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The President's CY 2007 Annual Report
Looking back, Fiscal Year 2007 was one of the most significant years in PSMBFI’s recent history, a year of unforeseen challenges, profound changes, and major business successes. The year marked the 10th anniversary of our Company’s founding. No other major organization in our industry boasts such a brief yet distinguished history. Mutual assistance, a sense of responsibility, and a drive to innovate – these are the principles on which our founders built the Fund, and they remain the basis for our long-term success today. All of us– trustees, employees, members, and partners – can be proud of this achievement and grateful for the trust this company has enjoyed since 1998. Now, we are working relentlessly to justify this trust and ensure PSMBFI’s continued success. A SUCCESSFUL YEAR Despite the challenges confronting us, we generated outstanding revenues from continuing operations in 2007 – P903 million or 18 percent above the already impressive prior-year figure. Retained surplus was posted at P1.4 billion, a remarkable growth of 24 percent. Total assets reached P3.5 billion, surpassing last year’s record by 18 percent. We are growing profitably in major areas of operation. We record investment income of P422 million, which primarily consists of interest earnings on loans and cash deposits. Insurance or underwriting income registered at P106 million after payment of benefit claims and operating expenses. We ended the year with a strong cash position of P577 million, up by 8 percent from the previous year’s P532 million. We generated a 17 percent return on equity that is over and above the 12 percent committed rate on members’ equity contribution.
Figure 1: Total Assets (figures in million pesos)
Figure 2: Surplus (figures in million pesos) I. MEMBERSHIP HIGHLIGHTS Intensifying membership efforts During the year, a total of 165 information drives were extensively conducted particularly during the recruitment period in the PNP, which is an opportunity to enroll incoming PO1s. Enrollment of new recruits and lateral entrants is encouraged immediately after the oath-taking since it is imperative that they be protected at the onset of their training. Upon signing the membership application, they are already considered bona fide members of PSMBFI and are entitled to the same benefits and privileges enjoyed by members who are already contributing to the Fund. A total of 4,770 new police recruits took oath in the last quarter of 2007, out of which 99% had already submitted their membership applications with the Fund. By year-end, membership strength of the PNP uniformed personnel stood at 110,095 in the Equity Plan; 63,330 in the Basic Group Term Plan; 107,942 in the Burial Assistance Benefit; and 115,300 in the Special Group Term Plan. Other sectors were likewise covered under the Equity Plan, composed of 1,072 PNP non-uniformed personnel; 242 retired PNP personnel; 283 personnel of the Bureau of Fire Protection; 82 personnel of the Department of Transportation and Communication; 78 personnel of the National Police Commission; and 149 employees of PSMBFI. Membership strength of the last ten years is shown below.
Figure 3: Equity Plan Membership Count
Figure 4: Basic Group Term Plan, Burial Assistance Benefit Plan, and Special Group Term Plan Membership Count For 2008, we will direct our membership efforts towards enrolling the existing PNP non-members, new police recruits, additional personnel from other member-agencies, as well as covering more government offices engaged in keeping public safety and order. Our enrollment targets consist of 117,500 members in the Equity Plan; 70,000 in the BGTP; Service extension in the regions The successful conduct of Caravan operations, the positive response of members to our express lane service, and the encouraging result of loan availments that exceeded our targets compelled us to continue the conduct of our modified service extension program (MSEP) in 2007. The Davao MSEP ran from February to March to serve the members from Regions 6, 7, 8, 9, 10, 11, 12, CARAGA, and ARMM. Simultaneously, information drives at the various PNP station offices in the localities were carried out by the MSEP team. As a result of the MSEP, PSMBFI granted a total of P73 million in salary loans to 1,290 borrowers and P16 million in policy loans to 2,846 borrowers with the objective of assisting our members in addressing their financing requirements. We look forward to expanding our reach and holding more MSEP missions in 2008. Building up the regional extension offices. The 2007 plan of action provided for the construction of eight (8) extension offices located in Regions 1, 3, 5, COR, 7, 11, 12, and 13. PSMBFI intensifies its effort to strengthen the regional extension offices (REOs) by constructing office buildings, providing equipment, and the necessary information and communication technology facilities. Through the Virtual Private Network (VPN) facility, our extension offices can link up with the head office to facilitate timely, efficient, and effective delivery of services to members. Presently, VPN linkage has been established for almost all REOs, while full connectivity is expected to be completed in 2008.
