GOVERNMENT SERVICE INSURANCE SYSTEM
ADMINISTERED FUNDS
NOTES TO FINANCIAL STATEMENTS
1.
GENERAL INFORMATION
Section 34 of Republic Act (RA) 8291, otherwise known as “The Government
Service Insurance System Act of 1997”, mandates the GSIS to administer the
following funds:
1) General Insurance Fund
2) Employees’ Compensation Insurance Fund
3) Barangay and Sanggunian Officials’ Insurance Fund, and
4) Property Replacement Fund.
The General Insurance Fund is composed of the following businesses: (a) general
insurance business (b) optional 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.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1
Basis of preparation of financial statements
The accompanying financial statements for the Administered Funds are
prepared in accordance with Philippine Financial Reporting Standards
(PFRS)/ Philippine Accounting Standards (PAS), where applicable. The
accounting policies applicable to the life insurance as well as the non-life
insurance operations are in accordance with the generally accepted
insurance accounting principles in the Philippines and reporting practices
prescribed by the Insurance Commission.
2.2
New accounting standards
The Financial Reporting Standard Council (FRSC) approved the issuance
of new and revised accounting standards which are based on International
Accounting Standards (IAS) and new International Financial Reporting
Standards (IFRS) issued by the IAS Board. These new standards have
been renamed Philippine Accounting Standard to correspond to IAS while
the PFRS corresponds to IFRS.
Starting January 1, 2006, the GSIS has adopted the new Philippine
Accounting Standards (PAS), where applicable, as enumerated below. The
System has been guided by PFRS 1, First time adoption of Philippine
Financial Reporting Standards:
8383
PAS 1
– Presentation of Financial Statements
PAS 8
– Accounting Policies, Changes in Accounting Estimates and
Errors
PAS 21
– The Effects of Changes in Foreign Exchange Rates
PAS 28
– Investments in Associates
PAS 32
– Financial Instruments: Disclosure and Presentation
PAS 39
– Financial Instruments: Recognition and Measurement
The GSIS had an early and partial adoption of PAS 39 in December 2004
on its investment in bonds. Application of the standard on the rest of the
investment in securities and debt instruments started in January 1, 2006.
As of December 31, 2006, the System has not yet determined the impact
of PAS 32 and 39 to the financial statements because the System is still in
the process of enhancing and polishing policies and procedures and
information systems related to the adoption of these Standards.
Generally, the adoption of PAS 32 and 39 will not result in the restatement
of prior years’ financial statements as allowed by the Securities and
Exchange Commission. Any cumulative effect of adopting the standards,
however, will be reflected in the equity.
PAS 40
– Investment Property
The GSIS uses the fair value model. Fair value model requires an
investment property to be measured at fair value with fair value changes
recognized directly in the statement of revenues and expenditures.
Philippine Financial Reporting Standards ( PFRS)
2.3
PFRS 1
– First Time Adoption of Philippine Financial Reporting
Standards
PFRS 4
– Insurance Contracts
PFRS 5
– Non-Current Assets Held for Sale and Discontinued
Operations
Cash equivalents
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.
8484
2.4
Loans and accounts receivables
Loans and accounts receivables 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. They are
expressed as percentages of the outstanding accounts, as follows:
Years
Age
Percentage of
Allowance
2005 – 2006
0 – 2 years
0
2003 – 2004
3 – 4 years
25
2001 – 2002
5 – 7 years
50
2000 – below
more than 7 years
100
On private loans, the level of allowance is based on the collateral deficiency
or the excess of the loan exposure (principal plus accrued interest) over the
fair value of the collateral.
Loans and receivable accounts which carry government guarantee are not
covered by the above provision.
2.5
Interest receivable
Interest income on unpaid premiums, loans and investments already
earned but uncollected are recognized in the books.
An interest of 2% per month is charged / accrued on unremitted Employees’
Compensation‘s premium contributions as of balance sheet date and
classified as non-admitted assets. Income will recognize only upon
collection.
2.6
Revenue recognition
The major sources of operating revenues of the Administered Funds are
insurance premium contributions, 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.
Beginning 2006, however, for the Employees’ Compensation Insurance
Fund, income and expenses have been recognized only upon collection
8585
and disbursement, respectively. Accrual on income is classified as nonadmitted assets.
