident agents 1 53 54

Actuaries 0 41 41

Adjusters 0 53 53

External auditor 0 93 93

Total 15,179 26,715 41,894

Source: Annual reports of the IC

Agents and other technical services The InsuranceCommissiongavenewandrenewalinsurancelicensesto35,987registeredordinaryagents in thecountry.25,430 were life agents and 10,557 were non-lifeagents.Theyalsoissuedlicensesto4,834variablelifeagents,232generalagents,93insurancebrokersand32 reinsurance brokers. Certificates of registrationweregrantedto53adjusters,41actuaries,54residentagentsand475non-lifecompanyunderwriters.

Financial surveillanceAllincludedinstitutionsweresubjected to eitheroffsiteoronsite examinations todetermineconformitywiththeInsuranceCodeandotherrulesandregulations.

During theyear,242 insurance companies/mbas/brokersweregivenexaminations.Theexamcoveredtests created into the financial condition, ways ofanalyzing loss cases, and examinations of actuarial

accounts of life and non-life insurance companiesandentities.Duringtheexam,477conferencesandfollow-ups were created, 232 examination and 22verificationreportsweresubmitted,54,720adjusters’reports were analyzed and penalties on breach oftariffsubmitted,and83synopseswereapprovedforexposal.

Public assistance and claims adjudication TheCom-missionalsoprovidedopportunitiesforthepublictohavetheircomplaintsheardandresolved.Intheyear2007,therewere5,054complaintsagainsttheCom-mission,whichsent3,005letterstocomplainantsandconducted1,859conferenceswiththem.

There were 859 cases that were terminated,decided,ordismissed,and5administrativecaseswereresolved.Atotalof1,162ordersforbondliabilities,56 resolutions and 9,407 certifications of originalrecordsonbondswereissuedduringtheyear.

Liquidation, conservation and receivership Afterdueprocess,someinsurancecompanieswerepeggedfor liquidationorbroughtunderconservatorshiporreceivership,asprovidedunderSections248-251ofthe InsuranceCode.Table8providesa listof thesecompanies.

table 8 • insurance companies under process

Liquidation start dates

Central Surety Insurance Company, Inc. 22 january 2007

Development Insurance & Surety Corporation 24 April 2007

filipino Merchants Insurance Company, Inc. 7 March 2007

Mantrust General Insurance Corporation 20 April 2007

Rico General Insurance Corporation 5 july 2007

Conservatorship

Algen Insurance Corporation 23 May 2007

Postal Services Mutual Benefit Association 4 April 2007

Receivership

first Quezon City Insurance Company, Inc. 20 june 2007

South Sea Surety & Insurance Co., Inc 3 March 2007

Source: Annual Reports of the Insurance Commission (IC)

Security deposits, guaranty fund and security fundAfter 2007, total government securities depositsamounted to P4,305.85 million (M) while timeddepositswereP32.35MandY65,000.Ontheotherhand, a combined guaranty fund of mutual benefitassociations amounted to P284.57M. Lastly, thesecurity fund of both life and non-life companieshaving P5M each had total interest earnings of

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P243,310.57 and P198,247.25, respectively, whichwereturnedovertothecontributorycompanies.

Reinsurance treaties, policy forms and investmentsIntheyear2007,360requestsforfacultativereinsurance2placementsabroadwereapprovedand985reinsurancetreatieswereevaluatedandfoundinorder.Therewerealsoissuancesofcertificationstoassurethelegitimacyof293foreignexchangeremittancesabroad.Similarly,835 mba insuranceplans and427bond formswereevaluatedandapprovedduringtheyear.Also,atotalof239investmentsamountingtoP11.13billion(B)and$96.67Mwereacteduponduringtheyear.

Input-output analysis According to the analysis,the non-life insurance industry’s major output isallocated to wholesale and retail trade (16.12%),publicadministrationanddefense(9.56%),jeepneys,tricyclesandotherroadtransport(6.29%).

