Annual Report 2014 - Generali · PDF fileachieving these milestones. ... 08 | Generali...

02 President’s Report

03 Corporate Objectives

04 Financial Highlights

Review of Operations

Shareholder Structure

Board of Directors

Corporate Governance

Corporate Social Responsibility

Products and Services

Corporate Officers

04

1011

Statements of Financial Position04 Statements of Income

09 Shareholders / Board Matters09 Dividend Policy09 Equality of Voting Rights of 09 Shareholders09 Remuneration of Board Members09 Compliance with Code of Corporate

Governance09 Company Matters09 Risk Management09 Whistle-blowing Policy

Business LinesProducts

06

06

07

09

10

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01 | Generali Philippines - Annual Report 2014

Table ofContents


President’s Report

To all our shareholders,

Over the last five years, Generali Philippines has employed a “back-to-basics” approach by fine-tuning product offerings, scaling up the quantity and quality of its sales force, strengthening IT infrastructure, and improving backroom operational efficiencies.

By the end of 2014, Generali's bancassurance channel has grown 35% to 740 Financial Advisors and Sales Managers. To further enhance sales productivity, the company employed tried and tested sales and marketing tools that intensified the sales force's product familiarization and sales skills.

By focusing on these essentials, Generali has built a robust bancassurance business model that can respond more quickly to ever-changing market conditions.

2014 was an excellent year for the company bannered by a 37% growth in total individual premiums. Individual renewal premiums significantly increased by 42% while First Year recurring premiums rose 23% versus 2013 levels.

Despite prevailing low interest rates, traditional products continued to provide healthy profit margins. At the same time, Regular Pay Variable Life business, introduced late in 2013, comprised more than 20% of new business by the end of 2014. Variable Life's growth momentum is expected to carry over into 2015.

The Company's strategy to focus solely on recurring-

premium products accounts for the continuing boost in GP revenues. This recurring premium strategy immunized GP's 2014 sales results from cyclical patterns caused by market corrections, unlike the effects on other industry players who are heavily reliant on sales of Single Pay products.

On the Group Life and Health (GLH) Insurance side, GP remains focused on becoming the preferred provider of employee benefit solutions among its corporate clients. The GLH strategies for 2014 and forward are anchored on increasing its share of the protection business, providing excellent service levels that will influence the retention of valued accounts and thus improve bottom line results.

As a result, total GP premiums including the Group Life and Health business jumped by 25% allowing Generali to move up and secure the 9th spot among the top life insurance companies in the country, despite veering away from single premium sales.

Our stellar performance in 2014 is the result of the excellent support of our bank partner, BDO and worldwide insurance leader Generali Group, along with the commitment of the GP sales force.

Moving forward, our overarching goal in the near term is to be among the top players in the industry. We shall do this together by striking the optimum balance between revenue generation strategies and bottom line improvements that will create an agile operating platform that will allow our stakeholders to experience sustained growth over the long-term.

Yours truly,

Renato A. Vergel De DiosPresident & CEO


Corporate Objectives

WE EXIST

Ÿ To help drive business growth by providing our clients with the right solutions that address their financial security needs (CLIENT-CENTRICITY)

Ÿ To manage the optimum product mix (Vision 50/50) via sales and marketing tools, promotional programs, and BTL client engagement activities (PRODUCT PORTFOLIO PROFITABILITY)

Ÿ To position GP to its stakeholders (i.e. distribution partners and target market):

Ÿ as a solutions provider that understands the client's needs for financial security

Ÿ as a company that cares through client education on proper planning

Ÿ as the company of choice for sales-oriented talents who want to maximize their potential


Financial HighlightsSTATEMENTS OF FINANCIAL POSITION

Years Ended Decem ber 31 2014 2013 ASSETS Cash and Cash Equivalents P3,266,354,88 1 P1,856,27 3,918 Insurance Receivables - net 3 16,065,31 5 307,25 3,435 Financia l Assets

