AlDEilNI-aRel-

NATIONAL REINSURANCE CORPORATION OF THE PHILIPPINES18th Floor, Philippine AXA Life Centre, Sen. Gil .,- PLryat Avenue .orner Tindalo Street. Makati City 1200, Philippines

Trunk lines: +632 759 5801 ro 06 * Fax: +632 759 5886 * Website: nrcp.com.ph * e mail: n(p@nrcp.com.ph

May 23,2012

Securities and Exchange CommissionSEC BuildingEDSA, Mandaluyong City

Attention: Atty.JustinaCallanganDirector

Re: 2011 Annual Report

Gentlemen:

We reply to your letter dated April 30, 2012, a copy of which we received on May 9, 2012,advising National Reinsurance CorpoEtion of the Philippines (the "CoDoration) of cefiain {indingspertaining to its 2011 Annual Report (sEC Form 17-A), and r€quiring the Corporation to submit an

Amended 2011 Annu€l Report and its explanation on the findings of the Commission, within 15 days orufiil May 24,2012.

In compliance with your requirement, we hereby provide the following exdanation on each of thefindings mentioned in your letter dated April 30, 2012:

Finding 1: Pa l - Business and Gen€ral Informalion- Disdose he status of any publicly

announced n* produc't or sewice.

Response: Not edicde.

Finding ?: Part l - Busine$ and Generat tnfonnati> Comp€t'lion - O€Bctibe the industy in*fiich the regbbant is sdling or expects to sel its ptodtttts or sewices, and

wiere applicable, any rccognized bads wihin i[at indusfry. mResponse: Vw|ile t|e initial rcport already makes re{erence to conpelition fro.n told$t reinsu|els,

morc detail has been pmiided ulder the sec'tim entit€d Compdilion on page 5 and

page 6 d t|e anended report.

Finding 3: Part | - Business aDd Generd Infomdion - Disdose how dependent the business

is upon a single cudotrrr ot a f* cusiomers, the loss ol any or more of *thichryould haw a matcrial adreme effec{ on tie registrant and ib subsidiades, taken

as a rrhole, m.

Response: The Co pany has a dv€rsifed o$tmer base that ind'rdes practically dl life and non-

life insurance ccrDanies in the Ptilipfines. lhe CcrTpany is not o/erly dependent on

any single custdner. This infomation is dsdosed at lhe top d page 6.

2

Finding 4:

Response:

Finding 5:

Response:

Finding 6:

Patt | - Buiiness and General Infomation - Disclose any need for government

approval of pdncipd produds or sewices. mNot aodicaue.

Patt | - Business and General Infomation - State the number of legistrant'spres€nt employeG r|d number of employees it anticipatF to have within theensuing trvelw (14 monlfts. mA section on Employees has been added on page 6.

Item 2 - Properlie- Indicde what prcperties lhe rcgistnnt intends to acquire inthe next hrelve {t} monhs, he coct of sudr acquisilion, the mode of acquisition,and uie sources of financing it exp€c'ts to use.

There is no defirite dan as yet for any property acqisition. Holv€ver, lr€ ha\€ added a

disctosule under the Properties whidr sets ftrlh our position that arry such acquisilion will

not have a rnate{id inpad m the Canparfs finamid mndilion. We will provide

imnEdate dsclosure via SEC Fom 17-C when and if a property lransaction

materialzes-

Response:

We likewise submit herevrith the Amended 2011 Annual Report of the Corporation.

We trust that the foregoing sufficiently addresses your requirements. Should you have furtherquestions or clarifications, please let us know.

Kind regards.

COVER SHEET6 0 I I t

S.E.C- Reqist-ation Number

o F T H E P H I L I P P I N E s

(Company/s FrJl Name)

I 8 T H F L o o R P H I L I P P I N E A x .A L I F E

c E N T E R S E N. G I L P U Y A T A Y E N U E

C o R N E R T I N D A L o s T, M A K A T I C I T Y

. Steet City / Town / Province )

HNE.HUANGContact Person

ffi EE"lhrffi Day

Amual MeetingFor lhe yEar endhg December 31 , 201 1

Secondary License Type, f Applicable

Dept. Requiring

Total Amour of BofiovJings

Domestic Foreign

Gompany Telephone Number

EtrffiMont| Day

FiscalYear

$ft Doc.

Total No. of Stockholders

FORM TYPE

Anerded Micl€s Numberlsec-tion

To be accompli$ed by SEC Personnel concemed

File Number

Document l.D.

t----- ---------------i

STAMPS I

I

Remarks = pls. use black ink for scanning purposes

Cashier

SECURITIES AND EXCHANGE COMMISSION

SEC FORM 17.A, AS AMENDED

ANNUAL REPORT PURSUANT TO SEGTION 17OF THE SECURMES REGULANON CODE AND SECTION 141

OF THE CORPORATION GODE OF THE PHILIPPINES

1 . For the fiscal year ended: December 31, 201 I

2. SEC ldentification Number E011E 3. BIR Tax ldentmcafion No.: 000480{69

4. Exact name of issuer as specmed in its charter:National Reinsurance Gorporation of the Philippin6, doing businessunder the names and stldes of Philippine National ReinsuranceCompany; Phill,laRe

5. PhilippinesProvince, Country or other jurisdidion of Industry Classification Code:inconporalion or organization

7. 18h Floor, Philippine AXA Life CentreSen. Gil Puyat Avenue comer Tindab St'eetMakati Gity, PhilippinesAddress of principal ofFce

8. (632) 7595801 to 05lssuefs telephone number, induding area code

6. | | (sEc Use only)

9. Not ApplacableFormer neme, former addness, and former fiscal year, if changed since lasl report.

10. Securities registered grrsuant to Sec{ions 8 and 12 ofthe SRC, orSec. 4 and I ofthe RSA

Title of Each class No. of Shares Outstandino Amount

Common Shares 2,123,605,600 Php2,123,605,800.00

ToTAL 2,123,605,600 Php2,123,605,600.00

1 1. Are any or all of these securities listed on a Stock Exchange?

Yeslxl No I I

lf yes, state the name of such slock exchange and the classes of securities listed therein:Philappine Stock Exchange Common

1204Postal Code

TABLE OF COi{TENIS

PART I- BUSINESS AND GENERAL INFORMANON

Paoe No.

Item 1 .

Item 2.

Item 3.

Item 4.

Business

Properties

Legal Proceedings

Submission of Maters to a Vote of Security Holders

4

8

I

10

PART II - OPEMTIONAL AND FINANCIAL INFORMATION

Market Price of and Divftlends on Registrants Common Equily 8ndRelated Stockholder Matters

Management's Discussion and Analysis of Financial Condition andResults of Operations

Financial Statements

Changes in and Disagreements with Accountants on Accounting andFinancial Disclosure

Item 5.

Item 6.

Item 7.

Item 8.

11

13

26

Item 12.

PART III - CONTROL AND COMPENSATION INFORMATION

Item 9. Directors and Execulve Omcers of the lssuer

Item 10. Executive Compensation

llem 1 l. Secudty O$rnership of Certein Record and Beneficial O/vners endMsnagement

Cerlain Relationships and Related Transactions

PART IV _ CORPORATE GOVERNANCE

Item 13 CorDorate Govemance

PART V - EXHIBITS AND SCHEDULES

Item 14 Exhitits and Reports

SIGNATURES

EXHIBIT INDEX

AUDITED FINANCIAL STATEMENTSilSUPPLEMENTARY SCHEDULES

26

27

2a

35

37

39

46

47

48

12. Check whether the issuer:

(a) has Rled all reports required to be filed by Se6tion 17 of the SRC and SRC Rule 17.1

ihereunder or Section 1 1 of the RSA and RSA Rule 1 1(a)-1 thereunder, end Sections 26 and 141

of The Corporation Code of the Philippines during the preceding twelve (12) months (or for suchshorter period that the registrant was equircd to file sucfi repois);

Yes [x] No [](b) has been subject to such filing requirements forthe pa$ ninety (90) days.

Yes lxl No il13. State the aggregate marfiet value of the voting stock held by non-afiliates of the registrant.

The aggregate market value shall be computed by reference to the price at which the slockwas sold, or the average bid and asked prices of such slock, as of a specmed date withinsixty (60) days prior to the date of filing. lf a determination as to whether a particular person

orer ity is an affiliale cannot be made without involving unreasonable efforl and expense, theaggregate market value ot the common stock held by non-affiliates may be calculated on thebasis of assumptions reasonable under lhe circumsiances, pfovided the assumdions are setforth in this Form. (See definition of "affiliate" in ?nnex B).

Shares Held byNon-Afiiliates

Market Value per shareas of xllxx/n

Total Market Value

APPLICABLE ONLY TO FAUERS IIWOLVED ININSOLVENCY/SUSPENSION OF PAYMENTS PROCEED]NGS

DURING THE PRECEDING FIVE YEARS:

14. Check whether the issuer has fil€d all doc ments and reports requircd to be filed by Sec*ion17 of the Code subseguent to the distibution of securities under a plan confirmed by a courtor the Commission. N/A

Yes [ ] NoI I

DOCUMENTS INOORPORATED BY REFERENCE

15. lf any of the following documents are incorporated by reference, briefly describe them andidentify the part of SEC Fom t7-A into which the document is incorporated:

(a) Any annual report to security holders;

(b) Any informdion statement filed pursuant to SRC Rule 20;

(c) Any prospectus filed pursuant to sRc Rule 8.1.

PART I. BUSINESS AND GENERAL INFORMATION

Item l. Business

(11 BusinessDevclopmel

National Reinsur:lnce Corporation of the PhilipFines Oereafter the "Company" or the'Corporation) was incorporated in 1978 pursuant to Presidential Decree No. 1270. TheCompany operates as a prcfessional reinsurance coryoration providing life and nonJifereinsurance to the Philippines snd to neighboring insurance marke{s. Since 2007, the Companyhas also been doing business ulder the names and slyles of "Philipftne National ReinsuranceCompany; PhilNaRe" in order to reinforce its image as the country's national reinsurer and itsposition as the only domestically-incorporated professional reinsurance company in thePhilippines.

The primary mandale of PhilNaRe is to assist in the development of the Philipdne insuranceindustry (a) by proviiing reinsurane€ capacity and support to Philippine insurance companies, (b)

by serving as a medium for rcgional and intemational cooperation in insurance, and (c) bycontributing towards higher retention of business within the courtry. The Company became thevehicle for the Philippines' perticipation in the Asien Reinsurance Corporation CAsian Re'), amunilateral reinsurance entity based in Bangkok, Thailand eslablished to foster regionalcooperation among insurance companies doing business in Asia.

PhilNaRe became the countys sole domeslic professional reinsurance company following itsmerger with Universal Malayan Reinsurance Corporation CUMRe) on March 6, 2006. UMReilself was the pr@uct of the 2OO4 merger between Universel Reinsurance Corporation ("URC)and Malayan Reinsurance Corporation CMRC). Pnor to their 2004 merger, URC had been thecountry's second largest reinsurer (n terms of gross pr€miums written) end MRC had beenranked third. At present, PhilNaRe has no subsldiaries.

The Company has nol been a p€rty to any bankruptcy, receivership or similar proceedings.

(21 Business of lssuer

Principal Products & Services

The Company writes both life and nonlife reinerrance. Major business lines under the non-lifesegment include fire, marine & aviation, and casualty & others. Marine & aviation coversinsurance on aircrafi, marine vessels and marine cargo. The casualty & others line covers variousbusiness and personal insurance risks, the biggesi of which are motor car atd industrial all risk.Induslrial all risk is a blanket policy thet protects a business establishment from various perilssuch as fire, machinery breakdorirn and loss of property.

As of December 2011, casualty & others accounled for 54% of the Company's Gross PremiumsWritten CGPW") and 37o/o of Net Premiums Written CNPVV), fire accounted for 26% of GPlrv and26% of NPW, life eccounted for 13% of GPW and 24% of NPW and madne end aviationaccounted for 77o of GPW and 13% of NPw'

The Compeny writes reinsurence largely for the domeslic market. The portion of the Company'sGPW accounted for by foreign insurance companies for the years 2009, 2010 and 2011 are 1006,11% and 9%, respectively.

The Company ofiers reinsurancr both on treaty srd facultative anangemenls or contmcts.Typically, in treaty anangements, reinsurance is offered to cover more than one polioy or entire,precisely defined portfolios while facultative arrangements pmvite cover on a per policy basis.Facunatue rcinsurance is indivtlualty wlinen by the reinsurer. Each facultative reinsurance polioy

is negotiated separately, with the pricing and olher terms established at the time lhe policy isundeMritten. Under a faa.rltative anangement the ceding oompany is under no obligation toreinsure any particular risk and the reinsurcr to whom an ofrer is made is likewlse under noobligalion to acceF any particular ]isk.

ln a treaty, the ceding company purchases rcinsurance to cover specified blocks of business ithas underwritten. The ceding company and the reinsurer enler into a treaty contract which setsout the terms, conditions and limitations which govem the reinsurance arrangements. Bothparties are automatically bound in advance with respecl lo any and all risks that fall wilhin thescope of the contracl such that the ceding cornpany woutd be obliged to cede, and the reinsurerwould be obliged to accept all business falling urder the scope of the agrcement. Reinsurancetreaties specify the ceding company's binding limil, wttictt is the maximum smount of risk that canbe ceded automatically and that the reinsurer must acc,€pt. In contrast to facultative teinsurance,the reinsurer does not approve each indivilual risk under a tre€ty arangement.

Competition

As the sole domestic professional reinsurance company in th€ Philippines, the Company'sbusiness prospects are closely al'qned with the growth and development of the insuranceindustry in the Philippines. While the induslry has in recent years exhibited spurts of growth inpremium income, much of this expansion was attributable to increases in investmentlinkedinsuran@ products of the life insurance segment, which products are not reinsured by theCompany. In its main business of rcinsuring property & casuatly risk on the non-life segment andmoftality and disattlity risks on the life segment, lhe Company enticipates groMh to be closelyconelated with the expansion of the countryS GDP. As GDP increases, the volume of neededprotection and the demand for insuranc€ prcducts also increases, thus the need for reinsuranceproducts to accommodate rising levels of insurance business.

The Company has idefitified its competitors as domestic insurance @mpanies which are alsolicensed to sell reinsurance and the foreign reinsurance companies who have repres€ntativeagents licensed by the lnsurance Commission. PhilNaReb competltors have different objecllves.domestic insurance companies' core business is selling direct insurance to the general populationand thus their reinsurance operations arc more offen used for exchange of reinsurance businesswith other domestic companies to eam premiums rvhile diversifying their portfolio than for purerisk transfer/management.

Foreign reinsurance companies on the other hsnd directly compete with the Company in terms ofproducts and services. The Company competes with a number of large foreign reinsureF in itsselected lines of business. These companies offerthe fines of feinsuran@ that the company alsooffers. The company benefits to a certain exent from Presidential Decree No. 1270 ( 'PD 1270)which mandates all life and nonlife insurance and reinsurance companies doing business in thePhilippines to cede to the Company at least ten percent of their outward reinsurance placed withforeign reinsurers.

Based on the most recent industry information provided by the lnsurance Commission, totalpremiums coming ftom reinsurance for the liG and non-life insurance industry in 2010 amountedto P18.8 billion, of which the Company's share was P4.3 billion or23%.

The princip€l methods of compctilion in the reinsurance business are prioe and service. The priceof the product or premium is the expected value of the risk reinsurance companies are chargingfor accepting risks. Several fac{ors such as tadffs, mortalily, exposure ac-cumul€tion andcatasirophe diclate premium levels. Reinsurance seNice is measuted through a valiety of factors:risk acceptance capacity, daims volatility mnagemenl, risk sharing, technic:l advice on nev,products and martets and underwriting expertis€.

As of December 31, 2011, the Company had exislirE reinsurance treaties with 77 out of the 85licensed non-lffe insurance companies in the Philippines and 33 of the 34 licensed life insurancecompanles.

Fot 2011, the Company's top ten customers accounted fof 50% of the Companyl grosspremiums written but only 4096 of net premiums retained. No single custotner accounted formore than 8.6% of net sales.

Employees

The Company cunently hes ninety-six (90) employees, of whom twer y-one (21) occupy clericalpositions; twenty-three (23) are in professional-technical posts; thirteen (13) are at lhesupervisory level; thirty-four (34) are in managerial and officer levels; and five (5) occupyexecutive positlons.

Broken down by operations, there are fourteen (14) employees in the Life Operations Group,thirty-two (32) in the Non-Life Operations Group and fifty (50) employees in the support group ofAccounting and Finance.

ln the next 12 months, the company p{ojects an increase in the number of emdoyees, fromninety-six (96) to one hundred four (104).

The Company's employees are not and have never been subject to any Colledive BargainingAgreement.

Risks

The occurence of severe ca'',s'rcphlc even6 nay nave a mdbrtal adve6e etw on Arcfinanciat r€sutfs aN corrditions

The Company reinsures property, marine and casualty insurance with large aggregateexposures, coresponding to the possibility of loss due to natural and man-made disaslers suchas typhoons, floods, and earthquakes. The Company expects that the loss experience generallywill include inftequent everis of great sevedty. The risks associated with natural and man-madedisaslers are inherently unpredict€ble, and it is difrcult to predic* the timing of such events withstatislic€l certainty or estimate the amount of loss any given occurrenoe will generate. However,such losses are considered manageable. The Company has procured an excess of lossproteclion to limits its risk exposure to Pilo million per catastrophic event.

A signifrcarrt emoutrt 6 t',e Company's invested assets wrfl be subject to ct anges i''interest ratss, exchange ,ates anat nl€,d(€t volatility.

A maior portion of the Company's assets is its invesdment portfolio lvhich, as of December 31,2011, amounted to approximately P7 bllion. About 89% of the potffolio was invested in fixedincome obllgations of the Phitippine govemment and of large Philippine corporations. About E%was invesled in equities traded on the Philippine Stock Exchange. While the bulk of itsinvestments are in the local cunency, lhe Company mair ains some invesiments in securitiesdenomineted in U.S dollars.

The fair maftet value of these assets end the inveslment income from these assets will fluctuatedepending on general economic and merket conditiorE. Inveslments in fixed income securitiesmay be adversely afecled by fluduations in interest rates. An increase in interest rates willdecrease the vglue of the inveslments while a decrease in interest retes will increase ihe value ofthe investments. The investmeri results may also be adversely sffected by chsnges in thebusiness, financial condition or results of op€rations ofthe entities in which the Compeny invests.

