Insurance Code of Governance

CORPORATE GOVERNANCE PRINCIPLES AND LEADING

PRACTICES

As custodian of public funds, insurance corporations and insurance intermediaries shall ensure that their dealings with the public are always conducted in a fair, hones and equitable manner.

Public Accountability (Insurance Code)

IC code delineated the role of the Chairman and the Chief Executive Officer.

The diligence required of insurance companies, intermediaries and their directors and officers is not merely due diligence of a good father of a family, but one of a much higher order, perhaps even equivalent to the highest diligence required in banking industry.

Insurance Commission Circular no. 31-2005

Objective: To enhance the corporate accountability of insurers and intermediaries, promote the interests of their stakeholders specifically those of the policyholders, claimants and creditors.

CORPORATE GOVERNANCE PRINCIPLES AND LEADING

PRACTICES

Key features:

Role of the board, the chairman and the non-executive directorsProcedures for the appointment of directorsFormal evaluation of the performance of the board and individual directors.

Board of Directors

Refers to the collegial body that exercises the corporate powers of all corporations formed under the Corporation code. It conducts all business and controls or holds all properties of such corporations.

Principles:

Every Company should be headed by an effective Board to lead and control the company to ensure its success.

Provide entrepreneurial leadership of the company within a framework of prudent and effective controls which enable risks to be assessed and managedSet the companies strategic aimsEnsure that the necessary financial and human resources are in place for the company to meet its objectives and review management performanceSet the companies values and standardsEnsure that its obligations to shareholders and others are understood and met.

Directors sitting on the Board in any insurance entity shall be possessed of the necessary skills, competence and experience, in terms of management capabilities preferably in the field of insurance or insurance-related disciplines.

Board of Directors

Essential Standards

Meeting Regularly

Discharge of duties efficiently

Non-executive directors (led by independent directors)

Meet annually without the chairmans presence to appraise the chairmans performance and on other such occasions deemed appropriate

All concerns of the directors about running the company shall be recorded in the minutes of the Board

Annual Report

Statement of how the Board operates, types of decisions to be followed and those that are delegated to management Identification of chairman, vice chairman, independent director and the chairmen and members of the nomination, audit and remuneration committees. Number of meetings and its attendance

Constitution of an effective Board

Composition

At least 5 but not more than 15 members elected by shareholders

2 independent directors in the Board

Balance of executives and non executives

No individual or small group of individuals can dominate the Boards decision making.

Chairman and CEO

Must be separate in principle to ensure balance of power, accountability and independent decision making

Chairman shall be non-executive director Check and balance

SEC CODE: at least 2 or 20% of the member of the Board, whichever is lesser

SEC CODE: If the position of Chair and CEO are unified, the proper checks and balances should be laid down independent views.

Appointment to the Board

Essential Standards

There shall be a formal, rigorous and transparent procedures for the selection and appointments to the Board.Appointments to the Board shall be made on merit and against subjective criteriaCareful deliberation and consideration shall be done to ensure appointees have enough time for the job.Plans shall be in place for orderly succession to the Board and that of the senior management level in order to maintain a balance of appropriate skills and experiences within the company.

Audit Committee

Nomination Committee

Committees

Remuneration Committee

Nomination Committee

Composition

At least 3 members of the BOD, one of whom must be independent

Role:

Shall review and evaluate the qualifications of all persons nominated to the Board as well as those nominated to other positions requiring appointment by the BOD. It should prepare a descriptions of the roles and capabilities of a particular appointment.

Audit Committee

Composition

Shall be comprised of independent board members, preferably with accounting and finance experiences

Role:

Provides oversight of the institutions internal and external auditors.

It shall monitor and evaluate the adequacy and effectiveness of the internal control system of the company.

Remuneration Committee

Composition

At least 3 members, one of whom is an independent director

Role:

It shall judge or make plans where to position the company relative to other companies. But such comparisons shall be used with caution in view of the risk of an upward ratchet of the level of remuneration with no corresponding improvement in performance.

It shall delegate responsibilities for setting up remunerations for all executive directors and chairman, including pension rights or any compensation payments.

SEC vs IC

SEC CodeIC CodeDuties and FunctionsEnsure:Standard of best practice for the company and its stakeholdersConduct itself with utmost honesty and integrityInstall a system of selection to ensure a mix of competent directors, each of whom can add value and contribute independent judgment to the formulation of sound corporate strategies and policies.Essential Standards:Board must meet regularly to discharge its duties efficiently, and all concerns of Directors shall be recorded in the minutes of the Board.Responsibilities of BoardEssential StandardsAdopt the companys strategic plan.Oversee conduct of companys business to ensure business properly managed, and dealings with policy-holders, claimants and creditors are fair and equitable

SEC CodeIC CodeSelect and appoint the CEO and other senior officers who must have the motivation, integrity, competence and professionalism at a very high level.Adopt a professional development program for employees and officers and succession planning for senior management.Identify principal business risks and ensure implementation of appropriate risk management system.Approve corporate policies and core areas of operations of under-writing, investments, reinsurance and claims management.Plan succession, appointing, training, fixing the compensation of replacing senior management.Develop and implement an investor relations program

SEC CodeIC CodeDetermining corporations purpose and value, set strategies and general policies to ensure that it survives and thrives despite financial crisis and its assets and reputation adequately protected.Provide sound written policies and strategic guidelines that will help decide on major capital expenditures.Determine important policies that bear on the character of the corporation its long-term viability and strengthReview adequacy and integrity of internal control systems and management information systems, including systems of compliance with the laws, rules, regulations, directives and guidelines.Select/appoint officers who are qualified to administer insurance affairs soundly and effectively, and establish adequate selection process for all personnel.Apply fit and proper standards on personnel.