F inancial assets at fair value through profit o r loss 2 85,967,23 6 50,48 7,593 Available- for-sale financial assets 14,106,446,60 7 12,314,8 62,172 Held-to-maturity investm ents 83,705,67 9 84,29 6,216 Loans and receivables - net 2 84,322,12 8 423,48 4,749

Accrued Income 1 50,308,94 3 141,04 2,849 Reinsurance Assets 2 50,442,33 9 192,81 8,024 Property and Equipment - net 82,221,64 1 54,77 3,318 Intangible Assets – net 49,360,65 4 25,37 1,459 Pension Asset - net 41,094,31 7 34,53 6,401 Other Assets 48,650,30 3 61,71 0,177 P18,964,940,04 3 P 15,546,91 0,311 LIABILITIES AND E QUITY Liabilities Insuran ce contract l iabilities P12,906,659,70 4 P 11,148,22 9,087 Premium deposit fun d 1,662,666,46 8 1,719,3 06,983 Insuran ce payables 3 94,245,69 7 339,54 5,359 Trade and other liabilit ies 4 95,832,75 3 272,99 0,944 Deferred tax liability - net 10,016,19 1 10,19 0,973 15,469,420,81 3 13,490,2 63,346 Equity Capital stock 1,515,050,50 0 1,515,0 50,500 Contributed surplus 50,000,00 0 50,00 0,000 Contingency surplus 2 79,038,23 2 279,03 8,232 Other comprehensive income 6 97,861,23 1 110,64 8,904 Retain ed earnings 9 53,569,26 7 101,90 9,329 3,495,519,23 0 2,056,6 46,965 P18,964,940,04 3 P 15,546,91 0,311

STATEMENTS OF INCOME

Yea rs Ended De cember 31 2014 2013 RE VE NUE

G ross premiums on insurance contracts P5,4 15,048,578 P4,3 21,729,39 5 R einsurers ’ sh are of gross p remiums on insu rance co ntracts (426, 231,931) (402,483, 803)

Net insurance p remium s 4,9 88,816,647 3,9 19,245,59 2 Investment incom e 94 8,458,746 1,1 71,940,74 3 F oreign exchang e g ain - net 1 3,760,773 -- O ther in co me 2 6,256,468 2 2,416,24 5 98 8,475,987 1,1 94,356,98 8 5,9 77,292,634 5,1 13,602,58 0 BENE FITS, CLA IMS AND OP ERATING EXPE NSES G ross benefits and claim s incurred on in surance co ntracts 2,3 53,519,549 1,2 33,727,92 2

R einsurers ’ sh are of benefits and claims incurred o n insu rance contracts (399, 618,477) (315,426, 194)

G ross change in legal po licy reserves 1,3 97,328,261 1,9 32,509,87 5 R einsurers ’ sh are of gross change in leg al po licy reserves

(5, 995,711) (20,829, 651)

Net insurance benefits an d claims 3,3 45,233,622 2,8 29,981,95 2 Co mmiss io ns and other un derwrit ing expenses 1,0 14,848,719 87 5,408,60 0 G eneral and adminis trative expenses 43 3,738,752 37 8,137,40 9 Insurance taxes and licenses 13 1,931,401 9 1,649,74 1 F oreign exchang e loss - n et -- 4 5,698,15 6 Interes t expen se 7 7,149,395 10 5,196,52 9 O perating expenses 1,6 57,668,267 1,4 96,090,43 5 5,0 02,901,889 4,3 26,072,38 7 INCO ME BE FO RE INCO ME TAX 97 4,390,745 78 7,530,19 3 P ROVIS ION FO R INCO ME TAX 12 2,730,807 9 5,069,36 4 N ET INCO ME P 8 51,659,938 P 6 92,460,82 9

The Board of Directors approved the Annual Financial Statements on 17 March 2015. With its approval, the Board of Directors concurred with the external auditor's assessment on the adequacy of the Company's system of risk management and internal controls.