Since a subs{anlial amounl of the Company's inveeted assets ere clessitled as securities

availeble for sale, changes in the market value of these securities will be reflected insharehoklets' equity.

The Company's Boad of Direclors has eslablished investment guidelines which involvediversfiing the investment portfolio, limiting investments to inslruments not exposed to significantrisks, performing rigorous analysls of potenfiat investments and establishing sultable benchmaftsfor targeted rcdums, among others. The Company cunently inves'ts only in inslruments allo/*ableunder Section 200 of the Insurance Code and by related issuances of the InsuranceCommissioner. The Board of Directors of the Company has established an InvestmentCommitee 10 implement the Company's inveslment strategy in eccordance wilh approvedinveslment guidelines.

The Company's frnancial colrdifun nay be affied by delays in Arc payment of premiutt sby cedarrts,

On facultative acceptances, the Company generally provides its cedants a grace period of 120

days for the sefilement of prcmiums. \Mrthin this 120{ay premium payment wananty term, thecompany ls obligated to pay legitimate claims arising trom ns acceptance of risk, even though it

may not have yet received any premiums. As of Deoember 31 , 201 1, premiums receivable fromceding comp€nies amour ed to Pl,076.6 million.

To mitigate the risk of non-payment of premiums, the Company regularly reviews and evaluatesthe financial capacity and payment history of the companies from which it accepts business.Moreover, should the Company not receive premium paymenls within the prescribed premiumpayment warranty term, the Company automatically cancels its acceptance and any claimsarising from said acceptance will be denied-

The Company's tinancial pefionnance may be atrecte.t by flre inabilw of tEr€trccessioraires to pay their share of ,osses

As of end 2011, the Company retroceded P2.4 billion or 68% of its gross premiums written toretrocessionaires. The company retroceded paft of the gross pemiums in order to transfer therisk to the retrocessionaire. As ce ain loss evenls occur, the Company is obligated to pay thelegal claims made by ils customers. lf the Company retroceded part of the premiums paid by itsclients to retrocessionaircs, then the Company is entitled to recover commensurately the losses itpaid to its clients from the latter. However, if the retrDcessionaire is not able to pay the claimsmade by the Company, the latter will shoulder the losses il pai.l to its customers and this willimpact negatively on the Company's financials. As of end 2011, reinsurance recoverable onlosses amounted to P3 billion.

In choosing its retrocessionaires, the Company takes into consideration a r€drocessionaircsfinancisl capacity, technical kno\Adedge/expedise and industry reputation. The Company alsoconsiders the retrocessionalres record of paylng daims and adverse balances. The companyadheres to these guidelines to ensure that this risk is mitigated and/or avoided.

Item 2. Ploperties

The net property, plant and equiprnem of the Gompany as of December 31, 2011 amounted toPl27 million, broken down as follows:

The Companyb princip€l offce is located at the 18tn Floor, Philippine AXA Life Centre, SenatorGil Puyat Avenue comer Tindalo Street, Mekati City. The Compeny owns the condominium unitscomprising approximately 993.13 square m€ders together with 7 parking slots.

The company also maintains a Llfe and Corporate Services center ofrice at the 31d Floor, AyalaLife-FGU center,6811 Ayala Avenue, Makati City, comprising approximately 824 square meterstogether with E parking slots. This property had been owned by UMRe which, as earlierdiscussed, was merged irto the Company on Marcfi 6, 2006. Pursuant to the merger, ownetshipof the Ayala Life-FGU office condominium was passed to the Company.

The Company intends to consolidate its operation in one location. Such plans may involve thedisposal and/or acquisition of a major property (office space) in the next twelve months. As of thedate of this report, ths Company has yet to determine the prop€rty it ir{ends to acquire, th€ cosl,or the mode of acquisition C.e. by purchase, lease or otheMise). However, any acquisition shallbe tinanced through the sale of the Companyb existing ofnce space andlor thmugh intemallygenerated funds. As of December 31, 201 1 net property, plant and equipment accounted for only1% of total assets. The Company do€s not anticipate any acquisition, should it occu., to have anoverly material impad on the Company's financi€l condition.

There are no liens, mortgages or encumbrance over the aforementioned properties of theGompany. There is likewise no limitation on the olvnership or usage of the said properties,except under slandaKl rules oftheir respedive condominium corporations.

There is no litigation or claims of material importance known to the Company to be pending orthreatened against the Contpany's pmperties.

Item 3. Legal Proceedings.

The Company is cunently a p€rty to the following litigation cases:

1. tndustrial Bank of Korea vs. DoMSATCivil Case No. 99-188Ragionel Tnal Cout, Mekati CW, Branch 135

This is e third-party compleint filed by the Govemmet Service lnsurance Sy$em (GSIS) againstthe Compeny as well as other reinsurcrs (collectively, the 'reinsurers). The thid-party complaintstemmed from a complaint filed by the Industriel Bank of Korea, e{ a/. egainst DOMSAT Holdings,Inc. CDOMSAT) and GSIS to eollect DOMSAT'S debt in the amount of US$1l million, plus

(in Philippine Pesos) Cost

Accllmulated

Depreciatbn Net book value

condominium unfts 1-*,882,915 63,632p97 91,250,818

Otfice improvements u,z4L6A9 6,68L82s 5,559.864

Office fumiturc and equipment'oAss,422

9,568,256 887,166

Transportation equipment 13.9523O7 4,216433 9,74D,874

EOP equipment 39,m9,102 19,071,915 L9,937,L87

interesl, defaull intercsl, expenses as well as damages. The proceeds of the loan werc used tofinance DOMSAT'S two-year lease and/or purchase of a Russian satellite. GSIS'S liatility isbased on tne surety bond it issued to guarantee the rcpayment by DOMSAT of its debt (the'surety bond). GSIS filed € third-party complaint against the reinsurers pursuant to the terms ofthe bond r€insuran@ binder and the reinsurance treaty executed by them.

GSIS filed a Manifestation and Urgent Omnibus Motion dated March 25, 2008 CMotion) whichmoved for the continuation of the main comdaint between the lenders on the one hand, andDOMSAT as well as GSIS on lhe other (tndustrial Bank of Korea, et al. vs. DOMSAT, et al.).GSIS fufther moved for the suspension of the proceedings in its third-party complaint againstNRCP and the other reinsurcrs, because the liability of the reinsurejs is contirEent on the liabilityof GSfS in the main comdaint. In an Order dated December '12, 2008, the court suspended theproceedings against NRCP and the thid-perty defendants until affer the comple{ion of theproceedings in the main comdaint, since the third-pady defendants' liability is contingent onGSIS'S liability in the main comdaint. Thus, the thitd-party proceedings were deferred until thecompletion of the proceedings in the main complaint.

Trial in the main case is ongoing.

2. wRCP vs. Strcnghold lnsumnce companyCivil Case No. 1&1036Regional Tnal Cout, Makati City, Branch 142

This is a complaint filed by NRCP for sum of money with damages and application for attachmentwith respect to its daims against S:tronghold Insurance Company, Inc. fstronghold).

On its first daim, NRCP is the reinsurer of a bankers blanket bond urder GSIS Policy No. BBS95021 between the Land Bank of the Philipdnes CLBP') and GSIS as insurer. NRCP rcinsuredits risk with Stronghold. \,,lIrth tne occurence of the contingency insurcd under the bankersblanket bond, LBP filed an insurance claim fmm GSIS. GSIS paid the amount of P/+9,000,000.00lo LBP. GSIS then filed ils daim with NRCP, which, in tum, filed its daim wilh Slronghold. NRCPhas since peid GSIS'S claim for P38,513,885.40. Despite demand by NRGP, Stronghold failed topay.

With regard the second claim, GSIS and Bangko Sentral ng Piliftnas CBSP) entered into a fireinsurance contract. GSIS, in tum, reinsured its risk with NRCP. NRCP then reinsured its risk withStronghold, which likewise reinsured its risk with other entfies. On February 22, 2001, BSPincuned a loss due to the fire covered by the insurance. GSIS paid BSP'S claim and NRCP thenpaid its share of the GSIS cl€im amounting to P63,321,280.00 for the buildings andP9,254,9'12.O'l for the contents of the building which were losi due to fire. Thereater, NRCPnotmed Stronghold of the total amount of its share in tne bss, which amounts to P57,564,800.39for the buildings and P8,413,556.67 for its contents. Despite repeated demands, Strongholdrefused to pay its share ofthe loss to NRCP.

The hearing on the application forthe issuance of a writ of prcliminary atachment is on{oing.

3. NRCP vs. Strongf,old lnsuranc€ Company, lnc.lnsuran@ Commission. ManilaI.C. Adm. Case tlo. RD422I n su.a,nce Conm i ssion, M a nila

This is a complaint filed by NRCP with the Insuranoe Commission againsl Stronghold for thercvocation or cancellation of Stronghold's liocnse to oonduc* insutance business, with respectNRCP'S second claim as discussed in itern No. 2.

9

Despite several meetings betureen the parties, they were not able to come up with a settlement.The parties have filed their respective Position paper, and the case has been submited forresolution.

Item ,1. Submission of MatteF to a Vote of Security Holders

No matters were submited to a vote ofthe stockholders during the fourth quarter ofthe fisc€lyear ending December 31, 2011.

10

PART II - OPERATIONAL AND FINANCIAL INFORMATION

Item 5. Market for lssuefs Gommon Equity and Related Stockholder Matter

{Al Market Pdce of and Dividends on Registrant's Common Equity and RelatedStockholder MatteF

(f ) Market Infomation

The common shates of the Company have been listed on the Philippine Stock Exchange sinceApril 27, 2007. The hbh and low prices for each quarter of the last two years are as follot|/s:

2010 m10 an1 2011

Htrh Low Hkh lowlst quarter2nd q.rarter3rd quarterrEh Quater

L.621.982.422.ZZ

L.M1.44L.74L.76

1.82L.75L.721.86

1.581.501.40

The price information as ofthe latest prac{icable traditp date, March 31, 2012, was P2.48 pershafe.

(21 Holders

Approximate Number of Holders es of 3l December alllThere were approximately 286 common shorcholdeF of the Company as of December 31, 201 1.

The Top 20 shareholders as of December 3'1, 2911, with their oorresponding shares andpercent€ge ownership ofthe Company, are as follovtE:

Name of Record OwnerNo. of Shares

Held Percentage

PCD Nominee corporation(Filipino)(Non-Filioino)

1,450,086,33397.021.600

68.28%4,57%

2 Bank ofthe PhiliDr*ne lgands 290,795.500 13.69%? FGU lnsurance CorpoEtion 36,1m,000 t.7a%4 Malavan Insurence como€nv. Inc. 35,610,100 1.68%5 Rosario. Paul Gerard B. Del 23,021 ,000 1.08%A PhiliDDine chaner Insurance corp. 15,305,900 .72%7 First NatioftYide Assurance corp 13,157,000 .6?/0R Philiprines First Insurance Co., Inc. 11.075.200 .5?AI PhilioDine Americ€n Life Insurance Co. 8,628,600 .41olo

t0 Pa. Ana Go 8/or Go Ki 7,500.000 .35%11 Empire lnsurance Company 7.498,900 .35%12 Indus{rial Insurance Co., Inc. 6,184,900 .2Y/o13 Allied B€nkers Insurance Corporation 5,428,700 .260/o

14 Phil. Intemational Life Insurenc€ co., lnc. 5,110,900 .24%15 NelY lndia Assurance Co.. Ltd. 4,168,300 .200h16 South Sea Suretv & Insurance Co., Inc. 1,152,7@ .20o/o

17 Equitable Insurance Corporation 4,(N5,000 190h

18 Parsmount Life & Gen. ins Com 3,790,100 18o/o

19 Federal Phoenix AssuEnce company, Inc. 3.786.3@ .18o/o

20 Phil. British Assurance Co., lnc. 3.590,400 .'t7%

11

(3) Dividends

It is the CompanyS policy to declare dividends regularly wfth the pay-out determined by theCompany's pedormance as well €ts by the availability of unappropriated retained earnings fordistribution. On May 19, 2011, the Company dedarcd cash dividends amounling to a total ofP43,193,552.00. The payment of divitends by insurance companies is govemed in thePhilippines by Sec'tion 195 of tha lnsuran@ Codo as woll as by Se€tion 43 of the Corporationcode, both of which eslablish the appropriate amount of retained eamings which may be paid outfor dividend distribution. Beyond these inherent limitations, there are no known restrictions orimpediments to the Companyb ability to pay dividends on common equity or are there likely to be

any in the ftrture.

(1) Recent Sales of Unrcgistered or Exempt Securities, lncluding Recentlssuance of Securities Constatuting an Exempt Transaction

The Company had no recent sales of unregislered or exempt securities, including recentissuances of securities consiituting an exemd transaction.

t2

ftem 6. Managemerf's Discussion and Analysis of Financial Gondition and Results ofOperations

Review of 2011 versus 2010

Results of operations

Reinsi/ran{€ $emiums - net of retums or Gross fremiums wfiftenGross premiums written in 2011 decreased by P755 million, or 17.7Vo, to P3,524.3 million fromP4,279.4 million in 2010, retlectir€ the Company's conseryalive undetwriting stance end itsfocus on profitability. Declines resulted across all premium sources, as greater selec{ivity on riskacceptances prevailed. Premiums fiom non-life facultative businss decreased by P375.3 millionor 18.37Vo from P2,043.1 million in 2010 to P1,667.7 million in 2011. Non-life lreaty premiums

declined by P359.6 million or 20.6% from P1,214.9 million in 2010 to P1,385.3 million in 2011,and fife premiums decreased W P2O.2 million or 4.1% fiom P491.4 million in 2010 to P471.3million in 20'l 1.

Net Nemiums retainedReinsurance premiums rctained also declined, W P471.4 million (29.5%) to P1,126.5 million in

2011 trom P1,597.8 million in 2010. The percentage of decline In net premiums for 2011 wasgreater than the percentage decline in gross premiums for the year due to a lower retention ratio

- 32% in 201 1 as against 37Vo in z01A.

Premiums eamedIn line with the decline in premiums retained, premiums eamed decreased by P434.5 million(26.90/6) to P1,182.1 million in 2011 comparEd to P1,616.6 million in 2010. In 201 1 , the decreasein the uneamed premium reserve was P55.6 million as against a decrease in uneemed premiumreserve of P18.8 million in 2010. The relatively large decline in 2011 resulted from the drop in theCompany's premiums during the year, which resulted in the release of reserves for uneamedpremium underthe 24h method of accounting for reinsurance premiums.

Siaae i,h ctarims and /ossesShare in claims and losses for 201 1 decreased by P895.4 million or 48.7% from Pl,838.8 millionin 2010 to P943.4 million in 2011, resulting in an imprcved loss ratio of 79.8oh in 2011 from113.7Vo in 2010. The improvement in loss ratio reffecis lot/rer catastrophe losses and claimsreceived/advised during the year and provides justincation for the Company's tighter undeMritingslandards.

Commissions - netconsistent with the decline in reinsuEnce premiums retained, net commissions decfeased byP90. 1 million ot 2O.7Vo from P435.7 million in 2010 to P345.6 million in 201 1. However,commission ratio (as a percenlage of net premiums retained) increased from 27.3% in 2010 to30 .7% in 2O1 1 .

lnvesftnetrt in@me anc, other inco relnvestment and other income grew by 56.4% to P768.2 million in 2011 from P491.2 million in2010, as positive trends continued in the Company's main investment markets of Philippineeouities and fixed income securities in 201 1.

Interes{ income decreased by 1.8% to P37'1.5 million in 2011 fmm P378.4 million in 2010 as thegeneral low level of inlerest rates prevailed through most of the year. However, trading gain onequities and tixed income securities amounted to P354 million in 2011, more than double therealized gains of Pgg.3 million in 2010. Foreign cufiency translafon gains also reversed fromnegative P21.1 miltion in 2010to positive P7.8 million in gains for 2O11. Dividend income slightlyincreased from P33.6 million in 2010 to P38 million in 2011.

l3

General ancl ac*ninislrative expensesGeneral and administrative $eenses (GAg had a marginal increase of 3.4% to P248.8 million in201 1 from P240.6 million in 2010. While the Gompany successfully controlled operating cos1s, anallowance for impairment amounting to P32.5 million was booked in 201 1 as against acomparable figure of P21.6 million in 20'10. Also, depreciation and amortizston expensesincreased from P20.1 million in 2010 to P28.8 million in 2011 due to additional amortizalion ofcapitalized costs related to computerization.

Tax expenseThe Company's tax expense was fld at P72.1 million in 2011 as against P72.6 million in 2010.Ta)( expense lsrgely represents the final tax on interesi income from the Company's ftxed-incomeDortfolio.

Net mfit Loss)As a result of the aforementioned fadors, the Company registercd a nel income of P340.4 millionin 201 1 as comp€r€d to I net loss of P480 million in 2010.

Financial condition

As of December 31, 2011, total resources of lhe Compeny sdood at P12,638 million, ju$ slightlyhigher than total resources of P12,553 million as of December 31, 2010. Material changes in theCompany's resources which corflributed to lhe increase are described below.

Reinsurance balances receivable, net of alloflance for impairment of P315.6 million, decreasedby P318.3 million or 7,6% to P3,892.2 million in 2011 fmm P4,21O.4 million in 2010 laruely as aresult of collec{ions and lo er level of business volume during the year.

Reinsurance balances receivable indude: (1) premiums due fmm ceding companies (decreasedfrom Pl,180.2 million in 2010 to Pl,076.6 million in 2011); (2) reinsurance recoverable on unpaidlosses (decreased frcm P2,725.7 million in 2010 to P2,589.6 million in 2011); (3) reinsurancerecoverable on paid losses (decreased frcm P454.5 million in 2010 to P396.6 million in 2011);and, (4) funds held by ceding companies (incr€ased from P133.2 million in 2010 to P145 millionin 2011). Reinsurance recoveraHe on losses, which is the la€est component of this asset,represents amounts that the Company slands to recover from its retmcessionaires.

Availabl+.for-sale financial assets (AFS) declined by P931.5 million or 14.8% to P5,365.6 millionin 2011 from P6,297.1 million in 2010 due to lhe sale of AFS securities, the proceeds of whichwere transfened to cash and short-term investrnenls..