2.7
Administrative and operating expenses
This account pertains to the contribution to the Employees’ Compensation
Commission (ECC) and the Occupational Safety and Hazard Commission
(OSHC), to be drawn from the Employees’ Compensation Insurance Fund,
as its share in administrative expenses.
2.8
Investments
Investments are classified in the following categories at initial recognition
based on the purpose for which they are acquired.
a.
Held for trading – stocks (HFT)
Stock investments are classified as held for trading if 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 balance sheet date. Any difference between the cost and the
fair value is recorded as unrealized gain or loss in the income
statement of the current period.
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.
c.
Available for sale (AFS)
Available–for–sale financial assets are acquired and held indefinitely
for long-term capital appreciation or are not classified as (a) loans and
receivables (b) held-to-maturity 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.
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.
8686
e.
Investments in subsidiaries
The System practices the equity method in Investments in shares of
stocks in which it holds at least 20% 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.
f.
Investments in non-traded stocks
Non-traded stocks are valued at cost, net of allowance for impairment
in value. Investments in Peso ROP 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.
2.9
Foreign currency transactions
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
currency – denominated assets and liabilities are credited to or charged
against current operations.
2.10
Actuarial reserves
Actuarial reserve requirement for the mandated obligation of the System is
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.
2.11
Non-admitted assets
Assets of the General Insurance business like prepaid expenses,
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
8787
Assets. The foregoing classifications are pursuant to Section 179 of the
Insurance Code and the recommendation of the Commission on Audit.
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 are
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 non-admitted assets.
2.12
Funds held-in-trust (FHIT)
Funds held-in-trust account of the Administered Funds consists of the
following:
1. Cash Collateral for performance bonds, surety bonds, judicial bonds
2. Premium Reserve for inward reinsurance under treaty agreements.
3.
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% of the gross premiums, less returns and cancellations, of
all policies or risks in force. For marine cargo risks, reserve is equal to 40% of the
premiums written during the last two months of the calendar year.
4.
TRANSITION TO PFRS
The transition to PFRS resulted in certain changes in the System’s previous
accounting policies referred to in the succeeding tables as “previous Generally
Accepted Accounting Principles (GAAP)”.
These transition effects resulted from the adoption in CY 2006 of PAS 39
(Financial Instruments: Recognition and measurement), PAS 32 (Financial
Instruments, Disclosure and Presentation), and PAS 40 (Investment Property), and
are translated in figures for the affected balance sheet and income accounts.
Investment property
Under previous GAAP, foreclosed housing units, cancelled DCS awards and big
tickets accounts are presented and recognized as acquired assets at carrying
8888
values and classified as “Acquired Assets” regardless if these assets are occupied
or not.
Under PFRS ( specifically PAS 40 ) acquired assets which are currently occupied
and from which the System derives rental income and acquired assets which are
being held by the System for potential appreciation in the future are recognized as
investment property ; under PFRS, these assets are recorded by the System
initially at cost and subsequently at fair values.
The investment properties for the Administered Funds are comprised of the Manila
Hotel and the Manila International Airport Terminal (MIPTI). These assets were
acquired in 2003 thru dacion en pago, by the Social Insurance Fund to the General
Insurance Business and the Optional Life Insurance Business.
Compliant with PAS 40, the acquired assets were appraised and revalued to their
fair values at year end of 2006. As a result of the appraisal, the Manila Hotel
gained P 1.14 Billion from the fair valuation; MIPTI’s appraisal did not yield any
appreciation or gain in value.
Although PAS 40 was applied by the System for the first time in 2006, appraisal of
the aforementioned assets has already been reported in 2003, the year of the
appraisal. That being the case and as recommended by COA, the gains on
valuation of the Manila Hotel were all recognized as Surplus adjustments in 2006;
the transitional valuation had no effect on the net results of operation of the current
year; investment property as of balance sheet date was increased by P1.4 Billion
from its net book value of P 7.7 Billion.