Total final demand for non-life insurance isP3,078,700 which is less than total intermediatedemand at P18,897,802.Therefore, the industry isanintermediatedemandindustry(see Table 9).

table 9 • Composition of total final demand

output Percentage (%)

PCE 5,421,057 176.08

GGCE - -

GfCf - -

CS - -

E 1,458,435 47.37

M (3,800,792) -123.45

TfD 3,078,700 -

Source: NSCB

Total final demand for the non-life insuranceindustryisnotnegative.Thismeansdemandfortheindustry’sservicesisstable.Themajorattributionofdemand in the industry—up to 176.08%—is frompersonalconsumptionexpenditureofconsumers(see Table 10).

table 10 • Composition of total intermediate input

top 5 industries input flow Percentage (%)

Restaurants, bars, canteens and other eating and drinking places

1,107,597 15.81

2Anoptional,case-by-casemethodusedwhenthecedingcompanyreceives an application for insurance that exceeds its retention limit(Rejda,GeorgeE.,Principles of Risk Management and Insurance,Boston:PearsonEducationInc.,2008,p.118).

table 10 • Composition of total intermediate input

labor recruitment and provision of personnel

719,996 10.27

jeepneys, tricycles (motorized and non-motorized) and other road transport

447,312 6.38

Manufacture of soap and detergents 381,804 5.45

legal activities 313,589 4.48

Total intermediate inputs 7,007,556

Source: NSCB

Thenon-lifeinsuranceindustryobtainsitsmajorinputs from restaurants, bars and other eating anddrinking places (15.81%); labor recruitment andprovision of personnel (10.27%); and jeepney,tricycle,andotherroadtransport(6.38%)—alltradesthatinvolveriskofincurringliabilityfromdamageorinjurytolargegroupsofpeople.

Total intermediate inputs amounted toP7,007,556—less than total primary inputs of theindustrybyP14,968,946(see Table 11).Therefore,theindustryisaprimaryinputorvalue-addedindustry.Operating surplus had the highest percentage(74.67%)amongtotalprimaryinputs,reflectingtheindustry’scapitalintensivecharacter.

table 11 • Composition of primary input

input Percentage (%)

Compensation 2,748,664 18.36

Depreciation 527,019 3.52

Indirect taxes-subsidies 515,361 3.44

Operating surplus 11,177,902 74.67

Total primary inputs 14,968,946

Source: NSCB

Advantages and disadvantages Non-life insuranceprotectstheinsuredbyindemnifyinghimincaseoflossofhisproperty.Notallkindsofriskcanbeinsuredagainst, but general insurance provides protectionagainst a significant number of contingencies thatcanresultinlossorliability.Despitetheadvantages,however, therearealso risks in investing innon-lifeinsurance.Insomecases,thecostofprotectioncanbeprohibitive,correspondingtohighlevelsofrisk.

Next issueInthesecondandconcludingportionofourarticlewe discuss growth in the insurance industry since2007.IM

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AutomotiVE

Ford studies new auto product for rP after thailand expansionAfter announcing its $450 million (M) automotiveexpansion in Thailand to produce a car model itis already producing here, Ford Motor CompanyPhilippines(fmcp)istryingtoappeasethePhilippinesby saying they are studying new product programopportunitiesforthecountry.

fmcp remains focused on the manufacture ofworldclassFordandMazdavehiclesandservicesforPhilippinecustomersandexportmarkets.Accordingtofmcp,theThailandinvestmentwillhavenoimpactonthecurrentFordFocusprogram,orthemanufacturingoperations of fmcp. Ford’s $450M investment inThailand is part of its investment and expansionstrategyintheAsiaPacificandAfricaregion.

The company remains fully committed to theexport program, including the fulfillment of theconditions of its registration under the AutomotiveExportProgram.fmcphasexportedmorethan65,000units of Ford Focus, Ford Escape and Mazda 3 forasean marketssince2002.