Loans end receivables grew by P223.9 million or 52.1% to P584.6 million in 2011 from P360.7million in 2010 principally due to additional invesfients in term loans and the inclusion of certainaccounts receivable for collecdion in earty 2012 (proceeds from sele of vafious equity investmentswhich were sold at the end of the year).

Property and equipment (PPE), net of accumulated depreciation increased by P49.5 million or63.6% to P127.4 million in 2011 from P77.8 million in 2010. The increase was the result of areclessification of cedain condominium units owned by the company from investment propertiesto PPE. These units, located at Ayala LiE FGU Center werc, until March of 2011, beir€ leasecl toan unrelated party. The lease has since been cancelled 8nd the property afrer being renovated isnow being used by the Company for its om purposes.

Defened acquisition costs, which meinly consisl of commissions, decreased by P60.5 million or30.5% to P137.9 million in 2011 from P198.4 million in 2010 in line with the decrease in grossreinsurance pfemiums and net prEmiums retained.

74

Deferred reinsurance premiums increased by P50.2 million or 9.8% as of December 31,2011.This is consisient with the lotver reter ion ratio during the year. DefenEd reinsuran@ pt€miumspertain to the portion of reinsuranoe prcmiums ceded out that relate to the unexpired periods ofthe policies at the end of each reporting p€riod.

Other assets decreased by 5.3% to P266.1 million in 2011 from P281 million in 2010 laQely dueto redassificalion of prcperty no longer intended for rental.

Totaf fiabifities decreased by P92.7 million or 1.47oto m,512 million in 2011 from P6,605 millionin 2010. The decrease in total liabilities is exdained below:

Reinsurance balances payable slighuy decreased by ,64% or by P34.9 million to P5,427.8 millionin 2011 from P5,46,2.7 million in 2010. This accoufit principally includes amounts due loretrocessionaires, which decreased frcm P706.5 million in 2010 to P6r7.E million in 2011; fundsheld for retrocessionaires which decreased from F91.8 million in 2010 to P88.6 million in 2011;and claims payable, which slightly decreased fom P4,664.i1 million in 2010 to P4,661.4 million in201 1. Claims paysble represent 85.9% of the totel reinsu.ance balances peyable and are beinoestablished to provide fot ftJture amounts to pay daims related to insured events that haveoccuned and have been reported but have nol yet been settled.

Accounts payable and acdued expenses decreased by P1.2 miltion or 1.1% from P108.6 millionin 2010 to P107.5 million in 2011 paincipaly due to lolver withholding taxes payable at the end of2011 amounting to P1.9 million compared to P7 million in 4n10.

Reserve for uneamed aeinsur€nce premiums declined to P897.5 million in 2011 fiom last year'sP902.9 million or by P5.4 million due to the decline in lie Company's premiums written.

Deferred reinsurance crmmission decreased by P51.3 million or 39.3% from P130.5 million in2010 to P79.2 million in 201 1 , consistent with the decrease in premiums and commissions.

Total equity as of December 31, 2011 grcw to F6,126.1 million, or 3% frorn P5,948.4 million as ofDecember 31, 2010. Contdbuting to the increase of P177.7 million was the net income posled forthe year 2011 of P340.4 million less payment of cash dividends to slockholders on June 21, 201 1

amounting to 43.2 million, lower revaluation reserve due to the impact of mark-to-marftetadjustments amounting to P59 million and repurchase into treasury by the Company of NRCPshares amounting to P60.4 million.

Material changes (increase/decrcas€ of 5% or morEl in the financial statements

lncome Statement items - 2011 versus 2o1O

18% decrease in reinsurance prcmiumsPrincipally due to lower acceptanc€s for both life and non-life treaty and facultative business.

11% decrease in retroceded premiumsDue to decrease in reinsurance premiums.

30% decrease in net oremiums retained.Due to lo,ver premium volume and lower retention ratio.

197% decrease in reserve for uneamed reinsurance premiums.Due to higher level of reinsurance premiums not suued to 24m method of revenue recognition.

,+3% decrease in underwriting deduc{ions.Due to lovrer claims incuned during the year.

l5

8496 decrease in net underwrititlg lossLargely due to lofier claims incund during the year.

56% increase in investment and other incomeAttributable to higher trading gains on equities and fixed income securities.

1717o increase in net income.Largely due to smaller undeMritir8 loss and higher in\reslment income.

Balance Sheet items - 2011 versus 2010

177% increase in cash and cash equivalerts.Mainly due to inveslment shned from available.for-sale financial assets (AFS) to short-terminvestmerils.

7% dec,.ease in reinsurance balances receivable.Due to colledion of receivables.

15% decrease in available for sale financial assets.Due to sale of AFS securities, the proceeds of which were transfened to cash and short-termlnvestments.

6206 increase in loans end receiveHes.Primarily due to additional investments made in certain fxed rate cor'porate promissory notes andsale of equity securities, proceeds of which form pefi of this account and were stil,for collection.

64% insease in property and eguiprner , netMainly due to redassmcation of ce ain condominium units owned by the Company frominvestment properties ( included ss part of other assets in 2010) to property and equipment (PPE)in 201 1.

31% decrease in deferT€d acquisition cost.Consistent wnh the decrease in reinsurance Dremiums written.

10% increase in defered reinsurance premiumsPrincipally due to higher level of r;troceded prcmiums subjed to 24th method of revenuerecog nition.

5% decrease in other assetsDue to the reclassificdion of property no longer intended for rental (now under PPE)

39% decrease in defened reinsurance commissionsConsistent with the decrease in reinsurance Dremium retroceded.

Review of 2010 versus 2009

Results of operations

Reinsuran@ Wmiums - net of rcturns or Gross hemiums WittenGross premiums written in 2010 instased by P741 million, oe 2O.9Vo, to P4,279.4 million fromP3,538.4 million in 2009. The growth was latgely due to increases in premiums for theCompany's non-life treaty and non-life facultative businesses, lyhich benefitted from a favorableenvironment for premium rates. The firmer rates reflec{ed risk aversion on the part of cedingcompanies due to the natural catastrophes encouriercd in prior years, as well as general

l6

comdiance with minimum taTiffs es,lablished by the Insurance Commission. Gross premiumsftom Company's non-life lreaty business increas€d by P232.7 million or 15.4% from P1,512.2million in 2003 to Pl,7rt4.9 million in 2010. Gross premiums from the Company's nonlifefacultative business grew by P548.1 million or 36.7% from P1,495 million in 2009 to P2,043.1million in 2010. These increases more ihan offset a drop in gross premiums from the Company'slife business, which sew gross premiums dectease by P39.7 million or 7.5% from P531.2 millionin 2009 to P491.4 million in 2010

Net wemiums rctainedConsistent with the increase in gross premiums Mitten, net premiums tetained also increased byP245.4 million or 18.2% to Pl,597.8 million in 2010 ftom Pl,352-4 million in 2009. Retenlion ratiowas flat at 38% in 2010 relative to 2009

Prcmiums earneclPremiums eamed in 2010, totaled P1,616.6 million, an increase of 9-996 over premiums eamed in2009 of P1,470.9 million. The rate of incnease in premiums eamed in 2010 was lo^rer than therate of increase in gross premiums written and net premiums retained because of a smallerdecrease in the reserve for uneamed reinsuran@ prcmiums. In 2010 the decrease in theuneamed premium reserve was P18.8 million as against a decrease in uneamed premiumreserve of P118.5 million in 2009. The relatively latge decline in 2009 resulted trom the drop inthe company's premiums during that year, which resulted in lhe rclease of reseNes for uneamedpremium underthe 24n m€*hod of accounting for reinsurance premiums.

siare in ctains and bssesShare in claims and losses fot 2010 exceeded the previous yeafs figure by P806.3 million or78.1% from P1,032.6 million in 2009 to P1,838.8 miflion in 20{0. The increase was primsrilyassociated with Typhoon Ondoy claims from 2009 which were advised to the Company in 2010.Also contributing to the higher claims cost were additional loss reserves egablished sner theCompany's review of daims wfiich had previously been denied due to, amorE other things,delayed paynent of premiums by ceding companies.

Commissions - netDespite double{igit premium grcwth, net commissions increased by only P28.7 million or 7.1%from P407.0 million in 2009 to P435,7 million in 2010. This was the resuli of averagecommissions of 27.3% in 2010 as against 30.1% in 2009.

lnvestment income aN ottler inconeInvestment income and other incorne grew by 5.3% to P491.2 million in 2010 fiom P/+66.7 millionin 2009. Wtrile the continuing appreciation of the Philippine Peso againsd the U.S. Dollarcontributed to some foreign curency lranslation losses, positive trends continued to prevail in lheCompeny's main investment markets of Philippine equities and fixed income securities.

Interest income decreased by 1% to P378.4 million in 2010 from P382.4 million in 2009.However, trading gain on equities and fixed income securities amounted to P99.3 million in 2010,almosl double lhe realized gains of P50.1 million in 2009. Cunency translation loss of P21.1million in 2010 (as against P24.3 million 2009) was offset by dlvidend income of P33.8 million(P20.0 million in 2009).

As of December 31,2O1O, the Company's stockholders' equity induded revalualion reservesamounting to P393.7 million compared to P18.4 million as of December 31, 2009. The increeseof P375.2 million represents the yeais fair value gains, net of taxes, on the compeny'sinvestment portfolio, which gains are induded in the Company's statement of comprehensiveincome.

11

In 2010, the Company booked a P6.4 million impairment charge on certain legacy investments.This expense has been rccoded as pan of general ard edminis*rative oQenses (GAE).

Genera,l aN adminiffiive expensesGeneral and administrative exp€nses (GAE) decreased by 26% to P240.6 million in 2010 fromP325.1 million In 2009, laEely due to lower allowance for impaitment (doubtful accounts)provided in 2010. The lower provision ofiset increases in employee b€nefits cost andamortization costs of the Gornpany's computerizat'on program. Excluding allowance forimpairment, GAE in 2010 amounted to P219 million comp€rcd to P196.8 million in 2009, or anincrease of 11.396.

Tax expenseThe company's tax expense incteased marginally by 3.9% or P2.7 million from P69.9 million in2009 to P72.6 million in 2010. Tax expense was composed largely of the final tax on theCompany's interesl income on its invesiments.

Nef PrD,ff (Loss)As a result of the aforementioned fac{ors, the Company sustained a net loss of P480 million in2010 as compared to a net income of P103 million in 2009.

Financial condition

As of Decemb€r 31, 2010, total resources of the company stood ar P12,553 million, P1,457higher than tdal resources of P11,096 million as of December 31, 2009. Material changes in theCompany's resources which contributed to the insease are described beloh,.

Reinsurance balances receivable, net of allowance for impaiment of P283.1 million, increased byP1,336 million or 46.5% to P4,210,4 million in 2010 from P2,874.4 million in 2009 . This accountsfor a substantial portion (more than 90%) of the increase in the Cornpany's assets.

Reinsurance balances receivablc indude: (1) prcmiums due fom ceding companies 0ncreasedfrom P912.7 million in 2009 to P1,180.2 million in 2010); (2) reinsurance recoverable on unpaidlosses (increased from P1,76o.2 million in 2OO9 to P2,725.7 million in 2010); (3) reinsurancerccoverable on paid losses Gncreesed from Pgtg.6 million in 2009 to P4S.5 million in 2010);and, (4) funds held by ceding companies 0ncreased from P119.8 million in 2009 to P133.2 millionin 2010). Reinsurance rccoverable on losses, which is the laeest component of this asset,fepresents amounts that the Company stands to recover from its retrocessionaires. The level asof December 31, 2010 refleds the high volume of claims ard losses incurred by the Company in2010.

Availabf R.for-sale linancial assets increesed by P248.4 million or '14.1!o to P6,297.1 million in2010 from P6,048.7 million in 2009, reflecting mark-tc market gains as well as transfers fromcash and cash equivalents to available-for-sale fnancial assets.

Loans and receivables grew by P107.2 million or 42-3% to P360.7 million in 2010 from P253.5million in 2009 principally due to the Company's acquisition of new inve$ment Cerm loans) duringthe yeer.

Property and equipment, net of accumulded deprecidion increased W P24.4 million or 18.7% loPl54.4 million in 2010 nom P130 million in 2009, mainly due to capitalized cosl of the Company'slT Project tRlS (lntegrated Reinsurance System), which commenced 4'n Qtr.2009.

Defened acquisition costs, which mainly consisl of commissions, increased by P32.7 million or19.8% to P198.4 million in 2010 from P165.7 million in 2009 in line with the increase in grossrcinsurance premiums and net premiums retained.

l8

Defened reinsurance premiums decreased by P257.4 million or 33.4% as of December 31, 2010due to recognition in 2010 oJ a portion of defened reinsurance premiums as of December 31,2009 as eamed under the 24n method of rcvenue recognition..

Other assets increased W 21.6% to P2o1.4 million in 2010 from P168.2 million in 2009. Otherassets primarily include accounts such as defened input VAT Cncreased from P55 million in 2009to P72.1 million in 2010), crditable withhokling to( 0ncreesed fiom P40.7 mi$ion in 2009 toP58.3 million in 2010), investment property (decre€sed ffom P36.3 million in 2009 to P34.7 millionin 2010), input vAT (decreased frcm P26.3 million in 2oo9 to P24.1 million in 2010) and deferredwithholding VAT (increased from P4-8 million in 20091o P9.1 million in 2010).

Total liabilities increased by P1,663 million or 33.7% to P6,605 million in 2010 from P4,941 millionin 2009. The increase in total liabilities is explained below:

Reinsurance balances payable increased by 52.3o/o or by Pl,874.E million to P5,462.7 million in2010 from P3,587.9 million in 2fl)9. This account principally includes amounts due toretrocessionaires, which increased from P4ti8.8 million in 2009 to P706.5 million in 2010; fundsheld for rctrocessionaires which increased from P71 million in 2009 to P91 .8 million in 2010; andclaims payable, which increased from P3,048.1 million in 2009 to P4,664.4 million in 2010.Claims payable represent 85.4% of the total reinsuranc€ balances payable and are beingeslablished to provide for luturc amounts to pay daims related to insured events that haveoccund and have been reported but have not yet been settled. The high level of claimspayable as of December 3'1, 2010 reflects the Company's poor underwriting results for the yearand represents a substantial portion of the increase in the Company's total liabilities.

Accounts payable and accrued expenses increased by P31.9 million or41.6% from P76.7 millionin 2009 to P108.6 million in 2010 pfincipally due to unreleased checks which were reverted backto cash with a corresponding liability accounl being lodged to this account amounting to P28.5million as of December 31, 2010.

Reserve for uneamed reinsurance premiums declined to P902.9 million in 2010 from last year'sP1,179.1 million or by P276.2 million (23.4%) traced largely to reinsuranc€ premiums no longersubject to 24D method of revenue recognition.

Defened reinsurance commission increased by P32.9 million or 33.8% ftom P97.5 million in 2009to P130.5 million in 2010largely due to Increase in premiums and commissions ceded.

Total equity as of December31,2010 dedined to P5,948.4 million, or 3.496 frcm m,154.6 millionas of December 31, 2009 principally due 10 the net loss suslained by the Company amounting toP480 million in 2010. This was partially offset by lhe positive movement of the company'srevaluation reserve amounting to P375.2 million less divllend paymenl of P101.5 million in 2010.

Material changes {incrcase/dectease of 5% or more} in the financial statement€

lncome Statement i|P.ms - 2O1O versus 2AOg

21% inclesse in reinsurance prcmiumsPrincipally due to increase in non-life facultative and treaty business.

23% increase in retroceded DrcmiumsDue to increase in reinsurance premiums.

18% increase in net premiums Etained.Due to growth in non-life reinsurance pfemiums.

t9

84% decrease in reserve for uneamed reinsurance premiums.Due to higher level of rein$rrance premiums nol subjed to 24' m€thod of rcvenue recognition.

58% increase in underwriting dedudionsDue to lats reported losses relating to Typhoon Ondoy and additional loss reserves on previouslydenied claims.

220170 decrease in net undeMriting incomeLargely due to increased c€tastrophe losses.

5% increase in investment and other incomeAttributable to higher trading gains on equities and fixed income securities.

26% decrease in geneml and administrative €xpensesPrincipelly due to lower pmvision for impaiment.

b66% d""r"""" in net income (loss).Largely due to negative undeMriting results.

Bafanc€ Sheet rfems - 2ot0 versus 2009

11% decrease in cesh ard cash equivalents.Mainly due to paymert of P.047 cash dividend.

46% increas€ in nginsurance b€lances receivableDue to increase in reinsurance recoverable on losses.

47o increase in available for sale financial assets.Essentially due to additional invesiments and mark-to-market gains during the year.

42% increase in loans and receivables.Primarily due to additional investments made in certain fxed rate corporate promissory notes.

19% increase in property and equipment, nelMainly due to capitalized cost of comp{rterization: Project lRlS (lntegrated Reinsurance Sy$em)

20% increas€ in defened acquisition cost.Consistent with the increase in reinsurence premiums written.

33% decrease in defenEd reinsuranee premiumsPrincipally due to lourer level of retmceded premiums subjecd to 24' method of revenuerecognition.

22oh increesF- in other €ssetsDue to in$ease in defen€d input value added tax.

52% increase in reinsurance balances payableDue to higher level of claims payable.

42% increase in accounts payable end accrued o(pensesPrincipally due to redassification of accounls (unreleased checks).

23% decrease in reserve for uneamed reinsurance premiumsEssentially due to lower level of reinsurance premiums subject to 2Cn method of revenuereoognition.

tn

34% increase in defened reinsuran@ commissionsConsislem w h the increase in reinsurance premium retroceded.

3% decrease in stockholders' equityPrimarily due to net loss sustained by the Company in 2010.

Review of 2009 \retEus 2008

Results of operations

Reinsurance premiums - net of retwns or Gross Premiums lMiftenGross premiums written in 2009 decreased by P955.1 million, or21.3%, to P3,538.4 million fromP4,493.5 million in 2008. The dectBase was due largely to the Compeny's stricter underwritingpolicies, which resuned in the cancellation of certain unprofrtable treaties and facultativebusiness, the losses from which negativety affec{ed the Company's underwriting performance inprevious years. Consequently, reinsurance premiums from the casuaity line of businessdecreased from P2,254.8 million in 2008 to P1,652 million in 2fi)9. Reinsurance premiums tromthe company's marine business also decreased from P784 million in 2008 lo P384.1 million in2009. These declines werc not offset by reinsurance premiums from the fire business, whichgrew from P944 million in 2008 to P971.2 million in 2009 or from the life business, whichincreased from P510.7 million in 2(n8 to P531.2 million in 2009.