II. INSURANCE HIGHLIGHTS Total insurance premium reached P253 million in 2007, rising by 6.5 percent over P237 million in 2006. Premiums contributed by each insurance plan amounts to the following: P159.9 million, Equity Plan; P19.8 million, BGTP; P22.5 million, BAB; P16.6 million, SGTI; and P34.2 million, CLI/CRI. On the other hand, P155.5 million in total insurance benefit was paid to 795 claimants under the different plans. The amount actually declined by 3.5 percent although the number of beneficiaries slightly increased against that registered in 2006. There were 612 claimants for death benefits, 58 for disability, and 125 for financial assistance. The loss ratio is the percentage rate of benefit payments against the premium collection and gives us an idea of the money values coming in and out of the Fund at a certain period. We posted the following loss ratios for 2007: Equity Plan, 72%; BGTP, 42%; SGTI, 63%; BAB, 53%, and CLI/CRI, 30%. Although we see that these figures are fluctuating on a yearly basis, the statistics are kept below the 83% loss ratio standard as set in PSMBFI’s operating plan.
III. INVESTMENT HIGHLIGHTS PSMBFI remains proactive in addressing the needs of its members. Quick loans in the form of salary and policy loans are easily accessible to members to alleviate their emergency needs as well as help them prepare for future contingencies.
In 2007, a total of P1.125 billion in salary loans, 19 percent higher than the previous year and exceeding the P1-billion target, was granted to 17,681 borrowers. Loan volume was bolstered by the MSEP early in the year as well as the intensified information campaign. Below is the ten-year salary loan record. Policy Loans Policy loans were granted to 25,089 borrowers with a total amount of P142.2 million, which grew by 23.5 percent against the prior-year figure. As with salary loans, our service extension programs and extensive member-focused information strategies boosted availments in the policy loan facility. Collection efficiency improved to 95.33 per- cent from 95.24 percent in 2006. Through constant coordination with the finance offices of our member- agencies and by bolstering our collection policy, we were able to maximize the return of our investments in the loan facility, and at the same time, minimize losses from uncollected loans.
Figure 8: Salary Loans (figures in hundred million pesos)
Figure 9: Policy Loans (figures in hundred million pesos) Short -term and Long-term Investments Funds not used to pay benefit claims and loan grants are invested in interest-earning instruments such We have P492.9 million in short-term deposits and P65 million in long-term Retail Treasury Bonds for a combined total of P557.9 million as cash deposits, which was 14 percent above the P522-million record in 2006. Combined interest income of our cash deposits improved by 27.7 percent to P563 million. IV. CORPORATE SOCIAL RESPONSIBILITY Additional benefit at no extra cost: KIA/WIA Financial Assistance PSMBFI realizes the risks involved in police operations, particularly of being wounded, and worse, being killed in the line of duty. Thus, we were compelled to extend further benefits for those who are wounded-in-action and killed-in-action, mindful of the losses that have to be born by their families. Effective October 1, 2007, at no additional cost or premium to the members, we give the following additional benefits for those involved in legitimate operations: a. 10,000 pesos for members who sustain minor wounds b. 20,000 pesos for those who suffer from a major injury c. 25,000 pesos for those killed in action and who do not qualify for double indemnity.This amount is over and above the standard insurance benef ts and the accumulated equity value which their beneficiaries are entitled to receive. Benefits for the living through dividends PSMBFI recognizes the need of the members to experience a tangible monetary benefit from the Fund, a benefit for the “living” apart from the usual loan privilege and mortality benef ts. So, in March 2007, the company declared cash dividends amounting P100 million from the Retained Surplus for members of the equity plan qualifying under the following conditions: b. Membership policy has been in force for at least one year from December 31, 2005. Dividend distribution teams were deployed in the provinces to personally release the dividend checks to 105,716 qualif ed members under the Sponsoring members’ morale and welfare In March, the PNP and PSMBFI signed a Memorandum of Agreement in line with the former’s Morale and Welfare Program. Specif cally, we provided from the unremitted collection fee a total amount of P27.5 million for the following projects: a. P9 million for the construction of a 16-door PNP-PCO condominium unit at the off cers’ row inside Camp Crame b. P9 million for the construction of the proposed extension of the PNP Gym inside Camp