At present, Ford’s assembly plant in Sta. Rosa,LagunaproducesFordFocuscarsboth for the localandexportmarkets.ThePhilippine-assembledFordFocusmodelisexportedtoThailand,IndonesiaandMalaysia.There were 337 units of Ford Focus soldlocally in the January-Mayperiod this yearor14%higherthanthe295unitssoldinthesameperiodlastyear.

Source: Manila Bulletin Online, 26 June 2010

Auto industry expects 11% growth in �010The Chamber of Automotive Manufacturers of thePhilippinesInc.(campi)hasreviseditsyear-endsalesgrowthtargetto11%from4%.

campi president Elizabeth Lee said the industrywasbullishduetoitsstrongsalesperformanceduringthefirstfourmonths,andgiventhesurprising7.3%economic growthduring thefirst quarter, industry-widesaleswereup36.6%year-on-yearfromJanuarytoMay,mostlyonrobustdemandforlightcommercialvehicles.In2009,carsalesrose6.4%to132,244unitsversus 2008. campi expects car sales to hit 147,000units this year, higher than its earlier projection of134,000units.

Factors thatwill continue tobolster vehicle salesincludeaggressivefinancingpackages,makingiteasyandaffordable forbuyers topurchase theirvehicles;the expected rise in ofw remittances, which is theengine of consumption; and positive business andconsumerconfidence.2010willbe anexcitingyearforbothautoplayersandbuyers,Leeadded.

Source: the PhiliPPine Star Online, 17 June 2010

AViAtion

PAL is top rP carrier operating from nAiAIn the reports of Official Airline Guide (oag),Philippine Airlines (pal) was the leading Philippinecarrier in terms of flights and seat capacity for thelasttwoyears.Inasurveyofthetopairports intheAsia-Pacific region, oag data show that naia’s fourterminals handled 1,859 flights per week in 2009,an increaseof12%over the1,654flightsperweekhandledin2008.

These flights resulted in 309,616 seats per weekflownbyallairlinesusingthenaiacomplexin2009—11% more than the 278,130 seats per week flownin 2008. Of this traffic volume, pal had a market-leadingshareof35%ofallflightsperweekand38%of all seatsflownperweek at the country’s premierairportin2009,oagreports.Bothfiguresrepresentedincreasesoverthe33%and37%shares,respectively,thatpalpostedin2008.

Incontrast,pal’smainlocalcompetitorwasafarsecondinbothcategories.Thebudgetairlinemanagedonlya32%shareinflightsperweekand28%inseatsperweek in2009, according to oag.For2008, thecorrespondingfigures for the secondarycarrierwere28%and25%,respectively.


BAnKinG

Bdo, BPi bag top awards in Finance Asia surveyFinance Asia, a prestigious finance and businesspublicationinAsiaandthePacific,hasnamedBancodeOroUnibankInc. (bdo) thebestdomesticbankandtheBankofthePhilippineIslands(bpi)asthebestcashmanagementbankinthePhilippines.

Initsannualsurvey,FinanceAsiaalsonamedbdothe best foreign exchange bank while bpi was cited

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as the best trade finance bank in the Philippines.FinanceAsia’sannualcountryawardsforachievementrecognized thebanking institutions ineachcountryintheregion.

ThesurveycoveredtheperiodfromJune1,2009toMay17,2010.bdoCapital,asubsidiaryofbdo,meanwhile bagged three other awards, namely, bestinvestment bank, best equity house and best bondhouseinthePhilippines.


BEVErAGE

Local bottler is rC Cola’s biggest seller in the worldAsiawide Refreshments Corporation, licensedmanufacturer and distributor of rc Cola in thePhilippines, has put the country on the cola mapas the largest rc Cola bottler in the world. FrancisLamprea,managingdirectorofrcColaInternational,who visited the local office twice this year, said thebrandhasbeenabletopenetratethemarkettosuchadegreethatrcColacannowclaimtobethemostpreferredcolabrandintheMetroManila.

The company was founded in 1905 and itsformulationhasbeenaroundsince1937.OneofthedrivingforcesofrcColaremainsconstant:toprovidepeoplewithasymbolthroughwhichtoexpresstheirindividualityanddefinitelyasymbolforindependent-mindedconsumers.