Net ffemiums rdainedThe percentage decline in net premiums retained was lofrer than grcss premiums because of thecompany's higher retention ratio. Net premiums retained in 2009 decreased by P227.6 million,or 14.40/6, to Pl,352.4 million from P1,580 million in 2008, Retenlion ratio in 2009 was 38.2% in2009 as against 35.16% in 2008, owing to the fact that a large portion of risk acceptancescancelled or not renewed in 2009 were risks in which lhe Company had a lower retention.

fremiumseamedPremiums eamed in 2009 decreased by only P80.5 million, or 5.2ayo, to P1,471 million fromP1 ,551 .3 million in 2008. This was due to a decrease in the reserve for uneamed premiums ofP118 million in 2009 as against an increase in the reserve of P28.6 million in 2008. Uneamedpremium reserve represenls the une€med po,tion of pIemium income rccognized fom pdicies inforcr as at report date. The drop in 2009 of the Company's gross premiums written and netoremiums retained resulted in a decline in lhis reserve and therefore an addition to eamedpremiums.

Share in daims and lossesDespite the occulTence of e number of fire, marine and catas{rophe-related (i.e., typhoon) lossesin 2009, share in claims aml losses for 2009 decressed by P204.3 million, or'16.5%, to P1,033million from P1,237 million in 2008. The decrease was largely due to the denial of certain claimsdue to non-payment oflhe associated reinsurence premiums.

Commrssions - nefThe increase in net commissions of P19,8 million or 5.1% from P387.2 million in 2008 to P407million in 2009 was the resultant effect of the P118.5 million decrease in reseNe for uneamedpremiums. The decline in this reserye, which resulted in additional premiums deemed eamedunder the 24' method of prcmium accounting, also .esulted in the recognition of the associatedacquisition cost (i.e., commission) which had untilthen been defened

2l

lnvestment income and other in@,meInveslrnent income and other ino(me rose by 4% to P466.7 million in 2009 from P449.2 million in200E. During the year, positive trends prevailed in lhe Companyb main investment marfiets ofPhilippine equities and bonds.

Interest lncome increased by P2% or P7.4 million to P382 million in 2009 from P375 million in2008 as the Company continued to invest in high{uality fixed-income govemment securities andcorporate bonds. Other Income, oomprised la€ely of dividend and trading income, experienced atumaround in 2009 with a gain of P108 million comparcd to a loss of P41 million in 2008. Thiscushioned the imp€c{ of unrealized foreign exchange lo6s in 2009 amounting to P24.3 million

Generat atd administrafir,e expensesGeneral and adminislrative expenses (GAE) increased by 53.6% to P325 million in 2009 fromP211.7 million in 2008, primarily due to additional provisions for impairment C.e., bad debts) ofP128 million. Wthoutthe provision, GAE in 2009 would have decreased from the previous year.

Provision for inco,me taxThe income tax provisions for 2009 and 2008 were flet at P70 million. These provisions relateprimarily to linal tax on the Gompany's inlerest income on bank deposats, govemment securitiesand corporate bonds.

Net IncomeAs a result of the aforementioned fadors, the Company ended 2009 with a net income of P103million, P9 million or 906 higher than 2008 net income of P94 million.

Financial condition

As of December 31, zOW, total resources of the Company stood al P11,096 million, P1,175milfion fo\,ver than total resources ot P12,272 million as of December 31, 2008. Exdudingreinsurance a@ounts, assets vrere primarily comprised of cash and short-term inves-trnents, fixedincome securities, and equity investmenls designed to match the c€sh flow requirements ofreinsumnce liabilities. Material changes in the Company's nesources which contributed to thedecrease are described below.

ReinsuEnce balances receivable, net of allo$/ance for impairment of P26E million, decreased byP1,479 million or 34% to P2,874.4 million in 2009 from P4,353.4 million in 2008 mainly due to thedecline in gross r1-.insurance premiums iMitten. Reinsurance balances receiv€ble includepremiums due from ceding companies (decreased fmm Pl,669 million in 2008 to P912.7 millionin 2009), reinsurance recoverable on unpaid losses (decreased from P2,4{3 million in 2008 toP1,760 million in 2009) reinsurance recoverable on paid losses (increased from P309 million in2008 to P350 million in 2009) and funds held by ceding comp€nies (increased from P112 millionin 2008 to P120 million in 2009.)

Available-for-sale financial assets increased by P764 million or 14.5% to P6,048.7 million in 2009from P5,284.6 million in m08, reflecting mark-tcmarket adjustments as well as transfeF fromcash and cash equivalents to availa e-for-sele financial assets.

Loans and fec€ivables went up by P57.7 million or 29.5% to P253.5 million in 2009 from P195.7million in 2008 principally due to the Company's inveslment in frxed rate corporate promissorynotes due 2011 of EEI Corporslion.

Property and equiprnent, net of accumulated deprecialion incteased by P43.5 million or 50% toP130 million in 2009 from P86.5 million in 2008, mainly due to acquisition of new computers andperipherals as replacements for existing equipment as well as for the computerization projed ofthe Gompany wtrich commenced in 3E quarter 2009.

22

Deferred acquisition costs dmpped by P35 million or 17,4Vo to P166 million in 2009 from P200.7million in 2008, reflecting portions of defened acquisition co6i booked in 2008 that w€re chargedto commisslon expense in 2009. The decrease is also related to the drop in premium volume for2009 and the conesponding decreese in uneamed premium reserve.

Defened reinsuran@ premiums showed a decrease ot 6.70/0 to P772 million in 2009 from P827.3million in 2008 largely due to lower level of premiums in 2009 compared to 2008.

Defened input value added tax decreased by P9.5 million or 14.7ai/o to P55 million in 2009 fromP64.5 million in 2008 mainly due to decline in commission expense subject to VAT.

Other assets increased by 3.5% lo Pl13.2 million in 20t)g from P109.4 million in 2008 primarilydue to an increase in unutilized creditable expanded withholding.

Total liabilities decreased by P1,380.7 million or 21 .8% to P4,941.2 million in 2009 from P6,322million in 2008. The decrease in total liabilities is explained below:

Reinsurance balances payable decreased by 23.8% or by Pl,117.8 million to P3,587.9 million in2009 from P4,705.6 million in 2008 due largely to the overall decrease in reinsurance premiumsin 20Q9. This account primarily includes amounts due to retrocessionaires, which declined fromP1,105.6 million in 2008 to P,168.8 million in 2009; funds held by retrocessionaires, whichdecreased from P83.8 million in 2009 to P71 million in 2009; and claims payable, whichdecreased from P3,516.2 million in 2008 to P3,048.1 million in 2fi)9.

Accounts payable and accrued expenses decreased by P11 million or 24.3% from P45.5 millionin 2008 to P34.4 million in 2009 principally due to the reversal of a pre-merger accrued expensesand retirement liabilities wtrich were set up in 2006.

Reserve for uneamed reinsurance premiums dedined to P1,179.'t million in 2009 from last yeaasP1,353.1 million or by Pl74 million (12.9%) traced la.gely to decrease in gross reinsurancepfemiums written during the year on casualty and marine business.

Defened reinsurance commission dedined b,!' P10-g million or 1096 fiDm P108.3 million in 2008to P97.5 million in 2009, reflecting the Compsny's lower level of commission income.

Defened output value added tax decreased by m7.1 million or 61.3% to P/+2 million in 2009 fromP109.4 million in 2008 due to lorer commission income subject to VAT.

Total equity as of Decemb€r 31, 2009 stood at P6,155 million, an increase of P2(X.9 million or3.4% frcm P5,950 million in 2(88. The increase was primarily due to net income ot P103 millionand P166 million positive movement in the Company's revaluation reserve less a dividendpayment of P86 million in 2009.

Material changes (increase/decrcase of 5% or morc) in the financial statemer s

lncome gatenent il€'ms - 2o(P versus zooe

217o decrease in reinsurance oremiumsPrincipally due to canc€llation of non-profitable marine treaty and facuttative business.

25% decrease in retroceded premiumsDue to decrease in reinsurance Dr€miums.

1496 decrease in net premiums r€dained.Due to decrease in reinsurance premiums offset by incrcase in retention ratio.

ZJ

514% decrease in reseNe for uneamed rcinsumnce premiums.Due to higher level of curent reletive to defened reinsurance premiums.

1 1% decrease in underwriting deduciionsDue to lower level of compensable daims ofiset by higher commission expense.

143% increase in net underwriting incomeAttributable to decline in undenrrritirE dedudions, i.e., lower claims expense.

54% increase in general and administrative expensesPrincipally due to additional provision for impairment.

99o increase in net income.Largely due to positive urderwriting resutts and higher investment and other income.

Balance Sheet items - 2009 wrsus 20OB

41% deoEase in cash and cash equivalents.Mainly due to conversion from cash to available-for-sale financial assets.

34% decrease in reinsuran@ balances receivableDue to decrease in reinsurance recoverable on losses.

1406 increase in available for sale financial assets.Essentially due to additional inveslmerts and mark-tcmafte{ gains during the year.

29% increase in loans and receivables.Principally due lo additional inve$ment made in EEI fxed rate corporate promissory notes.

5096 increase in property and equiprnent, netMainly due to acquisition of additional computers and peripfierals for replacement and forcrmputerization project of the company.

17% decreese in defefied acquisition cost.Due to decline in gross premiums wfitten.

796 decrease in defened reinsurance premiumsPrincipally due to lower level of retroceded premiums.

15% decrease in defened insrl value added taxLargely due to lo\ er commissions which are subject to input VAT.

3% increase in other assetsDue to increase in unutilized creditable expanded withholding tax.

24% decrease in reinsurance balances payableLargely due to lo,yer level of daims payable.

24olo decrease in accounts payable and accrued expensesPrincipally due to reveFal of pre.merger accrued expenses and retirement liability.

13% decrease in reserve for uneamed reinsurance premiumsEssentially due to lower level of reinsurance prcmiums assumed.

100/6 decrease in defened reinsuranoe commissionsDue to lower commission in@me.

aA

61% decrease in defened outptJt value-dded taxDue to lower commission income subiect to vAT.

30/6 increase in slockholders' equityPrimarily due to net income plus higher revaluation reserve.

Kev Performance Indicato6

2011 2010 2009Net Profit (Loss) P 340 million (P480 million) P103 millionEamings per share P 0-16 (P O.22' P 0.05Retention ratio 32% 37% 38%Combined ratio 133% 156% 124|,hRetum on averaqe equity 5.6% 7.9%) 1.7%

The company's key performanc€ ratios for the lasi three years are described heteunden

Net Profit (Loss) (NP) - The Company's net profit was P340 million in 2011 as compared to NetLoss of P480 million in 2010 and net profrt of P103 million in 2009 respectively.

Eamings per share (EPS) - EPS is computed by dividing net ptofit by the weighted averagenumber of shares issued and outstanding. The compeny's EPS was P0.15, (P0.22) and P0.05tor the years ended December 31, 2O1 1, 2O1O and 2009, rcspeclively.

Retention ratio - indicates the total amount of business risk retained by the company, computedby dividing reinsurance premiums retained by reinsurance premiums (Gross Premiums Written orGPW). Retention ratio for 2011 was at 32 , lo\rrer than retention ratio in 2ol o and 2oog of 37016

and 38% respeclively.

Combined ratio - a measure of performance used by the Company to measure proftability of itsinsurance operations. A ratio below 100% indicates that lhe company is making undeMritingprofrt while a ratio above 100% means that it is paying oul mo{e in claims and expenses than it isreceiving from premiums. Comtined ralio is the sum ot loss ralio, commission ratio and expenseratio. The combined ratio was at 133% in 2011, 156% in 2010 and 124% in 2@9.

Retum on average equity (ROE) - measures the rate of retum on the ownership interest(shsreholders' equity) ofthe common stock owners, computed by dividing net income by averageequity. ROE for the last thrce years wes at 5.6%, C/.9%) and 1.7yb tot 2011,2O1O and 2009respectively.

Material Evenus and Uncertaar ies:

Other than the disclosures described in the preceding sections, the Company has nothing toreport on the following:

e. Any known trends, demends, commitments, events or uncertainties that will have amaterial impad on its liquidity.

b. Events that vrill trigger direcd or contirEent financial obligation that is material to thecompany, ineluding any default or ecceleration of an oHoetion.

25

c. Malerial off balance sheet t.ansaciions, anaqgements, obligations (indudingcontingettt odigaiions), and other relationships of the Company with unconsolidatedentities or other persons created during the reporting period.

d. Any mate.ial commitments for capital expenditures.

e. Any known trends, events or uncertair[ies that have had or that are rcasonablyexoected to heve a material favorable or unfavorable imDac{ on netsaleyrevenues/income from continuing operations-

f. Any significant elements of income or loss that did not arise from the issuefscontinuing operations.

g. Any seasonal aspects that had a matedal efiect on the financial condition or results ofopefations.

Item 7. Financial Staternents

Pfease reter to the ettached Audited Financial Statements for 2011, audited by the accountingfirm of Punongbayan & Araullo, ard signed by partner Mr. Leonardo D. Cuaresma, Jr.

Item 8. Changes in and DisagreemenG with Accountanis on Accoun$ng and FinancialDisclosure

Punongbayan & Araullo has served as the independent auditor of the Company's financialstatements since 2003. The Company has not had any matedal disagreements on accounting orfinancial disclosure matters with Punongbsyan & Araullo.

Extemal Audit Fees

The following are lhe aggregate fees (n Philippine Pesos) billed for each of the lasl three fiscalyears for professional services rendered by Punongbayan & Araullo:

The Audit Committee revieu,s the extemal auditorb engagement letter covering th6ir scope ofwork and the reasonableness of the related professional fee. The Audit Comminee recommendsfor approval of the Boad the appointment of the extemal audit s€rvice provider for the subjectaudit year. The Boatd ap,proves the appointment subjeci to ratification by the stockholders duringthe Company's annual stockholders meeting.

2011 2010 2009Audit and audit-related fees P1.248.5U P1. 592.828 P2,137 j08Other assurance and relatedservices 40,000 73,614Tax fees

Total P1.288.534 P1.592.828 P2,210,272

zo

PART III- CONTROL AND COMPENSANON INFORMATION

nem 9. Dir€ctors and Executive Ofiicens of tne lssuer

(1) Dlrcctorsr Including Independent Directors, and Executive ofncers

The company's Articles of Incorporation provide for an 11-seat Board of Diredors. Following isthe list of the incumbent membeE of the Board:

Name Position ,qge Citizenship

Following is the list ofthe Corporation's key executive officers es of the date of this report:

Name Position Age Citazenship

Helen Yucnenqco - Dee Chaimerson 67 FilipinoRobert G. Ve0ara Mce Chairman 51 FilipinoRoberto B. Crisol Di.ector/Presidenuchief

Executive Officer59 Filipino

Alfonso L. Salcedo. Jr. Director/Treasurer 56 FilipinoYvonne S. Yuchengco Director FilipinoGreoorio T. Yu Dire6tor 53 FilipinoJose Teodoro K Limceoco Director 49 FilipinoDanilo A. Gozo Diredor 66 FilipinoRomeo L. Bemardo lndeDendent Director t? FilipinoEmilando D. NaDa lndeoendent Direcior 62 FilipinoMedel T. Nera Inde@ndent Director 56 Filipino

Roberto B. G]isol Pr€sident and Chief ExecutiveOfficer

59 Filipino

Armando S. Melebenan Exectrtive Mc€ Presidern andChief Operatino Ofncer

ot Filipino

John E. Huang Senior Mce President andChief Financial Officer

54 Filipino

Noel A. Laman Cor@rate Secretary 72 FilipinoMa. Pilar M. Pilares-Gutienez Assistant Corporate Secretary JC FilipinoRoberto S. de Leon ll First Vice Presidem - Non-Life

Division52 Filipino

Augusto C. Cipdano First Mce President - LifeDivision

58 Filipino

Edgar B. VillaseRor First Vice President -Corpo€te SeNices / RiskManagement Dvision

58 Filipino

Amerfil V. Basco Vice President forReinsurance Accountino

51 Filipino

Regina S. Ramos Mce President for lntemalAudit

49 Filipino

Vicente B. Villarama, Jr. Vice President for GeneralAccountino

54 Filipino

Merissa P. Aldeano Vice President - Treasury andlnveslments

RN Filipino

Rene de Guzmen Mce President forInformation Technology

49 Filipino

2',1

Term of Oftice

The term of ofnce of the Diredors and executive officers is one (1) year from their etection assuch until their successors are duly elected and qualifi€d.

Eusiness er@erie nce of the D ectors and Office's during the past fwe (g yeats/Other direc'torslrips herd in ,Wofting co',|'lp€nies naming each connmy

Helen Yuchengcooee, Chairpe6on of the Boad, Dir€ctor of the Corporation sinceJanuary 2010. Ms. Helen Y. Dee is lhe Chairperson of Rizal Commercial Banking Corporation.Ms. Oee is also the Chaimerson of House of Investments. She also holds Ghairmanshippositions in various companies, including Landev Corporation, Hi-Eisai Pharmaceutical Inc.,Mapua Infotmation Technology Center, Inc. and Manila Memorial Part. She is the MceChairperson of Pan Malayan Management & Investment Corporation. She likewise holdsdireciorship positions in Philipdne Long Distance Telephone Company, Peho Energy ResourcesCorp., Sun Life GREPA Financial, lnc., Malayan Insutance Company, Inc., ard MICO Equities,Inc. Ms. Dee is a Trustee of the Mapua lnslttute of Technology and the Yuchengco Center. Shegraduated from Assumption Co ege with a Bachelor of Science degree in Gommerce andcompleted her Masters in Business Adminisiration at De La Salle University.

