2017 annual report - bpi-philam · for the future. we strengthen our skills in social media,...

2017 ANNUAL REPORT

TABLE OF CONTENTS

BPI-Philam at a glance 03

AIA at a glance 04

BPI at a glance

Business Highlights

04

10

Message from the CEO

Board of Directors

06

33

Philam Life at a glance

Capital StructureList of Stockholders

3132

04

Financial Highlights

Corporate Governance

Financial Statements

08

41

57

BPI-PHILAM AT A GLANCE

MARKET LEADER

70 YEARS18 MARKETSIN ASIA PACIFIC

03 BPI-PHILAM AT A GLANCE

BPI-Philam Life Assurance Corporations is a strategic alliance between two leading financial companies in the Philippines- The Philippine American Life and General Insurance Company (Philam Life) and Bank of the Philippine Islands (BPI).

As a combined brand, Filipinos can trust BPI-Philam to help achieve their dreams through solutions that are easy to get, accessible and personalized.

We understand that the Filipinos’ needs continue to evolve as they go through the different life stages and they want to be able to easily access solutions that help them live healthier, longer and better lives.

The Philippine American Life and General Insurance Company (Philam Life) is the country’s premier and most trusted life insurer for over seven decades now. We focus our knowledge and experience on the Philippines and, as part of the AIA Group, are strengthened by their presence in the Asia-Pacific region.

Bank of the Philippine Islands is a leading commercial bank in the country with over 160 years of experience in the local banking industry and an extensive branch network of more than 800 branches and 1,500 ATMs.

A Member of the AIA Group

BPI-Philam is the bancassurance arm of AIA in the Philippines. AIA is the second largest life insurance company in the world that operates in18 markets in Asia Pacific.

160 YEARSEXPERIENCE

branches

ATMs

8001500

#1 991

70,759

592,631

#3in Bancassurance Bancassurance

Sales Executives

New policies (from January-December 2017)

Lives Ensured

in Life Insurance

OUR VISION OUR MISSIONTo be the leading life insurance company in the country by making insurance accessible and personalized to every Filipino

We make insurance easy to get and easy to have for every Filipino no matter what class they belong to

BPI AT A GLANCE

PHILAM LIFE AT A GLANCE

AIA AT A GLANCE

BPI AT A GLANCE 04

7.9 Million Clients 831Branches

in the Philippines

3 Foreign Offices 3,061ATMs

& CAMs

1.39

1.39 500

Million

Billion Million

Capitalfor its life insurance license

in capital for its life insurance license

in capital for its non-life insurance license

Php

Php Php

700,000 8,000 2,200,000

500,000 4,000

6x the amount

individual policies agents nationwide insured group members

individual policies group policies issued

set by the Insurance Commission

more than almost over

over over

Excess capital

8,000almost

agents nationwide

Over

2.5 Millioninsured group members

Largest ListedThe

company on the Hong Kong Stock Exchange

2 Largestnd

Life Insurer in the world#1 Worldwide

for MDRT Members

30 Million Serving over

individual policyholders

16 MillionOver

participating members of group insurance schemes

ProvidesProtection

to people across the region with total sum of over USD 1T

MESSAGEFROM

THE CEO

To our valued stakeholders,

In 2017, we continued our advocacy of making insurance accessible to all Filipinos as we built upon our foundations for growth. It was relatively a successful year, as we continued to grow our business, substantially insuring 592,631 families.

This was built on the support of our partners – BPI, Citibank, Our Institutional Distribution Partners and The Philam Group; our sales force and staff; and most importantly, our policyholders.

There were a number of notable achievements in 2017. Highlighting our efforts last year were our efforts in Total Wellness throughout the year. This included a series of product launches, campaigns, customer and employee engagement efforts, and our push for improving customer’s health and finances. As a result, customer’s quality of life was our topmost priority in all our initiatives.

2017 saw us launch 6 Products for better insurance accessibility for Filipinos and for integrating the Philam Vitality into the existing popular products, establishing the foundations for better quality of life for customers as our major focus.

Sales platform upgrades, and increased sales capacity with upgraded sales skills ensured that sales improved both in annualized premiums and policy counts achieving our “Best year ever”.

With continuous focus on customer service, we supported the In-Branch customer servicing with our first-in-the-country customer service center, VIBE, dedicated to providing our clients with quality after-sales services that make doing business with us easy and hassle free. Along with that we launched our Facebook page so we can better reach out to Filipinos on a platform they frequent through the content we publish.

2017 was also a year of giving back as BPI-Philam contributed P4,368,251.00 to PHILAM Foundation. Together with other Donors, the PHILAM Foundation built and turned over a total of 34 PHILAM Paaralan classrooms at the end of 2017.

All our efforts have begun to be recognized as we won the “Best Life Insurance Company in 2017” awarded by The World Finance Magazine. All of the above were cemented with an improving foundation of the development of skills that would help us build for the future. We strengthen our skills in social media, payment platforms, CRM, Big Data and Digital Service Platforms. We are therefore well on the way to ensuring the skills for the future are in BPI-PHILAM.

Once again, we thank our policyholders; our partners in BPI, Citibank, Philam Life, and the AIA group; our employees, our board of directors, our shareholders, our host of resource and supply partners; and our friends from the media. Together we have continued further toward our goal of narrowing the protection gap, making sure every Filipino is protected and empowered to live healthier, longer, and better with our comprehensive products and services.

Our efforts going forward will have to increase significantly to meet the growing needs of the Philippine public, as both the economy and the population continues to grow strongly.

Unwavering in focus, thank you!

Surendra MenonChief Executive Officer

MESSAGE FROM THE CE0 06

FINANCIAL HIGHLIGHTS

FINANCIAL HIGHLIGHTS 08

REVENUEAll amounts in thousands of Philippine Peso

NET INCOME

SHAREHOLDERS’ EQUITY

TOTAL ASSETS

Fir

st Y

ear

Pre

miu

ms 2017

2016

9%

PHP 3,044,975

PHP 2,789,203

Net

Inco

me

2017

2016

-7%

PHP 1,672,302

PHP 1,793,460

Sha

reho

lder

s’ E

quit

y*

2017

2016

5%

PHP 7,756,125

PHP 7,416,535

Tota

l Ass

ets

2017

2016

17%

PHP 104,022,675

PHP 88,778,176

Fee

Inco

me

2017

2016

9%

PHP 1,904,492

PHP 1,741,270

Ren

ewal

Pre

miu

ms 2017

2016

44%

PHP 6,553,560

PHP 4,536,581

Gro

ss In

vest

men

t In

com

e

2017

2016

6%

PHP 1,514,497

PHP 1,427,353

increase

increase

decrease

increase

increase

increase

increase

BUSINESSHIGHLIGHTS

PRODUCTSAs the number of prospering Filipinos continually increase annually, the need for a partner who will help them understand how

to properly manage their wealth, protect their assets, and prepare for a great future ahead with their loved ones grow stronger.

With this we’ve observed that the entrance of a younger group of professionals into the workforce prioritized the focus on

living healthy and maintaining an active lifestyle. These have thus prompted BPI-Philam to continue, and further strengthen

our advocacy of championing Total Wellness to Filipinos by releasing accessible insurance offerings tailored to meet their

needs on health and protection. With our insurance products and wellness program, we’ve prepared holistic solutions that

provide comprehensive life and health coverage that also secures their assets. This makes sure that they can continue living and

enjoying their current lifestyle even in the years to come. Meanwhile we also extend to them the science-backed Philam Vitality

wellness program geared to help them know and improve their health while rewarding them for the healthy choices they make.

In the products we’ve launched in 2017, we made sure to consider our clients’ personal journeys to best protect what they value

now and prepare for the future they want to live.

In the first three quarters of the year, we launched two new products and a suite of four plans newly - integrated

with Philam Vitality

As their committed and dependable co-laborer in health and wealth, we’ve identified six important life stages we call

“Key Moments” wherein we genuinely want to help our clients win in. Whether they are,

– they can fully live in each stage knowing they are secured with the best quality service we can offer them

buildingtheir wealth

Key

Mom

ents

workingabroad

gettingmarried

planning forretirement

preparing to become parents

running abusiness

PRODUCTS 10

LIFE READY PLUS

PREFERRED LIFE PLUS

With Preferred Life Plus we opened to our clients interested

in building their wealth a first-in-the-market, single pay

variable life insurance product that offers high protection

coverage. It gives the policy holders peace of mind through

a higher death benefit multiple at 160% of the single

premium.

Our inaugural launch for 2017 was for our preferred segment.

After conducting a Focus Group Discussion with Filipinos

aged 25-35 years old last June, two conclusions became

apparent: Protection to Filipinos, simply meant a secured

future and; insurance should be about protection and

wealth building.

With our gleanings from that discussion we launched

Life Ready Plus, our affordable, regular-pay variable life

insurance product to the media during a Round Table

Discussion in September. The company advocates holding

the policy for an appropriate term which enables the client

long-term and high protection coverage while ensuring

higher probability of positive returns for his or her funds.

With Life Ready Plus we offered young professionals the

opportunity to get an insurance policy early on with a

premium that easily fits into their monthly cashflow.

The release of this product also aimed in better educating

Filipinos on financial planning by correcting the erroneous

notion that “insurance is just for the rich.”

PRODUCTS11

THE WELLNESS SERIES

Finally, during last year’s bancassurance month celebration, we also launched the Wellness Series – a suite of protection solutions that enable clients to invest in both health and wealth with a range of products powered by Philam Vitality. This product suite addresses specific client needs covering Health under Critical Care Plus and Critical Care Max, and Protection under Life Ready Plus and Build Estate Plus.

Life Ready Plus is an easy-on-the-pocket protection and wellness solution for a better, life ready future. Critical Care Plus is geared to ease clients through critical illnesses upon diagnosis while Critical Care Max offers an advanced wellness solution focused on improving client health in the event of early diagnosis. Finally, Build Estate Plus gives clients an estate planning solution with protection for a long-lasting legacy.

Each product in this series is poised to extend to our clients with Total Wellness—holistic physical and financial health—whichever key moment in life they are ready to win in. Through the Wellness Series, we offer Filipinos a solution for preventive health care that focuses on allowing them to know their health, improve their health, and enjoy the rewards of good health through Philam Vitality, a points-based wellness program that provides several benefits to the insured. With Philam Vitality, insured individuals under any of the Wellness Series products are also encouraged to develop and commit to living healthier, longer, and better lives. Aside from the discounts they will enjoy from Philam Vitality partners, they also get upfront 20% additional basic life and rider coverage, which can go up to a maximum of 50% depending on the member’s Philam Vitality status.

With the launch of these comprehensive products, not only have we extended to Filipinos the security and protection they need to continue enjoying life with their loved ones, we have also prepared them to live boldly and worry free as they know that what matters to them are in trustworthy hands.

PRODUCTS 12

MARKETING23

The focus on total wellness for our clients is embodied in the launch of the Wellness Series – a set of four products integrated with Philam Vitality. This supports our clients in their pursuit for total wellness and champion the Philam Vitality wellness program to clients who were looking to live healthier, longer, and better lives.

The Wellness Series is available for clients acquiring any of the four policies: Life Ready Plus, Critical Care Plus, Critical Care Max, and Build Estate Plus.

PRODUCT LAUNCHES

I. Wellness Series

Aside from individuals who wanted to start living healthy, BPI-Philam also wanted to reach out to four markets: Millennials, young families, matured families, and Overseas Filipinos.

The unit-linked product helps millennials look out for their health with comprehensive insurance coverage while helping them build an emergency fund for the future.We introduced this new product to the public through a Round Table Discussion with our friends from the media in July. Media took interest in the new product’s first-in-the market feature of a lower premium charge as well as its higher death benefit coverage of up to 30x it’s annual premium and guaranteed bonuses for the policy holder after 15 years.

With this affordable solution made available to Filipinos, Life Ready Plus proves that insurance isn’t only for the rich, or whose benefits can only be experienced at the onset of death or sickness. Life Ready Plus instead encourages Filipinos to live bolder knowing that they and their loved ones are well protected and continue to enjoy the lifestyle they have now until the future.

II. Life Ready Plus

III. Preferred Life Plus

Earlier in the year we launched a new product called Preferred Life Plus. This product offers our clients another variable life product that gives them high protection coverage and death benefits at 160% of the single premium.

MARKETINGAIA released the findings of their Healthy Living Index—a survey they conducted among more than 10,000 adults across Asia Pacific, in 2016. From the survey’s 764 respondents who were Filipinos, it was found that the country’s healthy living index was below the regional average, yet Filipinos weren’t taking lasting action to improve their status. Filipinos were some of the most sleep-deprived in their region, with their unhealthy eating habits and almost inactive lifestyles hindering them from confident living. In order to assist Filipinos in their journey toward healthier, longer, and better lives no matter which key moment in life they were in, we shifted the conversation from financial security to Total Wellness. Here we focused on giving them a more holistic solution to secure themselves and their loved ones today while preparing for tomorrow. We underscored total wellness in marketing initiatives of our products, boosted with Philam Vitality, to educate Filipinos on physical, mental, social, and financial wellness. With this holistic approach, we urged Filipinos to have a more secure future in taking care of themselves and their loved ones, thereby addressing not only the need for better financial literacy but also the aspiration for living life to the fullest.

To prepare for the launch internally, we released a new set of Sales Training videos while the Human Resources department of both BPI-Philam and BPI launched the Vitality edition of Humans of BPLAC and Humans of BPI. The pages featured employees who, through their lifestyles, championed total wellness to set an example to the rest of the workforce.

We launched the new suite to the public during our celebration of Bancassurance Month in October 2017.

