GOVERNMENT SERVICE INSURANCE SYSTEM
ADMINISTERED FUNDS
NOTES TO FINANCIAL STATEMENTS
(All amounts in Philippine Peso unless otherwise stated)
1.
GENERAL INFORMATION
The Administered Funds are the funds that the GSIS is mandated by law to administer,
other than the pension fund. As enumerated in Section 34 of Republic Act (RA) 8291,
otherwise known as “The Government Service Insurance System Act of 1997”, the other
administered funds of the GSIS are the following:




General Insurance Fund;
Employees’ Compensation Insurance Fund;
Barangay and Sanggunian Officials’ Insurance Fund; and
Property Replacement Fund.
The General Insurance Fund is composed of the following businesses: (a) general
insurance business; (b) optional life insurance business; and (c) pre-need insurance
business.
A separate set of financial statements is prepared for the aforementioned funds to
clearly distinguish the financial position, financial performance and cash flows of the
administered funds from those of the Social Insurance Fund.
The accompanying financial statements of the GSIS were authorized for issue by the
GSIS management represented by the President and General Manager and the Senior
Vice President – Controller Group on 30 April 2009.
2.
UPDATE ON NEW COMPUTERIZED SYSTEM
2.1
Integrated loans, membership, acquired assets and accounts management
system (ILMAAAMS)
The ILMAAAMS is designed to handle and process all data requirements in four major
areas that form the core of GSIS operations: membership, loans origination and
administration, acquired assets, and accounts management. Its main objective is to
have a concrete grasp on the concept of “one member view”.
The system facilitates the automatic posting of financial data to the members’ accounts
on a transaction level. As a result, the GSIS has drastically quickened the pace by
which it administers membership accounts from loans processing to the identification of
delinquent members – by integrating its financial requirements in all processes of loan
granting, premium billing, and loan and premium collection.
ILMAAAMS can integrate with the general ledger system of the FIS (FI-GL).
Transactions like loan granting and collections etc are automatically reflected in the
general ledger. There is seamless communication between these two systems.
73
At present, posting periods from January 1997 to December 2008 in the SAP are still
open due to the on-going updating of members’ accounts.
2.2
Financial information system (FIS)
The FIS is designed to capture the recording of all the financial transactions from the
source or feeder systems. These feeder systems have implementation environments
different from that of the FIS subsystems. Financial data from various feeder systems
are either automatically extracted and uploaded to FIS through interface program or
generated in excel format known as SAP prescribed template with pre-defined
accounting entries and manually uploaded to FIS through upload program.
The following are the GSIS’ feeder systems and how the data from these systems are
currently fed to the FIS:
a.
General insurance information system (GIIS)
GIIS is an oracle-based system application designed for the computerized
processing of non-life insurance transactions for underwriting, reinsurance and
claims.
The underwriting process includes issuance of certificate of cover, policy
contract and bill for various lines of business such as fire, motor car, floater,
marine cargo, marine hull, engineering, aviation, personal accident,
miscellaneous and bonds. The reinsurance process includes the distribution of
business to reinsurers, whether facultative or treaty, and the corresponding
issuance of binders. Processing of claims includes recording of reported losses
and the final adjustment of claims for all lines.
Once the interface program that will enable GIIS to connect to FIS becomes fully
operational, accounting entries will be automatically generated and recorded in
the FIS on a per transaction basis.
At present, all general insurance claims, underwriting and reinsurance
transactions are uploaded to FIS through manually-prepared templates provided
by the Housing and Insurance Group (HIG).
b.
Technistock portfolio management system (TPMS)
The TPMS is a portfolio management solution which was customized to fit the
back-office portfolio requirements of the Investment Management Office. It
captures transactions involving equities as well as local and foreign fixed-income
securities. It also handles accruals, maturities, amortizations of bond and
premiums and mark-to-market valuations of equities. The system generates a
SAP-prescribed template with predefined accounting entries in excel format for
batch uploading to FIS.
74
c.
Real and other properties owned and acquired (ROPOA) and Leasing
manager
The ROPOA Manager is a system used for monitoring and recording the
acquisition, administration and disposition of acquired assets covering big ticket
accounts.