Robert G. Veruara, Vice Chairman of the Board, Director of the Corporation since 2010. Mr.Vergara is the cunent President and General Manager of the Go\temment Service lnsuranceSystem (GSIS). Prior to his appointment to GSIS, Mr. Vergara wes Managing Director and theFounding Partner of Cannizaro Limited (Hong Kong), e multi-strategy hedge fund managerin\,€sting in Asian markels. He rvas Direc{or of Oresdner Kleinwort Wasserstein Secuaities (Asia)Ltd. from June to August 2001 , and Principal of Morgan Stanley Ltd. ftom 1997 to 2001 where heset up and managed the firml Asien proprietary irading a€iivities. lmmediately before that, Mr.Vergara worked at IFM Trading, a pioneering hedge fund based in the city of London thatspecialized in arbitrage and derivative tEding strategies in global capital markets. He gradualedfrom the Harvard Graduate School of Business Adminislration in Massachusetts, USA, in 1986and he eamed his Bachelor of Science degrees in lulanagement Engineering and Mathematics,magna cum lauck, from lhe Ateneo de Manila University in 1982.

Roberto B. Crisol, Director, Prcsident and chi€f Erecutive Ofiicer since January 2009. Mr.crisol served as Executive Mce President and COO of the Corporation from January 1, 2OO2 toJanuary 31, 2007. Prior to ihis, he wss the Dep{rty Regional Manager of MAPFRE RE AsianRegional Office in Menila from 1990. Mr. Cdsol sterted his career in insurance in 1974 with thefnsular Life-FGU Insurance Gmup. He subsequently joined Universel Reinsurance Corporation(URC) where attained the position of Vice President of the Non-Lite Foreign Business &Retrocession Division. Mr. Crisol is a Member of the Board of Truslees of the Insurance Institutefor Asia and the Pacitic (llAP), where he also conducts training courses on reinsurance. Heeamed his Bachelor of Arts degree, major in Economics, cum latffi, trom the University of thePhilippines.

Danilo A Gozo, Director since June 2011. Mr. Gozo is curently lhe Chairman and CEO ofRelationship Management Consultants. He is a member of the GSiS Board of Trus{ees,Executive Consultant of Lopez Holdings Corporation and Communications Adviser of SGVFoundation. He is a Board member of the Freedom Furd for Filipino joumalisls and member ofthe Public Relations Society of the Philippines. He was Assbtant Mce President and PR Directorof Ayala Corporation from 1989 to 2002, Board member of Philippine Amusement and GamingCoryoration from 1986 to 1988 end 2001 to 2008, Vrce President and Head of PR Services ofAce Saatchi and Saatchi Advertising Co. frorn 1974 to 1986. Mr. Gozo eamed his Bachelor ofArts degree in Joumalism trorn the University of the Phiti$ines in 1968. He also took theAdvanced Cours€ in Broadcest News Editing end Management as a Colombo Plan Scholar at theBritish Bmedcesting Corp. Sctrool, UK 1S71.

28

Jose Teodoro K. Limcaoco, Dircctor since an09. Mr. Limcaocn is the President of BPI FamilyBank, the @nsumer banking subsidiary of the Bank of the Philippine lslands and BPIS Grouphead for the Insurance businesses He is also a Director of BPI Philam Life AssuranceCorporation, BPI/MS Insurance Corporation and Ayala Pl€ns, Inc. Prior to his assignment at BPIFamily, he was the Presldent of BPI Capital Corporation. He is also a Managing Diredor et AyalaCorporation and has worked with Ayala since 1998. Mr. Limcaoco eamed a Bachelor of Sciencedegree in Mathematical Sciences (Honors Progrem) fiom Stanford University and an MBAdegree, major in finance and investnents from \nharton School ofthe University of Pennsylvania.

Alfonso L. Salcedo, Jr,, Director since June 2002. Mr. Salc€do is the Head of ihe CorporateBanking Division of Bank of lhe Philippines lslands since July, X)10. He is also a Director ofBPI/MS lnsurance Corporation. He has held the following positions: President of BPI FamilySavings Bank, Inc. (200+2010), BPI Insurance Group, BPI Bancassurance, Inc., Ayala LifeAssurance, Inc., Ayala Plans, Inc.; Presidenl of Allstate Life Insurance (Phils.); CountryMarketing Director of Citibank, NA. (Manila); Marketing Manager of Nippon Vicl(s KK (Japan):and Richardson Vicks PhilipFines. He graduated with honors with a Bachelor of Arts degree inEconomica Honors Pmgram fiom the Ateneo de Manila University in 1977. He also took theAdvanced Management Prognm at the Harvard Business School in 2006.

Gregorio T. Yu, Director since July 2010. Mr. Yu is a Trustee of the GSIS. He is alsoconcurrenlly Chairman of CATS Motors lnc,, Chaiman of the Executive Committee of PhilippineBank of Communications, Mce Chaiman of Slerling Bank of Asia, Director of Philippine Airlines,Philequity Fund, lremit Inc., Unistar c|edit and Finance Corporation, Prode BPO, YeheyCorporation, e-Ripple cotporation, Vlrsl Corporation, Nexus Technologies, Jupiter SystemsCoDoration. He is also a Trustee of Xavier School Inc., and a Boad Member of BalletPhilippines and The Manila Symphony Orchestra. He was formerly President and CEO of BelleCorporation, Tagartay Highlands Intemational Gof Ctub, Inc., Tagaytay Midlands Golf Club andthe Country Club at Tagaytay Highlands, Mce chaifinan of APC Group and Philcom. He wasalso formerly a dir€dor of Intemational Exchange Bank ard Vantage Equities CorpoEtion. Hewas a Director for Corporate Finance of Chase Manhattan Asia in Hong Kong and a VicePresident, Area Credit forthe Chas€ Manhattan Bank Regional Office in Hong Kong. He receivedhis MBA tum the Wharton School ot the University of Pennsylvania and his Bachelor of AIts inEconomics (Honors Program) Summa Cum Laude from De La Salle University.

Yvonne S. Yuchengco, Dir€ctor since June 2006. Ms. Yvonne S. Yuchengco is the Presidentand Director of Malayan Insuranc€ Company, Inc- since 1995, and MICO Equities, Inc. since1995. She is cunenty the Chairperson of RCBC Capital Corporation; Director of RizalCommercial Banking Corporation; CFO, Treasurer and Diredor of Pan Malayan Management &Investment Corporation €nd Hond€ Cars Kaloohan; Director of Pan Malayan Realty Corporation,Malayan Insurance (U.K), Malayan Insurance (H.K), Malayan Intemalional InsuranceCorporation, Manila Memorial Parl! Inc., Mapua lnsiitute of Technology, La Funereda Paz SucetInc., iPeople Inc., Seafront Resources Corporation, Petro Energy Resources Corp., MalayanHigh School of Science Inc., Yuchengco Museum, Inc., House of lrveslment, HYDeeManagement and Resource Corporation, Malayan College, Lagune and Luisita Industrial ParkCorporation; Direc{or and Presklent of Philippine Integfiated Advertising Agency, Inc.; Presidenl ofPlA,/Phil-Asia Assislance Fourdaiion, Inc.; Chairperson of Firsl Nationwide A*suranceCorporation, XYZ Assets Corporation and Malayan Plaza Condominium Association Inc.; Boardof Trustees member of AY Foundation; Assis{anl Treasurer of Enrique T. Yuchengco Inc. Shegraduated with a Bachelor of Arts degree from Ateneo de Manila University in 1977 and took upfudher studies in UAP under SBEP p.ogram.

Romeo L, Bemardo, Indeperdent Director since June 2006. Mr. Bemardo is ManagingDirector of Lazaro Bem€tdo Tiu and Associates (LBT), a boutique financial advisory tirm based inManila, and Globalsource economid in the Philippines. He is Chairman of ALFM Familv ofFunds and Philippine Stock Index Fund and a Diredor of several companies and organizations

29

inctuding Aboitiz Power, BPl, Globe Telecom, RFM Corporation, Philippine InvestmentManagement, Inc. (PHINMA), Philipgine tnslitute for De\relognent S:ttdies (PIDS), BPFPhilamLife Assurance Corporation and Institute for Development and Econometric Analysis. Hepreviously served as Undersecretary of Finance and as Altemate Executive Director ofthe AsianDevelopmert Bank. He was an Advisor of the World Bank and the IMF (Washington D.C.), endserved as Deputy chief of the Philippine Delegation to the GATT (VWO), Geneva. He wasformerly President of the Philippine Economics Society; Chaiman of the Federation of ASEANEconomic Societies and a Facufty Member (Finance) of the University of the Philippines. Mr.

Bemardo holds a degree in Bachelor of Science in Business Economics fmm the University of thePhifippines (mNna cum laude) end a Masters degree in Development Economics at WlliamsCollege (top of the dass) from Wlliams college in lMlliamsown, Massacfiusetts.

Ermilando D. Napa, lndependent Dircctor sance June 201{. Mr. Napa's business experienceforthe past five years includes direc{oFhips in Manila Consulting & Management Company, lnc.,Century Woods, Inc. and Catanauan Resour@s and Develop,nent Corporation. Mr. Napacunently serves as Director and Chairman of the Audit Commifree of the CllF Oil Mills Group,Shareholder and Direc:tor of the L'Opera Group of Restaurants. He is the Founder and CEo ofManila Consulting & Manegement Company, |nc., Century Woods, Inc. and CatenauanResources and Development corporstion. Previously, he wes a Panner of Sycip Gones Ve,eyo& Company (Philippines) and also a Principal of Kassim Chan & company in Kuala Lumpur,Malaysia, a former member firm of SGV Group and Delloite Haskins & Sells Intemational. Hewas also formerly Manager of Arthur Andersen in New York. He has attended special trainingend various courses such as Strategic Management in St. Charles Chicego, Corporate Finance inNew York and IMPACT Productivity lmprovement in St. Charles, Chicago. Mr. Napa holds adegree of Bachelor of Science in Business Management from the Aquinas University where hegraduated in 1970. He obtained his Maslers in Management at the Asian Institute ofManagement in 1980.

Medel T, Nera, lndepender Diector since July 2011. Mr. Nera is President and CEO ofHouse of Inveslments, Inc. and President of RCBC Realty Corp. He serves as Director of Houseof lnvestments and lts signmcant subsidiaries and associates. He also serves as Director ofRizal Commercial Banking Corporation and Seafront Resources Corp. He was a former seniorp€rtner of Sycip, Gones, Vetayo and Co., CPAS (SGV) where he served as Financial ServicesPractice Head. He also seNes as Dire€tor and Treasurer of CRIBS Foundation Inc. Mr. Neraholds a degree in Bachelor of Science in Commerce from Far Eastem University where hegraduated in 1976. He obtained his Master of Business Administration degree from New YorkUniversity in 1980.

Noel A. Laman, Corporate Sect€tary sinee June 2007. He is a founder and a Senior Partnerof Castillo Laman Tan Pantaleon & San Jose Law Offices. He seNes as a Direclor and/orComorate Secrelary of GlexosmithKline Philip,pines Inc, Boehringer Ingelheim (Phils.), lnc.,Merck Inc. and Eli Lilly (Phils.), Inc- He also serves as Corporate Secretary of DMCI Holdings,Inc. and its various subsidiaries. H6 obteined his Bachelor of Jurisprudence and B€cfielor ofLaws degrees from the University of the Philippines college of Law. He obtained a Master ofLaws degree in 1963 from the University of Michigan Law School as a De V\fitt Fellow. His lawpracdice concentrates on corporalion and business law. He is en active member of theIntellectual Property 4sso6"rion of lhe Philippines, the Intelledual Property Fourdation, and thePhilipfine Bar Association. He ac{s as resource person of vadous foreign chambers ofcommeroe. He is the firm representative to the State Capital Group, an intemational associationof lew firms.

Ma. Pilar M. Pilates€utierrcz, Assistant Corporate secrctary since December, 2{t02. She ispresently a Partner at Caslillo Laman Ten Partaleon Sen Jose Law Offices. She odained herBachelor of Science degree maior in Legal Managemenl from the Ateneo de Manila University in

1997 and her Bachelor of Laws Degree from the University of the Philippines, college of Law in

2A01 . She is the Assistant Corporate Secrelary of DMcl Holdings, Inc. end its various

30

subsidiaries. She holds the position of Corporate Secretary/Assis;tant Corporate Secretary inseveral other Philippine corporations.

Armando S. Malabanan, Executive Vice Prcsident, Chief Operating Ofricer. He joined thecompany on March 1 , 2007. Pdor to ioining PhilNaRe, he w€s the General Manager and cEo ofAsian Reinsurance Corporation and Chief Accountant of the Charter Insurance Company (nowPhilippine Charter Insurance Company). He eamed his Masters in Management from sasinG|BA-Chulalongkom University, Bangkok, and his Bachelor of Science in BusinessAdminislration from the Mapua Institute of Technology in 1969. Mr. Malabanan is a CertifiedPublic Accountant.

John E. Huang, Senior Vice President, Ghief Financial ofEeer. He ioined UMRe in 2004 as itschief Finance ofncer. Prior to joining UMRe, he held the positions of chief Financial Officer ofC&P Homes, Inc., Senior Mce Presklent of Urban Bank, and Mce President of First NationalBank of Boston. He graduated yrith e Bachelor of Arts degree in Economica Honors, magna cumIaude, lrcm the Ateneo de Manila University in 1978, atd obtained his Maslers degree inBusiness Administration from the HaNard Business school in 1962.

Augusto G. Cipriano, First Vace PEsident, Life Division- He joined URC in 1981 and becameVice President and Head of that compeny's Life Divi$on in 1997, He completed a degree in ABEconomics at the Ateneo de Manila University in 1973. He is also an instructor/leciurer d theInsurance lnstitute for Asia & the Pacmc (nP).

Roberto S. De Leon 11, First Vice PEsident, Non{ife DMsion. Mr. De Leon joined FGUInsurance Corporation as a Management Trainee in 1982 before joining URc in 1989 asAssistant Manager, handling mad(e{ing and underwfiting for both treav and facultative accounts.He graduated from the De La Salle University with a Bachelor of Science degree in Commerce,major in Marteting, in '1982.

Edgat B. Vitlasenor, First Vice Prcsident for Corporat€ Services and Risk Management' Mr.Villasenor served in various capacities wlth URC and UMRe and was head of the laftefs MISDepadment prior to the meryer wilh the Company. He gmduated with a Bachelor of Arts deoree,Major in Polilical Science trom Far E€stem University in 1973.

Amerfil v. Basco, vice Prcsident for Reinsuiance Accounting. Ms. Basco has served in

various capacities in the Corporation for over 17 years. She is a Certified Public Accountant andobtained her Bacfielor of Science in Commerce, Major in Accour ing from the Far EastemUniversity in 1982.

Regina S. Ramos, Vice President for Intemal Audit. Prior to joining the Corporation in 2000,Ms. Ramos worked with Development Insurance and Surcty Corpomtion and SGV & Co. She isa Certified Public Accountant es well as a Certified Intemal Auditor. She oHained her Bachelor ofScience in Commerce, major in Accounting lrom $. Paul College, Manila in 19E2.

vicente B. villarama, Jr., Vace PGsadent for General Accountang. Mr. Villarama has beenwith the Corporation since 1983. He wes the Manager for the General Accounting Departmentsince 2000. He is a Certified Public Accourtant and obtained his Bachelor of Science inCommerce, major in Accounting from lhe Baliuag Unh/etsity in 1982

Marissa P. Aldeano, Vice Pr€sid€nt for Trcasury and Investrents. Ms. Aldeano joined URC

in 1982 and was head of UMRe's General Accounting Department prior to the merger with tneCompany. She is a Certfied Puuic Accountant and obtained her Bachelor of Science in

Commerce, m4or in Accounting from the University of Samo Tomas.

Rene De Guzman, Vice PGsident for Information Technology Services. Mr. De Guzmanjoined the Gompany in March 2009. Prior to that, he was a lecturer for the Masters in

3l

Management Program of the Univelsity of the Philippines bdension Program in Clatk and Subic.He was Information Technology Menager al Janssen Pharmaceutica, a division of Johnson &Johnson Pnils., Inc. from 1994 to 2008. He obtained his Ma$efs Degree in BusinessAdministration in 2007 and Ma$efs Degree in Information Management in 20(X, both from theAteneo de Manila University. He graduated with a degree Bachelor of Science in lnduslri€lEngineering from the University ofthe Philippines in 1984.

{21 Significant Employees

Although the Corporation has and will likely continue to rely significantly on the conlinuedindividual and collective contributions of its senior management team, tfie Corporation is notdependent on the services of any particular employee. lt does not have any special arrangementsto ensurc that any emdoyee will remain with the Corporetion and will not compete with theCompany upon termination.

(3) FamilyRelationships

Ms. Helen Yuchengco-Dee ard Ms. Yvonne S. Yuchengco, both directors of the Coporation, aresislers, and thus, are related to each other within the second degree of consanguinity.

(4) lnvolvement in C€rtain Legal Proceedings

To tne best of the Corpo€tion's knowledge, there has been no o@unence during the past 5years up to lhe present date of this report of any of the following events that are material to anevaluation of the ability and integrity of any direcior, any nominee for election as ditEclor,executive officer, or controlling person ofthe Corporation:

. Any bankruptcy petilion tiled by or again$ any business of whi$ the person was a generalpartner or executive officer, either at the time of the bankrudcy or within 2 years prior to thattime:

Any conMciion by fnal judgment, induding the nature ofthe offense, in a criminal proceeding,domestic or foreign, or being subjed to a pending criminal proceeding, domestic or foreign,traffic violalions and other minor offenses;

Being subject lo any order, judgment, or decree, not subseguently reversed, susPended orvecated, of any court of competent jurisdiction, domestic or foreign, permanently ortemporarily enjoining, baning, suspending or othenyise limitir€ his involvemerfi in any type ofbusiness, securities, commodities or banking ac{ivities; and

Being found by a domestic or foreign court of competent jurisdidion 0n a civil action), theSEC or compaiable foreign body, or a domeslic or forcign excharEe or other organizedtrading market or self-regulatory organizalion, to have violated a securities or commoditieslaw or regulation, and the judgment has not been reversed, suspended or vacated.