Review of OperationsGenerali Philippines was able to grow its individual life premiums by 37% in 2014. Total premiums from Individual and Group Business increased by 27%. The Company's strategy, focusing on recurring premium products, increasing the size of the sales force, using sales and marketing tools to enhance sales productivity, and intensifying product familiarization and training, was crucial in achieving these milestones.

“The overarching goal is to build a robust business model that will enable GP to penetrate the top five category in weighted new business premiums within a three (3) year period,” according to Renato A. Vergel De Dios, President and CEO of Generali Philippines. Despite low interest rates, traditional products continued to provide good profit margins. At the same time, regular pay Variable Life business, which was introduced at the end of 2013, contributed more than 20% of new business in 2014.

Shareholder Structure

Three hundred twenty new financial advisors (FAs) were hired in 2014, representing a 70% increase from the number of FAs hired the previous year. Moreover, Generali was able to increase FA productivity by 7% per advisor per annum even with the larger manpower base. Individual cases sold grew 24%.

Generali also partnered with BDO Private Bank to offer insurance-based tax-funding solutions to its high net-worth clients. This was aimed to provide a needs-based, total solutions approach to those seeking to fortify their estate transfer plans. Generali sees this as a growth area in the effort to highlight life insurance as a top-of-mind solution in crafting the client's wealth management program.

For 2015, Generali plans to increase its sales force and become the preferred provider of employee benefit solutions among its corporate clients, including the SME market.

GENERALIASIA N.V.

60%

BDO

40%

Generali Pilipinas Holding

Company, Inc.100%

Generali Pilipinas Life Assurance

Company, Inc.


Board of Directors

TERESITA T. SYNon-Executive DirectorChairman of the BoardAge: 64Date of first appointment: November 11, 1999

Ms. Teresita T. Sy-Coson has had extensive experience in banking, retail merchandising and mall management. She is presently the Chairperson of Banco De Oro Unibank,Inc., the largest bank in the Philippines, and several of its subsidiaries and affiliates. She is also the Vice Chairperson of SM Investments Corp., the flagship of the SM Group of companies which is a leading Philippine conglomerate.

TERENCE WONGNon-Executive DirectorVice Chairman of the Board of DirectorsMember of the Executive CommitteeMember of the Audit CommitteeAge: 49Date of first appointment: March 27, 2014

Mr. Terence Wong has over 25 years of experience in insurance and asset management. He is presently the Deputy Chairman of the Board of Directors of Generali Investments Asia (GIA). He is also the Executive Director and Responsible

Officer of GIA. Prior to joining Generali in Hong Kong in 2011, Mr. Wong had held a number of senior executive positions in Japan, London and New York. He is a Chartered Financial Analyst and graduate of Yale University.

NESTOR V. TANNon-Executive DirectorMember of the Board of DirectorsChairman of the Executive CommitteeMember of the Audit CommitteeAge: 57Date of first appointment: July 14, 1999

Mr. Nestor V. Tan holds a Bachelor's degree in Commerce from De La Salle University. He acquired his MBA at the Wharton School, University of Pennsylvania. Mr. Tan was formerly connected with Bankers Trust Company in New York as Vice President and the Barclays Group in New York and London where he served as Planning Director and Head of Strategic Planning for Corporate and Institutional Services Group. Thereafter, he became the Chief Operating Officer for Financial Institution Services Group of BZW, the investment-banking subsidiary of the Barclays Group, before joining BDO as Executive Vice President in 1997. He became President of the Bank in July 1998.

DARIO V. PIERALISINon-Executive DirectorMember of the Board of DirectorsAge: 45Date of first appointment: March 27, 2014

Mr. Dario Pieralisi is the General Counsel of the Generali Asia Regional Office and also serves as a non-executive director on several boards of the Group in Asia. He is responsible for overseeing all the Legal, Corporate and Regulatory activities for the Generali group entities operating throughout the region. A qualified lawyer specialized in corporate and commercial litigation, prior to joining the Group, he led the Legal department of a large Italian Investment Management company, part of the US-based Private Equity and Hedge Fund operator, Fortress Investment Group. Mr. Pieralisi also holds an MBA from the University of Chicago Booth School of Business.