The Leasing Manager on the other hand, is a system that creates the records for
the accrued rental receivables on occupied properties for big ticket accounts that
were previously covered by cancelled DCS and occupied foreclosed properties
after the expiration of the redemption period.
Both systems generate file with predefined accounting entries in excel format.
The file is saved in a specified storage directory and extracted for batch
uploading to FIS.
d.
Claims and pensions administration system (CPAS)
CPAS is a comprehensive application system that will consolidate all information
and processing requirements of members’ claim, pension, retirement and
dividend under the new open system platform (SAP).
The CPAS is designed to provide online facility for inquiry, processing and
computation of optional, pre-need and employees’ compensation (EC) claims. It
can integrate with the general ledger system of the FIS. Completed transactions
of claims and pensions will be automatically reflected in the general ledger. The
CPAS Project will be implemented in 2009.
At present, all optional, pre-need and EC claims are uploaded to FIS through
manually-prepared templates based on the monthly abstract of disbursed claims
extracted by the ITSG from the mainframe.
The GSIS is still in a transition period due to the recent implementation of the new
systems, thus the financial statements for CY2008 were prepared manually based on
the readily available data from the SAP and feeder systems.
3.
RECORDING OF COLLECTIONS AND DISBURSEMENTS IN FIS
3.1
Collections
a.
Collections thru the Financial Information - Cash Desk (FI-CD) facility of
ILMAAAMS
Effective October 13, 2008, all collections pertaining to loans and contributions
were processed thru the FI-CD of ILMAAAMS where transactions are
automatically recorded simultaneously in the general ledger and subsidiary
ledger.
75
b.
Collections thru the Cash Receipts and Management System (CRMS)
All collections pertaining to Social Insurance (SI) accounts not covered by the FICD, investments and other miscellaneous transactions are processed thru the
CRMS. Collections done thru the CRMS are uploaded to FIS through the use of
templates.
c.
Collections covered by Letter of Authority (LOAs)
All collections pertaining to investment maturities and interests and all fund
transfers from other bank accounts are covered by LOAs. Collections that are
covered by LOAs were uploaded to FIS through manually prepared templates
based on the manually processed LOAs.
Effective December 2008, all LOAs covering incoming collections were prepared
in the SAP where transactions are automatically recorded in the FI-GL.
3.2
Disbursements
All disbursements pertaining to general insurance, investments, and other
miscellaneous transactions from January to May 2008 were uploaded to FIS through
manually prepared templates based on the manually-processed disbursement vouchers
and LOAs.
In June 2008, the Accounts Payable (AP) Module, one of the subsystems of the FIS was
implemented.
The subsystem provides automated support in processing the
miscellaneous disbursements of the GSIS. It generates disbursement checks and
provides accounting information.
Effective October 2008, all LOAs covering miscellaneous disbursements and fund
transfers to other bank accounts were prepared in the SAP where transactions are
automatically recorded in the FI-GL.
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
4.1
Basis of preparation of financial statements
The accompanying financial statements for the Administered Funds (AF) are prepared in
accordance with the Philippine Financial Reporting Standards (PFRS) and reporting
practices prescribed by the Insurance Commission.
4.2
Cash and cash equivalents
Cash includes cash on hand and in banks. Cash equivalents are short - term and highly
liquid investments with original maturity of less than three months, are readily
convertible into cash and are subject to an insignificant risk of change in value. These
include special savings deposits and time deposits.
76
4.3
Loans and accounts receivable
Loans and accounts receivable are stated at the outstanding balance reduced by
unearned income, and allowance for estimated uncollectible accounts.
Allowance/provision for probable losses is established for estimated losses on the
principal portion of private loans and receivable accounts based on management’s
evaluation of the probability of collection.
4.4
Interest receivable
Interest income on unpaid premiums, loans and investments already earned but
uncollected are recognized in the books.
An interest of two per cent per month is charged/accrued on unremitted Employees’
Compensation‘s premium contributions as of balance sheet date and classified as nonadmitted assets. Income is recognized only upon collection.