32

Name Year 5alary Bonus Other annualcomoensati r

Total

CEO and key execjtiveofficers named

All other ofiicers anddirectors as e groupunnameo

2010 18,7ffi,000

15,065,600

3,126,000

2,510,933

1,067,423

4.522,U2

22,549,423

22,499,175

CEO and key executiveofficers named

All other ofricers anddireclors as a grcupunnamed

2011 19,254,346

15,445,O77

3,182,370

2,686,717

1,501,401

4,654,894

23,938,117

22,786,687

CEO and key executiveofficers named

All other oflicers anddireciors as a grcupunnemed

2012(Estimates)

18,193,140

12,08'1,510

3,032,190

2,013,585

1,142,115

4,849,856

22,367,145

18,944,951

]tem 10. Executilre Gompensation

ANNUAL GOMPENSATION IN PH]LIPPINE PEAOA

Ofncers and dirEctors named for 201 1 indude the follot ing:1. Roberto B. Crisol. President and cEo2. Armando Mal€banan, Executive Mce President and COO;3. John E. Huang, Senior Mce President and CFO;4. Roberto S. De Leon ll, First Vice President, Non-life Division; and5. Augusto C. Cipriano, First \rFe President, Life Division

The Corporation's By-Laws (Artide lll, Section 8) provide that such per diem as the Board ofDirectors may approve shall b€ paid to each direc{or for attendance at any meeting of the Boerd;provided however, that nothlng herein contained shall be condrued to preclude any director fromreceiving such bonuses, other than per diems, as pro\rided elseryJhere in the corporation'sAmended By-Laws, or from s€Ning in any other capacity and receMng compensstion thercfrom,subject to approval thereof by the vote of stockholders representing at le€st a majority of theoutstanding capital stock el a regular ot special s{ockholders' meeting. In this connection,Sec'tion 30 ofthe Corporation Code ofthe Philippines states that'in no case shall the total yearlycompensation of diredors, as such directoF, ex@ed ten petcent (10%) of the net income eftertax ofthe corporation during the preceding year."

JJ

Each director of the Corporation re@ives a per diem based on the following schedule forattendance in meetings of the Board of Dircctorv Commifrees:

A. Board MeetingsChairman P 50,000Vice-Chairoerson 45,00qDirecdor/Treasurer 37,500I nc,eDendenl Direc{ors 20,000Regular Diredors 17,000

B. Committees'Meetingstndependent Oirectors P 6.000Reoular Diredors 5,000

Aside from the above, no other resolrrtion relating to directods remuneration has been edopted bythe Boaftl of Diredors.

Among the executive officets of the corporation, Mr. Roberto B. Crisol, the President and ChiefExecutive Officer, is covered by an employment cor ract, which will expire on December 31,2013. Mr. Armando S. Malabanan, Executive Vice President and Chief Operating Omcer as ofDec,ember 3,|, 2011, was covered by an emdoyment conrad which expitEd on February 29,2012. Mr. Malabanan has since retired and currently serves as a part-time consultant for theCorporation.

As of date, none of the Corpofalion's common shares are subjec{ to outslarding options orwanants to Durchase, or securities convertible into common shares of the Corporation.

J4

Item 11. Security Ownetship of Ce ain Record and Bene{icial o,yners and Management

{J} Securw Ownershlp of Certain Record and Beneficial Owners

The following table sets fonh as of Deoember 31, 2011 , the record and/or beneficial ormers ofmore than 5% of the outstanding Cornmon Shares ofthe Corporation and the amount ofsuchrecord and/or benefi cial ownershiD.

beneficialy owned by Gsrs and MICO Equities, rospdivdy, fom pat of the 1,450,0&,333 sharesregistered in the name of rcD Nomin€o Corporation (Fflipino).

(2) Security Orwlership of Management

The following table sets forth as of Dec. 31, 20111, the recod or beneficial slock ownership ofeach Directorofthe Corporation and all Ofiicers and Direc{ors as a group.

Title ofClass

Name, Addrcss ofRecord Oivnerand Relationshipwith lssuer

Address ofBeneficial Ownerand Relationshipwith RecoldOwner

Citizenship Number ofShares Held

Percentof Class

Common Bank of Philippinelslands,Ayala Avenuecomer Paseo deRoxas, Maksli Citr

Benk of Philippinelslands.Ayala Avenuecomer Paseo deRoxas. Mekati Cit'

Filipino 290,795,500 13.69%

Common PCD NomineeCorporation(Filipino)', G/FMSE Building, 6754Ayala Avenue,Makari City

SeNice lnsurenceSystem2,NewGslSHeadquarters,Financial Center,

Filipino 546,466,200 25.73o/.

Common PCD NomineeCorporatlon(Fillpino)', G/FMSE Building, 6754Ayala Avenue,Makati City

Yuchengco Bldg.,484 QuintinParedes StreetManila

Filipino 273.717jW 12.89%

Title ofClass

Name of Beneficial O,vner Amount analNature ofBeneficialOwnerchip

Catizenship Percent of Class

Common Helen Y. Dee 100Beneficial

Filipino 0.00000s%

Common Robert G. Vergana 1,000Beneficial

Filipino 0.000047%

Common Gregorio T. Yu 1,OOO

BeneficialFilipino o.oooHT%

Common Alfonso Salcedo 100Beneficial

Filipino 0.000005%

35

Common Roberto B, Cdsol 1,000RecoId

Filipino 0.0000470/6

Common Yvonne Yuchengco 26,000Record

Filipino o.0012240h

Common Malayan lnsurance Company,Inc. (assigned to Yvonne S.Yuchenoco as nominee director)

100Beneficial

Filipino 0.000005%

Common Ermilando D. Napa 1,000Beneficial

Filipino 0.000047%

Common Jose Teodoro K. Limcaoco 100Beneficial

Filipino 0.0{X)005%

Common Romeo L. Bemado 100Recod

Filipino 0.000005%

Common Danilo A. Gozo 1000Beneficial

Filipino 0.000047%

Common Medel T. Nera 1 ,000Beneficial

Filipino 0.000047%

Common TOTAL FOR DIRECTORS 32,500 0.00153%Common Armando Malabanan 600,(x)0

RecodFi|ipino O.028254o/i

Common Amerfil V. Basco 31,800Record

Filipino 0.001497%

Common Edgar Villasenor 50,dx)Record

Filidno 0.002354%

Common Vicente B. Villarama. Jr. 12,800Recort|

Filipino 0.000603%

Common TOTAL FOR OTHER OFF]CERS 694,600 0.032709%Common GRAND TOTAL 727,100 0.034239%

All th€ above named dirsctors and officers of the Corporation are the record end b€neficiel own€rs of theshares of stock set forth opposite their espective names.

voting Trust HoldeF of 5% or more

The Corporation is not ewate of any prson holding morc than 5% of the shares of theCorporation under a voting trust or similar agmement which may r6ult in a change in control ofthe Gorporation.

Changes in Control

From January 1 , 2012 to date, there has been no cfiange in control of the Corporation. Neither isthe Corporation aware of any anangement which may result in a change in conlrol of it.

36

Item 12. Certain Relationships and Related Transactions

The following teble presenls cn millions of Philippine Pesos) premiums written (inward)

and ceded (outward), receivables and payables between the Corporation, its PrincipalShareholders and companies represented by other members of the Board of Directors for 2010and 2011:

In addition, the Corporation has enterod into the follorving agreements with the Bank of Philippinelslands:

1. Custodianship Agreen ent: On December 14, 2006, the Corporation entered into aCustodianship Agreement with BPI for purpoGes of opening and maintaining acustodianship account with BPI over securities pertaining to the Corporalion. BPI ac'ts asa depositary of such securities. For services rendered, BPI is entitled to theqrstodianship fees based on the net asset value of the fund. The Agreement shallcontinue in full force and effeci unless sooner terminated by either of the partiescon@med for any reason whatsoever upon giving the other party at leasl 30 daysadvance written notice of termination.

SHAREHOLDER/OIRECTORCORPORATION

2010 2011

In Million PHP lnward Orh^'ard Reccivable P.y.Ho hNr.d Outward Receivabb PayaHe

GSIS 795.25 13.31 524.40 553.25 921.52 .27 419.62 551.67

Aytla LifeAssurance. Inc.

16.61 2.63 10.69 3.91 (3.s2) 3.00 6.31 6.63

BPIruSlnsuranceCorDoration

144.87 (.14) 51.50 249.9 184.50 54.27 '149.27

FGU lnsurenceCorDoration

.u .27 .03 .18 .35 .65

Total BPIGrouo

202.32 2.76 62.22 253.S9 180.58 3.00 56.93 156.55

First NalionwideAssurance Com.

.04 50.07 .13 50.11

Great PacmcLife AssuranceCom.

4.05 5.47 3,65 2,5 .46 3.55

MalayanlnsurenceComoanv. Inc.

63.66 150.98 't7.25 99.69 37.60 74.60 5.10 99.86

Malayan ZurichlnsuranceComoanY. lnc.

.12

Tokio MarineMalayantnsuranceGorDoration

't0.20 .39 5.30 30.25 4.00 1.6 5.69

Total MalayanGrouo

77.91 151.37 28.06 183.66 44.10 75.06 10.65 159.21

5I

2. Invedn efit Manwment Agreen eft. On December 14, 2006, the Corporation enteredinto an Inveslment Management Agreement with BPI for Srrposes of appointing BPI asInvestment Manager and to invest and reinvest the funds deposited in an investmentmanagement account with BPl. As compensation for services, BPI shall be entitled tocolled such reasonable oompensation to be paid out of the fund. The Agaeement shallcontinue in full force and effect unless sooner terminated by either of the parties

concemd for any reason whatsoever upon gMng the other party at least 30 daysadvsnce written nolice of termin€tion.

3. Retirerrcnt Fund lryesintent ManwBmerrt Agreemefit. On July 26, 1985, the Board ofTrustees of the National Reinsurance Corporation Emdoyees Retiremer Plan enteredinto an Inveslment Management Agreement with BPI for purposes of appolnting BPI asInveslment Manager and to invesl and reinvest the funds deposited in an investmenlmanagement account with BPl. As compensation for seMces, BPI shall be entitled locolled such reasonable compensation to be pakl out of the fund. The Agreement shallcontinue in full force ard effect unless sooner terminated by either of the partiesconcemed for any reason whatsoever upon giving the other party at least 30 daysadvance yvritten notice of temination.

There are no other parlies, aside from the related parties discussed herein, with whom theCorporation has a relationship that enables ihe parties to negotiate ierms of material transaclionsthat may not be available to olher moTe dearly independent parties on an arm's length basis.

38

PART IV- @RFORATE GOVERNANGE

Item 13, Corporate Govemance

Management and the Boafd of Directors of PhilNaRe recognize that a good corporategovemance syslem is integral to the mandate given by the Company's shareholders. In thisr€gard, the Company has established its Menuel on Corporate Govemance pursuant to: (a)

f nsurance Commission (lC) Citcular Letter No, 12-2N2, as amended by lC Circular Letler No.31-2005, (b) the Revised Code of Corporate Governance of the Secudties and ExchangeCommission (SEC), and (c) other relevant lC and SEC issuanoes and regulations.

on an annual besis, the Company conducls a regular review of its corporate govemance policiesand practices through a self-assessment using scorecards and besl-practice guidelines issued bythe SEC, the lC, the Philippine Stock Exchange (PSE) and the Institute of Corporate Directors(cD).

In 201 1, the Board, through its Audit Committee, performed a self-evaluation in which the cunentand potential state of the Company's corporate govemance practices were rated using bestpractice guidelines issued by the PSE. Through this assessmenl, the Company was able toevaluate its corporate govemanoe system, measurc the level of cornpliance with the Manual ofCorpofate Govemance and identry areas for improvement to further strengthen its policies andprocedures and protecl the interests of the Company and its stakeholders.

PhilNaRe is committed to continuously improve its corporate govemance practices. This effortwas affimed by the latest report from the lcD, in which the company showed a significantincrease in its fating of 64% in 2007 to 85.57% in 2010. The latest rating was also noted to beabove the 77% average score for all the 199 participaling publidy-listed companies.

Board Responsibiliw

The Boaftl recognizes its responsibility in guicling corporate stralegy, monitoring managerialperformance and achieving an adequate retum for shareholders while preventing conflicts ofinterest and ensuring compliance with applicabte larvs and regulations. The Board is composed ofeleven (11) members, three (3) of whom are independent direclo$. Each member is elected bythe stockholders during the Annual Stockholders' Meeting srd will hou office for one year untiltheir successors are eleded and qualified in accordance with the Company's amended bylaws.

S-tnteg ic Ptanning Process

The Board is continually engaged In discussions of strategic business lssues, to generatesustainable value for the Company's shareholders with due regard to its stakeholders, The Boardoversees management's developmenl of a business strategy in the conte)d of the Company'svision, mission and value system end monitors ard controls its imdementation.

Comdementing these business strategies is an execution process that incorporates peformancemanagement, changes in lhe Company's business environment, managemenl slyle and culture.This execution process is peformed through an annual planning conference held by SeniorManagement Committee together with Key ofncers wherein organizational and depertmentetgoats are set, end implementation plens, budget and perfomance measurement criteria arediscussed and approved in line with overall Company strategy.

39

ln&perr&nt Direcfrrs

An irdependent direcior refers to a person other than an ofiicer or employee of the Corporation,its parent or subsidiaries, or any other individual having any relationship with the Corporation,which would interfere with the exercise of independenl judgment in carrying oul theresponsibilities of I director. This means that apart frcm dircctots' fees ard shareholdings, heshould be independent of managemern and free ftom any business or other rclationships whichcould materially interfere with the exercise of his independent judgment. He must also possess allthe qualillcations required and none of lhe disqualifications of an independent director provided

under lC Circular Letter No. 31-2005, SRC Rule 38, the SEC Revised Code of CorporeteGovemance, and other rele\rant lC and SEC issuances and rcgulations.

Pursuant to the applicable rules and regulations ofthe lC and the SEC, independent directors arenominated and eleded in the Annual Stockholders' Meeting and each director issues acertitication confirming their independence within 30 days frorn theit eledion. Messrs. ErmilandoD. Napa, Romeo L, Bemado and Medet T. Nera are cunently tne Companyb IndependentDireclors.

ChairpeBon and Prestdenychid Execufrve Ofricet (CEO]

To ensure balance of power and authority, increased accounlability, and greater capacity forindependent decision mamng, the roles of Chairperson of the Board and PresidenUCEO shall asa general rule not be combined. These positions are being held by lwo separate individuals, theChairperson of the Board is Ms. Helen Y. Dee, while the President and Chief Executive Ofncer(CEO) is Mr. Roberto B. Crisol. Their respective roles are dearly defned in the exisiing Boardstruclure and practices wherein the Board perfoms oversight fundion and the Managementd ischarges its execulive responsibilities tor the business.

The President and CEO is on emF oyment contracl for two (2) years and his performance isevaluated by the Nomination & Compensation Commitee b€fore renewal.

Bard Pe ontnnceThe Board holds regular monthly meetings and special board meetings to deliberate on majorissues affec{ing the Company. Ordinadly, the Boad adopts a formal and sequential agenda foreach regular meeting. The agenda includes brief reports or updates by the Chairperson and lheBoard Committees, reporls on tinanciat pertormance provided by the Chief Finence Ofiicer, endoperational pefformence pmvided by the President and Chief Opetating Officer. The agenda alsoincludes items for tne Board's deliberation and approval. The Corporate Secretary providesassistanc,e and advisory servic€s to the diredors on their responsibilities and obligations.

Discussions during board meetings are open and indeperdent views are given due consideration.

Summarized below are the number of meetings and the attendance record of the individualdireclors for the year 201 1.

Name Meetings Attendance

Bemardo, Romeo L 100% (12t12'Crisol, Roberto B. 100% (12t12)

Dee, Helen Y. 83% (1Ot12)

Gozo, Danilo A. ' 4P/o @mLimcaoco, Teodoro l( 83% (1Ot12)Napa, Ermilando D. ' 1oo% om

40

Name Meetings Attendance

Nera, Medel T. 100% (6/6)

Salcedo. Alfonso Jr.L. 75% (9t12\Vergara, Robert G. s1% (11t12)Yu, Gt€qoaio T. 91% (11t12)

Yuchenqco, Yvonne s. 100% (12t12Cal, Primitivo C. 100% (s/5)Manansala, consuelo D. 80% (4t5)

1 Elected on June 2O1 1

':Eleded on July 2O1l"Not reelected in June 2011

g@'dCommit|B€s

Pursuant to Article V, Sedion 2 ot the Company's By-Laws, the Board cons{ituted the boardcommittees on Nominstion, Compensation and Audillo assist them in the implementation of good

corporate govemance. tn addition, board committees on Risk Management, Underwriting,Inveslment and Budget and Infomation Technology were also created to provide oversight toManagement on these key ereas of opergtions.

Nomination and Compensation Gommittee

The Committee, headed by Mr. Rob€rt G. Vergara, is composed of four (4) members, one ofwhom is an indeoendent direc{or. The Committee revlews and evaluales the qualifications of allpersons nominated to the Boad as well as thos€ nominated to other position requiringappointment by the Boad. Relative to compensetion, lhe Commite€ provid€s a formal andtransparent proceduro for develoFng e policy on exgcutiw remuneretion and for fixing theremuneralion of corpoEte officers and directors. lt also provides oversight over remuneration ofsenior management and other key personnel.

The Nomination and Compensation cornmittee held six (6) meetirEs in 2011 ard the indivilualattendance record of each member is shown below:

Name Meetings Attendance

Vergara, Robert G, (Chairman) 100% 6/b

Yuchenqco, Yvonne S.Mce Chairperson) 66% 4t6Salcedo, Alfonso Jr. L 66% 4t6Napa, Emilando D. 100% 3t3Cal, Primitivo C. 100% 3i3Gallaga, Rafael C. (Ex-Officio) 830/6 5/6

rReDtaced Mr. Cal as Member

'?Not re-elecied b Jutle 2011

Risk Management Committee

Tne Committee,neaded by Mr. Romeo L. Bematdo (an independent director), is composed of six(6) director, two (2) of whom are independert directors. This was estauished io assist the Boardin the development and oversight of the gompsny's risk management program. lts main task is to

4l

oversee lhet risk management is an integral part of the planning and operations ofthe Companyin order to meet corporale goals and objedives.

In 201 1, the planned aciivities for the Enterprise Risk Management Process were reprioritized toincorporate Company endeevours on its computerization projects. The Committee, together withthe Risk Managemem Council focused its efforts on efiectively monitoting and managing theCompany's top four risk arcas: Claims, lnvestments, Urderwdting, atd impact of the tc'sIncreased capitalization Requirement.