PRODUCTS13

MARKETING 14

WIN THE MOMENTOur call for Filipinos to start living a healthy life today has expanded into our full-fledged campaign we called “Win The Moment.” We believe that every Filipino, no matter which key stage of life they are in, can certainly seize the success they want, but in order to do so they needed the right partner, tools, and motivation to win. Our Win The Moment campaign was formally launched this year with the vision of helping our customers get the most out of life, helping them become the best versions of themselves through healthy living so they can continue taking care of their loved ones. With this campaign we also released a free, downloadable trial version app of the Philam Vitality Wellness Program called Philam Vitality Active which encouraged users to take steps toward healthy living. Aligned with Philam Life’s #LiveBetter campaign, Win The Moment sought to empower every Filipino to take important steps toward total wellness. The campaign’s marketing backbone consisted of three points: Customer Engagement, Digital marketing, and On-ground and In-branch activation. The campaign also drove home the relevance of winning the moment for Filipinos and push Philam Vitality Active app downloads and sign-ups.

We opened BPI-Philam’s first-ever contest, the Win the Moment Photo Contest with the intention of generating insights from our customers on what “winning the moment” meant for them. This also aimed to create awareness and excitement for the launch of the campaign to the public and compile photos we may use throughout the campaign. The mechanics were simple: entrants must post a photo of their winning moment with a brief description on why it was their winning moment in their Facebook account. They must use the hashtags #winthemoment and #bpiphilam so we can track entries. The photo must also be sent to a designated BPI-Philam email. From the promo’s run period of December 3, 2016 to January 21, 2017 we received a total of 378 entries--more than 7 times our initial expectation of 50 entries.

I. Win the Moment Photo Contest

Following the Win The Moment photo contest, we tapped local RnB musician Quest and powerhouse vocalist KZ Tandingan to collaborate for a song that will capture the very heart of the campaign.

II. Win the Moment Song by Quest and KZ Tandingan

To further promote the Vitality Active app, we utilized OOH Ads strategically placed in key areas around Metro Manila and Cebu with a significant amount of foot traffic: the Paseo De Roxas and Salcedo underpass, and Ayala Triangle lamp post banners in Makati and the Fuente Osmeña Rotunda in Cebu.

III. Out-of-Home (OOH) Advertisements

The culminating activity of the campaign for the year was the Win The Moment Wellness Festival held in June 24. With the purpose of offering total wellness to the general public, we launched the whole-day Wellness Fest in Trinoma, Quezon City where we received an audience of an estimated 500 people. The interactive exhibit included a life-sized boardgame where players were tested on their physical, mental, and financial strength and knowledge. The crowd was treated to Mixxedfit and G-Force dance classes which livened up the afternoon

IV. Win the Moment Wellness Festival

On June 24, the official Win The Moment song was released on various pre-branded and branded platforms: the artists’ social media accounts (Facebook, Instagram, and YouTube); Spotify and Soundcloud; Magic’s radio stations across Cebu, Bohol and Metro Manila; MYX Pinoy; the BPI-Philam YouTube page and Website, and Quest’s concert. We also announced the song’s release through various Public Relations and Media Release articles. To amplify these efforts, we released videos of the pair’s interviews on YouTube which generated a total of 341,000 views as of November 2017. Win The Moment peaked as the third most voted song in Billboard.ph’s Freshest pick for the month of March.

PRODUCTS15

Through our partnership with the Bank of the Philippine Islands (BPI), we continued the dynamic engagement we enjoyed in the Wellness Fest with the public through the BPI Lifestyle Madness events. The three-day weekend trade show was held for all BPI product groups in all Ayala Malls nationwide, effectively boosting the campaign’s reach. From March 3 to July 16, 2017, we partnered with BPI in their trade shows in the following locations: Cebu, Bacolod, Pampanga, Cabanatuan, Batangas, Bulacan, Davao, Tuguegarao, and Bohol which generated 5.5 million pesos in Annualized New Premiums for BPI-Philam. To further push the Vitality Active App downloads, we announced the Vitality Active Raffle promo where we raffled off a Garmin Vivosmart HR, an Apple Watch, and a Trip for two to Hong Kong to three lucky winners. The winners were picked randomly from a pool of people who downloaded the app from April 1 to July 31, 2017. BPI also helped us amplify the reach of our campaign by utilizing their branch TVs and our Vitality Active How-To videos from June to August and displaying Vitality Active Pull up banners, as well as holding In-branch activities like Win The Moment Days and Life Talks. These initiatives helped produce a total of 2,533 app downloads.

V. BPI Customer Engagement

with explosive dancing boot camp-style toning and hip-hop dance lessons. There was also a succession of informative talk sessions on living healthier and better with Gold’s Gym, having a winning mindset with motivational speaker Didoy Lubaton, and winning financial habits with financial adviser Sha Nacino. Local media participated in the event as well, including a Round Table Discussion to share our desire to help Filipinos win in life through healthy living. This simple gathering and media coverage generated over three million pesos in total media values. The Wellness Fest culminated in the main show where we awarded the winners of our Win The Moment Photo contest and delivered a talk on Vitality Active. We ended the event on a literal high-note with the Win the Moment concert by Quest and KZ Tandingan where they performed the campaign’s anthem.

BANCASSURANCE MONTH

Continuing our efforts of owning the month of October to highlight financial literacy and wellness to Filipinos, we celebrated this year’s Bancassurance month with the vision of reiterating the concept of Bancassurance to them. We also reintroduced BPI-Philam as their intuitive and trusted partner in financial planning and future protection.

PRODUCTS 16

DIGITAL MARKETING

This year we amplified our online presence with Digital Marketing campaigns which included owned, paid, and earned media. We further improved on our website by ensuring excellent user experience throughout the platform in terms of navigation and content. We improved and updated informational and product pages to make it easier for clients to determine which policy best suits their needs. With the launch of our Facebook page, we created another avenue to publish our content and effectively reach out to our existing customers and untapped market. Through these digital platforms we emphasized thought leadership by

We held various events to showcase our firm intention of providing every Filipino with accessible and comprehensive insurance some of which we’ve invited our friends from the media.

Highlighting accessibility, we launched our first-in-the-country customer service center, VIBE on October 24 where we received 35 VIPs and 15 media attendees. Our grand launch received significant traction in both print and online media. The following day we got together with our blogger friends and enjoyed a fun game of Praxis at Lugang Café in SM Aura. The media were highly engaged learning about financial planning in an easy and delightful way. Winners were awarded with fun prizes and tickets to Quest’s Winning Moment Concert later that evening. As the concert’s main sponsor, we were able to generate 60 new leads and to facilitate 51 Vitality downloads. We emphasized healthy living to our clients by holding over 106 in-branch Zumba sessions for the entire month with almost 3,000 attendees who were BPI clients. We also bolstered the Vitality campaign and VIP selling by offering Bancassurance merchandise and additional tokens in over 800 BPI branches. Our media events yielded media mileage of almost one million pesos while our in-branch Zumba activities gave us almost twenty million in Annualized New Premiums.

releasing financial and lifestyle-themed articles surrounding financial literacy. Finally, we also bolstered our advertising initiatives to better introduce our consumer base to our products by effectively utilizing Facebook and Google advertisements which suggest products to users based on their preferences.

SEGMENTS

SEGMENTS

PERSONAL BANKING

PRIVATE BANKING

PREFERREDBANKING

OVERSEASFILIPINOS

The year 2017 saw us strengthen our servicing efforts and product offerings for each of our target segments through various initiatives to boost the capacity of our workforce. We also piloted strategic placement of Bancassurance Sales Executives (BSEs) in areas that will afford our clients improved accessibility to quality products and trusted service as we help them live healthier, longer, better lives.

Efforts to better equip BSEs catering to clients in the Personal Banking segment were strong in 2017. Gamified and experiential learning programs and customer engagement activities were launched to the sales force, bank partners, and customers making financial education fun and more effective. BPI-Philam insurance products are now affordable and easy to understand for the younger market as the launch of Life Ready Plus & Vitality-integrated products BPLAC was able to reach the millennials. Furthermore, we introduced them to Philam Vitality which enabled us to serve our customers’ health and wellness needs.

The Private Banking (PB) segment focused on providing products and services specialized for high net worth individual. This follows the team’s concerted efforts of providing customers with elevated customer engagement activities and BPI-Philam’s launch of Vitality-integrated products targeted toward the segment like the Wellness Series’ Critical Care Max and Build Estate Plus. Meanwhile, new products like Premier Benefit Life and Preferred Life Plus are single-pay premiums that offer higher than market coverage of 2x to 4x and 1.6x their single premiums respectively. The Private Banking segment also focused on helping their clients better plan their estate with a professional estate lawyer. The team held Estate Planning Forums for their clients in Metro Manila, conducted by leading estate planning lawyer, Atty. Vicky Hilado to supplement their financial knowledge and planning acumen. With Atty. Hilado’s expertise and fresh insights, clients received practical and choice advice on their estate needs. To ensure sales targets and objectives are met, the segment also welcomed a new Private Banking Sales Head in September focusing on sales and activity management.

The Preferred Banking segment’s thrust was laying the groundwork for a differentiated customer experience. As the relationship and quality of conversation from BPI Relationship Managers (RMs) and BPLAC BSEs make a big part of the customer experience, Preferred Segment put in its efforts to train and develop these front-liners. Certified Risk Planning Program and Registered Financial Planner Program (RFP) were piloted to RMs and BSEs respectively. These training programs were run to sharpen and sophisticate the RMs’ and BSEs’ ability to respond and satisfy their clients’ advanced financial needs.

And with Estate Planning identified as one of the important needs of Preferred Clients, Preferred Life Plus was (PLP) launched in February 2017. The product’s design takes into consideration what Preferred Clients need in estate planning—an inexpensive, and seamless transfer of wealth to their beneficiaries, in case of uncertainties. PLP is a Guaranteed Issue Offer, under certain coverage limits, that simplifies the application process for clients. It also offers one-time payment of a minimum of P5M, for a coverage amount of 160% of the Single Premium. By having PLP, Preferred Clients can have a peace of mind that their wealth reaches their loved ones efficiently and intact.

The growing market share of our partner, BPI, on the overseas market is evident in the significant number of accounts opened for their deposit product specifically designed for Overseas Filipino Workers (OFW). Given the growing number of OFWs and their diversifying needs, the segment realizes the need to keep up with the growing market. To augment the company’s main distribution channel - the deployment of BSEs in BPI branches across the country, we expanded our partnership with BPI’s Overseas Customer Segment (OCS) Sales Team in providing our market, OFWs, with trusted advice for financial services such as insurance.

In the fourth quarter of 2017, we launched a pilot program for OFWs by deploying BSEs to the key areas of Manila. The outcome showed that there is a market for insurance products in this segment. Therefore, plans to deploy more BSEs in 2018 have been laid.

SEGMENTS 18

CUSTOMER`EXPERIENCE

CUSTOMER EXPERIENCE 20

CUSTOMER EXPERIENCE

Alongside the improvements in our operations, we also employed ways of enriching our customers’ experience with institutionalized engagement programs and convenient service platforms. Over 75, 000 of BPI-Philam’s existing customers were registered on ePlan, our online customer portal where information on policy can be accessed with ease. The portal also makes it easy for customers to create simple transactions such as updating of contact information, reinstatement, and redemptions of up to P 30, 000 at the convenience of their smartphones and mobile device. As part of their onboarding journey with BPI-Philam, over 80% of new customers were contacted for the Welcome Call program. The features and benefits of the recently purchased policy is reaffirmed, with emphasis on the value of life insurance protection and assurance that the policy is a fit in view of their needs. Meanwhile, as a way of continuously engaging with and providing proactive service to our growing customer base, half of BPI-Philam’s customers, including Ayala Life policy holders were greeted on their policy anniversary through the Anniversary Call program. Also in 2017, BPI-Philam paid over P5.8 billion in benefits to customers whose policies had reached full term or maturity. Overall, last year we focused on enhancing our customers’ journey from purchase to claims. By remaining anticipative of our customers’ need for convenience and earnest service, BPI-Philam stands firmly on our conviction to do good to our customers and be a company that is easy to do business with.

OPERATIONS

OPERATIONS 22

OPERATIONS

On our mission to provide Filipinos with easily accessible, comprehensive insurance, we embraced technology and innovation on our servicing efforts for our growing customer base.

We provided our clients choice of service touchpoints that made after-sales requirements processes easy: from policy amendments, fund amendments, partial and full redemptions, and release of policy benefits to claims.ePlan, our mobile, online-based customer portal has allowed our clients to easily and immediately view their policy values or selected requests. 10% of customers is already enrolled in ePlan and now enjoy our services anywhere. From there, we are planning to expand the range of services we offer on the platform to adapt to the change mobility is introducing to ouryounger market.

We’ve also updated the distribution portal used by our Bancassurance Sales Executives (BSEs) in-branch. Now it includes the status of the policy after the sale and payment transactions to give our BSEs better visibility of the progress of policies inputted and inform their clients on updates.

During our Bancassurance month celebration we launched Vibe, our first-in-the-country Customer Service Center. Manned by trained and knowledgeable staff, clients can visit the service center and receive expert financial advice, find resolutions to challenges they might have, and after sales servicing needs. The fast, easy, and reliable service we offer in Vibe supplements our other servicing personnel and platforms: ePlan, our BSEs, and the Customer Care Hotline.

In enhancing our payment facilities, our customers can now pay premiums seamlessly using their EMV-enabled debit and credit cards. They can also enroll their subsequent premiums electronically via Automatic Debit Arrangement when they apply for insurance.

SALESFORCE

SALESFORCE 24

SALESFORCE

BPI-Philam values our people as our company’s success lies in their excellence and heart to serve. Our salesforce has continually contributed to our wins and in 2017 we sustained and initiated events to empower and recognize our sales team while providing them with valuable learning experiences outside of the country.