4.5
Revenue recognition
The major sources of operating revenues of the AF are insurance premiums, interest
income on premium arrearages, dividends from investments, interest income from
loans, and other miscellaneous income.
Revenues are recorded using the accrual method which provides for the recognition of
income in the books when earned regardless of when it is received, and expense when
incurred regardless of when it is paid.
For the ECIF, income and expenses are recognized only upon collection and
disbursement, respectively. Accrual on income is classified as non-admitted assets.
4.6
Administrative and operating expenses
This account pertains to the contribution made by the GSIS to the Employees’
Compensation Commission (ECC) and the Occupational Safety and Hazard
Commission (OSHC), to be drawn from the ECIF, as its share in administrative
expenses.
4.7
Investments
Investments are classified in the following categories at initial recognition based on the
purpose for which they are acquired.
a.
Held for trading (HFT) or Fair value through profit or loss (FVPL)
These are financial assets acquired principally for the purpose of generating
profit from short-term fluctuations in price or dealer’s margin.
These are initially recorded at cost and are revalued at fair values every reporting
date. Any difference between the cost and the fair value is recorded as
77
appreciation or depreciation of the fair value of investments in the Statement of
Revenues and Expenditures.
Investments in equity securities - stocks traded are classified as HFT or FVPL
and as such, these are recorded at initially cost and are revalued every monthend.
b.
Held-to-maturity investments (HTM)
These are financial assets with fixed or determinable payments and fixed
maturities. They are carried at amortized cost using the effective interest method
and are classified as non-current assets.
Investments in Foreign Currency and Peso Denominated Bonds are classified as
Held-to-Maturity and as such, these are recorded at cost, duly adjusted
periodically through the amortization of premiums or discounts.
c.
Available-for-sale (AFS)
AFS financial assets are acquired and held indefinitely for long-term capital
appreciation or are not classified as (a) loans and receivables (b) held-tomaturity investments or (c) financial assets of fair value thru profit and loss.
They are included in the non-current assets unless GSIS intends to dispose of
the investments within 12 months of the balance sheet date.
These assets are initially recognized at cost and are subsequently valued at fair
values. Unrealized gains and losses arising from changes in fair values are
recognized in equity.
d.
Loans and receivables
These are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. They are classified as non-current
assets.
They are initially recognized at cost and subsequently carried at amortized cost,
net of allowance for uncollectible accounts.
e.
Investments in subsidiaries
The System practices the equity method in Investments in shares of stocks in
which it holds at least 20 per cent ownership or where it has the ability to
exercise significant influence over the companies’ operating and financial affairs.
Equity method prescribes the initial recognition of the investment at cost but
subsequently increased by the share in net earnings (or decreased by the share
in the net loss) and extraordinary items and prior period adjustments of the
investee/subsidiary.
78
f.
Investments in non-traded stocks
Non-traded stocks are valued at cost, net of allowance for impairment in value.
4.8
Investment property
Investment property pertains to land or a building or part of a building or both, held to
earn rentals or for capital appreciation or both.
These consist of real property that were previously the subject of mortgage loan,
individual real estate loan, commercial-industrial loan, lease-purchase agreement, or
deed of conditional sale, which were either foreclosed or cancelled or dacioned by
former owners in favor of the System.
a.
Fair valuation model
In compliance with Philippine Accounting Standard (PAS) 40, the GSIS applies
fair value model consistently on its investment property, whereby the assets were
initially recorded at cost (consisting of the purchase price and any directly
attributable expenditures), then subsequently valued at fair values.
Gains or losses from changes in fair values are recognized during the period in
which they occur.
b.
Selling price
In November 2007, the GSIS Board of Trustees thru Board Resolution No. 167
approved the computation of the new selling price of acquired housing units and
lots for disposition by applying the higher of 70 per cent of the current market
values (CMV) of the said acquired properties; and book value plus 50 per cent of
the rental receivables of the acquired property.
4.9
Foreign currency translations
Foreign currency-denominated income and expenses are translated into Philippine
Pesos based on the Philippine Dealing System Weighted Average Rate (PDSWAR)
exchange rate prevailing on transaction dates.