ELECtroniCs

semicon and electronics sector being revitalizedThrough the initiative of the CongressionalCommissiononScience,TechnologyandEngineering(comste),thesemiconductorandelectronicbusinessin thePhilippines isbeing revitalized thisyearwithan agreement with Taiwan’s Industrial TechnologyResearchInstitute.

TheagreementistoassessthestateofthePhilippinescienceand technology systemandprovide researchand development support. Sen. Edgardo J. Angarasaidcomste,whichhechairs,hascontinuedfundingresearch and development for technology in eight

universitiesthatprovidescholarshipsinmaster’sanddoctoraldegreesinvariousengineeringfields.

With the agreement, the semiconductor andelectronics sector expects improved sales and bettertechnological innovation. He added this will laythe groundwork for the creation of the PhilippineIndustrial R&D Institute, for which funding hasalreadybeenallotted.


HotELs

Waterfront hotels see �5% rise in bookingsWiththelaunchofitsredesignedwebsite,WaterfrontHotels&Casinosexpectsa25%increaseinbookings.Thesiteoffersamoreexcitingbrowsingandbookingexperiencetocustomers.

The recent launchofWaterfrontHotels’CentralReservations Office, a one-stop online service forall Waterfront hotels nationwide, complementsexisting capabilities directed toward making hotelbookingconvenientforguests.Withincreasedonlinedistribution,theGroupwidensitsreachtoprospectiveclients.

Otherfeaturesincludeagallerypage,whereuserscan browse hotel facilities and amenities; a “hotelspecials” tab,whichwillhighlightpromosacross all5 properties; and an “experience” page that allowsguests tosharetheir thoughtsonroomstay,dining,andeventsatWaterfronthotels.


oiL And GAs

Exxonmobil earmarks $500m for oil exploration in rPExxonMobil may spend around $500 million forits initial exploration activities in the Philippines,accordingtothecountry’stopenergyofficial.

Energy secretary Jose Ibazeta said the US-basedmultinationalmayspendthisamountforitsmediumterm drilling program. ExxonMobil is the leadcontractorofServiceContract56,alongwithotherconsortiummembersMitraEnergyLtd. (25%)andbhp BillitonInternationalExplorationPtyLtd.(25%).sc 56coversanareaof8,200squarekilometerslocatedabout900kilometers southwestofManila and200

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kilometersnorthwestofBongao,thecapitalofTawi-Tawiprovince.

ExxonMobil is scheduled to continue theirpetroleum exploration commitment with theDepartmentofEnergybydrillingthethirdwellinthedeepwatersoftheSouthSuluSea,utilizingthesemi-submersibledrillingrigWestAquarius.ExxonMobilhasalreadycompleteddrillingofthefirsttwowells,Dabakan-1 and Banduria-1, but data processing isstillongoing.


ProPErtiEs

Eton Properties plans foray in tourismEtonPropertiesPhilippinesInc.isplanningamajorforayintothetourismsector,seenasthenextengineofgrowthforthecountryandthepropertyindustryaswell.

Eton president Danilo Ignacio said the firm isseriously considering diversifying into the leisuredevelopmentmarketpossiblywithintheyear,pointingoutseveralofitspropertiesthatcanbeusedforthisventure.Etonownsa34-hectarepropertyonMactanIsland inCebuprovince,whichcanbe transformedintoatourismestatewithafive-starhotel,condotels,residentialcondominiums,andluxurygardenvillas.

Partof the company’s expansion is its entry intotheaffordablehousingsegmentthroughanewbrandcalledFirstHomes.Itsfirstproject,AuroraHeights,will rise on a 4,820 square meter property nearthe intersection of Katipunan Avenue and AuroraBoulevard in Quezon City. Slated for turnover by2013,AuroraHeightswillhavetwo20-storytowersofferinga totalof1,256unitsor626units each.A

two-bedroomunitstartsatP1.2million(M)whileathree-bedroomunitcostsP2.2M.