The effects of the PFRS in 2006 are summarized as follows:
Previous GAAP
Effects of
Transition to
PFRS
PFRS
Assets
Investment Property
Liabilities and Networth
Surplus
P 7,773,081,126
P 1,141,683,343
P 8,914,764,469
P 4,956,356,730
P 1,141,683,343
P 6,098,040,273
The details of the transaction effects on the above accounts are shown below:
Investment Properties
Manila Hotel
GIF
OLIF
Sub-Total
Manila International
Airport Terminal (MIPTI)
GIF
OLIF
Sub-Total
Total
Previous GAAP
Gain on Valuation
PFRS
P 1,392,613,662
326,662,464
1,719,276,126
P 926,284,388
215,398,955
1,141,683,343
P 2,318,898,050
542,061,419
2,860,959,469
4,911,646,560
1,142,158,440
6,053,805,000
P 7,773,081,126
P 1,141,683,343
4,911,646,560
1,142,158,440
6,053,805,000
P 8,914,764,469
8989
5.
CASH AND CASH EQUIVALENTS
The Cash on Hand and in Banks account of the Administered Funds consists of
the following:
Particulars
2006
Cash on hand and in banks
P
2005
396,884,772
P 4,960,711,738
774,959,208
1,321,314,876
Cash equivalents
Special savings deposits
Time deposits
14,963,994
Total Cash and Cash Equivalents
6.
P 1,186,807,974
P 6,282,026,614
CONTRIBUTIONS/PREMIUMS RECEIVABLE
The account represents all premiums and contributions earned but not yet received
as follows:
Particulars
6.1
2006
2005
Premiums receivable from:
General insurance business
Pre-need insurance business
Optional life insurance business
Sub-total
Reinsurers
Ceding companies
Sub-total
P 2,030,445,935 P 1,144,973,495
258,918,522
19,513,322
56,142,930
(22,204,988)
2,345,507,387
1,142,281,829
712,921,154
605,345,909
196,269,191
161,175,328
909,190,345
766,521,237
Total Contributions/Premiums Receivable
P 3,254,697,732 P 1,908,803,066
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 June15,1951), 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.
9090
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 is recorded at gross premium amount, and is
composed of the unearned premium and the earned premium. Unearned
premium is calculated at 40% of Premium Receivable Account, net of
Reinsurance Expense (pursuant to Section 213 of the Insurance Code of
the Philippines). This unearned portion shall be recognized as earned
during the subsequent periods until expiry of the policy.
6.2
Optional life insurance premiums receivable
Optional Life Insurance Premiums vary according to the classification of
risk, 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.
6.3
Pre-need insurance premiums receivable
Pre Need insurance premiums were recognized in the books whenever
there were policies sold, and these were during its marketing years.
Marketing activities have long been stopped, since 1998. Movements in
the existing balance of the Pre-Need Premium Receivable Account pertain
to adjustments, as part of the cleansing process being done on the account.
6.4
Employees’ compensation insurance premiums receivable
Employees’ Compensation is an insurance coverage compulsory for all
employers, both in 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 1% 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.
Beginning 2006, income is recognized only upon collection. Balance of
premiums receivable forwarded into 2006 has been classified as Nonadmitted Assets; 2005 premiums receivable were restated to allow
comparison.
9191
6.5
Priority of payment
Since 2003, the GSIS has been implementing the policy of prioritization of
payment on EC claims. The policy necessitates the classification of
member agencies into member of good standing and delinquent accounts.
Agencies of good standing were given priority in payment of EC claims and
benefits. Agencies classified as delinquent are last in the order of priority of
payment.
Beginning 2006, claims are recognized as expenses only when paid.
7.
INVESTMENTS
The Administered Funds’ investments account consists of the following:
Particulars
2006
Current Investments
ROP Bills
ROP Notes and Bonds
Held-for Trading - Stocks
Sub-total
Non-Current Investments
ROP Notes and Bonds
Available for Sale - stocks
Stocks - subsidiaries
Stocks non - traded
Sub-total
P
Total Investments
2005
8,614,526,565
4,785,778,405
208,781,150
13,609,086,120
P 1,616,430,478
526,947,025
2,143,377,503
2,257,798,898
920,407,471
518,763,925
2,143,840
3,699,114,134
8,045,108,272
1,006,180,702
474,627,845
2,143,840
9,528,060,659
P 17,308,198,254
P 11,671,438,162
Foreign-currency denominated ROP bonds in the total amount of P4.8 billion were
reclassified from Available for Sale (AFS) to Financial Assets at Fair Value
through Profit or Loss (FVPL). The reclassification was due to the change in
Management’s intention/strategy from holding these securities for a longer period
to short-term profit taking.