Foreign currency-denominated assets and liabilities are translated into Philippine Pesos
based on PDSWAR prevailing at the end of the interim reporting period. At the end of
the reporting year, foreign currency - denominated assets and liabilities are translated to
Philippine Peso using the exchange rate provided by the Insurance Commission.
Gain or Loss from foreign exchange transactions and revaluation of foreign currencydenominated assets and liabilities are credited to or charged against current operations.
79
4.10
Actuarial reserves
Actuarial reserve requirements for the mandated obligation of the System are computed
monthly by the GSIS Actuarial Group based on certain assumptions which are in
accordance with generally accepted principle of actuarial valuation.
Actuarial reserves are set up/appropriated out of the Surplus representing the
accumulated earnings of the administered funds.
4.11
Non-admitted assets
Assets of the GIF like prepaid expenses, supplies and materials in stock, receivables
from reinsurers and from ceding companies are classified as Non-Admitted Assets.
Contingent assets arising from deficit cases of the Optional Life Insurance Business are
likewise classified as Non-Admitted Assets. The foregoing classifications are pursuant
to Section 179 of the Insurance Code.
Due from Reinsurers account refers to losses recoverable from reinsurance policies.
On the part of the GSIS, reinsurer’s shares on losses are recognized as income and a
receivable from the reinsurers.
Reinsurance premiums for all policies exceeding one year cover shall be recorded as
prepaid reinsurance premium and are recorded as expense on the following year until
expiry of the policy.
Starting CY 2006, all accrual on EC Fund (premium and interest) are classified as nonadmitted assets.
4.12
Funds held in trust (FHIT)
Funds Held In Trust account of the AF consists of the following:


5.
Cash collateral for performance bonds, surety bonds, judicial bonds
Premium reserve for inward reinsurance under treaty agreements
ACCOUNTING FOR NON-LIFE INSURANCE BUSINESS
Unearned premiums
Pursuant to the provisions of Section 213 of the Insurance Code and the Regulatory
Accounting Principles and Practices (RAPP) prescribed by the Insurance Commission,
the GSIS maintains a reserve for unearned premiums on its policies in force which is
charged to liability. Except for marine cargo risks, such reserve is equal to 40 per cent
of the gross premiums, less returns and cancellations of all policies or risks in force. For
marine cargo risks, reserve is equal to 40 per cent of the premiums written during the
last two months of the calendar year.
80
6.
CASH AND CASH EQUIVALENTS
This account consists of the following:
2008
Cash on hand and in banks
Cash equivalents High-yield short-term placements (HYSTP)
7.
533,898,131
2007
594,835,954
4,173,231,713
-
4,707,129,844
594,835,954
CONTRIBUTIONS AND PREMIUMS RECEIVABLE
The account represents all premiums and contributions earned but not yet collected as
at December 31, 2008, as follows:
2008
Premiums receivable from:
General insurance business
Optional life insurance business
Barangay and sanggunian officials’ insurance fund
Pre-need insurance business
7.1
2007
1,494,394,161
295,645,402
281,249,189
228,497,372
912,753,341
98,133,070
281,249,189
237,376,616
2,299,786,124
1,529,512,216
General insurance premiums receivable
General insurance premium contributions pertain to non-life insurance covers of
government properties/assets from any risk that may occur on specified period of time.
These include fire and allied perils, including sabotage and terrorism, engineering
insurance, suretyship and covers classified under marine and casualty.
Pursuant to Section 5 of Republic Act No. 656 (otherwise known as the “Property
Insurance Fund” enacted on June 15, 1951), every government unit, except
municipalities below first class, is required to insure its properties with the Property Fund
against any insurable risk therein provided and pay the premiums thereon which shall
not exceed the premiums charged by private insurance companies.
Premium Receivable for all policy contracts (except for Bonds, which is on a cash basis)
is recognized based on the date of billing.
Premium receivable consisting of earned and unearned premiums are recorded at gross
amount. Unearned premium is calculated at 40 per cent of Premium Receivable
account, net of Reinsurance Expense (pursuant to Section 213 of the Insurance Code of
81
the Philippines). This unearned portion shall be recognized as earned during the
subsequent periods until expiry of the policy.