SEC CodeIC CodePeriodically evaluate and monitor implementation of such strategies, business plans and operating budgets as well as managements over-all performance to ensure optimum results.Ensure that company complies with laws, regulations and codes of best business practice.Identify the companys major and other stakeholders formulate a clear policy of communication, render accounting on serving their legitimate interests.Establish compensation package for all personnel consistent with interest of all stakeholders.Review/approve material transaction not in the ordinary course of business.Establish system of check and balance for the board.Have appropriate reporting system so Board can monitor, assess and control managements performance.

SEC CodeIC CodeProvide an investor relations program that reaches to shareholders.Adopt system of internal checks and balances, which may be applied in the first instance to the Board and a regular review of such system, must be made.Endeavor to provide appropriate technology and systems rating to account for available resources to ensure a position of a strong and meaningful competitor.Present to Board members and shareholders balance and understandable assessment of companys performance and financial condition.Appoint Compliance Officer to be responsible for coordinating, monitoring and facilitating compliance with laws, rules and regulations.Entitled to Corporate Secretary who shall ensure: all appointments are proper, all necessary information obtained from directors, both for the companys own record and in meeting statutory and agency obligations.

SEC CodeIC CodeIdentify risk areas and key performance indicators and monitor the factors with due diligence.Constitute an Audit and Compliance CommitteeProperly discharge Board functions by meeting regularly, giving due consideration to independent views, and all meeting should properly be minuted.Keep Board authority within the defined powers of the corporation, as prescribed in its articles and by law, and in existing laws, rules and regulations.

Duties and Responsibilities of Individual Directors

SEC CodeIC CodeConduct fair business transactions with corporation and ensure that personal interest does not bias board decisions.Devote time and attention necessary to properly discharge his duties and responsibilities, familiarize himself with the institutions business, must be constantly aware of its condition and be knowledgeable to contribute meaningfully to Boards work.Conduct fair business transaction with the company to ensure that personal interest does not bias board decisions.Act honestly, in good faith, and with loyalty to the best interest of the company, stockholders and other stakeholders such as policy-holders, investors, borrowers, other clients and general public.Devote time and attention necessary to properly discharge their duties and responsibilities, familiarize himself w/ the companys business, must be constantly aware of the companys condition and be knowledgeable to contribute meaningfully to Boards work.

Duties and Responsibilities of Individual Directors

SEC CodeIC CodeTo act judiciously Before deciding on any matter brought before the Board of Directors, he should thoroughly evaluate the issues, ask questions and seek clarifications.Exercise independent judgment: He should view each problem/situation objectively.Have a working knowledge of the statutory and regulatory requirements affecting the corporation, including contents of its articles of incorporation and by-laws, SEC requirements and of other regulatory angencies.Act judiciously: Before deciding on any matter brought before the Board, he should thoroughly evaluate the issues, ask questions and seek clarification.Exercise independent judgment: He shall view each problem/situation objectively.He shall have working knowledge of the statutory and regulatory requirements of the company, including contents of articles of incorporation and by-laws, IC requirements and of other government agencies.

Duties and Responsibilities of Individual Directors

SEC CodeIC CodeObserve confidentiality of non-public information acquired by reason of his position, and not disclose said information to any other person without board authority.Every director shall make decisions objectively in the companys interests. Non-executive director shall: * Scrutinize performance of Management in meeting agreed goals and objectives; monitor performance report. * Constructively challenge and help develop strategic proposals for the company.

Accountability and Audit

The Board is primarily accountable to the stockholders. It should provide them with a balanced, position and prospects on quarterly basis, including interim and other reports that could adversely affect its business, as well as reports to regulators that are required by law.

Preparation of Financial Statements

Effective system of internal control

Insurance Commission Circular no. 21-2009

The scorecard requires full disclosure of company practices on corporate governance in accordance with the Principles and Leading Practices on Good Corporate Governance.

Corporate Governance Scorecard

OBJECTIVE: The scorecard has been developed to further measure levels of compliance with corporate governance rules and regulations.

Developed by the IC and during the Annual working session of the Institute of Corporate Directors (ICD) (a non-government organization that has been in the forefront of promoting corporate governance reforms in the Philippines)

Employs the person-on-the-street test serving as a reasonable approximation of the quality and quantity of public disclosure.

Corporate Governance Scorecard

It takes the side of an ordinary investor with no special access to any privileged information. The easier for the ordinary investor to get information, the higher is the score.

IssuesWeightsI. Rights of Shareholders15%II. Equitable Treatment of Shareholders15%III. Role of Stakeholders10%IV. Disclosure and Transparency30%V. Board Responsibilities30%Total100%

Manulife Financial Corporation

Business Profile

Manulife Financial Corporation (MFC) provides financial protection and wealth management products and services to both individual and group customers in the United States, Canada, and Asia. These products and services include individual life insurance, group life and health insurance, long-term care insurance, pension products, annuities and mutual funds.

Risk Governance

Audit and Risk Management Committee (ARMC)

Assisted the Board in its oversight with respect to the effectiveness of Manulifes risk management and compliance practices

The Board of Directors oversees the implementation by management of appropriate systems to identify and manage principal risks of the companys business and periodically reviews and approves our enterprise risk policy, risk taking philosophy and overall risk appetite.

Strategy:

Our corporate governance practices, corporate values, and integrated, enterprise-wide approach to management risk set the foundation for mitigating risks. We strengthen this base by establishing appropriate internal controls and systems and by seeking to retain trained and competent people throughout the organization.