To inaugurate the new fiscal year and Ignite the Light within our team, we held the 2017 Sales Kick Off at the World Trade Center. Setting off to Win The Moment in the coming months, we remembered what we value most as a company--the welfare and protection of all Filipinos--and set the agenda to further what we have accomplished the year before. We also treated the salesforce to an evening of good food and entertainment as we celebrated how their grit and passion made us the largest Bancassurance company in the Philippines.

Following that we recognized the top performers from our in-branch sales team as well as our bank partners in the 2016 Annual Awards. Held at Shangri-La Makati with the theme “Illuminate: The Way to Win” we celebrated our people whose excellence and positive workplace attitude shone brightly as an inspiration to everyone within the company.Afterwards, we held the Win with Vitality Wellness Fest across 51 BPI and BPI Family savings Bank (BFB) areas. Here we launched and cascaded Vitality Integrated Products, the Vitality Active app, the full Vitality program, and BPI Cares--BPI’s Vitality program for employees--to our officers and staff of BPI and BFB. During the entire run, we also facilitated team-building sessions for our bank partners to strengthen their bond and resolve to equip every Filipino with solutions that will help them experience Total Wellness.

Finally, qualifiers from both BPI and BPI-Philam had the privilege of receiving fresh industry insight and valuable lessons when we sent them off to the annual Sales Learning Convention abroad. 128 delegates were sent to Auckland, New Zealand, while 103 delegates were sent to Cape Town, South Africa. While gaining knowledge was the primary goal of the trips, qualifiers also got to enjoy premium housing, local delicacies and dishes in the best restaurants, cultural and heritage tours, as well as visits to famous landmarks of the two countries.

By the end of 2017, the size of our salesforce is now at 935 people from 800 in 2016, all of whom are constantly being equipped and set up for servicing excellence.

We believe our heart for the Filipino people is translated through the work and attitude of our salesforce. By building in them the right mindset through trainings and learning opportunities, and molding in them the right heart we provide our customers service that is excellent, unparalleled, and most importantly, genuine.

OURPEOPLE

OUR PEOPLE 26

OUR PEOPLE

EMPLOYEEENGAGEMENT

In our company’s pursuit of effectively extending Total Wellness to all Filipinos, we have trained and built up a team of excellent individuals possessing the grit and passion to do good and do well. We believe that to genuinely reach out to Filipinos, helping them improve their physical and financial health, our people must be at the forefront of this experience. Extending to our own employees the opportunity to live healthier, longer, and better lives through both physical and financial health, we allow them to live out for themselves a life of Total Wellness starting at the workplace. Our desire is for our people to embrace and embody the vision of BPI-Philam for Filipinos all over the country. To do this, BPI-Philam employees go through training and engagement activities in the workplace, eventually inspiring them to be agents of change for Filipinos, one bettered life at a time.

According to global performance management consulting company, Gallup Inc., an engaged employee is involved in, enthusiastic of, and committed to his or her work. In their Database Percentile Rank, the industry benchmark for engagement is 75th percentile rank and up. Getting our people genuinely involved, enthusiastic of, and committed to their work is the primary goal of our engagement efforts. To gauge the effectivity of these engagements, we’ve partnered with Gallup Inc. in 2011 to measure the engagement levels of our employees. The objective of engaging our people was to ultimately satisfy their needs through the organization and its leaders utilizing a three-pronged approach:

1. Strongly focus on helping each employee understand the impact of the work that is expected of them,2. Identify the materials and resources they can utilize to deliver their tasks, and 3. Provide them with opportunities of growth within the organization.

With the commitment to understand the needs of their team members and support activities anchored toward promoting collaboration, our leaders have empowered employees to work passionately. Through this management style, employees had a deeper understanding of the impact their work had to the organization and encouraged them to innovate to achieve better outcomes. This also helped employees feel a profound connection with the company, lessening managerial concerns over absenteeism.

In effect, productivity increased by 17% because employees were performing at consistently high levels, shooting up our sales as our people committed themselves to increasing customer metrics. In March of 2017, we launched the “Let’s Get Active” program. The aim was to promote healthy living and lifestyles to our employees through organized fitness programs every week. We made sure that every company event and activity had a Vitality component so employees are not only reminded but are also empowered to live healthier, longer and better. Basketball was scheduled on Mondays, Zumba and Dance classes on Tuesdays, Badminton on Wednesdays, and Running on Thursdays. To make living a healthy and active lifestyle easier for our employees we provided them with resources and materials such as instructors and court venues free of charge making it easier for employees TO be active. Our goal of having 60% of our employees engaged in the workplace by 2018 was set initially in 2014, and with these methods we’ve already reached the target in 2017, a year earlier than expected. It yielded us a 77th percentile rank--higher than the industry standard--making BPI-Philam an ideal place for employee engagement and helping us close the year with a 987 BSE headcount. As we continually strive to genuinely connect with Filipinos in addressing their top health and financial concerns, we change our perspective and understand first what it means to have holistic wellness. With our internal efforts, we ignite the passion of our people through engagements that not only make sure we bring out the best in them and their work but also help them become the best versions of themselvesthus far.

VITALITY

VITALITY 28

VITALITYIn 2017 we shifted the conversation to wellness after the Philippines scored low on the AIA Healthy Living Index with Filipinos being one of the most unhealthy, sleep-deprived people in the region. This was also our way of addressing the concerning fact that plenty of Filipinos were either underinsured due to insurance affordability or completely uninsured due to lack of financial literacy. We decided to introduce Philam Vitality to our customer base through products and other offerings we launched in 2017, gearing ourselves up to help Filipinos live healthier so they could get more out of life while being protected from life’s greatest risks. To do this, we partnered with our affiliate, the Bank of the Philippine Islands (BPI) the top local banking entity in terms of profitability, market capitalization, and assets. They have a broad national presence through their many BPI and BPI Family Savings bank branches, a dense customer base of eight million clients with a staff of ten thousand in-branch and those in the Head Office. We also made available to all Filipinos a free app called Philam Vitality Active to provide them with a condensed experience of the full program to give them an idea of its benefits and encourage enrollment. The mobile application gave people rewards for achieving simple fitness goals. Locally, BPI is the only bank to focus heavily on health and wellness while BPI-Philam is the sole bancassurance provider of a program for wellness--Philam Vitality.

IMPLEMENTATION AND ENGAGEMENT FOR EMPLOYEES

VITALITY FOR OURCUSTOMERS

In effectively implementing Vitality, we employed a strategic framework with four pre-requisites:

1. BPLAC staff Vitality activation2. Sales Supervisors and BSE activation3. Clear value proposition link between Vitality Active, BPI CARES, and the full Vitality program, and4. Clear migration for customers from Vitality Active to the full Vitality program.

Training, program roll-out, and employee buy-in laid the foundation for these.

In the head office, we included the Philam Vitality program in monthly town halls called “Umagang Kay Sarap” and year-round engagement activities like the “Let’s Get Active” weekly health and wellness activities we arrange for our employees free of charge. We also made Garmin wearable devices an integral part of our staff’s uniform. In BPI, we helped launch BPI CARES in August which provides BPI employees with free membership to the Philam Vitality program. We also cascaded the program to bank employees through a nation-wide Wellness Fest which yielded 9, 443 Vitality Membership sign-ups.

Meanwhile for our customers, aside from offering them the free Philam Vitality Active app, we also launched a suite of products integrated with the full Philam Vitality program called the Wellness Series during last year’s bancassurance month. Four of our previously released products are included in the suite to provide comprehensive insurance products to each of our segments: Life Ready Plus, Critical Care Plus, Critical Care Max, and Build Life Plus. In terms of performance, the Wellness Series contributed at least 20% of ANP and VoNB on its first full month in October and was able to hit 88% of its P 228 Million ANP target in a span of 3.5 months. To continue on this massive growth, we plan to improve the mix of Vitality Integrated Products through implementation of Vitality Remedial Classes starting February of 2018.

Following these up we intend to host regular employee engagement programs to push for 100% head office engagement. For our sales team, we will introduce the Vitality Scorecard, allot an additional allowance for in-branch activation and implement BSE remedial courses as refreshers for to program. Then for the bank staff we plan on increasing their engagement rate through activities and referral incentives.

BPI-PHILAM

Partnership Beyond Bancassurance : Corporate Social Responsibility

Philamlife and BPI continue their partnership beyond bancassurance to include corporate social responsibility initiatives. BPI Foundation and Philam Foundation built 16 new fully-furbished classrooms in 2017 under the program Philam Paaralan, which builds in calamity hit and underserved areas in the country. This project was made possible with BPI-Philam’s commitment to allocate a portion of its income for CSR annually. This annual donation to Philam Foundation help fund programs that focus on health, education and financial well-being namely the Philam Savings Awareness and Values Education Sessions (Philam SAVES) and Alliance for the Philippines’ Health and Advocacy (ALPHA Initiative).

Philam SAVES provides financial literacy sessions to Grade 4 to Grade 5 students, community, teachers and parents. It ended the year with 2,514 Grades 4 and 5 students, and 919 parents and teachers educated on the importance of saving. Through this program, 180 financial advisors were engaged, with a total of 540 volunteer hours logged in.

Its health initiative, Alliance for the Philippines Health and Advocacy (ALPHA) in partnership with Philippine College of Surgeons and Philippine College of Physicians, rounded out the year with a memorandum of agreement signing to formalize the program’s launch. Its first initiative, ALPHA 1.0, supports the web-based cancer registry program of CARE Philippines to collect and analyze data from Filipinos diagnosed with cancer from various public and private hospitals nationwide.

BPI-Philam through Philam Foundation will continue to work towards making better lives possible among our countrymen through its programs that make each Filipino “Healthy, Wealthy, and Wise”.

VITALITY 30

CAPITAL STRUCTURE31

CAPITAL STRUCTURE

Authorized Capital Structure

Par Value

Subscribed & Paid-Up Capital Stock

Treasury Share

P1Billion

P1.00 per share

P749,993,979.00

P6,000.00

LIST OF STOCKHOLDERS 32

LIST OF STOCKHOLDERS

NAME

THE PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE (Philam Life) COMPANY

Darren ThomsonNon-Executive DirectorVice-Chairman

Surendra MenonExecutive DirectorChief Executive Officer

BANK OF THE PHILIPPINEISLANDS (BPI)

Aurelio Luis R. Montinola IIINon-Executive DirectorChairman

Simon R. PaternoNon-Executive Director

Romeo L. BernardoIndependent Director

Joseph Albert L. GotuacoNon-Executive Director

Cezar P. ConsingNon-Executive Director

OTHERS (Minority Stockholders)

TOTAL

Ariel G. CantosNon-Executive Director

Ryan Robert QuinnNon-Executive Director

Andreas RosenthalExecutive Director

Jesus P. TambuntingIndependent Director

SHARES HELD

382,496,925

1

1

357,554,232

100

100

100

100

100

9,942,317

749,993,979

1

1

1

1

CLASS

Common

Common

Common

Common

Common

Common

Common

Common

Common

Common

Common

Common

Common

Common

AMOUNT PAID (PHP)

382,496,925.00

1.00

1.00

357,554,232.00

100.00

100.00

100.00

100.00

100.00

9,942,317.00

749,993,979.00

1.00

1.00

1.00

1.00

% OF OWNERSHIP

51.00%

47.67%

1.33%

NATIONALITY

Hong Kong SAR

British

Singaporean

Filipino

Filipino

Filipino

Filipino

Filipino

Filipino

Filipino

Filipino

American

German

Filipino

BENEFICIARYOWNERSHIP

Philam Life

Philam Life

BPI

BPI

BPI

BPI

BPI

Philam Life

Philam Life

Philam Life

Philam Life

DATE OF OWNERSHIP

08 July 2014

22 January 2016

25 April 2000

15 April 2015

24 April 2006

21 April 2017

03 April 2014

01 July 2013

18 April 2016

18 July 2016

27 November 2009

BOARD OFDIRECTORS

BOARD OF DIRECTORS 34

BOARD OF DIRECTORS

AURELIO LUIS R. MONTINOLA III DARREN THOMSON66 Years OldNon-Executive DirectorChairman of the Board

55 Years OldNon-Executive DirectorVice-Chairman

Aurelio R. Montinola III, 66, Filipino, is a Director of Bank of the Philippine Islands (BPI). His other affiliations, among others include, Chairman, Far Eastern University; Chairman, Kabang Kalikasan ng Pilipinas Foundation Inc.; Vice Chairman, Philippine Business for Education; Director, BPI/MS Insurance Corporation; Trustee, Makati Business Club; and Member, Management Association of the Philippines. He graduated with BS Management Engineering at Ateneo de Manila University in 1973. He received his MBA at Harvard Business School in 1977.

His past affiliations include being President of Bank of the Philippine Islands for 8 years, President of the Bankers Association of the Philippines for 4 years, President of the Alliance Francaise de Manille for 7 years, and Trustee of the International School of Manila for 4 years.

Mr. Darren Thomson was appointed to AIA Thailand, as Chief Strategic Bancassurance Alliance officer with effect from February 1st, 2018. He is also a member of AIA Thailand Executive Committee. With countless years of experiences in the financial services industry, he will be able to contribute to the success of the new Bancassurance Partnership with one of the most respectable and successful banks in Thailand, Bangkok Bank. Within this new role, he will be working closely with the senior management of Bangkok Bank in formulating and executing the short to long term strategic plans to support the growth, profitability, and operational success within the framework of the partnership agreement.