7.2
Optional life insurance premiums receivable
Optional life insurance premiums vary according to the classification of risks, determined
as applicable by the GSIS, after considering risk factors (age, health condition, family
history, occupation, moral hazard, among others) and the corresponding amount of
insurance applied for.
Optional life insurance premiums are paid directly by the insured member, if retired or
separated from service, or through salary deduction if still in the service.
7.3
Pre-need insurance premiums receivable
Pre-need insurance premiums are recognized in the books upon sale of policies. The
marketing activities for this product have been stopped since 1998. Movements in the
existing balance of the Pre-need premium receivable account pertain to collection and
adjustments resulting from the cleansing process being done on the account.
7.4
Employees’ compensation insurance premiums receivable
Employees’ Compensation Insurance (ECI) is an insurance coverage compulsory for all
employers, both in the public sector and the private sector. There is no employee’s
share in the premium payment.
ECI premiums (income and/or receivable) represent all government employers’ monthly
contribution for each of their respective employees computed at one per cent of the
monthly basic salary of the covered employee or P100, whichever is lower. Pursuant to
ECC Memo-Circular No. 02-04-235, dated April 11, 2002, the maximum limit of monthly
contributions of the Public Sector to the ECI Fund was raised from P30 to P100 per
month. This increase in premium started in January of CY 2003, per GSIS MemoCircular No. 1-2002, dated July 15, 2002.
Starting in 2006, income is recognized only upon collection and claims are recognized
as expenses only upon payment. The balance of premiums receivable forwarded to
2007 has been classified as Non-admitted assets.
Priority of payment
Beginning 2003, GSIS implements the policy of prioritization of payment on ECI claims.
Prioritization necessitates the classification of agencies whether in good standing or with
delinquent accounts. Agencies of good standing are given priority in the payment of ECI
claims and benefits.
8.
LOANS AND INVESTMENTS - NET
Total investment of the AF is composed of (1) loans and, (2) investments in marketable
securities and fixed- rate debt instruments.
82
8.1
Loans
As at December 31, 2008, investment in loans is broken down as follows:
Policy loans
Private loans – net
8.2
2008
2007
1,623,209,448
69,298,368
1,802,263,220
57,944,817
1,692,507,816
1,860,208,037
Investments
As at December 31, 2008 the Administered Funds have investments in financial assets
broken down as follows:
ROP bills
ROP notes and bonds-HTM
Stocks traded –available-for-sale
Externally managed funds-global
Stock traded-held for trading
Stocks non-traded
ROP notes and bonds-HFT
a.
2008
2007
4,248,230,740
3,406,177,915
2,571,635,167
906,632,906
160,771,720
2,143,840
-
8,055,497,088
2,070,703,061
1,327,907,246
253,197,012
2,143,840
4,001,556,432
11,295,592,288
15,711,004,679
Investment in externally managed funds-global
The Board of Trustees in its Resolution No. 155 dated October 25, 2007
approved the hiring of ING Investment Management (ING IM) and Credit
Agricole Asset Management (CAAM) as global fund managers of GSIS with the
following objectives:

Assist the GSIS to invest in global financial instruments through sufficient
diversification among asset classes and geographically; and

Provide GSIS with consistent investment returns with capital preservation
and sufficient liquidity over a three-year period.
b.
Foreign-currency denominated Republic of the Philippines (ROP) bonds
The foreign-currency denominated ROP bonds in the total amount of P58.387
billion were reclassified from HFT or FVPL to HTM.
Due to the current financial crisis resulting to market volatility, the Philippine
Financial Reporting Standard Council (PFRSC) has approved last October 29,
83
2008 the immediate adoption of the amendments to PAS 39, reclassification of
financial assets from HFT to HTM.
The Bangko Sentral ng Pilipinas (BSP) came out with the Guidelines on the
Reclassification of Financial Assets between categories under Circular Nos. 626
and 628 dated October 23 and 31, 2008, respectively. BSP allowed financial
institutions to look back anytime between July 1, 2008 and November 14, 2008
for the purpose of selecting the effective date of their reclassification.