RENATO A. VERGEL DE DIOSPresident and CEOMember of the Board of DirectorsMember of the Executive CommitteeAge: 61Date of first appointment: October 14, 2009

Mr. Vergel De Dios has over 35 years of experience in life insurance management. He directed both the sales and marketing division as well as the individual life operations as Executive Vice President of the Philippine American Life Insurance Company before moving on to Manulife Philippines as President and Chief Executive Officer for over 10 years. He earned a BS Mathematics degree from Ateneo de Manila University and his MS Management degree from Stanford University. Mr. Vergel De Dios also completed the exam requirements of an Associate (ASA) of the US Society of Actuaries and has been a Member of


the Board of Trustees for the Insurance Institute for Asia and the Pacific (IIAP) for many years.

MADAM TAM CHIEW LINIndependent DirectorMember of the Executive CommitteeMember of the Audit CommitteeAge: 64Date of first appointment: March 26, 2004

Madam Tam Chiew Lin is a Fellow of the Institute of Chartered Accountants in England and Wales, a member of the Malaysian Association of Certified Public Accountants and the Malaysian Institute of Accountants. She attained her Diploma in Applied International Management from the Swedish Institute of Management and Postgraduate Certificate in Banking and Finance from the University of Bangor, Wales. She is presently the Managing Director of JAB Capital Berhad, a public listed company in Malaysia.

HERMINIA S. JACINTOIndependent Director Chairperson of the Audit CommitteeAge: 76Date of first appointment: March 29, 2012

Ms. Herminia S. Jacinto is the current President of the Insurance Institute for Asia and the Pacific (IIAP). She is a Certified Public Accountant who has served the insurance industry in various capacities – Chairman of the Philippine Insurance and Reinsurance Association (PIRA), President of the Insurance & Surety Association of the Philippines (ISAP), President of the Philippine Insurers' Club (PIC), among others. Ms. Jacinto is currently an Independent Director of the Generali Insurance Companies, Bankers Assurance Corporation, Taishan Insurance Brokers, Inc. and the KRM Reinsurance Brokers.


Corporate Governance

SHAREHOLDERS / BOARD MATTERS

Dividend Policy

As stated in GP's By-Laws, dividends shall be declared by the Board of the Directors and shall be paid from the surplus profits arising from the business of the Corporation. Stock dividends shall be declared in accordance with Law. To ensure the continued operations of the business of the Corporation and in compliance with the requirements of the law, no dividends that will impair the capital of the Corporation shall be declared.

Equality of Voting Rights of Shareholders

GP had issued two (2) kinds of shares – preferred and common. According to its By-Laws, the Corporation, through a resolution of the Board of Directors may limit the voting rights of a specific kind of share should it deem proper. Seeing that equality of voting rights is absolutely essential, the Board of Directors had deemed it proper not to limit the voting rights of any kind of stock. Thus far, all stocks, regardless of kind, have equal voting rights. Each share has one vote on all matters submitted for resolution or approval.

Remuneration of Board Members

Independent Directors receive per diems for every meeting held. For the other directors, approval of the means to confirm compensation, if any, is submitted to the stockholders of record.

Compliance with Code of Corporate Governance

The Corporation, as agreed to by the Board of Directors, is substantially compliant with the mandates of the Code of Corporate Governance. In fact, aside from the said Code issued by the Insurance Commission, the Corporation also abides by its own internal Code which it has localized from the Global Policy of the Generali Group.

COMPANY MATTERS

Risk Management

The company has established a risk management function with clear terms of reference and with the responsibility for developing policies on market, credit, liquidity, insurance and operational risk. It also supports the effective implementation of policies at the overall company and individual business unit levels.