Mr. Thomson was formerly a director of Partnership Development in the Strategy & Corporate Development Department of AIA Group Office and before that CEO Group Partnership Distribution AIA Group Office. There, he implemented and built a strong and successful partnership with Citi Bank in 11 regional countries as well as with many local bank partners. Within the Group Office roles, he ensures that AIA, is the most preferred partner in Asia for leading banks, IFA’s & HNW, and affinity groups, while providing best- in- class bancassurance and partnership capabilities. Darren joined AIA Group Office in May 2014 as the Regional Head of Business Development & Special Projects. Prior to joining the AIA, he held several senior positions in the financial services industry in the United Kingdom and Asia such as the Regional Head of Strategic Channel Development at Manulife Financial In Hong Kong; President and CEO at Manulife (Singapore) Pte., Ltd; Chief Partnership Distribution Officer at Prudential Assurance Company in Hong Kong; and Regional Manager at Prudential Assurance Company, UK.

BOARD OF DIRECTORS35

BOARD OF DIRECTORS

SURENDRA MENON ARIEL G. CANTOS59 Years OldExecutive DirectorChief Executive Officer

57 Years OldNon-Executive Director

Surendra Menon is the Chief Executive Officer of BPI-Philam Life Assurance Corporation. Prior to his appointment, Mr. Menon held the role of Regional Director for Bancassurance of the AIA Group. As a catalyst in the Bancassurance industry, he has built and developed various profitable businesses in Asia including Indonesia, Singapore, and the Philippines. He joined AIA in 2003 and was responsible for acquisition of 10 partnerships in Indonesia including BCA, CIMB, ANZ and was the Deputy CEO and CDO. He then became the subject matter expert for the AIA Group in Bancassurance for 2013 to 2015. Helping many countries in Asia with 2014 & 2015 final on BPI-Philam in Philippines. As the current CEO, he steers the management of BPI-Philam to transform the business into one of the leading life insurance companies in Philippines. Mr. Menon has actuarial, financial planning and investment management qualifications from UK, Singapore and Indonesia, respectively. Prior to joining AIA, he worked in DBS Bank in Singapore, BDNI Life in Indonesia, and the Insurance Corporation of Singapore (now known as Aviva in Singapore). He was also a director of GT Asset Management in forming the first mutual fund in Indonesia and, was a police inspector in the Singapore Police Force and Captain in the 1st Rescue Battalion Singapore Civil Defense as part of his national service duty.

Aibee Cantos is the CEO of Philam Life. Prior to his appointment, he held the role of CEO of BPI-Philam, the bancassurance joint venture of Philam Life and the Bank of the Philippine Islands, and the leading bancassurance operation in the Philippines. He is also a member of the Board of Directors of various Philam companies and sits as a Chairman of Philam Foundation.

His most recent position at Philam Life was Senior Vice President and Chief Agency Officer, before spearheading the growth of BPI-Philam in 2013. He joined Philam Life right after completing his Bachelor’s Degree in Economics, Honors Program, from the Ateneo de Manila University and had an enriching and successful career in Philam Life’s Agency Distribution Channel, where he served for close to 30 years. He held various positions within the channel such as Profit Center Head of Accident & Health Products, Director of Manila Agencies, and Director of Provincial Agencies.

Mr. Cantos is also currently a corporate member of Philippine Life Insurance Association Inc. (PLIA), Management Association of the Philippines (MAP) and Makati Business Club (MBC).


BOARD OF DIRECTORS

CEZAR P. CONSING58 years oldNon-Executive Director

Cezar P. Consing, 58 years old, has been since 2013 President and Chief Executive Officer of Bank of the Philippine Islands (BPI), and a Senior

Managing Director of Ayala Corporation, BPI’s controlling shareholder. He has served on BPI’s board of directors for 16 years (1995 - 2000,

2004 - 2007, 2010 - present), 5 years representing J.P. Morgan & Co., then BPI’s second largest shareholder, and 3 years as an independent

director. Mr. Consing serves as chairman of BPI’s thrift bank, investment bank, UK bank, property and casualty insurance, leasing, and rental

subsidiaries, and vice chairman of its foundation; and is also a board director of BPI’s life insurance, asset management and micro finance

subsidiaries. Mr. Consing is a member of BPI’s executive committee, and is chairman of its credit and management committees.

Mr. Consing serves as Chairman of the publicly listed National Reinsurance Corporation, President and board director of Bancnet, Inc., and

board director of LGU Guarantee Corporation, three industry consortium institutions where BPI is a minority shareholder.

Outside his association with BPI, Mr. Consing serves on the boards of four private companies: The Rohatyn Group, Sqreem Technologies,

FILGIFTS.com and Endeavor Philippines. He has also served as an independent board director of three public companies: Jollibee Foods

Corporation (2010 - present), CIMB Group Holdings (2006 - 2013) and First Gen Corporation (2005 - 2013). He is also a board director of the

US-Philippines Society and a trustee of the Manila Golf Club Foundation. Mr. Consing has been a member of the Trilateral Commission since

2014.

Mr. Consing first worked for BPI, in corporate planning and corporate banking, from 1980 - 1985. He worked for J.P. Morgan & Co., based in

Hong Kong and Singapore, from 1985 - 2004, rising to co-head or head the firm’s investment banking business in Asia Pacific from 1997 - 2004,

the last five years as President of J.P. Morgan Securities (Asia Pacific) Ltd. As a senior Managing Director of J.P. Morgan, Mr. Consing was a

member of the firm’s global investment banking management committee and its Asia Pacific management committee.

Mr. Consing was a partner at The Rohatyn Group from 2004 - 2013, headed its Hong Kong office and its private investing business in Asia, and

was a board director of its real estate, and energy and infrastructure private equity investing subsidiaries.

Mr. Consing received an A.B. Economics degree (Accelerated Program), magna cum laude, from De La Salle University, Manila, in 1979. At

university, he was a member of the student council, the student newspaper and the varsity track and field team. In recent years, he has

served on the advisory committees of the university and its school of economics. Mr. Consing obtained an M.A. in Applied Economics from the

University of Michigan, Ann Arbor, in 1980.


BOARD OF DIRECTORS

ROMEO L. BERNARDO SIMON R. PATERNO

63 Years OldIndependent Director

59 years oldNon-Executive Director

Romeo L. Bernardo, 63, Filipino, is the Managing Director of Lazaro

Bernardo Tiu and Associates (LBT), a financial advisory firm based in

Manila. He is also a GlobalSource economist in the Philippines. He is

Chairman of ALFM Family of Funds and Philippine Stock Index Fund.

He is likewise a director of several companies and organizations

including Aboitiz Power, BPI, Globe Telecom Inc., RFM Corporation,

Philippine Investment Management (PHINMA), Inc., National

Reinsurance Corporation of the Philippines (NRCP) and Institute

for Development and Econometric Analysis. He is a member of the

Philippine World Bank Advisory Group and a member of the Panel of

Conciliators of the International Centre for Settlement of Investment

Disputes. He previously served as Undersecretary of Finance and

as Alternate Executive Director of the Asian Development Bank. He

was an Advisor of the World Bank and the IMF (Washington D.C.).

Mr. Bernardo holds a degree in Bachelor of Science in Business

Economics from the University of the Philippines (magna cum

laude) and a Masters Degree in Development Economics at Williams

College from Williams College in Williamstown, Massachusetts.

Simon R. Paterno is the Executive Vice President of the Bank of the Philippine Islands (BPI) and heads the Financial Products and Alternative Channels Group of the Bank. He is responsible for managing the product businesses of the Bank, including Investment Banking, Corporate Loans, Transaction Banking, Retail Lending, Cards and Payments, Asset Management and Trust, Electronic Channels, and Deposits. He also oversees subsidiaries and affiliates in insurance, leasing, and merchant acquiring. He is a member of the Management Committee of BPI.

Mr. Paterno is the former President and CEO of the Development Bank of the Philippines, serving from 2002-2004. He worked for 18 years at the New York, Hong Kong, and Manila offices of J.P. Morgan, serving finally as Managing Director in charge of sovereign clients during the Asian Financial Crisis of 1997-98, and as Country Manager for the Philippines until 2002.

He also worked for 8 years at Credit Suisse as Managing Director and Country Manager for the Philippines.

Mr. Paterno obtained his MBA from Stanford University in 1984. He was awarded his A.B., cum laude, Honours Program in Economics from Ateneo de Manila University in 1980. In 2005, he was elected President of the Management Association of the Philippines. He serves on the boards of the Foundation for Economic Freedom and Ateneo Scholarship Foundation. He was named a TOYM awardee for Investment Banking in 1999.

JESUS P. TAMBUNTING, OBE80 years oldIndependent Director

Ambassador Tambunting is Chairman of Capital Shares Investment Corporation, an investment and management company. He was Chairman

of Planters Development Bank, the Philippines’s leading bank for promoting and growing SMEs, which he founded in 1971. From 1993 to1998,

he served as the Philippines’ Ambassador to the United Kingdom of Great Britain and Northern Ireland and concurrently, to the Republic of

Ireland. In 2016, he was appointed by President Benigno Aquino III as Chairman of the Small Business Corporation.

In 2017, Her Majesty Queen Elizabeth II awarded Ambassador Jesus P. Tambunting the recognition as an Officer of the Order of the British

Empire. He was conferred Master Entrepreneur and Entrepreneur of the Year 2009 by the British firm Ernst & Young and the SGV Foundation,

and inducted into the World Entrepreneur Academy in Monaco in June 2010. He also received the International Alumnus Award from the

University of Maryland in April 2011, the first Ramon V. del Rosario Sr. Award in Nation Building in 2010, the Distinguished Person of the Year

2009 from the Association of Development Financing Institutions in Asia and the Pacific, the Management Man of the Year 2003 from the

Management Association of the Philippines, the Lifetime Achievement Award for 2005 from the Asian Bankers Association, the Distinguished

Service Award from the Department of Foreign Affairs and “Knight Commander with Star” in 2008 and “Knight Grand Cross” in 2016 from the

Equestrian Order of the Holy Sepulchre of Jerusalem.

Other roles include being Co-chairman of the Philippine-British Business Council, member of the Board of Trustees of the Carlos P. Romulo

Foundation, Philippine Business for Education, PinoyMe Foundation, ABS-CBN Bayan Foundation, Makati Medical Center Foundation, and

Caritas Manila. He is a member of the Makati Business Club National Issues Committee. From 2004 until May 2008, he served as

Chairman of the Association of Development Financing Institutions in Asia and the Pacific, a regional organization of 127 development banks and

institutions in 44 countries. He was elected to the Board of Directors of BPI-Philam Life Assurance Inc. in 2009.

The Ambassador earned his Bachelor of Science degree in Economics from the University of Maryland. Prior to that, he had obtained his

secondary education from the Culver Military Academy in Indiana and his elementary education from the Ateneo de Manila University.


BOARD OF DIRECTORS


RYAN ROBERT QUINN JOSEPH ALBERT L. GOTUACO

46 Years OldNon-Executive Director

52 years oldNon-Executive Director

Ryan Robert Quinn was recently appointed as Regional Head of Partnership Distribution for Australia, New Zealand, Vietnam and Philippines. He is responsible for working with our local heads of partnership distribution and working with them to execute their business strategies. He also has responsibility for HNW, IFA/Brokerage across the AIA group.

From 2012-2015 he was Chief Distribution officer of the Korean AIA business. As CDO, he was responsible to drive the face to face distribution strategy focusing on building the distribution platform to become the pre-eminent multi national life insurance provider in Korea. He held responsibility for Korea’s Bancassurance, Agency, Brokerage and Corporate Solutions business lines.

Prior to his appointment to Korea, Mr. Quinn was AIA’s Regional Chief Agency officer, covering Korea, Philippines, Hong Kong, New Zealand and Australia. He was tasked with developing and driving the Premier Agency strategy along with supporting the brokerage business in New Zealand and Australia.

Mr. Quinn has over 22 years’ experience in financial services. He was a financial consultant in the US from 1994-2001, he moved to AIG in 2001 to head up AIG’s Southern California bank and brokerage distribution with AIG, this division was the number one bank/brokerage distributor in the US for 10 years in a row (1993-2003).

Mr. Quinn moved to Hong Kong in 2003 joining AIA and has held several roles during his tenure including Regional Head of AIA’s Retirement Services Division SEA, IFA Brokerage, HNW and also Head of Bancassurance.

Filipino, 52 years old, Mr. Gotuaco is Head of BPI’s Retail Banking Group and is responsible for the Bank’s retail customer relationships, and its branch and retail sales network. Mr. Gotuaco also serves as Chairman of the Board of BPI Direct BanKO, the Bank’s microfinance arm. He is a member of the Board of Directors of BPI Family Savings Bank and BPI International Finance Ltd., a Hong Kong-based subsidiary serving high net worth clients. Mr. Gotuaco is a member of the Bank’s Management, Asset & Liability, IT Steering, and Operating & IT Risk Management Committees. Mr. Gotuaco served as CFO of BPI between 2013 and 2017.

Mr. Gotuaco began his banking career in New York in 1986, as a trader and risk manager for fixed income products at Chemical Bank, a predecessor firm of J.P. Morgan. In 1994, he was based in Hong Kong for J.P. Morgan, then a major shareholder of BPI, where he was responsible for arranging financings for corporate and sovereign clients in the Philippines and in Southeast Asia. In 2002, Mr. Gotuaco worked at Credit Suisse; in 2005, he worked Merrill Lynch and served on the firm’s Asia-Pacific Operating Committee. At both Credit Suisse and Merrill Lynch, he was responsible for developing and marketing fixed income financings and risk management solutions for sovereign, financial institution, and corporate clients across non-Japan Asia. Immediately prior to joining BPI in 2013, Mr. Gotuaco worked in a Singapore-based investment company, where he helped the Brunei government manage portfolio investments, and founded a captive finance company targeting U.S.-based retail and SME clients in the aviation sector. Mr. Gotuaco obtained his B.S. Economics in Finance and Marketing, summa cum laude, from the Wharton School, University of Pennsylvania, in 1986. He obtained his MBA from Harvard Business School in 1994. Mr. Gotuaco also serves as a non-executive board member of AirFleet Capital, Inc., a U.S.-based originator of retail and corporate loans for general aviation aircraft.