GSIS has selected the date August 31, 2008 to reclassify its FCY ROPs from
HFT to HTM, resulted to a net unrealized gain of P0.143 million.
9.
INVESTMENT PROPERTY
Investment property includes acquired assets carried at fair values broken down as
follows:
2008
2007
Manila International Airport Terminal
6,286,340,000
6,053,805,000
Manila Hotel
2,860,959,469
2,860,959,469
9,147,299,469
8,914,764,469
10.
OTHER ASSETS
The Other Assets account is composed of the following:
2008
Due from reinsurer
Income receivable
Notes receivable
Paintings and tapestries
Accounts receivable for deficit cases
Contingent asset – COA disallowance
Other receivable – agencies with MOA
Sundry accounts receivable
2007
845,672,632
690,649,130
526,110,750
54,012,354
2,270,501
158,635
642,871,727
779,883,089
519,053,036
54,012,354
2,296,997
158,635
111,700,028
643,278,624
2,761,745,729
2,110,382,763
84
11.
LIABILITIES
This account is composed of the following:
2008
Current liabilities
Claims and losses payable
Due to reinsurers
Dividend payable
Other current liabilities
Provision for unadjusted claims
Sundry accounts payable
Funds held in trust
Pre-need insurance expense payable
2007
1,547,612,176
1,254,672,974
153,542,011
1,764,975,591
1,008,568,312
248,361,855
1,165,458,329
226,308,628
66,490,624
-
885,732,560
148,947,414
64,366,659
62,557,905
1,458,257,581
1,161,604,538
4,414,084,742
4,183,510,296
102,355,960
457,483,016
1,068,066,401
943,497,603
5,584,507,103
5,584,490,915
Non-current liabilities
Interest payable on advances from other funds
Deferred credits
Deferred credits
This account includes unearned premiums equivalent to 40 per cent of the gross
premium of certain non-life policies in force of the General Insurance business.
Non-life insurance policies normally cover a period of one year. For policies whose
period of coverage is more than one year, the excess on 365 days is recorded as
Unearned Premiums account. This unearned portion is recognized as earned during
the subsequent period until expiry of the policy.
Pursuant to the provisions of Section 213 of the Insurance Code and the Regulatory
Accounting Principles and Practices (RAPP) prescribed by the Insurance Commission,
the GSIS maintains a reserve for unearned premiums on policies in force. Except for
marine cargo risks, such reserve is equal to 40 per cent of the gross premiums, less
returns and cancellations, of all policies or risks in force. For marine cargo risks,
reserve is equal to 100 per cent of the premiums written during the last two months of
the calendar year.
12.
RESERVES
As of December 31, 2008, the actuarial reserves requirement amounted to P17.937
billion while the actual reserves set-up was P16.519 billion or a variance of P1.418
billion.
85
The variance pertains to Pre-Need and Employee Compensation Insurance reserve
deficiencies amounting to P0.801 million and P0.617 million, respectively.
For Pre-Need, the actuarial reserve set-up was less than the actuarial reserve
requirement due to the continuous payment of claims and benefits to the policy holder
claimants despite the discontinued selling and marketing of this product since 1998
which resulted to the depletion of the fund.
For ECIF, no reserve is set up for the year since the fund uses the cash basis in
recording income and expenses. Reserves previously set-up were closed to surplus
account.
Actuarial
Reserve
Requirement
Actual Reserve
Set up
Deficiency
Pre-need business
7,660,875,356
6,859,492,498
801,382,858
Optional life insurance business
4,894,471,535
4,894,471,535
-
General insurance business
4,765,089,271
4,765,089,271
-
Employees compensation insurance fund
616,872,065
17,937,308,227
-
616,872,065
16,519,053,304 1,418,254,923
The reserves for Optional Life policies in force are computed using the mean reserve
formula. This formula assumes that the entire premium for the calendar year was paid
at the beginning of that policy year. The amount presented above is net of P130.286
million representing the net deferred premiums for 2008.