The Risk Management Commitee held one (1) meeting in 2011 snd the individual attendancerecord of each member is shofrn below:

Name Meetings Attendance

Bemardo, Romeo L(Chairman) 100% 111

fu, Greqorio T. (Mce Chairman) 100% 1tlNapa, Ermilando D. 100% 111

Dee, Helen Y. 'lOQYo 111

Limcaoco, Teodoro K, 100% 1t1Crisol, Roberto B. 100% 'U1

Audit CommitteeThe Committee is composed of three (3) independent directors, headed by Mr. Ermilando D.

Napa. lts main task is to assisi the Board in fulfilling its overcight responsibilities for the financialreporting process, the system of intemal control, the audit process and the company's process formonito,ing cnmdiane,e with laws ard regulatiorc and the code of conduci. To ensure continuingefiectveness of the Committee, its members conduct an annual performance self-evaluation toassess its strengths and weaknesses snd identify ateas fol imprc\rement. In 201 t, the Boardapproved the revised Charter of the Committee, which include updates on its authority andfes0onsibility.

The Audit Committee held nine (9) meelings in 2011 and the individual aftendance record of eachmember is shown below:

Meetings Attendance

Napa, Emilando D. ' (Chairman) 100% 515

Navano, Rizalino S.' (Chairman) 10006 414

Bemardo, Romeo L. 77% 7t9Nera, Medel T. 100% 5i5Cal, Primitivo G. 100% 4t4

1P6ed away on July 2011'Reglaced Mr. Navaro as Chairman3Elected on July 2Ol I' Not fe-eleded in June 2ol I

Independent Pubfiic Acco{tnlanb

The Audit Committee recognizes its responsibitity in confirming personal identification andprofessional quatifications of the Company's independent e)'ltemal auditor. lt conducts duediligence checks with guidance frorn SEC and lC requirements on independent auditors forpublicly listed insurance companies, mainlains comdete documentation of the selected

independent auditods acd€ditation certifications, and performs an annual evaluation of itsindependert auditor together with key Company oficets.

In 2011, Punongbayan and Araullo was reappointed by the shareholders during the annualstockholders meeting. The engagement partner assigned to the Company since 2008 is Mr.Leonardo D. Cuaresma, Jr. who has elilensive accounting and auditing experience. Thisappointment is in eccordance with the SEC regulation that the audit partner principally handlingthe Company's account is rotated every five (5) years or sooner.

As a matter of good govemance, the Independent Public Accounlants also hold execulivesession with the Audit Committee, without the presence of Management. They are also present

during the Annual Stockholders' Meeting to respond to questions of shareholders atld to make aslatement, if they so desired.

tn|€,rnat Audlt

The Board in peforming their oversight rote has established the Intemal Audit funciion to provideindependent and objective assunanoe and other non-assurance services designed to add valueand improve the Company's operations. To ensure independence in fulflling its duties andresponsibilities, Intemal Audit is govemed by a separate Cha et and organized to fundionallyreport to the Audit Committee. An annual performance evaluation of the Depaftment and itsmembers is also conducted by the Audit Committee to ensure continuing efiectiveness and valuegeneration of the function.

Intemal Audit had completed thirty one (31) engagenFnts in 2011, whicfi indudes its apptovedwork plan for the year and olher special engagements requesied by Management and AuditCommittee. On a quarterly basis, its rcport to the Audit Committee and Management usuallyincludes.- the summary of its activities thrDugh an Action Plan Regisler maintained and madeavailable for reference, significant and emelging dsk exposures, control and regulatory issues,potential improvement €reas, pertinent measut€ment goals and results, and other mattersneeded or requesled by the Board.

In addition, the funciion intrcduced improvements in its organizational structure and responsibilityareas, formalized its Operations Manual and conducted leamirE sessions forthe Company.

lntemat Conttot

Vvtile policies are set by the Board, Managemem is primarily r€sponsible for the design,implementation and maintenance ot the intemal contrcl system of the Company. The Boardthrough its Audit Commiftee oversees the actions of Management and monitor the effeciivenessof the intemal control system put in dace.

On an annual basis, the Chief Audit Executive issues an Intemal Control Report indicatingprocedures performed by Intemal Audit in evaluating the intemal control system of the Companythat includes its policies, procedures and processes asw€ll as an aftestation that a sound intemalaudit, control and compliance system is in place and wor*ing effec{ively.

Flnanctal Rptting

The Management of the Company is responsible for the preparation and fair presentation of thelinancial slatements in acc,ordance with the Philippine Financial Reporting standards. Thisresponsibility includes designing and implementing intemal controls relevant to the preparetion

and fair presentation of financial stdements, seleciit€ and applying appropriate accountingpolicies, and making reasonable accouming estimates.

+J

The Audit Committee, on the other hand reviews interim and annual financial statements prior toits presentation to and approval by the Board, trith particular focus on changes in accountingpolicies and praciices, majorjudgmental areas, signilicant adjuslments resulting from audit, going

concem assumptions and comdiance.

The Company submits its interim and annual financial slatements to the SEC and the PSE on atimely basis and provides regular updates on its operating perfotmance and majol merket-sensitive information affecting share price performance, as nec€ssary, to regulators.

Compliance Mdritoring

The Boad initially assigned the compliance function to lntemal Audit and designated the InternalAudit Head to assume lhe rote of the Cornpliance Officer. The main responsibility is to monitor theCompany's adherenc€ to its Revised Manual of Co|porate Govemance, and ensure compliancewith all applic€Ue laws, rules end other regulatory requirements. Assistance from the legalcounsel is also sougttt to facilitate a more efiective performance of the compliance role.

The Compliance Offrcer issues an annual certification on the exlent of the Company's compliancewith its corporete goveman@ manual and pmvides explanations for deviations, if any. TheCompany also conlinuously identifies and develops initiali\res to turther strengthen and improveits corporate govemanoe policies end practioes such as the annual corporate govemances@recard evaluations and participation in corporate govemance trainings.

Riqhts of the shareholder

sharghotder li€€,ting

Stockhotders sre informed at least 15 business days before the scheduled date of the AnnualStockholders' Mee{ing. The notice inctudes the date, lime, venue and agenda of the meeting, therecord dste of stockholders entitled to vote, and the date and place of proxy validation. Tne noticefor the June 30, 2011 Annual Stockholders' Meeting was sent on June 3, 201 1 .

Voting Rulrfs and Voting *oc€dures

Each share entitles the holder to one vote that may be exercised in person or by proxy atshareholder meetings, induding the Annual Stockholdets' Meeting. Shareholders have the rigtttto elect, remove and replsce direciors and vote on cenain corporate acis in accordance with theCorporation code. Voting procedurs on matters presented for approval to the sfiockholders inthe Annual Stockholders' Meeting are set out in the Definitive Infomation Statement, which issent to all slookholders of rectrd at least 1 5 days before the date ol meeting .

Riglrt b lrrtormatio4r

Shareholders are provided lhrough public records, cnmmunication media, and the Company'swebsite, the disclosures, announcemenls and reports filed with the SEC, PSE, lc and otherregulating agencies. Alt shareholders are also allowed to inspect corporate books and recordsincluding minutes of Boerd meetings and stock registries in accotdance with the CorporationGode. Moreover shareholders, upon request, are proviled with periodic reports which disclosepersonal and professional information about the directors, officels and certain other matters suchas their shareholdings, dealings with the Company, relationships among direcdors and keyofiicers, ancl the eggregete compensation of directors and officefs.

44

Divide'|ds

The Board of Directors are authorlzed lo declare divldends out of tne unreslricled relalnedeamings of the Company, which may be payable in cash, in property, or in stock to allstockhotder. Releted provisions pertaining to divideld rights of shareholders are indicaled inother Darts of this submission.

Stakeholder Relations

Sharchorder mcl ,rvestor Retations

The company has set-up communication channels that promote effec{ive communication with itsshareholders and the investing community- Aside from the regular reporting and disclosures tothe verious regulating agencies such as the SEC, PSE and tC, the company actively maintainsits website that provides timely infomation updates on its govemance, operational, and financialperformance. The Company also have designaled telations ofncers to handle inveslor andshareholder queries and reque$s, and their contac{ infomalion can easily be accessed throughthe Company's website.

Emptoyee Re;tations

The Company explicitly articuldes tts recogniton end prctecdion of the rigms and interests of itsemployees through its Employee Manual of Policies and Proc€dures. The manual also govemsemployee related matters to ensure uniformity and consistency of interpretation andimplementation, promote harmonious employer-emdoyee relationship as !t ell as set-upguidelines in potecting the use of material inside infotmation.

The Company provides post-employnent employee benefits through a detined beneft plan andvarious contrihrtion dans- Employees also participate in vadous industry and regulatory trainingsand seminars that are designed for their career advancemetrt and functional development, andare linked to\wards shareholder value ffeation.

corpotElfE social Respo,nsibitry

The Companys efforts are cunently focused on mitigating the crnsequences of naturalcataslrophes. lt participates in conferences on this subjecd and is worting with the Philippine non-life insurance induslry to put in place miligation measures. The Company also participates jointlyin community related projects urdertaken by other entilies from time to time. Other environment-related and communiB involvement programs are being facilitated to funher contribute to theinsurance induslry and the Philippine society.

Code d EthtcsPhilNaRe prcmotes a culturc of good corporate govemance by formally adopting a Code ofEthics that is founded on the Companyb c,orc business principles of faimess, aocountability,integrity, transperency and honesly. The code guides individual behaviour and decision making,and clarilies responsibilities and proper conduct for its directors, offcers and employees.

45

PART V - EXHIBITS AND SCHEDULES

Item 14. Exhibits and Repo.ts

(al Exhibits - See accornpanying Index of Exhibits

{b) Reports on SEC Fo]m {7€

Items reportod undet SEC FoIm 17C during the last six months inc'lude the follovving:

. February 29, 2012 re: Exfiration of employment c€nt|act of Mr. Amlardo S. Malabananas Executive Mce President and Chief Operating Ofiicet of the Company.

. February 16,2012 rc: Rescleduling of annual slockholders' meeting of the Companyfrom June 25, 2A12 6- wlonOay of June under the by-laws) to June 27, 2012Wednesday), at 3:00 p.m. allhe Carlos P Romulo Auditorium, RCBC Plaza, Makati City.The r€cord date is May 15,2012.

. January 15, 2012 re: Corporate Secretary's Swom Cettification on the Attendance in

Board meetings of each direcior for the year 2011, pursuanl to the Code of CorporateGovemance which is etrforc€d by the Securities and Excnange Commission.

o November 17, 2011 re: Resumption ofthe Coryoration's share repurchase program andresignation of Mr. Alfonso L. Salcedo, Jr. from his position as Trcasurer of theConporation pursuant to BSP diredive on intedocking officelships.

40

SIGNATURES

Pursuant to the requiremenls of Section 17 of the Code and Section 141 of the Corporation Code,this report is signed on behalf of the issuer by the undersigned, thereunto duly authorized, in theCity of Makati on May 24,2012.

NATIONAL REINSURANCE CORPORATION OF THE PHILIPPINESlssuer

By;

/^a^*du-'JJ/ ROBERTO B. CRISOLPrincipal Executive Otricer (CEO)

\ /'\I l'|

-r:.:f - i:.1tY.lrVICENTE B. VILLARAMA. JR.Principal Accounting O,ffi cer

SUBSCRIBED AND SVITORN to b€fore me this MAYexhibiting to me their Residence Certificates, as follows:

NAMESRoberto B. CrisolJohn E. HuangVic€nte B. VitlaramaMa. Pilar Gutienez

RES. CERT. NO.07009884111416171889t17400702078/

DATE OF ISSUEJan,24,2012Jan. 14,2012Jan.23,2012Jan. 27 ,20'12

2 3 2012 affiant(s)

PLACE OF ISSUEMakati CityPasig CitySJDM, BulacanMakati CitY

u e ur rudltdleP. sblie nnezAubolnf,n6nt No. l,l-32

ooc. tto.: 4g2 ;

Page No.: ?K ;

Book No.: fll :

series of 26'Z-

Casiilio Lanrin Tair Pantsieon& San JosD L:rrv Firrn

Ths Vrleio Tc'rsi, i22 Valsrc SfeotSalcsdo Mllsqo, M3k8ti Ciry

PTR No. 3174538; .J1-il2-2012; Makstj CltyIBP No. 09080; Lifotimo; Quezon City Chspbr

Roll No. 58742

al Financial offic

MA. PIT.Ifi i'W IL.A(ES,--G UTIERREZAssistant Corporate Secretary

N(}T/\RY PT IBI,ICt{L}LL \C. 587{:

47

EXH]B]TTABLE

SEGURITIES REGULATION CODE FORMS

Desc{btion 17-AJ Plan of Acquisruon, Reorganization,

Ananqemer*. Lhuidation. or Successionn.a.

lnstuments Defining the Rights of SecurityHolders. lncludino Indenhnes

n.a.

I Votinq Tfiist A$eement n,a,10 2011 Financial Statements and Independent

Auditors' Report (with notadzed Statementof Management Responsbility and SECSuoolementarv Scft edules)

Attached

13 Letter re: Change in CertiryingAccountant

n.a.

15 Letter re: Chanoe in Accounlinq PrinciDles n,a.

16 Report Fumished to S€oxity Holders na.

18 Subsidiaries of the Reoisfant n.a.

19 Published Report Regarding MattersSubmitted to Vote of Securitv Holders

n.a.

20 Consents of Experts and IndependentCounsel

n.a.

21 (a) Power of Attomey(b) Power of AttorneF-+oreign Registrart

n.a.

29 Additional Extrbits n.a.

n. a. Not applicable or require no ans er.

48

() ernongbayan &Arautlokmb.r frmli0 nG { Tho. or Inffiod Lld

Financial Statements andIndependent Auditors' Report

National ReinsuranceCorporation of the Philippines

December 31,2011,2010 and 2009

Q nrnongbayan &Araullo

Report of Independent Auditors

Cttlhd Fl/loc^.6{nt.LP& i ! tMlc.f m $dlrd G rt Thdnto. lIlmrdml LtOfr6 In CobJ, O.e, C.vih

8O4PfiC c..t ol tua tb. @02S@ G.sp A

^cEditrlbn No. o@2.FR 3

20th Floor, Tower IThe Enterpise Center6766 Ayala A!€nue

1200 Mabtl City

Phllippin€6

T +63 2 8a6 55llf +63 2 886 5506; +63 2 886 5507www pu nongbayaGaft|ullo.com

The Board of Directors and the StockholdersNationd Reinsurence Cotporation of the Philippines18th Floor, Philippine AXA Ufe CentetSen. GilJ. Puyat Averue conet Tinddo SteetMakati Gty

Repon on the Financial Statements

We have audited the accompanying financial statemedts of National Reinsurance

Corpotation of the Philippines, which comprise tle statemetrts of financial position as

at Decembcr 31, 2011 and 2010, end thc stat€m€nts of incohe, stat€meots ofcompreheasive income, starcmens of changes in equity and statements of cash flows

for each of the tlree years in the period ended Decembet 31, 2011, and a summary ofsignificaDt accouf,ting policies and othet explanatory infomation.

Managacatl ktpwiffii! fu tba Finacial Statcaetts

Management is responsible for the pteparation and fair presentation of these

financial sbt€trents in accotdance with Philipp.ine Firancial Reporting Standards, and

for such intemel contol as oanagement detetmines is necessary to enable ttre

preparation of financial statements tltat are free from matetial misstateneDg whethet

due to ftaud or etor.

Q eunongbayan &Ar:aullo-2-

Azdinr'PcqouibiEg

Our responubility is to cxpress an opinion on these financial statelrents based on outaudis. I7e cooducted our audits in accordence with Philippine Standards onAuditing. Itose standatds rcquire tlnt we comply with ethical tequiremerts and plaoand perfom the audit to obtain reasonable assurence about whether the doancialstateEef,ts aie frec ftom material misstatement.

An audit involves performing procedures to obtain audit evidence about the amouotsand disdosures in the financial staternetrs. 'Ihe procedues selected depeod on theauditot's iudgmeng lldgding the assessment of the risks of matclid misstatement ofthe fin"nqiel stalements, whether due to fraud or error. 11 mrLing those riskessesshents, tle euditor considers intemal control r€levmt to the eatity's preparationand 6ir presentation of the financid statehents in otdet to desiga audit proceduresthat are apptopriate in the circumstaoces, but not for the putpose of eqrressing aaopinion on the effectiveness of the entity's intemal control An audit also iocludesevaluating the appropdatcoess of accounting policics used aad the rcasonableness ofaccounting estimates made by managemeng as well as waluating the ovetallptesentation of the financial statehents.

Ife beliwe that the audit evidence we have obtained is sufficient and epproptiate topmvide a basis for our audit opinion.

Opiaion

In our opiniorq tbe Enancial staternents present faidy, in all meterir,l resPects, thefinancial position of National Reiasurance Colporation of the Pbilippines as atDecember 31, 2011 aod 2010, and its fin-ngial perfofiunce and its cash flowsfot each of the tbtee yeats in the pedod ended Decembcr 31,2011 ia accordance withPhilippine Financial Reporting Stan&rds.

F&A b . mb-nm wllin 6dr itrbr hb.ddd La

Q Prnongbayan&Araullo

Crm.d Aalc &d{nbntrFaA b r mftb4 tm sltih Gnni Tltntb. Intri.!o.'.| ltd

-3-

Report on Other Legal and Regulatoty Requirements

Our eudits were conducted for the pu4rose of forming an opinion on the basic

financial statements taken as a whole. The supplementary infotmation for the yeat

ended December 3 I , 201 1 required by the Bueau of Intemal Revenue as disdosed inNote 26 to the financial statemenb is plesented for purposes of additional analysis

and is not a required patt of the basic financitl statements prepared in accordance

with Philippine Financial Reporting Standatds. Such supplementary infotmation is

the tesponsibi\ of the macagemenr The supplemeotary infomation has been

subjected to the euditing procedures applied in the audit of the basic financialstatemeots and, in our opinion, is f^idy stated in all matcrial rcspects in relation to the

basic financiel statements taken as a whole.

PI.]NONGBAYAN & ARAULLO

By: I*onardo D. Cuaresmq JtPartner

CPA Reg. No. 005864?