BOARD OF DIRECTORS

BOARD SUPPORT

CARLA J. DOMINGOCorporate Secretary

Atty. Domingo is currently the Chief Legal Officer & Corporate Secretary of The Philippine American Life and General Insurance (Philam Life)

Company. She also serves as the Corporate Secretary of BPI-Philam Life Assurance (BPLAC) Corporation (formerly Ayala Life).

She was the Deputy Company Secretary of AIA Group Limited from February 9, 2014 to February 6, 2015. She was also Corporate

Secretary of various Philam companies from 2008 to January 2014, to wit: Philam Equitable Life Assurance Company; Philam Properties Group of

Companies; Philam Asset Management Inc.; Philam Call Center Services, Inc.; the Tower Club, Inc. and Philam Foundation, Inc.

Atty. Domingo is a member of the Integrated Bar of the Philippines, and a Fellow of the Institute of Corporate Directors. Atty. Domingo is a

graduate of the University of the East, with a Bachelor of Arts degree major in Political Science, where she graduated Magna Cum Laude. She

took her Bachelor of Laws degree in San Beda, College of Law.

BOARD SUPPORT 40

CORPORATE GOVERNANCE

CORPORATE GOVERNANCE

ROLE AND RESPONSIBILITIES OF THE BOARD

BOARD INDEPENDENCE BOARD PROCESS

BPI-Philam confirms its full compliance with the Code of Corporate Governance. Its commitment to the highest standards of

corporate governance is rooted in the belief that culture of integrity and transparency is essential to the consistent

achievement of its common goals. Creating a sustainable culture, where trust and accountability are vital as skill and wisdom,

steers us towards achieving long-term value for shareholders and clients, and strengthens our confidence in the institution.

The Board of Directors exercises all the powers of the corporation; all business conducted and all properties of the corporation

are controlled and held by them. The Board is completely independent from management and major stockholders.

The Board is accountable to the shareholders and as such it shall ensure the highest standard of governance in running the

Company’s business and setting the strategic directions. The detailed role and responsibilities are set forth in the By Laws and

the Manual of Corporate Governance.

For 2017, The Board of Directors, through its Board Risk and Audit Committees, has conducted a regular review of the Company’s

material controls (including operational, financial and compliance controls) and risk management systems. The Board Risk

Committee, the Audit Committee and the Board of Directors have declared their satisfaction and confidence on the Company’s

internal controls and risk management systems.

Each of the independent directors meets the guidelines

set in the Manual of Corporate Governance. None of the

independent directors has any business or significant

financial interest in the Company or any of its subsidiaries.

They, therefore, continue to be considered independent.

The Board meetings are on a quarterly basis unless a special

meeting is necessary to consider urgent matters. Minutes of

meetings of the Board and all Committees are kept by the

Corporate Secretary.

Said minutes are open for inspection by the Board and

Stockholders upon request. Board materials are sent to the

members at least five (5) business days in advance of the

scheduled board meetings.

In addition to the regular meetings, the directors also engage

in informal meetings on a quarterly basis to further discuss

issues and strategies. Non-executive directors also find time

to meet separately to discuss the business affairs of the

Corporation. Independent Directors likewise, regularly meet

with management, the internal auditors and the external

auditors, separately, to ensure proper check and balance is

achieved by the Corporation.

CORPORATE GOVERNANCE 42

ELECTION OF DIRECTORS

PERFORMANCE EVALUATION

ORIENTATION PROGRAM AND TRAINING

The Company uses a transparent procedure for the election of

directors. The Nomination and Governance Committee looks

into the qualifications of directors and thereafter the Board

deliberates on the recommendation of the Committee. At the

stockholders’ meeting, the shareholders are duly informed by

the Corporate Secretary of the qualified nominees and of the

voting method and vote counting system. Each stockholder

with voting privilege shall be entitled to cumulate his/

her vote in the manner provided by law. After the election

process, the Corporate Secretary shall count the votes and

thereafter declare the duly elected members of the Board.

The Company has established its own performance evaluation, the criteria of which are based on the Insurance Commission’s

Circular on Corporate Governance. Every April of each year, the Board, as well as the Committees, conducts annual

self-assessment of its performance, the results of which are submitted to the Nomination and Governance Committee and to the

Board of Directors.

In the Annual Board Performance Evaluation Survey, the Board members are required to rate the performance of the Chairman,

the CEO, the Board, and the Board Committees based on the standards and criteria provided therein. Among the criteria set

include but not limited to the following: the appropriateness of the Board’s composition; the director’s skills, expertise, and their

participation and contribution in the Board and Committee discussions; the working relationship among the Board, the Chairman,

and the senior management; the overall performance of the Chairman, the CEO, the Board and the various Board Committees. In

the Survey, the Board members are required to give the subject either an ‘excellent’; consistently good’; ‘adequate’; or ‘needs major

improvement’ rating. The directors are also required to provide other ideas and suggestions on how they could further improve

the performance of the Board. After accomplishing the survey, the directors will submit the same to the Corporate Secretary,

who will then consolidate and evaluate the answers and submit the results to the Nomination and Governance Committee for its

approval. The results will then be reported to the Board for its notation.

For 2017, the Annual Board Performance Evaluation Survey was participated by the members of the Board, where the Board

registered an overall rating of “excellent”. The result clearly exemplifies the effectiveness and competence of the Company’s

Board of Directors. It also shows that it clearly understands the Company’s objectives, as well as the major roles it plays to the

Company, its shareholders and stakeholders.

The Corporate Secretary provides the orientation for new

directors to explain the organizational profile, charters, by

laws, policies and procedures in the company. A corporate

governance seminar is also arranged for each director to

ensure adherence to best practices on corporate governance.

The Board members are likewise encouraged to attend

trainings and seminars to further develop and improve their

skills, knowledge and experience necessary in the effective

performance of their functions as members of the Board.

CORPORATE GOVERNANCE43

RETIREMENT BENEFIT

DIVIDEND POLICY

BPI-Philam sought the services of Mercer to provide a formal

retirement plan for the employees. We adapted the Defined

Contribution (DC) Retirement Plan wherein the employer,

employee or both make contributions on a regular basis.

Monthly contributions are pooled and invested by an assigned

fund manager which means that future benefits fluctuate

on the basis of investment earnings. During the launch in

2014, employees were given an option to elect the new DC

Retirement Plan or remain under statutory minimum normal

retirement benefits. The board of directors elected BPI Asset

Management and Trust Corporation (BPI AMTC) as fund

manager while Zalamea administrates the individual ledgers

of each employee. All employees are provided an online

It is the policy of BPI-Philam to adopt and comply with the provision of the Insurance Code (RA 10607) that states that no

domestic insurance corporation shall declare or distribute any dividend on its outstanding stocks unless it has met the minimum

paid-up capital and net worth requirements under the Code and except from profits attested in a sworn statement to the

Commissioner by the President or Treasurer of the Company to be remaining on hand after retaining unimpaired the entire

paid-up capital stock, the solvency requirements, the legal reserve fund required by the Code, the sum sufficient to pay all net

losses reported, or in the course of settlement, and all liabilities for expenses and taxes. Any dividend declared or distributed by

our Company shall be reported to the Commissioner within thirty (30) days after such declaration or distribution.

As provided in our Company’s By-Laws, Article VIII, Section 1, of the net profits resulting from the annual balance, there shall

be first segregated the sum set aside for dividends for participating policies; and, from the remainder, the amount that may be

allotted by the Board of Directors for payment of dividends on common shares, carrying the balance to surplus.

The Board of Directors may determine the distribution of the surplus or a part thereof as dividends either to the participating

policyholders or as dividends to our stockholders.

The Board of Directors may declare cash dividends to the stockholders at any time when in its judgment the condition of the

Corporation allows it, or grant stocks and bonds dividends subject to the approval of our stockholders in accordance with law.

account which allows them to view their monthly statements

and keep track of contributions and investment earnings.

Each employee is credited an employer contribution monthly

based on 8% of his/her current monthly basic salary which

started in July 2014. Benefits are computed based on the

vesting factor and number of years of service. Minimum

years of service entitled for Retirement Pay under DC plan

is 5 years. The voluntary contribution has just started this

April 2018. Employee participation will be incentivized by

the company with 50% of voluntary contributions subject

to a maximum of 3% of employee’s monthly basic salary.

CORPORATE GOVERNANCE 44

BOARD COMMITTEES45

BOARD COMMITTEES

AUDIT & RPT COMMITTEE

EXECUTIVE COMMITTEE

BOARD RISK COMMITTEE

GOVERNANCE, NOMINATION & REMUNERATION COMMITTEE

INVESTMENT COMMITTEE

ROMEO L. BERNARDOINDEPENDENT DIRECTOR

CHAIRMAN

CHAIRPERSONCHAIRMAN

CHAIRMAN

VICE CHAIRMAN

CHAIRMAN

ARIEL G. CANTOS NON-EXECUTIVE DIRECTOR

CEZAR P. CONSINGNON-EXECUTIVE DIRECTOR

ARIEL G. CANTOSNON-EXECUTIVE DIRECTOR

ARLEEN MAY S. GUEVARASENIOR OFFICER

ARIEL G. CANTOSNON-EXECUTIVE DIRECTOR


SIMON R. PATERNONON-EXECUTIVE DIRECTOR


SURENDRA MENONEXECUTIVE DIRECTOR

SPENCER T. YAPSENIOR OFFICER

JESUS P. TAMBUNTINGINDEPENDENT DIRECTOR


JOSEPH A. GOTUACO*NON-EXECUTIVE DIRECTOR



RYAN ROBERT QUINNNON-EXECUTIVE DIRECTOR

*as alternate of Mr. Consing and Mr. Gotuaco


JOSEPH GOTUACONON-EXECUTIVE DIRECTOR

JOSEPH G. DE DIOSSENIOR OFFICER

BOARD MEETINGS

The number of meetings held in 2017 and the overall attendance rate are as follows:

19 January 2017

21 April 2017*

21 April 2017**

20 July 2017

19 October 2017

5 MEETINGS88.93%

AURELIO LUIS R. MONTINOLA III

JESUS P. TAMBUNTING

RYAN ROBERT QUINN

ARIEL G. CANTOS*

NATIVIDAD N. ALEJO**

SIMON R. PATERNO

*effective 20 July 2017 **until 21 April 2017 ***effective 21 April 2017 ****until 20 July 2017

DARREN THOMSON

ROMEO L. BERNADO

ANDREAS ROSENTHAL****

SURENDRA MENON

JOSEPH A. GOTUACO***

CEZAR P. CONSING

5 MEETINGS

3 MEETINGS

5 MEETINGS

5 MEETINGS

2 MEETINGS

5 MEETINGS

4 MEETINGS

5 MEETINGS

2 MEETINGS

5 MEETINGS

1 MEETING

5 MEETINGS

N/A

3 MEETINGS

N/A

1 MEETING

N/A

N/A

N/A

4 MEETINGS

N/A

N/A

N/A

N/A

1 MEETING

1 MEETING

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1 MEETING

N/A

N/A

4 MEETINGS91.67%

1 MEETING100%

19 January 2017

21 April 2017

20 July 2017

19 October 2017

27 March 2017

BOARD MEETINGS 46

The Board had a total of five (5) meetings in 2017. The directors received the meeting pack five days in advance. The meeting

pack includes among others, the Board and Committee Meeting Minutes for approval of the Board, the business and financial

highlights of the Company and other items that need Board action and approval.

The presence of at least six (6) out of eleven (11) directors is necessary to have a quorum and the affirmative votes of the majority

of the directors present are required to decide a matter except where the law or the by-laws require a higher number.

The Board exercises discretionary powers and oversees the management of the company.

MEMBER

NO. OF MEETINGS HELD & ATTENDED FOR THE YEAR 2017

BOARDAUDIT & RPT COMMITTEE

GOVERNANCE, NOMINATION& REMUNERATION COMMITTEE

*Outgoing**Organizational

OPERATING PHILOSOPHY

OPERATING PHILOSOPHY 48

OPERATING PHILOSOPHY

CODE OF CONDUCT - ANNUAL CERTIFICATION PROGRAM

BUSINESS CONDUCT ORIENTATION PROGRAM

The AIA Code of Conduct

Honesty and integrity are the cornerstones of the AIA business. AIA serves millions of customers across the most dynamic growth region in the world – and is known and admired for its unwavering commitment to these values.

This reputation and the trust it inspires is critical to the success of the organization. Dedication and commitment to high standards have helped build the organization in the past and continue to do so. It can only maintain such reputation to the future when each employee strives harder to do what is right and by being prepared to take their personal responsibilities in observing the highest standards of integrity and conduct at all times and in every dealing.

This is what the AIA Code of Conduct is about. It sets out AIA’s and its member companies’ commitment to the Operating Philosophy of “Doing the Right Thing, in the Right Way, with the Right people... and the results will come.” This establishes the unique culture of AIA across all 17 markets within the Asia Pacific region that includes BPI-Philam.

The AIA Code of Conduct sets out the ethical guidelines for conducting business which is the same code that BPI-Philam observes. This serves as a guide in managing the company’s compliance, ethics, and risk issues.

The standards set forth in the Code also apply to business partners including agents, contractors, subcontractors, suppliers, distribution partners, and those who act on behalf of AIA and BPI-Philam. Thus, the corporation, its directors, senior management and employees are mandated to comply with the policies. The Compliance Department is tasked to implement these policies and monitor compliance therewith.