Crame c. P1,734,000 for the procurement of ambulance units for PRO 8 and PRO 10 d. P8.5 million for the following PSMBFI-initiated programs: •P2.5 million for the Wellness Program Further supporting our PNP members, we have developed loan programs, apart from the existing salary loan facility, to encourage members to acquire their own homes and to become entrepreneurs. One of the priority projects under the PNP transformation agenda is the PNP Kalinga Housing Program and PSMBFI supports this endeavor through its own Tulong Pabahay Program. Police families and beneficiaries are granted loan assistance in acquiring affordable yet decent and well-situated housing units such as in Camp Macabulos, Tarlac. PSMBFI likewise entered joint ventures with the PNP and private institutions to fuel the entrepreneurial spirit of our police members. They are given access to small businesses such as the Project Piglink that can help them emerge from being salary-reliant to becoming self-suff cient. PSMBFI is committed to continuously exploring sustainable business opportunities for members. Meanwhile, the calamity loan facility that bears a much lower interest rate than the salary loan, is intended for those who suffer damages in localities declared as calamity areas. Availment shall be within one month from the declaration date of the state of calamity of a specif c area. When typhoons Chedeng and Dodong hit the country last August, a total of P22.7 million in calamity loan was granted to 660 members. V. FISCAL YEAR 2008 AT A GLANCE PSMBFI is gearing up to face future challenges. Here we have identified the eight strategic battles to win in 2008: 1. Better products, as well as effective and efficient service Better products, more benef ts and services We have already started and are working hard to address these issues immediately. We look forward to finally implementing our new insurance plans, the Endowment at Age 56 and the Life Paid-Up at Age 56. Endowment at Age 56 is a retirement pension plan that provides a combination of insurance protection and savings. Insurance coverage becomes effective upon issuance of the policy and payment of the first premium. Savings, meanwhile, is derived through the cash surrender value which is accumulated at an accelerated pace toward the maturity of the plan when the member reaches the age of 56. Insurance proceeds may be received as a lump sum amount; a fixed amount for a specified period; or as paid-up life insurance for the member’s remaining years after age 56. Life Paid-Up at Age 56, on the other hand, is an insurance plan that provides maximum protection for every one peso of premium paid by the insured. Among the many insurance plans found in the market today, Life Paid-Up at 56 is the cheapest and provides the longest insurance protection, reaching up to age 99 of the member. Mode of premium payment is tailor-fit to the capacity of the member so that he only has to pay up to age 56. When he reaches the said age, his insurance plan will be considered paid-up so that there will be no more premium payment but insurance coverage continues up to age 99. We are currently working on offering these two new products in 2008 subject to the approval of the Insurance Commission. Strengthening organizational structure With regards to organizational development, we address PSMBFI’s need to develop internally the organization in terms of re-organization, upgrading its manpower, and enhancing its equipment and technology resources. We have already finished the job evaluation study of all our plantilla positions and have just approved the implementation of the new salary structure. We have likewise earmarked the study of the organizational structure in 2008. Expanding the market To expand our membership base, we will be targeting the enrollment of more non-uniformed personnel, as well as opening up to other markets such as the National Bureau of Investigation, the security guards, and the public safety practitioners in the local government units. Not only will new members further strengthen our membership, but boost our revenue generation as well, and consequently expand our capacity to give benef ts to members. The ultimate goal: maximum benef t to members at the least cost. This is the cycle that PSMBFI constantly internalizes in performing its tasks and duties to the members. All our present efforts are geared towards giving each and every PSMBFI member maximum future benefit. The bigger picture is fulfilling our corporate social responsibility. The experiences of PSMBFI in carrying out its social obligation to its members and their benef ciaries, the community, and the nation have been many and invaluable. Beyond achieving business and f nancial gains is becoming socially relevant. This goal we are striving hard to instill and realize in our everyday operation.
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