As at December 31, 2008, Reserves for the General Insurance Business consist of the
following:
Amount
Reserve for losses
Reserve for contingencies
Contingencies
Additional Reserve for contingencies
Total Reserve for contingencies
1,044,736,921
3,643,016,063
77,336,287
3,720,352,350
4,765,089,271
86
As at December 31, 2008, additional reserve for contingencies amounting to P77.336
million is set-up to provide for probable losses from litigations involving the general
insurance business broken down as follows:
Amount
United Overseas Bank of the Phil. Vs. Teledyne and GSIS
RP v. Western Guaranty Corp. v. GSIS
Malayan Towage and Salvation Corp. v. NPC and GSIS
Hon. Reyes, etc. and Pan United Shipyard v. GSIS
Liquigaz Phil. Corp. v. Laguna Gas, GSIS, et. Al
Marcelia Iturralde v. GSIS
Alex Siasoyco v. PNB and NASECO, et al
Philbert Iturralde v. GSIS
57,000,000
8,336,287
5,000,000
3,300,000
3,000,000
500,000
150,000
50,000
77,336,287
13.
PRF SINKING FUND
This account consists of the amount appropriated and remitted by the National
Government for the restoration of damaged government properties. The Fund shows
negative balances of P857.050 million in 2008 and 2007. Said balance includes claims
for losses amounting to P884.537 million in 2008 and 2007.
14.
REVENUES FROM INSURANCE - NET
This account is broken down as follows:
2008
Revenue from insurance
General insurance premium
Employee compensation insurance premium
Optional insurance premium
Commission on reinsurance
Pre-need insurance premium
Interest on premium arrearages
Gain/(Loss) on foreign exchange
Insurance expenses
Reinsurance expense
Extra remuneration
Commission expense
Loss on foreign exchange
Bad debts expenses
Pre-need insurance expense
2007
4,615,981,961
1,829,417,451
877,393,435
208,058,943
7,765,701
2,087,041
(6,582,962)
4,479,594,859
2,160,335,388
733,373,436
207,377,269
25,923,260
12,656,080
2,816,232
7,534,121,570
7,622,076,524
2,717,657,291
31,154,060
22,712,901
388,394
-
3,028,860,562
59,569,861
11,779,131
179,320,551
-
87
2008
Recovery/Collection fee
Service fee
Other insurance expense
15.
2007
2,729,467
1,525,800
334,747
3,261,778
2,774,642,113
3,284,652,430
4,759,479,457
4,337,424,094
REVENUES FROM LOANS AND INVESTMENTS - NET
This account consists of the following:
2008
2007
Loans
Interest on policy loans
Service income
142,686,358
7,374,788
234,519,127
11,668,955
150,061,146
246,188,082
Interest on advances to/from funds
934,290,975
586,930,910
Interest on ROP notes and bonds
931,015,256
692,994,477
Gain on sale of stocks
711,578,075
6,764,571
Interest on ROP bills
571,259,237
513,579,213
Gain/(Loss) on foreign exchange
356,664,064
Investments
Gain/(Loss) on sale of bonds
Unrealized gain/(loss) – Held for trading
Dividends on stocks
Other Investment revenue
(6,575,081)
(21,608,380)
25,100
(18,298,430)
(725,249,373)
3,621,369
32,621,327
195,442,370
31,613,529
3,678,997,835
1,117,671,374
Investment expenses
Interest on advances to/from funds
579,163,919
-
Expenses on eCard
-
2,421,559
Investment fees and others
-
500
Provision for probable losses
-
188,916,685
579,163,919
191,338,744
3,249,895,062
1,172,520,712
88
16.
REVENUE FROM INVESTMENT PROPERTY
This account consists of the following:
2008
Rental from Investment Property
Gain/(Loss) on valuation of Investment
Property
24,000,000
232,535,000
256,535,000
17.
2007
23,911,458
23,911,458
OTHER REVENUES
This account consists of the following:
Interest on savings deposits
Loss on recoveries
Service income
Interest on other receivables
Others
18.