Like AIA, BPI-Philam has always believed in the power of diverse, talented people to create value and deliver on customer and shareholder expectations. Thus, it competes vigorously to create new opportunities for its customers and for itself. However, competitive advantages are sought only through legal and ethical business practices. With the products, services and responsible business practices, BPI-Philam strives to improve the quality of life of every Filipino. Promoting compliance with local laws and local regulatory requirements that apply to the business is at the foundation of BPI-Philam’s good corporate citizenship.

To ensure that all BPI-Philam employees are aware of the provisions of the Code, an annual certification program is conducted whereby all employees confirm their knowledge and understanding about the rules and guidelines written in the Code.

At the same time, it is company policy that all new hires attend the Business Conduct Orientation Program (BCOP) whereby this Code and all other relevant compliance policies are discussed. This program is offered on a monthly basis and is conducted either by Compliance or Training Department.

BPI PHILAM IS A SAFE, HEALTHY AND SECURE WORKPLACE

BPI PHILAM SHAPES ETHICAL PRACTICES

BPI-Philam conducts its business in a manner that protects the health, safety and security of its employees and customers. Situations that may pose health, safety, security and environmental hazards must be reported promptly to management or to the appropriate Corporate Security Personnel.

Avoiding security breaches, threats, losses and theft requires that all employees remain vigilant in the workplace and while carrying out business. Employees are encouraged to notify management or Corporate Security of any issue that may impact the company’s security, fire and life safety or emergency readiness.

Using, selling, possessing or working under the influence of illegal drugs at BPI-Philam is strictly prohibited. At the same time, use of alcohol while conducting business for BPI-Philam is also prohibited.

Physical security systems reduce the risk of exposure.

Treating Customers Fairly

The Treating Customers Fairly Policy demands that customers should be treated fairly at all times and that products, services, and advice must be appropriate to meet customer needs. Marketing, advertising and sales-related materials and services must always be truthful and accurate, and misrepresenting or attempting to mislead or deceive customers by use of unsupported or fictitious claims about BPI-Philam products or those of its competitors is not acceptable.

BPI-Philam should provide high standards of service and should respond promptly and fairly to customer feedback.

BPI-Philam adopts a structured framework in handling complaints related to market misconduct. The Customer

Entry controls are implemented to ensure company’s safety security and protection. Wearing of IDs and uniforms are strictly observed.BPI-Philam respects the personal information and property of employees. Employees expect the company to carefully maintain the personal information they provide. Employee trust must not be compromised by disclosing this information other than to those with a legitimate need to know.

Access to personal information or employee property is only authorised for appropriate personnel with a legitimate reason to access such information or property. From time to time, BPI-Philam may access and monitor employee internet usage and communications to assess compliance with laws and regulations, policies and behavioural standards. Subject to local laws, employees shall have no expectation of privacy with regard to workplace communication or use of AIA and BPI-Philam’s information technology resources.

Complaints Handling Process ensures that all customer complaints and grievances are immediately addressed. The process defines the step-by-step approach in addressing and handling complaints as a result of any of its sales personnel’s misconduct.

There is a Regulatory and Compliance Disciplinary Committee that evaluates all complaints and determines whether a sales personnel has committed any wrongdoing. Any sales personnel found guilty of any market conduct-related offense is subjected to appropriate sanctions.

Misconduct includes, but is not limited to: misrepresentation of product features, misselling, policy replacement, misappropriation of client monies, and any other infringement of the Market Conduct Guidelines.


Data Privacy Fair Dealing & Creditor’s Rights

Sourcing Policy

Conflict of Interest

Customers expect BPI-Philam to carefully handle and safeguard the business and personal information that they share in the conduct of the business. BPI-Philam must never compromise a customer’s trust by disclosing private information other than to those with a legitimate business need to know.

Employees who handle customer information are responsible for knowing and complying with applicable information privacy and information security laws. In all cases, appropriate physical, administrative and technical safeguards for personal information and business data must be maintained.

BPI-Philam adheres to its Fair Dealing Policy, which ensures that businesses with the customers, service providers, supplier and competitors are conducted in a fair manner. Following AIA’s model, BPI-Philam seeks competitive advantages only through legal and ethical business practices. Every employee must conduct business in a fair manner with customers, service providers, suppliers and competitors.

Disparaging competitors or their products and services are discouraged. Improperly taking advantage of anyone through manipulation, concealment, abuse of privileged information, intentional misrepresentation of facts or any other unfair practice is not and will not be tolerated at BPI-Philam much more in the AIA Group.

It is also the policy of BPI- Philam to uphold creditor’s rights by honouring its contractual obligations with all its creditors and counterparties, in accordance with the provisions of their contracts and the law. In the conduct of its business dealings with third parties, BPI-Philam undertakes to honour all its commitments, stipulations and conditions set forth in their binding agreements.

Business partners serve as extensions of BPI- Philam to the extent that they operate within contractual relationships. Business partners are expected to adhere to the spirit of the AIA Code of Conduct and to any applicable contractual provisions.

Business partners must not act in a way that is prohibited or considered improper for a BPI- Philam employee. Employees must ensure that customers, agents, and suppliers do not exploit their relationship with BPI-Philam or use BPI- Philam’s name connection with any fraudulent, unethical or dishonest transaction.

Suppliers and vendors are selected on the basis of performance and merit in accordance with a fair and transparent process. Requirements for suppliers and vendors to follow the standards in the Code must be included in the vendor management programme.

The total expenditure on goods and services from third party suppliers form a significant part of BPI-Philam’s operating cost. Any activity by a line of business to acquire goods/services must be undertaken in a professional manner to ensure BPI-Philam is able to maximize the value and manage risks associated with use of external suppliers.

The local Sourcing Policy, which took effect in November 2013, sets out the framework within which BPI-Philam

An employee’s position in BPI-Philam must not be used for inappropriate personal gain or advantage. Any situation that creates, or even appears to create a conflict of interest between personal interests and the interests of the company must be appropriately managed.

Conflicts of interest (whether potential or actual conflicts) must be reported. There is a system being used for the reporting. Managers are expected to take appropriate steps to prevent, identify and appropriately manage conflicts of interests of those they supervise.

All AIA and BPI-Philam employees are prohibited from taking for themselves, or directing to a third party, a business opportunity that is discovered through the use of company’s corporate property information. BPI-Philam employees are prohibited from using corporate property, information or position for personal gain.

Employees are asked to declare if they have any personal relationships within the group. Immediate family members, members of the household and individuals with whom an employee has a close personal relationship within the group must never improperly influence business decisions. When determining whether a personal relationship might lead to a conflict of interest, the following questions can serve as guide:

• Does one of us have influence over the other at work?• Does one of us supervise or report to the other?• Could an outsider view the situation as a conflict of interest?

must engage external suppliers for goods/services and is supplemented by BPI-Philam’s Sourcing Practice Guide. This provides BPI-Philam the standard processes and document templates in engaging suppliers that should be read in conjunction with the policy document. The BPI-Philam Sourcing Policy, with the AIA Group Sourcing Policy as a model, was defined with the primary objective to establish standardized sourcing procedures.

As set out in the AIA Group Sourcing Policy, a Local Sourcing Lead (LSL) or a designate is appointed and will be responsible for ensuring implementation, execution, update and compliance of the local policy. This person should closely work with the AIA Group Sourcing (GS) team.

OPERATING PHILOSOPHY51

Supplier Selection

Anti-Corruption & Bribery & Gifts and Entertainment

Anti-Money Laundering and Counter Terrorist Financing

Communicating with Regulators & Other Governmental Officials

BPI-Philam also complies with the AIA Code of Conduct, which provides that the Company select suppliers and vendors on the basis of performance and merit in accordance with a fair and transparent process. Appropriate due diligence is performed regarding potential agents, consultants and independent contractors prior to engaging their services. Like AIA, BPI-Philam seeks supplier partnerships with diverse businesses and values suppliers that share the Company’s dedication and commitment to diversity and social responsibility.

The Policy is applied alongside the AIA Code of Conduct. It provides guidance on giving and accepting gifts and entertainment. The Anti- Corruption Guidelines specifies the roles, responsibilities and procedural controls for transactions involving government officials. All relevant laws countering bribery and corruption must be upheld. If local laws and regulations require higher compliance standards vis-a-vis the guidelines of the AIA Code of Conduct, then BPI-Philam must meet the higher standards.

The Anti-Corruption & Bribery Policy prohibits all employees, agents, or independent contractors in providing bribes or other benefits to another person in order to obtain or retain business or unfair advantage in any business interaction involving AIA and BPI-Philam Life, its customers and employees.

The company is not allowed to use improper means to influence another person’s business judgement. All employees and

Pursuant to Section 18 of Republic Act (RA) No. 9160, also known as the “Anti-Money Laundering Act of 2001”, as amended by RA No. 9194, RA No. 10167, RA No. 10168 and RA No. 10365, all covered institutions which include insurance companies supervised or regulated by the Insurance

Inquiries from regulators outside the normal course of BPI-Philam’s regulatory relationships must be reported immediately to the Compliance Officer or a designated Legal Counsel before a response is made.

Financial reporting-related inquiries may be responded to by authorised comptrollers. Responses to regulators must contain complete, factual and accurate information. During a regulatory inspection or examination, documents must never be concealed, destroyed or altered, nor must lies or misleading statements be made to regulators. Requests from auditors are subject to the same standards.

Commission are mandated to formulate their respective money laundering prevention program in accordance with the said law.

As a matter of policy, BPI-Philam shall foil any attempt by anyone to use the Company or its affiliates for money laundering purposes. This Anti-Money Laundering Program, together with the Company’s Guidelines, establishes the governing principles and business standards to protect BPI-Philam and its business operations from becoming an unwitting tool of money launderers. The company’s management, officers and staff must remain vigilant in the fight against money laundering and financing of terrorism and shall collectively oppose any effort to violate or flaunt the “Anti- Money Laundering Act of 2001”, as well as its implementing rules and regulations.

In order to promote an effective AML compliance program, the following actions were taken:

Institutionalized the AML Committee to ensure effective implementation of the company’s AML program. The Chairman of the AML Committee is the Head of Operations with the Head of Legal and Head of Compliance as members.

Adopted a Risk-Based Approach, and strictly implements Enhanced Due Diligence for defined High Risk Customers.Continuous eLearning for employees and face-to-face AML training for agents.

Adopted the Actimize system with 3 modules – Watch List Filtering or screening against PEPs and sanctioned persons; Customer Due Diligence that provides risk scoring for all clients; and Suspicious Activity Monitoring that provide red flag/ alerts for transactions, particularly, cash transactions.

Prevention of Insider Trading & Price Sensitive Information

Investment Code of Ethics

The AIA Group takes its obligations as a listed entity seriously and is committed to ensuring the highest standards of market conduct and fair dealing. The Hong Kong Securities and Futures Ordinance (SFO) prohibits market misconduct, including insider trading. Breaches of market misconduct laws are serious offences that attract heavy civil and criminal penalties.

Since BPI-Philam is a member of the AIA Group, it adopts the same policy and follows the same guidelines. The Prevention of Insider Trading and Market Misconduct Policy aims to build a robust system to prevent market misconduct, including insider trading. It sets out standards and controls to ensure compliance with the regulatory requirements. Lastly, the existence of this policy should prevent employees and directors from engaging in speculative trading in AIA Group Securities.

The policy applies to all employees and directors of AIA Group Limited and each of its subsidiaries (“AIA Group”), including BPI-Philam. This policy defines the duty of each employee to safeguard material information from improper use. Under the policy, it is illegal to trade securities while in possession of a material non- public information and pass a material non-public information to anyone who may trade securities based on it or give others recommendations to buy or sell securities.

In connection with this, dealings in AIA securities by certain employees, officers, directors, and their related interests, require pre-approval from the Group Company Secretary. Other securities about which AIA may have received or may expect to receive material, non-public information, or are otherwise subject to restrictions in trading, are placed on watch lists or restricted lists. Trading activities in securities included in these lists are restricted and/ or actively monitored.

AIA believes that individual investment activities by its officers and employees should not be prohibited or discouraged. Nonetheless, the nature of AIA’s fiduciary obligations necessarily requires some restrictions on the investment activities of certain employees, officers, directors, and their related interests, who may be deemed Investment Access Persons.

In managing assets for AIA entities, Investment Access Persons have a fiduciary responsibility to treat stakeholders

officers are required to report to the Compliance Officer any gift/entertainment provided to Government organizations and/or any of its officials.


fairly. This duty requires a course of conduct, consistent with other statutory obligations, that seeks to be prudent in AIA’s and its stakeholders’ best interest.

The AIA Investment Code of Ethics is intended to address three fundamental principles that must guide the personal investment activities of Investment Access Persons in light of their fiduciary duties:

1) Place the interests of AIA and its Stakeholders first. As fiduciaries, Investment Access Persons must avoid serving personal interests ahead of the interests of AIA or those of its stakeholders.

2) Avoid taking inappropriate advantage of one’s position as an Investment Access Person.

3) Conduct personal investing activities in such a way as to avoid even the appearance of a conflict of interest with investment activities undertaken for the AIA Portfolios.

As a member of the AIA Group, BPI-Philam adopts the same policy and follows the same guidelines. Generally, all Investment Access Persons are required to obtain pre-clearance prior to purchasing or selling a security. In addition, Investment Access Persons must provide and certify on a regular basis their accounts and beneficial holdings as well as all transactions in securities in which they had beneficial ownership and/or control. Certain outside business activities of Investment Access Persons also need prior approvals.

BPI-PHILAM’S COMPLIANCE DISCIPLINARY FRAMEWORK & GUIDELINES

Under this section, Framework & Guidelines (the “Framework”), Heads of Departments have the power to impose disciplinary sanctions to any employee who has been found, after due process, to have breached or violated any of the company’s compliance policies.