The policies define the Company's identification of risk and its interpretation, limit structure to ensure the appropriate quality and diversification of assets, alignment of underwriting and reinsurance strategies to the corporate goals and specific reporting requirements.

Whistle-Blowing Policy

The Company implements a policy where all employees, regardless of status or position, are encouraged to file complaints or make disclosures of improper/wrongful conduct to its officers and even the Board of Directors. Utmost confidentiality of the person's identity and circumstances is guaranteed. The Whistle-Blowing Policy is stated in the Employee's Handbook.


Corporate Social Responsibility

Generali Philippines employees donate money to typhoon Haiyan victims through UNICEF

Days after typhoon Haiyan hit the Philippines, employees of Generali Philippines immediately raised cash donations to help fund the immediate food, water and sanitation needs of the victims. To ensure the donations were effectively spent, they were coursed through United Nations Children's Fund (UNICEF) which provides, among others, emergency health kits, tents, water treatment products, day care centers, school supplies for children, and learning materials for day care workers and teachers.

Generali Philippines takes part in Insurance Commission blood donation campaign

On October 10, 2014, employees from Generali Philippines' Head Office took part in the Philippine Life Insurance Association's (PLIA) blood-letting activity held at the Insurance Commission (IC) compound in Manila. The activity was part of PLIA's Life Insurance Consciousness Week that involves all Life Insurance companies in the country. All blood donations were given to the Philippine Red Cross.

Products and ServicesBUSINESS LINES

Individual Life Insurance

BancassuranceCatering to the life insurance needs of BDO clients and their families.

Career AgencyProviding life insurance protection to the general public in selected areas nationwide.

Employee Benefits

Offering protection to employees through group term, accident, disability and hospitalization insurance products.

Credit Life

Protecting an institution's borrowers and their families from financial loss due to death of the borrower during the loan term.


PRODUCTS

ProtectionProtect your family and give them the secure future they deserve. Generali Philippines' life protection plans provide peace of mind for you and your family.

EducationGenerali Philippines offers fund accumulation plans that are designed specifically to help you save for your child's future education.

Savings & RetirementEnjoy the benefits of saving for your aspirations for the future. Generali Philippines' Endowment Plans help you prepare to enjoy some of life's most anticipated moments.

Estate PlanningProtect what you pass on to your heirs against possible erosion caused by estate and inheritance fees. Generali Philippines' also offers insurance products that create an instant monetary estate to be passed on to your beneficiaries in the event of untimely death.

Corporate OfficersRenato A. Vergel De DiosPresident & Chief Executive Officer

OperationsSharon B. MarananSenior Executive Vice President, Group Life Insurance

Jose Maria F. IgnacioSenior Vice President, Individual Life, Insurance – Operations

FinanceElizabeth E. GuevaraSenior Vice President, Controllership

Peter C. DarvinSVP, Actuarial

Sales and MarketingRobert J. MorrisHead, Individual Life Insurance

Mercy Santua-MalolesExecutive Vice President, Individual Life Insurance – Bancassurance

Leonardo D. Tan Jr.Senior Vice President, Marketing

Adelita J. AngelesSenior Vice President, Training & Sales Development

Ma. Lourdes M. SamsonVice President, Training & Sales Development

Shared ServicesLorna T. PabelicoVice President, Human Resources

Roland P. ArcadioVice President, Internal Audit

Contact Us

Generali Pilipinas Life Assurance Company, Inc.

Head OfficeGercon Plaza Building, 7901 Makati Avenue,Makati City, Philippines 1227(T): +63 2 885 4100 / +63 2 885 4200(F): +63 2 325 0792

[email protected]

Cebu OfficeUnit 304 PDI CondominiumArchbishop Reyes Avenue corner J. Panis Street,Banilad, Cebu City, Philippines(T): +03 2 231 9622(F): +03 2 234 6101

Davao Office3/F Metrolifestyle BuildingF. Torres Street, Davao City, Philippines(T): +08 2 227 8386(F): +08 2 226 8840

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