Philippine debt papers were among the best performing bonds in 2006 as a result
of sustained fiscal improvement of the country and credit rating upgrade
possibilities. The bullish outlook in the emerging market, including the Philippines
started in 2005. Management took advantage of the surge in bond prices to
realize gains by selling these securities. Also, the correction in the middle of 2006
caused by the apprehension in unit investment trust funds (UITFs) this time,
presented an opportunity for Management to buy back ROP bonds.
Based on this actual trading behavior, Management has deemed it appropriate to
reclassify foreign-currency denominated ROP bonds from Available for Sale (AFS)
to Financial Assets at Fair Value through Profit or Loss (FVPL).
9292
8.
LOANS RECEIVABLE - NET
The investment in loans is made up of Policy Loans of the Optional Life Insurance
business as follows:
Particulars
2006
2005
P 1,754,235,395
P 1,626,470,487
57,944,817
77,259,755
P 1,812,180,212
P 1,703,730,242
Policy loans
Private loans
(net of Allowance for Probable Loss)
Total Loans Receivable - Net
9.
INVESTMENT PROPERTY
Investment property includes acquired assets carried at fair values, appraised by
independent appraisers broken down as follows:
Particulars
Amount
Manila Hotel
Manila International Airport Terminal
Total Investment Property
10.
P
2,860,959,469
6,053,805,000
P
8,914,764,469
OTHER NON-CURRENT ASSETS
This account is broken down as follows:
Particulars
2006
2005
P 319,748,664
P 469,489,798
111,700,028
526,533,821
Paintings and tapestries
54,012,354
54,012,354
Income receivable
11,132,549
18,403,968
2,328,614
2,247,945
158,686
158,686
Contributions/ Premiums receivable
Other receivable - Agencies w/ MOA
Accounts receivable - Deficit cases
Contingent asset - COA Disallowances
Sundry accounts receivable
48,580
Interest receivable on advances to other funds
Total Other Non-Current Assets
9393
P 499,129,475
439,831,955
P1,510,678,527
11.
NON-ADMITTED ASSETS
Pursuant to Section 179 of the Insurance Code and upon the recommendation of
the Commission on Audit, certain assets are not allowed as admitted assets,
hence, are presented as non-admitted assets, like the (1) premiums receivable
(forwarded balance from prior years, inclusive of interest income receivable) of the
Employees’ Compensation Insurance Fund (2) prepaid expenses of the General
Insurance business (3) losses recoverable (receivables from reinsurers) for the
years 2002 and below of the General Insurance Business (4) contingent assets
arising from deficit cases of the Optional Life Insurance Business.
This account consists of the following:
Particulars
2006
Income receivable
Due from reinsurers
Prepaid expenses
Due from ceding companies
Contingent asset- deficit cases
Suspense account
Total Non-admitted Assets
2005
P6,483,985,631
490,012,735
1,907,820
103,943
81,286
(67,667,445)
P3,204,794,981
610,797,823
6,207,303
103,943
101,796
(67,667,445)
P6,908,423,970
P3,754,338,401
Income Receivable consists of interest receivable on obligations of the Department
of Budget and Management (DBM) and other government agencies for unpaid
and/or delayed premium remittances of Employees’ Compensation Insurance Fund
(ECIF) and the Barangay and Sanggunian Officials Insurance Fund (BSOIF), which
are credited to deferred income, as recommended by the Commission on Audit.
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 excessof-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 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.
12.
DEFERRED CREDITS
Particulars
2006
Unearned premium
Undistributed collections
Deferred income
Total Deferred Credits
9494
2005
P 1,141,427,901
2,532,114
8
P 1,122,783,760
2,532,055
76,315,754
P 1,143,960,023
P 1,201,631,569
Unearned premiums and income receivable
This account includes unearned premiums equivalent to 40% 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 of 365 days is recorded as
Unearned Premiums. This unearned portion is recognized as earned during the
subsequent period until expiry of the policy.