The Framework seeks to ensure that all decisions regarding employee misconduct or violation shall undergo a due diligence review, fair hearing, with representation if they so choose and with penalties that are proportionate.

In the event of a serious or material breach, criminal misconduct or where it is reasonably believed that the safety or welfare of employees or the Company is put at risk by the continuing presence of an employee or employees against whom allegations have been brought, such employee or employees will be suspended immediately without prejudice.


Heads of Departments shall closely coordinate with Compliance, Legal and/or Human Resources whenever necessary. For breaches identified by Compliance, Compliance shall escalate the matter to the Heads of Departments for further action.

Market Conduct Guidelines

Sales Code of Discipline

The Whistleblow Program

Anti-Fraud Policy

BPI-Philam envisions itself as having one of the highest sales standards in the life insurance industry in Philippines. All sales personnel are expected to conduct their business with the highest level of professionalism and personal integrity. BPI-Philam will not tolerate any less.

The Market Conduct Guidelines is used as a guide by all sales personnel in the conduct of their business and aid in the determination of what would be deemed proper conduct and behaviour. It shall apply equally and consistently to the conduct of Life business practices and all financial products. Any breach of the Market Conduct Guidelines may result in the imposition of a penalty upon the offender in question. Compliance with these guidelines does not ensure a continued contractual relationship with BPI-Philam. BPI-Philam reserves the right at all times to terminate the employment contract of any sales personnel in accordance with the terms of the contract entered into between BPI-Philam and that of the sales personnel. A Market Conduct Committee was also created with the main purpose of administering the rules of the Market Conduct Guidelines, Company policies or other guidelines, and to provide assistance to the Board of Directors and Company’s management to enable BPI-Philam to continue operating according to the highest ethical business standards and the applicable laws and regulations.

In pursuit of building and promoting professionalism and having one of the highest sales ethical standards in the life insurance industry, it is the policy of the Company to set up measures of conduct and standards of behavior to instil a strong sense of discipline among its sales force. Disciplinary actions are corrective rather than punitive in nature. In promoting professionalism among sales and moving towards self-regulation, the Office of the Insurance Commission and the Philippine Life Insurance Association support the need and use of penalties or sanctions or a combination thereof as the Company deems fit.

The BPI-Philam Sales Code of Discipline contains penalties associated with the breach of Company policy, the Market Conduct Guidelines, Employment Contract, laws, and regulations.

The objective is to establish uniform disciplinary sanctions amongst all sales personnel and adopt a systematic and equitable procedure in administering corrective measures.

The sanctions, which may range from Written Reprimand to Termination of Employment, are applied accordingly depending on the gravity of the offense and as deemed appropriate by the Company. The offenses listed in this Code of Discipline are given as guidelines and are not exclusive of all types of offenses. Unique and complex cases are handled by the BPI- Philam Compliance Disciplinary Committee (BCDC) or by highest levels of Management.

BPI-Philam does business with integrity and follow the highest ethical principles. Any employee (or anyone else) may raise concerns of misconduct or wrongdoing within AIA and BPI-Philam that can allow investigation to fix any problems. This Policy guides all employees on how to raise ethical concerns and managers on how they should respond when this happens. The Whistleblow Policy applies to all employees of the AIA Group including BPI-Philam.

‘Whistleblower’ refers to someone (an AIA employee, business partner, agent, consultant, vendor, customer, or other party) who informs AIA or BPI-Philam of suspected illegal or improper ways of doing business involving violation of laws, regulations, AIA or BPI-Philam policies, and other unethical actions that might negatively impact AIA’s and BPI- Philam’s reputation.

Employees who are aware of possible wrongdoing within AIA and BPI-Philam have a responsibility to disclose that information to management. Reports are taken seriously and investigated confidentially. Employees or other individuals

BPI-Philam adopts a zero-tolerance approach to fraud and expects all employees, agents, and third parties to act with honesty and integrity. The policy is intended to reinforce management procedures designed to aid in the prevention, detection, and investigation of fraud, thereby safeguarding the Company’s assets and providing protection from the legal and reputational consequences of fraudulent activity. All suspected cases of fraud are investigated and disciplinary procedures enforced, including prosecution and termination.

Aside from BPI-Philam’s existing Anti-Fraud Policy and Guidelines, the Company is now required by the Insurance Commission through IC Circular Letter No. 2016 -50 to submit by September 2017 an Anti-Fraud Plan to ensure that all Companies are prepared and ready to combat insurance fraud for its own protection and for the welfare of its stakeholders or insuring public.

Managing Financial Risks

We believe that sound risk management hinges on effective quantification of risks. To this end, risk metrics are used to identify our exposure to financial risks.

We manage our exposure to financial risk within tolerances agreed by the RMC. As an internal control procedure, risk metrics, risk tolerances, and limits were set to monitor risk exposure and to ensure that we are operating within our Risk Appetite. We also manage financial risk by periodically running specific scenario-modelling exercises.

will not suffer retaliation for reporting suspected wrongdoing in good faith.

An AIA Ethics line was developed to support the program. It is an independently managed website and hotline (telephone) service, receiving reports in local language, 24 hours a day, and 7 days a week. AIA and BPI-Philam can communicate with anonymous whistleblowers using this website via a secure platform.

The following misconduct including unethical or unlawful acts can be reported through this AIA Ethics line:

• Fraud, misappropriation, theft, bribery or corruption, giving or receiving inappropriate gifts or kickbacks;

• Harassment, bullying or assault, discrimination, conflicts of interest, or abuse of authority;

• Fake or falsification of signatures, customer accounts, information or business performance reports;

• Creating inappropriate funds or cash floats (slush funds) with travel agents, fake vendor bids etc.;

• Signs of retaliation against a whistleblower or suspected whistleblower including subtle acts such as exclusion from meetings or events which may impact long term career or advancement;

• Anyone trying to interfere with the confidentiality of a whistleblower report,

• Identifying or giving away the identity of a whistleblower, or encouraging or tolerating such actions.

Reporting of concerns or suspicions may be done by multiple means as provided in the Code. The report may also be made by using the AIA Group Ethics and Compliance Hotline (PLDT) 1010-5511-00 + 800-245-4179.


SOCIAL AND ENVIRONMENTAL RESPONSIBILITIES

ENTERPRISE RISK MANAGEMENT

Social Media

BPI-Philam recognises the value of social media to engage with stakeholders in innovative and interactive ways. When using social media, every employee must conduct them-selves professionally. Social media includes blogs, forums, chat rooms, professional and social networking sites, photo and video sharing sites, and other interactive online media such as Twitter.

Enhancing Value by Ensuring Stability

We recognize that effective risk management maximizes the value of our business to our shareholders and assures policyholders that we will always be there for them. For the regulators, sound risk management is vital to the stability of the financial system, and for our investors, it is a means of protecting and enhancing the long-term value of their investment.

We follow a Risk Management Framework (RMF) which identifies, quantifies, and mitigates risk within the company. An effective RMF is the key to avoiding significant financial and reputational damages that arise from inadequate or ineffective control of the risks in the business.

At the heart of our RMF is a system for risk governance that oversees various aspects. The RMF is built around the Risk Management Committee (RMC), which oversees and reviews both financial and operational risks, and ensures that appropriate risk policies are in place.

The RMC is responsible for the establishment of priorities and coordination across risk management activities, exposure monitoring, and development of guidelines for risk reporting. It coordinates and oversees status of action plans in addressing risk deficiencies, and monitors risks that may impact BPI-Philam’s financial position.

The RMC reports to BPI-Philam Board Risk Committee (BRC) which is responsible for oversight of the company’s risk management activities. The BRC determines the Risk Appetite, the Risk Management Statement, and the Risk Management Framework ofBPI- Philam, and advises and assists the Board of Directors in the review and approval of these matters. In 2016, the Board Risk Committee met four times and validated that risk management processes are in place to ensure that the amount of risk taken is consistent with the company’s Risk Appetite.

Financial risk is subdivided into credit risk, market risk, and liquidity risk. The primary source of credit risk is the investment portfolio, but such risk could also arise through reinsurance, procurement, and treasury activities. Credit risk management starts with the assignment of internal ratings to all counterparties.

BRC approves a matrix of risk tolerances that ensures that credit risk in the investment portfolio is contained within our Risk Appetite. These limits cover individual counterparty, segmental concentration, and cross-border exposures. The Investments Team has discretion to shape the portfolio within these credit limits, seeking further approvals through the risk governance framework. If certain investments are technically within credit limits but there is a specific concern, these are brought to the attention of the RMC or the Investments Committee, as appropriate.

Market risk is the risk of financial loss from adverse movements in the value of assets owing to market factors, including changes in interest and foreign exchange rates, as well as movements in the spread of credit instruments to corresponding bonds, “Credit Spread Risk” and in equity and property prices.

The BRC approves policies and metrics used in evaluating market risk exposures. We manage the different Market Risks, thusly:

Interest Rate Risk: by ensuring appropriate insurance design and underlying assumptions as part of the product approval process and by matching, to the extent possible and appropriate, the duration of investment assets with the duration of insurance liabilities. Interest Rate Risk arises from any difference between the duration of the company’s liabilities and assets, in particular in relation to the reinvestment of maturing assets to meet commitments, predominantly in insurance liabilities. This exposure can be heightened in products with inherent options or guarantees.

Credit Spread Risk: by focusing on the overall quality and diversification of our investment portfolios and avoid excessive volatility in their mark-to-market value. Credit Spread Risk arises from changes in the market value of non-government securities as a result of a change in perception as to their likelihood of repayment.

Equity Price Risk: by managing concentrations and volatility in our equity exposures, which are included in the aggregate exposure reports on individual counterparties toensure concentrations are avoided. Equity Price Risk arises from changes in the market value of equity securities and equity funds. Investment in equity a sets on a long-term basis is expected to provide d versification benefits and improve returns.

Foreign Exchange Rate Risk: by matching assets and


liabilities by currency. Foreign Exchange Risks arise from the translation of dollar-denominated assets and liabilities to local currency for financial reporting purposes.

Liquidity Risk occurs in two ways: Financial Liquidity Risk and Investment Liquidity Risk. We managed Financial Liquidity Risk by determining limits for our activities to ensure that sufficient cash is available to meet payment options to counterparties when they fall due. Investment Liquidity Risk is managed through continuous assessment of the relative liquidity of the company’s assets and managing the size of individual holdings through limits.

Handling Operational Risk

Operational Risk is managed by first breaking these down into thirteen (13) defined risk areas or Key Operational Risks (KORs):

1. Business Interruption risk2. Distribution risk3. Finance and Actuarial Process risk4. Financial Crimes and Fraud risk5. Information Security risk6. Information Technology risk7. Investment Process risk8. Legal and Regulatory risk9. Operations risk10. People risk11. Product risk12. Project risk13. Third Party risk

Each KOR is measured using KRIs, with a first line owner for respective KORs. The RMC reviews these risks regularly, including emerging risks.

Every year, our Risk and Control Assessment process identifies and assesses the impact of Operational risks. Here, management considers possible or actual risk events, ascribes likelihood of occurrence and potential severity, and then agrees on mitigation strategies to reduce these risks. These strategies are then monitored and the exercise being repeated, with the results stored in an operational risk database.

AUDIT COMMITTEEThe Audit Committee is an independent committee formed by the Board of Directors to assist the Board in the performance of its duties and responsibilities specifically in ensuring that governance, internal controls and risk management systems of the organisation are in place.

For 2017, the Audit Committee members were Mr. Romeo L. Bernardo as the Chairman and Ambassador Jesus P. Tambunting, Mr. Andreas Rosenthal (until 20 July 2017)

and Mr. Ariel G. Cantos (beginning 21 July 2017) as the members. The Chairman and Ambassador Tambunting are independent directors. Each Audit Committee member met the necessary requirements of the Securities and Exchange Commission, the Revised Code of Corporate Governance and other applicable laws and regulations in the Philippines.

The Audit Committee has adopted a formal terms of reference, the Audit Committee Charter, to detail its responsibility for oversight of the organisation’s corporate governance process. The Committee, while exercising its oversight role, relies on the expertise of Management and works with the Internal and External Auditors to ensure the integrity of the financial statements and the on-going review of the organisation’s governance process, risk management and internal controls.

The Audit Committee in accordance with its responsibilities outlined in the Audit Committee Charter developed an annual calendar and meeting agenda for 2017. From 1 January to 31 December 2017, the Audit Committee met four (4) times. In these meetings, the Audit Committee met with Senior Management, Group Internal Audit, the Compliance Office and the organisation’s External Auditors, Isla Lipana & Co./PricewaterhouseCoopers. In 2017, the Audit Committee also met individually with Group Internal Audit and the External Auditors without management being present. Among the agenda items discussed included the approval of the Annual Audit plan, Group Internal Audit updates, results of Compliance reviews and updates from the External Auditors. Group Internal Audit Updates include the results ofcompleted audit projects, the status of the audit plan and tracking of open issues.


Group Internal Audit (GIA)

Engagement with the External Auditors

GIA’s mission is to provide independent and objective assessment and reporting of the overall effectiveness of risk management, internal controls and governance processes across the Group and appropriately challenge executive management to improve the effectiveness of these processes. GIA adopts a risk-based audit plan which considers the significant risks affecting the strategies and key objectives of the company. These risks include financial, operational, compliance and industry’s emerging risks, among others. In finalising the audit plan, input and expectations from key stakeholders are considered prior to the final Audit Committee approval.