Etonexpects2010tobeamuchbetteryearwiththeexpectedlaunchof10newprojects.Encouragedby its strongfirstquarter results—which showed itsnetearningsgrowingmorethan10timestoP185MfromonlyP18M—EtonislookingatanetincomeofP700Mbyyear-end,which ismore thandouble itsP294Mincomereportedin2009.


sHiPPinG

Cathay Pacific to launch first round-the-world freighter serviceCathayPacificAirwayswilllaunchitsfirstround-the-world freighter service, offering customers a widerchoice and helping further develop Hong Kong’spositionasaleadinginternationalaircargohub.Theairline has spent months developing the new route,which will initially be operated twice weekly, everyFridayandSunday,usingaBoeing747-400freighter.

RupertHogg,CathayPacificdirector,isexpressingexcitement at the launching of the new freighterservice,whichwillfurtherstrengthenCathay’scargonetwork aswell as reinforce its commitment to thecontinueddevelopmentofHongKongas a leadinginternationalaircargohubthroughtheconstructionofanewcargoterminalandthecontinuedexpansionofitsfreighterfleet.

The round-the-world flight is an extension ofCathayPacific’sexistingservicetoChicago.Theflightwilltake44.5hourstooperate,includinggroundtimetoupliftfreight.


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GrossvalueaddedinmanufacturingQ32008toQ22010(atcurrentprices)

inPmillion2008 2009 2010

INDUSTRY/INDUSTRY GROUP Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Food manufactures 188,895 276,841 209,714 171,553 179,525 283,682 235,288 176,715Beverage industries 17,921 20,475 10,235 13,065 17,122 18,803 10,540 14,648Tobacco manufactures 3,768 2,317 1,053 1,481 3,738 2,655 1,080 759Textile manufactures 4,578 4,354 4,304 4,658 4,261 3,824 4,010 4,955Footwear wearing apparel 18,930 20,761 10,562 12,697 15,888 18,729 10,274 11,803Wood and cork products 1,010 2,274 861 1,191 901 2,212 890 1,229Furniture and fixtures 3,482 5,549 3,429 2,838 2,486 5,215 3,876 3,008Paper and paper products 2,227 1,414 1,377 1,553 1,908 1,301 1,508 1,891Publishing and printing 1,378 3,536 3,074 4,095 1,405 3,798 3,397 4,341Leather and leather products 10 440 100 6 6 281 141 8Rubber products 1,922 1,451 1,421 926 1,381 1,603 2,082 1,300Chemical & chemical prod. 28,653 31,438 18,719 23,255 28,042 34,341 21,089 26,420Products of petroleum & coal 58,457 38,274 18,443 29,481 35,713 42,402 40,831 41,246Non-metallic mineral prod. 10,838 14,145 8,176 11,721 11,529 16,095 9,167 13,234Basic metal industries 20,796 11,342 8,692 8,332 14,979 11,815 10,365 10,785Metal industries 5,558 8,914 3,644 9,362 4,915 7,830 4,104 10,527Machinery except electrical 2,667 2,657 1,808 2,070 2,437 2,668 1,944 2,120Electrical machinery 42,581 33,829 24,628 28,506 36,787 38,939 37,392 42,626Transport equipment 4,106 4,134 2,574 3,671 4,490 4,800 3,411 5,016Miscellaneous manufactures 8,817 10,084 9,111 7,735 8,202 9,910 11,253 9,356Gross value added in manufacturing 426,594 494,227 341,924 338,195 375,716 510,904 412,642 381,986