Income Receivable amounting to P6.9 billion representing interest portion of the
unpaid and/or delayed remittance of premium contributions have been reclassified
to Non-Admitted Assets and as a deduction from Deferred Income.
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 forty per centum (40%) of the gross premiums, less returns and
cancellations, of all policies or risks in force. For marine cargo risks, reserve is
equal to one hundred per centum (100%) of the premiums written during the last
two months of the calendar year.
13.
RESERVES
As of December 31, 2006, the actuarial reserves requirement amounted to P22.19
billion while the actual reserves set-up was P20.866 billion or a variance of
P1.324 billion.
The variance pertains to Pre-Need and Employee Compensation Insurance
reserve deficiencies amounting to P535.36 million and P788.40 million,
respectively.
For ECIF, this deficiency is expected to be fully erased once the interests for
unpaid and/or delayed payment of premium contributions are collected.
Particulars
Actuarial
Reserve
Requirement
as of 12/31/06
Actual Reserve
Set up
12/31/06
Deficiency
Optional life insurance business
P 7,222,336,005
P 7,222,336,005
-
General insurance business
6,657,835,465
6,657,835,465
-
Pre-need business
7,035,779,748
6,500,420,090
535,359,658
Employees compensation
insurance fund
1,274,306,296
485,904,429
788,401,867
P 22,190,257,514
P20,866,495,989
P 1,323,761,525
Total Reserves
9595
Reserves for the General Insurance Business, as of December 31, 2006:
Particulars
Amount
Reserve for losses
P2,299,693,046
Reserve for contingencies
Contingencies- prior set up
P3,181,059,905
Reserve for Ecobel Land Incorporated
Additional Reserve for contingencies
491,320,000
72,655,257
Total Reserve for contingencies
3,745,035,162
Reserve for Domsat Holdings
540,452,000
Total Reserves – General Insurance Business
P6,585,180,208
The additional reserve for contingencies amounting to P72,655,257 refers to
obligations expected from litigations involving the General Insurance Business, as
follows:
Particulars
United Overseas Bank of the Phil. Vs. Teledyne and GSIS
RP v. Western Guaranty Corp. v. GSIS
Hon. Reyes, etc. and Pan United Shipyard v. GSIS
Liquigaz Phil. Corp. v. Laguna Gas, GSIS, et. al
RP v. Bagong Buhay Shipping Corp. and GSIS
NPC v. Achievers Const. and Dev. Corp and GSIS
Alex Siasoyco v. PNB and NASECO, et al
Jorge Mulingtapang , et al v. Inigo Camacho et al
GSIS v. Ricardo Tan
Adelina Diy ROA, et al v. MMTC
Jimenez, et al v. M.H. Del Pilar High School, et.al
Total Additional Reserve for Contigencies
Amount of
Reserve
P 57,000,000
8,336,287
3,300,000
3,000,000
400,000
318,970
100,000
50,000
50,000
50,000
50,000
P 72,655,257
Reserve for the Employees’ Compensation Insurance Fund (ECIF)
Apart from the beginning reserves balance of P486 million, no additional reserve is
set up for the ECIF in 2006. This is justified by the fact that the unassigned
surplus as of the year end posted a deficit amount of P2.70 billion ; the results of
operation for 2006 amounting to P610.50 million was not sufficient to appropriate
the required reserve for the ECIF.
14.
GSIS FEES AND COMMISSION
Pursuant to Board Resolution No. 49 of CY 2004, the SIF is entitled to
administration fee and marketing commission, being the administrator of the
9696
General Insurance business (GI), the Optional Life Insurance business (OLI), and
the Pre-Need business (PN), as follows:
15.

10% administration fee based on the three businesses’ respective gross
income;

10% management fee on ECIF based on its total premium collections;

20% marketing commission based on gross premium earned of GI business
and OLI business.
CASH DIVIDENDS DECLARED
The GSIS Board of Trustees under Resolution No. 162-2006, dated November 8,
2006, declared cash dividends to all qualified Optional Life Insurance policy
holders in the total amount of P103.33 million, to be taken from the unassigned
surplus of the Optional Life Insurance Fund.
16.
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.
17.
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 2006 by as much as P72.60 million to provide for probable
losses from litigations involving the general insurance business.
9797