Philam GIA is directly overseen and supported by AIA Group Internal Audit, and functionally reports to the Audit Committee, while administratively reporting to the Chief Executive Officer. The Head of GIA, on behalf of the Group Internal Audit function, is responsible for reporting the result of internal audit work to the Audit Committee on a regular basis. In overseeing the internal audit function, the Audit Committee is actively involved in approving the internal audit

The Audit Committee, on behalf of the Board of Directors, is responsible for the appointment, re-appointment or removal of the External Auditors. For the 2017 year, the Audit Committee has approved the re-appointment of Isla Lipana & Co./PricewaterhouseCoopers as the External Auditor. The Audit Committee has reviewed and approved accordingly the scope and coverage of the Statutory Audit for the year 2017. Although Management has the primary responsibility for the financial statements and the reporting process, the Audit Committee having the oversight role, has noted and reviewed the audited financial statements for the calendar year 2017. The Audit Committee concurred and accepted the conclusion of the External Auditors on the financial statements, and was satisfied that the financial statements were in compliance with Philippine Financial Reporting Standards as assessed by the External Auditors.

plan including any subsequent changes, assessing the result of audit projects and monitoring the resolution of key issues noted. The Audit Committee is aware of the process by which assessment of the effectiveness of internal controls, risk management, financial reporting and information technology security are conducted.

FINANCIALSTATEMENTS

FINANCIAL STATEMENTS 58

BPI-PHILAM LIFE ASSURANCE CORPORATION (BPLAC)(FORMERLY BPI-PHILAM LIFE ASSURANCE CORPORATION)

STATEMENTS OF FINANCIAL POSITIONDecember 31, 2017 and 2016 and January 1, 2016

(All amounts in thousands of Philippine Peso)

December 31, 2017

ASSETS

LIABILITIES AND EQUITY

December 31, 2016(As restated)

January 1, 2016(As restated)

Growth vs PY

Amt %

Cash and cash equivalents 2,487,550 2,721,039 2,613,914 (233,489) -9%

Insurance receivables, net 896,402 593,369 312,270 303,033 51%

Available-for-sale financial assets 17,953,723 18,069,766 18,141,029 (116,043) -1%

Reserve for experience refund 194,508 195,307 179,644 (799) -0%

Policyholders’ dividends 477,708 468,740 454,394 8,968 2%

Premium deposit fund 2,001,426 1,979,624 2,031,089 21,802 1%

Insurance payables 631,348 277,573 96,134 353,775 127%

Deferred tax liabilities 114,131 92,014 60,269 22,117 24%

Other liabilities 654,025 468,689 556,566 185,336 40%

Investment properties 838,548 809,994 905,297 28,554 4%

Insurance contract liabilities, net 90,583,475 75,956,270 64,971,900 14,627,205 19%

Property and equipment, net 385,167 359,601 153,449 25,566 7%

Other assets, net 47,536 152,640 184,174 (105,104) -69%

Total assets 104,022,675 88,778,176 76,427,651 15,244,499 17%

Total liabilities 96,266,550 81,361,641 69,592,638 14,904,909 18%

Loans and receivables, net 1,660,827 1,388,259 1,206,511 272,568 20%

Accrued income 422,622 403,132 353,361 19,490 5%

Financial assets at fair value through profit or loss

79,262,656 64,212,732 52,490,002 15,049,924 23%

Investment in subsidiaries and associates

67,644 67,644 67,644 - 0%

Accounts payable and accrued expenses

1,609,929 1,923,424 1,242,642 (313,495) -16%

Share capital 750,000 750,000 750,000 - 0%

Treasury shares (6) (6) (6) - 0%

Reserves for:

Fluctuation on available-for sale financial assets

2,095,667 2,585,766 2,809,312 (490,099) -19%

Share-based payments 1,921 1,921 510 - 0%

Revaluation of property and equipment, net

18,972 4,668 1,049 14,304 306%

Retained earnings 6,017,058 5,439,747 4,643,779

Remeasurements on insurance contract liabilities

(1,135,728) (1,361,748) (1,350,444) 226,020 -17%

Remeasurements of retirement benefit scheme

8,241 (3,813) (19,187) 12,054 -316%

FINANCIAL STATEMENTS59

Total equity 7,756,125 7,416,535 6,835,013 339,590 5%

Total revenues and other income 32,558,305 21,554,430 11,003,875 51%

Total liabilities and equity 104,022,675 88,778,176 76,427,651 15,244,499 17%


STATEMENT OF TOTAL COMPREHENSIVE INCOMEFOR THE YEAR ENDED DECEMBER 31, 2017

(With comparative figures for the year ended December 31, 2016)(All amounts in thousands of Philippine Peso)

REVENUES AND OTHER INCOME

2017 2016(As restated)

Growth vs PY

Amt %

Gross premiums on insurance contracts 20,796,706 19,519,833 1,276,873 7%

Net insurance premiums 20,329,488 19,256,653 1,072,835 6%

Fee income 1,904,492 1,741,270 163,222 9%

Investment income 1,514,497 1,427,353 87,144 6%

Foreign exchange gains (losses), net (4,289) 47,821 (52,110) -109%

Fair value gains (losses), net 8,540,119 (960,032) 9,500,151 -990%

Others 18,728 1,616 17,112 1059%

Realized gains on sale of available-for-sale financial assets, net

255,270 39,749 215,521 542%

Reinsurers’ share of gross premiums on insurance contracts

(467,218) (263,180) (204,038) 78%

577,311 11%

Total expenses 30,644,717 19,408,202 11,236,515 58%

Total other comprehensive loss (237,721) (215,857) (21,864) 10%

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1,434,581 1,577,603 (143,022) -9%

NET INCOME FOR THE YEAR 1,672,302 1,793,460 (121,158) -7%

OTHER COMPREHENSIVE (LOSS) INCOME

Item that will be subsequently reclassified to profit or loss

Items that will not be subsequently reclassified to profit or loss

INCOME BEFORE INCOME TAX 1,913,588 2,146,228 (232,640) -11%

INCOME TAX EXPENSE 241,286 352,768 (111,482) -32%

EXPENSES

Change in insurance contract liabilities, net 12,057,468 8,079,864 3,977,604 49%

Benefits and claims on insurance contracts, net 14,558,990 7,822,794 6,736,196 86%

Commissions and other acquisition expenses 1,839,375 1,717,521 121,854 7%

General and administrative expenses 1,647,053 1,297,612 349,441 27%

Investment expenses 249,878 207,337 42,541 21%

Interest expense 160,694 156,675 4,019 3%

Insurance taxes, licenses and fees 131,259 126,399 4,860 4%

Net fair value changes on available-for-sale financial assets

(490,099) (223,546) (266,553) 119%

Remeasurement gains (losses) on insurance contract liability

226,020 (11,304) 237,324 -2099%

Net fair value gains on property and equipment

14,304 3,619 10,685 295%

Remeasurement gain on retirement benefit scheme

12,054 15,374 (3,320) -22%



STATEMENT OF CHANGES IN EQUITYFOR THE YEARS ENDED DECEMBER 31, 2017 and 2016

(All amounts in thousands of Philippine Peso)


As previously reported 750,000 (6) 2,809,312 - 1,049 (19,187) 510 4,874,205 8,415,883

Net income for the year - - - - - - - 1,793,460 1,793,460

Cash dividends - - - - - - - (997,492) (997,492)

Net income for the year - - - - - - - 1,672,302 1,672,302

Cost of share-based payments - - - - - - 1,411 - 1,411

Other comprehensive (loss) income - - (490,099) 226,020 14,304 12,054 - - (237,721)

Cash dividends - - - - - - - (1,094,991) (1,094,991)

Total comprehensive income for the year - - (490,099) 226,020 14,304 12,054 - 1,672,302 1,434,581

Other comprehensive loss - - (223,546) (11,304) 3,619 15,374 - - (215,857)

COMPREHENSIVE INCOME FOR THE YEAR

BALANCE AT JANUARY 1, 2016

TRANSACTIONS WITH OWNERS

COMPREHENSIVE INCOME FOR THE YEAR

TRANSACTION WITH OWNERS

Effect of changes in reserving methodology - - - (1,350,444) - - - (230,426) (1,580,870)

As restated 750,000 (6) 2,809,312 (1,350,444) 1,049 (19,187) 510 4,643,779 6,835,013

Total comprehensive income for the year - - (223,546) (11,304) 3,619 15,374 - 1,793,460 1,577,603

BALANCE AT DECEMBER 31, 2016, as restated 750,000 (6) 2,585,766 (1,361,748) 4,668 (3,813) 1,921 5,439,747 7,416,535

BALANCE AT DECEMBER 31, 2017 750,000 (6) 2,095,667 (1,135,728) 18,972 8,241 1,921 6,017,058 7,756,125

Share capital Treasuryshares

Fluctuation onavailable-for-sale financial assets

Remeasurement on Insurance

contracts liabilities

Revaluation of property and

equipment, net

Remeasurement of retirement benefit

scheme

Share-based payments

Retained earnings Total

RESERVES FOR


RELATED PARTY TRANSACTIONS

SUMMARY OF TRANSACTIONS WITH RELATED PARTIES

RELATED PARTY

AIAGL Ultimate Parent CompanyAIA Intermediate Parent CompanyPHILAM LIFE Parent CompanyBPI Significant investor

AHCI SubsidiaryPhilam Asset Management Inc. (“PAMI”)

Philam Properties Corp. (“PPC”)Fellow subsidiaries under common controlof Philam Life

RELATIONSHIP

In the normal course of conducting its business, the Company transacts with the following related parties:

The significant related party balances and transactions as at and for the years ended December 31 are summarized as follows:

The summary of transactions and balances arising from the Company’s outsourcing agreements as at and for the years ended December 31 is as follows:

The Company has entered into a service agreement with the Parent Company, BPI, PCCSI and PPC for various support services, effective January 1, 2010. For the outsourcing services rendered, the above parties allocate expenses based on percentage of time spent in the following areas: finance, operations, marketing, corporate services, corporate compliance, information technology, actuarial, underwriting, legal, internal audit, risk management, process management, property management, distribution services, corporate secretary and other related functions.

(a) Outsourcing services and other transactions

Philam Call Center Services, Inc. (“PCCSI”)BPI-AMTC

BIMI

Ayala Plans (“AP”)Subsidiaries of BPI

BPI M/S Insurance Corporation (“BPI M/S”)

2017

Outstanding payable balance

2016

Amount of transaction Amount of transaction Outstanding payable balance

Philam Life (38,628)492,914 464,014 (347,029)

BPI (350) 15,805 10,878 (950)

PCCSI (11,155)80,530 69,614 (18,083)

(50,133)589,249 544,506 (366,287)

PPC -- - (225)

Other transactions and balances with related parties as at and for the years ended December 31 are summarized below:

Security deposit received from related parties from the above lease transactions amounts to P6,639 (2016 - P13,728) and is under Account payable and accrued expenses (Note 14).

The outstanding balances presented are unguaranteed and unsecured, non-interest bearing and collectible/payable on demand. The amounts will be settled in cash. There are no guarantees provided or collaterals held arising from transactions with related parties. No provision for impairment has been made for amounts owed by related parties since collection is deemed to be reasonably certain.

From the detailed schedule above:


2017

2017

Outstanding receivable (payable) balance

Outstanding receivable balance

2016

2016

Amount of transaction




Outstanding receivable (payable) balance

Outstanding receivable balance

Allocated group expenses and charges for use of systems

Expense recoveries

Dividends declared (Note 15)

(b) Lease transactions (Company as lessor) as at and for the years ended December 31

(a) Receivable balances

AIA (12,703)- - (12,437)

PAMI 248,787 120,987 79,147 115,677

Philam Life - 558,446 508,721 -

BPI -522,029 V475,504 -

BPI M/S -21,495 21,116 -

BPI 7515,653 5,743 907

Ayala Plans -1,055 1,017 -

75128,203 27,876 907

AHCI 750 - - 750

PCSSI 3 373 627 1,309

BPI MS 139 - - 139

Philam Life (57,435)(531,893) (483,098) (2,120)

Service fees for the management of AFS financial assets and financial assets at FVTPL paid to BPI-AMTC

(11,811) (30,737) (35,997) (33,185)

Bank service fees to BPI (47,124)(1,019,656) (851,490) (42,526)

Provision for legal obligations of AHCI (69,961)- - (69,961)

Manpower Cost Billing and Other Transactions with Philam Life

1,017 4,978 17,433 8,311

RECONCILIATION OF OUTSTANDING RELATED PARTY BALANCES AT DECEMBER 31

Key management includes officers with a rank of Assistant Vice-President and up.

The salaries, wages and other employment benefits paid to the Company’s key management personnel for the years ended December 31 follow:

There are no outstanding receivables from or payables to key management personnel as at December 31, 2017 and 2016.

In 2017, the total remuneration of the directors is P3,470 (2016 - P2,059).

Due from related party balances are booked under the following accounts in the statement of financial position at December 31:

From the detailed schedule above:

The above due to related party balances reconcile to the following amounts presented in the statement of financial position:

2017

2017

2017

2017

2017

2016

2016

2016

2016

2016

249,807Philam Life, its subsidiaries and other related parties 125,297

249,807Loans and receivables, net 125,297

107,218Philam Life, its subsidiaries and other related parties 367,457

249,167Accounts payable and accrued expenses 526,516

114,886Salaries and wages, including share-based compensation 115,576

69,961ACHI 69,96159,285BPI, its subsidiaries and other related parties 76,66112,703AIA 12,437

890BPI, its subsidiaries and other related parties 1,046

1,640Accrued income 1,796

750ACHI 750

251,447 127,093

251,447 127,093

249,167 526,516

249,167 526,516

(a) Payable balances

KEY MANAGEMENT COMPENSATION


(632) 528 55011-800-188-89100 (TOLL FREE)15th Floor BPI-Philam Building

6811 Ayala Avenue Makati City 1226

www.bpi-philam.com

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