GrossvalueaddedinmanufacturingQ32008toQ22010(atconstant1985prices)

inPmillion2008 2009 2010

INDUSTRY/INDUSTRY GROUP Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Food manufactures 31,394 43,499 35,740 32,153 30,481 44,313 39,403 32,434Beverage industries 3,726 4,018 2,145 2,653 3,438 3,651 2,184 2,926Tobacco manufactures 1,117 675 311 440 1,126 786 307 219Textile manufactures 1,092 976 1,042 1,154 938 788 960 1,242Footwear wearing apparel 3,367 4,208 1,798 2,246 2,621 3,478 1,644 1,962Wood and cork products 285 674 253 342 253 653 262 352Furniture and fixtures 1,280 1,458 922 901 1,038 1,727 1,154 1,055Paper and paper products 727 449 468 607 706 475 545 744Publishing and printing 354 841 822 1,003 341 853 879 1,028Leather and leather products 3 109 32 2 2 69 43 2Rubber products 556 410 452 361 484 506 561 503Chemical & chemical prod. 5,227 5,504 3,525 3,983 4,793 5,651 4,174 4,567Products of petroleum & coal 11,462 10,477 7,283 10,186 9,213 10,678 12,059 11,985Non-metallic mineral prod. 1,783 2,311 1,355 2,316 1,851 2,620 1,500 2,563Basic metal industries 3,549 2,049 1,631 1,722 3,114 2,072 1,657 1,946Metal industries 1,342 1,927 925 2,615 1,237 1,886 1,097 2,921Machinery except electrical 889 893 660 729 792 955 726 792Electrical machinery 11,025 7,469 6,545 7,731 10,171 9,835 10,107 12,095Transport equipment 837 814 518 795 948 1,000 692 1,092Miscellaneous manufactures 2,656 2,611 2,603 2,358 2,577 2,948 3,163 3,057Gross value added in manufacturing 82,672 91,374 69,032 74,298 76,124 94,945 83,119 83,487

Source: National Statistical Coordination Board (NSCB)

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PersonalconsumptionexpenditureQ32008toQ22010(atcurrentprices)

inPmillion

2008 2009 2010

EXPENDITURE GROUP Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Personal consumption expenditure 1,332,510 1,498,238 1,286,865 1,404,908 1,371,511 1,611,681 1,412,350 1,531,978

Food 620,454 732,308 597,980 670,485 655,557 808,230 657,868 733,775

Beverages 21,636 22,912 16,456 19,585 21,025 22,622 19,404 23,423

Tobacco 20,175 23,002 15,198 21,185 21,705 27,259 16,712 20,583

Clothing and footwear 25,755 28,463 21,105 32,839 27,266 29,562 22,823 32,260

Fuel, light and water 64,109 58,278 57,150 62,499 57,368 58,844 69,038 79,634

Household furnishings 16,463 19,595 20,882 24,658 14,126 23,151 23,307 25,011

Household operations 118,203 113,825 131,117 13,1090 128,591 121,864 139,666 137,724

Transportation/comm. 170,711 159,840 143,959 14,4642 152,123 155,214 153,671 160,876

Miscellaneous 275,005 340,014 283,017 29,7925 293,749 364,935 309,856 318,691

PersonalconsumptionexpenditureQ32008toQ22010(atconstant1985prices)

inPmillion

2008 2009 2010

EXPENDITURE GROUP Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Personal consumption expenditure 269,923 311,848 261,435 286,924 276,957 327,341 275,426 301,098

Food 143,909 175,139 137,346 151,712 149,490 184,656 145,593 161,177

Beverages 5,647 5,861 3,970 4,992 5,317 5,653 4,590 5,877

Tobacco 5,570 6,024 4,395 6,016 5,790 6,873 4,664 5,684

Clothing and footwear 8,231 9,140 6,714 10,344 8,528 9,304 7,116 9,965

Fuel, light and water 10,335 9,462 10,405 11,043 9,685 9,475 11,262 11,968

Household furnishings 6,823 8,157 8,675 10,337 5,780 9,523 9,575 10,390

Household operations 22,734 22,052 22,625 23,312 23,443 22,738 23,297 24,043

Transportation/comm. 27,007 28,429 27,308 26,724 26,827 28,288 26,901 27,753

Miscellaneous 39,667 47,585 39,995 42,444 42,096 50,831 42,429 44,242

Source: NSCB

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