2008
2007
2,309,603
1,715,491
84,659
348,940
72,982
7,036,200
3,860,189
8,698
4,896,963
4,458,693
15,875,032
CLAIMS AND LOSSES PAID
This account consists of the following:
2008
Optional Life Insurance
Pre-need Insurance
Employee Compensation Insurance
General Insurance
19.
2007
385,652,560
253,444,999
46,565,916
363,535,088
656,643,603
210,220,170
65,879,355
659,940,461
1,049,198,563
1,592,683,589
GSIS FEES AND COMMISSIONS
This account consists of the following:
2008
Marketing commission
Administration fee
Management fee
2007
1,098,675,079
979,166,878
182,941,745
1,042,593,659
680,185,635
216,008,464
2,260,783,702
1,938,787,758
89
Pursuant to Board Resolution No. 49 of CY 2004, the Social Insurance Fund is entitled
to administration fee, marketing commission and management fee being the
administrator of the General Insurance business (GI), the Optional Life Insurance
business (OLI), the Pre-Need business (PN), and Employees Compensation Insurance
Fund (ECIF), as follows:

Ten per cent administration fee based on the three businesses’ respective gross
income;

Ten per cent management fee on ECIF based on its total premium collections; and

Twenty per cent marketing commission based on gross premium earned of GI
business and OLI business.
20.
ADMINISTRATIVE AND OPERATING EXPENSES
This account consists of contributions to other government offices amounting to
P36.700 million in 2008 and P39.179 million in 2007.
21.
EXEMPTION FROM TAX
Pursuant to Section 39 of RA 8291, the GSIS, its assets, revenues including all accruals
thereto, and benefits paid are exempted from all taxes, assessments, fees, charges or
duties of all kinds.
22.
NON-ADMITTED ASSETS
Pursuant to Section 179 of the Insurance Code certain assets are classified and
presented as non-admitted assets which consist of the following:
2008
Due from reinsurers
Prepaid expenses
Due from ceding companies
Contingent asset – deficit cases
Suspense account
2007
345,306,563
10,353,174
103,943
81,286
(67,667,446)
345,306,563
12,641,212
103,943
81,286
(67,667,446)
288,177,520
290,465,558
Due from Reinsurers refer to losses recoverable from insurance companies. On the
part of the GSIS, reinsurer’s shares on losses are presented as contra claims expense
account and a receivable from the reinsurers.
Prepaid expenses refer to the unexpired portion of the premiums on the excess-of-loss
insurance cover provided by a private insurance company under an excess of loss treaty
agreement. This is an insurance cover for the retention of the GSIS. Paid reinsurance
90
premiums for all policies exceeding one year cover shall be recorded as prepaid
reinsurance premium and are recorded as expense on the following year until expiry of
the policy.
23.
CONTINGENT LIABILITIES
At present, there are lawsuits and claims against the GSIS that are either awaiting
decisions by the courts or are subject to settlement agreements.
Reserve for Contingencies for the General Insurance business has been increased in
December 2008 by as much as P77.336 million to provide for probable losses from
litigations involving the general insurance business.
24.
EVENTS AFTER THE BALANCE SHEET DATE
On March 30, 2009, the GSIS experienced the first crash of its database management
system software or the IBM-DB2 software, in its unstable, corrupted state. The second
incident occurred on April 2, 2009. The GSIS experienced eight system crashes in two
months. About 90 per cent of the GSIS’ operations were adversely affected by the
crash. Thousands of loans and claims of GSIS members could not be processed,
membership records could not be updated, transactions could not be recorded, and a
sizeable data in the GSIS database were either corrupted or lost temporarily. During
system crashes, the G-W@PS kiosks were rendered off-line. The GSIS has suffered at
least P5 billion in actual damages as a result of the system crashes.
On June 3, 2009, the GSIS filed a civil case against IBM Corporation, IBM Philippines
and Questronix Corporation as it asked the court to order these companies to pay the
GSIS the amount of P100 million in damages.
The GSIS has implemented various measures for data recovery and upgraded its backup systems. The GSIS has assured all its members and pensioners that the integrity of
all its data has not been compromised. For every step of a process, records are
preserved and kept in perpetual storage. The GSIS is currently implementing migration
to Oracle database system software.
91