TrN 109-227-862PTR No. 3174799,J.ourty 12012,MaLu'n Ciry

SEC Gtoup A AccrcditrtiooPettdct - No. 000?-AR-3 (untilJrn 185 2015)

Firn - No. 0002-FR-3 (utilJan. 18, 2015)

BIR AN 08-002511-7-2011 (uotil Sc?t 21, 2014)

Firn's BOA/PRC Ccrt ofReg No. 0002 (until Dcc. 3l' 201Q

Mrtch 15,2012

NATIONAL REINSU CORPORATION OF THE PHILIPPINES18n' floor, Philippine A(A Lite Centre, S€n. cil J, Aryat Arenue (omer lindalo Street, Makati Cty l2|D, Philippin€s

Trunk lines: +632 759 5801 to 06. tax: +632 759 5EE6 . n eb6its n.cp.com.ph r emaif nKponre.(orn.ph

STATEMENT OF MANAGEMENT'S RESPONSIBILITYFOR FINANCIAL STATEMENTS

The management of National Reinsurance Corporation of the Philippines (the Company),is responsible for the ptepatation and fair presentation of the financial statements for tle years

ended Decembet 31, 2017 and 2010 in accordance with Philippine Financial RepotingStandards, including the following additional components attached therein:

a. Supplementary schedules tequired under Annex 68-E of the SRCb. Reconciliation 6f rctaingd sarnii€s available fot divrdend declarationc. List of standatd and inte4>retations under Philippine Financial Reporting Standatds as

of December 31,2011

This responsibility indudes designing and implementing intemal controls relevant to thepreparetion and fait ptesentation of financial statements tlat 4re ftee ftom matedalmisstaternent, whethet due to ftaud or eitor, selecting and applying apptoptiate accountingpolicies, and making 4gseunring estirnates that are reasonable in the circumstances.

The Board of Directots teviews and approves the financial statements and submits the same tottre stockholdets.

Punongbayan & Araullo, the independent auditorc appointed by the stockholdets, has examinecthe financia1 statements of the Company in accotdance with Philippine Standatds on Auditi.gand" and in its report to the Board of Directon and stockholders, has expressed its opinion onthe faimess of ptesentation upon completion of such examination.

./)/ l/-r-nef6NlonnChaimetson of the Board

& Chief Executive Officer

1 a 2012

ATT Y/A RII EI^ D. IIIAIFF'S

udnL :Ji:,'. l' , 1':12p G n J.7&* p !1 t !L3.1 lt !_pq z

ROBERTO B. CRISOL

SUBSCRIBED AI\aD SWORN m b€fore me rhis_day of Ao.il 2012 d the Crty of Makati. Afriants sxhibitcd io nc thcir

'Bi;i$:r4l{T,i.s;#5l$e't

NATIONAL REINSURANCE CORPORATION OF THE PHILIPPINESSTATEMENTS OF FINANCIAL POSITION

DECEMBER 31, 2011AND 2O1O

(Anounts in Philippine Pesos)

Notcs mf

ASSETS

CASH AND CASH EQUWAI-ENTS

REINSURANCE BALANCES RECETVABLE - NCt

AV{LABLE.FOR.SALE FINANCIAL ASSETS

LOANS AND RECEIVABLES

PROPERTY AND EQUIPMENT . NCt

DEFERRED ACQUISITION COSTS

DEFERRED R-EINSURANCE PREMruMS

OTHER ASSETS

TOTAL ASSETS

LIABILITIES AND EOUITY

REINSURANCE BAI^/INCES PAYASLE

ACCOUNIS PAYABI-E AND ACCRUED EXPENSDS

RESERVE FOR UNEANNED REINSUIANCE PREMIUMS

DEFEBRED REINSURANCE COMMISSIONS

Total Li.bilitics

EQUITY

TOTAL LIABILITIES AND EQUITY

P U,638,082,118 l' 12,553,084.312

l1

P 1,699,806,389

3,892,n3,173

5,365,644,659

s84,623,402

127.375,9O9

li?,8a0,973

564,483,447

2,66,094,166

P 5,427 ,8t0,91

r07,474,87i

89?,469,164

79,2'2,164

6,512,007 ,938

6,n6,07 4,180

t' 613,247 954

4"210,444,502

6,297,135,561

360,688,116

17,840,121

198,420,037

514,251,825

281,01 1,1 10

t' 5,462,7 t2,883

108,631,841

902,88'7,425

130,486,488

6,604,7 18,637

5,948,365,695

6

12

10

2

P t2,638,082,1r8 P 12,553,084,332

Sec Notes to Financial Staements-

NATIONAL NBNSUR^NCE CONPO8ATION OF TI{E PHIUPNNESSTATEMENIS OF INCOME

roR THB YEARS ENDED DBCEMBER 31, 20tl Z'10 AND 2009

(Anowd io PhilippiE PcN)

m\

P 35?,I.j,{,4862lpt&u047

\ $011e55r54!6E

'.l8,,!t4Jt?

913rl0a57|345,606.6rE

\2A90lr"r95

( m6pn,063 )

?68.180,{53

66Ufrigo

u8:n93n

44BtW

72Jtt5E2

P 42191t3[3821t81511561

1J9?,819,07418:l57.4tlt)

1.6165t6,4&1

l,ErE,sz5137415.$1,462

2274,52t1)9

( 6s7r4{Jn6)

491:21J4{)

( 164,724,676 )

240,rr4l,4llll

( 4117J6(,156 )

72.611.6U

P .1,538,1?5,112, t5,%1,7t0

rJ52J93,60r11t1471,598

1,,17(,,E65,| .)

1!32,57?,09441fi,r77,774

1,43r,545.E68

31,1rt,3t1

l(fty,,885

It1,i1(t216

t25,072,y18

r72.r03,7(B

69.84r+.151

REINIIURANCE PREMruM TNooMERcill.rnnc. Fmi!6 - ftt of GtuttrsRcttEaalql Frsium

Rcisurincc f'tmilm ttd.dlkffi$ in es! itr 6c.!E l rci.sunx€ r'llnirtr

UNDERVRITINC DEDUCTIONSsh.E in cl.iN dd liEs

NET UNDBRSITTING INCOME O'SS)

INITESTME}{I AND OTHEn lNftMB - Nct

PROFTI O'SS) A,FTBR INVESTMBNT AND OTHBR INOOMB

CENERAL AND ADMINISINATTVE EXPENSES

PROFTT (rts9 BEFORE a X

TA)( BPENSE

NEI PROFIT G'6S)

E 6ins.Cr.s) P..Shc

t9

ry-llgg (]:--{2|2lL!gl) P rrB'u1,-1s7

P 0.16 ( P 11.22\ l, 0.o5

*. IIo', b Fior','.,ltl&tdacdr.

NATTONAL REINST.'RANCE CORPORATION OF THE PHIIIPPINES

STITEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 3I, z)IT, MIO AND !{09(ADo.na iD PtiIiPPiEc Pc&.)

Nolc !)lt ano Ax)9

NET PROFTT 0rSS) P 3OJ50,4$ (P 179'977'&'0 ) P 103'03e.3s7

olt{ER COMPREHENSNE TNCOME (rOSS)

thir nruc siins (G\!tJr) - nct of t sc( 7 (

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NATTONAI. REINSiURANCE CORPORITIION OF TTIE PTTlIJPPTNES

SIATBMBNTS OT CASH FT{'VSFOR THE YBA.RS BND@ DBCBMEBR 51 2O!L 2OO }ND AX}g

(AtanE b Pt fiPPie PcN)

?oll

P 4\epn

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e4ryo31L0,94 )39,(l@.tl5 )

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n@&l164.rE9t53l

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P 172,903,718

:!.8q426,619 )I ?,{t6,1,18 )

I 1E,471Jr'8 )D,nL727

'm,765,([lE183t,4t1?l264354

CASH FI.oWS FROM OPEMTTNG ACTIVITIE!;Ps& 06i) b.fi)r E

lntrBt md'm(;rin m sL of .rnndtefor-s.ic f@ei.l $*t,l)E(s in lRrt &r uncrftrl Eisu'rG 0lmifuDiriLfll iffinDc"Ki.dd rnd fl)di'rlimlryrrimt ls*sUtcdiel firci8n .*h.nse lN krh)c.in m slc.f !l!)tEq i*l <'lifnF\t

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EFFBCTS OF FONB|CN CUR.RENCY IEVAII'ATION ON C/ISHAND CASII EQUIVALENIS

NET TNCRBASE (DBCREASB) rN CAStt AND CASH EQlJrgArlNTS

CASH .IND CA!iH BQOTVATENTS AT BBGINNTNC OF YEAR

C.ASH,AND CASTT BQUIVAI,ENI:i AT BND OF YEAR

(P 4lt-i(n,r 56 )

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NATIONAL REINSURANCE CORPORATION OF THE PHILIPPINESNOTES TO FINA\ICIAL STATEMENTS

DECEMBER 3t, 201t, 2010 AND z)09(Amouat ia PhiliPPiae Pcsos)

CORPORATE INFORMATION

Natior*l Reinswance Corpoution of the PMippines (the Company) was incorporatedonJrme 7, 1978 by virtue of Presidentid Deaee No. 1270, as a domestic ptofessionalreinsurance frm to ptovide Me and non-life rcinsurence capacity to the Pbilippines and

neighboting insunnce markets. Uodet the Dectee, it became the vehide for thePhilippine insuancc industry's participatioo in the Asian Rcinsuaoce Corporation(Asian Re), a multi-ggveromensinitieted reinsurence entity, based in Bangkok, Thailand,which was cstablishcd to foster regional cooperation among insumnce comPanies doiog

business io Asia. The Compaay's shares ate listed in the Philippine Stock Ex'hange(PsE).

The Company's tegistercd offce, which is also its priociPal PLce of business, is locatedat 18th Floor, Philippine AXA Life Center, Sen- GilJ. Puyat Aveoue corret TindaloSteeg Makati City.

The firencial satements of the Company fot the yeat eoded December 31,2011(induding the comparativcs fot thc years ended Decembet 31, 2010 aod 2009) we.re

autlrotized for iszue by the Company's Board of Directots (BOD) on Merch 75,2072.

SUMMARY OF SIGNIFICANT ACCOI,'NTING POLICIES

The sigo.ificant eccormting policies that heve been used in the prepatation of these

financial satements ere sunrnarized below. These policies have been consistendyapplied to all the years presented, unless othetwise sated.

2-7 Basis of Ptepamtioa of Fiaencial Saemcat

(a) Stdcncat of Conpliaa vitb Phifupin Fhancial R4otting Standads

ffis f,nan.irl stateoents of the Company have been prepated in accordance withPbilippine Financial Repoaiog Standards (PFRS). PFRS ate adopted by theFinancial Repoting Standards Council (FRSQ ftom the ptonormcements issued bythe Intemational Agcqunring Standards Board (ASB).

The fioancid satemeots have beeo ptepated using the measurement bases specified

by PFRS fot each type of assets, liabilities, iocome aad exPense. Tfre measurencotbases are more fully described iq the accounting policies that follow.

-2-

(b) Prcnrtatin oJ Finazcial Statazcta

The finqncial stat€menB ale prcs€nted in accotdance with PhiliFpine AccountingSteodard (PAS) 7, Pnsnwion of Financial Sunnr*. The Company ptesents thestatement of comPtcheasive income in two statern€ots: a stateEeDt of itcoDe and a

stetement of compteheosive income. Two competetive Pedods arc prese[ted fotthe statement of faancial position when the Compeny applies en accounting policyretrospectively, makes a tetrospective restatemef,t ofiteras in its Enancial

strtements, ot reci4ssi6es items io ttre financial statem€nts.

(c) Fnahaal ard Pnaatation Cmaq

These fina.ncial statemeots are presented in Philippine pesos, the Company'sfrrnctiooal and ptesentation crrrrency, and all values represent absolute amorrntsexcept wheo otletwise indicated.

Items induded in the 6nan6lal 5blshenm of the Compaoy are measued usiog itsfunctional cutreacy. Fuactional cureocy is the currency of the p'itno'y economicenvironment in which the entity operates.

2.2 Adoptioa of Nev ed Amendcd PFRS

(a) Efcaiw ia 201| tbd an P,tblant b tbe Conpary

In 2011, the Company adopted the following amendments, inte4rretatioos and

annual improvements to PFRS that are relevant to ttre Company and effective fotfinancial stetem€nts for the aonual petiod beginaing oa ot eftetJanuary 1, 2011:

PAS 24 (Amendment)Philippine Interpretetircns

Iotemetiooal FinaocidReporting InterpteationsCommittee (IFRIC) 14(Amendmeot)

IFRIC 19

Various Sandatds

: Related Party Disclosues

: Ptepayment of a Minimum FundingReauftement

: Extindishiog Finencial Liabilities withEquity Instrunents

: 2010 Aanuel Improvemeots to PFRS

Discussed below are devant information about tlese new and ameoded standards.

@ PAS 2a $oendment) ,kl*d Poy Dkcbs*s (effective &om Januery 1, 2011)-

The a.meodmeot simFli6o 2sd cbtifies the defnition of a related party byeliminating ioconsisteocies in deteo:rining related patty telationships. Theameodment also provides parrid e:<emption ftom lhe disdosure rcquinenents

fot goveomeot-aelated cotities to disdose deails of all te''sactions v'ritl the

goveinment and other gQvcmment-rclated entities. The adoptioo of this

ameodment did oot result io any signific nt changes on the Company's

disclosures oftelated oarties in ifs finan.i^l stetemeots-

€t

-3-

Philippine Interpeation IFNC 14 (AmeodmenQ , PftPoncttt of a Mbi,,zmFttnlkg&qninnat (effective ftomJanuary 1, 2011). This interpretatton

addresses uninteoded consequences 1tr41 66 erise ftom the previous

tequirement when an entity ptepays futue conttibutions into a defnedbeocfit pensioa plan. It scts out guidancc on when an eotity recognizes an

asset in relation to a sulplus for defned benefit plans based on PAS 19'

EnilEa Bcndtt, t\x tte subiect to a tninitnntn funding requirement TheCompany is oot suQect to minimum fimding teguitements eod it does notusudly make substaotial advance conffiutions to its retircment fimd, hence'

the adoption of the tesised stenderd has no naerid effect o,n ib finqnl-ial

st2.tehetrts.

Philippine lateryretation IFKIC 19, E*ingirbingFircwial ljal'ihtitt "ith

Eqri,brtrnnx (eftaine ftomJuly 1, 2010). Tbis inte4xetation "l-tiEes the

accounting when ao entity rcnegotiates the terns of a Enaocid liabilitythrough issuance of equity iostnrmens to extinguish all or patt of the Enancial

liebility. These *""sactions ete sometimes refffred to as "debt for equity"o.hang"" or s,o"p*. The inteqxeution rcquires the debtol to accou,st foi afinanciil liability which is extinguished by equity instium€ots as follows:

. thc issue of cquig instuments to a creditor to extinguish all or part of afnaacid liebility is considetation paid iq accotdaoce s'ith PAS 39,

Finarcial l*rnnnx. kcognitior and Manmnnt,

r thc entity measures the equity instrusetrts .issued at fait value, uoless this

caonot be teliebly measured;

o if the fair value of the equity instruments camot be rdiably measure4tlen the fair value 66$9 finzncisl liability extinguished is used; and'

r the diffetence between the catrying amount of the fioancitl liability

extinguished and the coasidetation paid is recognized in profit or tross'

The adoption of the interpretation did not har/c a mr'terial effect on dre

Company's fnancid statemeots as it did not extinguish financial liabilities6mugh equitt swap during the year.

201 0 Annud Improvemene to PFRS. The ERSC bes adopd the fll 0IttPtowtBcttts to PFkr. Most of these ameodmeats becaoe effective fol aonual

pe.riods b€nning oo or aftetJuly 1, 2010 orJanuaty 1, 2011' Aooog those

imploverneos, or\ the follorring amendmens were id€ntified to bc relevant

to the Company's finenciel sbt€meos but which did not havc any matetial

impact on its fnancial statcmcnts:

. PAS 1 (Amadrent), Pnatation of Financial Statncntt: Clmfuaion oJ

Statcncat oJ Changtt in Eryil (etrecive ftom July 1, 2010). The anendmeotclarifies thag for eech compoaent of equity, aa entity may Prcserrt an

andysis of othet comprehcnsive income either in the statement of changes

in equity oria the notes to the finan(jel stetemmts' As the Compeny's

ottrer comprehensive income only includes fair value changes inavailable-fot-sale (AFS) finanqial assets, the ComPany has elected tocontioue pteseoting each item of othet comprehensive income in the

statemeqt of ch.ngcs io equity.

@t

(r')

-1-

o PFRS 7 (Amendmat), Fiaarcial Int*ncnts: Cla{tcatioa of Disebwns

(efftctive ftom January 1, 2011). The amendmeot dadfies the disdosure

requircmens which emphasize the intetaction bet'reen quantitative and

qualitative disdosutes about the aature and extent of risks atisiag ftomfinancial instruments. It also amends the requited disclosure ef Gnancial

assets including the financid effect of collateral held as security' TheCompany already provides adequate information in its finencid statemeots

in compliance with the disclosure rcquirements.

r PAS 34 (Amcndment), .I;/azyz Finandal E4ottittg- Sigzfinnt Eunx and

Tranracthw (effedYe ftomJaouary 1, 2011). The amen'lment provides

irrther guidance to illustate how to .PPly disdosure principles rmder

PAS 34 fot significant events and cadsactiotrs to itlptove intedmfinancial reporting. It requires additiond disclosure covering 'ignificaotchanges to foir value measurement and classification of finaocial

instruments, and to uPdate r€levant idfotmation &om the most recent

annual repott The Company's interio Eaancial reportiog dready

provides adequate information in its financid sateraents in compliance

with tle disdosure requiremeots'

p) Efcxitc itt 201| b$ ,tht kbran, b tbc Conpary

The following amendments and improvemen* to PFRS are man&tory fol

"ggeulrri''g pfoods beginning on or zftrr. Jmruz;y 7,201 1 but are not rclevant to fhe

Company's fi mncial statetxrcnts;

PAS 32 (Amendment)

PFRS I (Amendmeots)

2010 Annual IrnprovementsPAS 21 (AmcndmeoQ

PAS 28 (Amcndment)PAS 31 (Amendmeat)PFRS 1 (Amendment)PFRS 3 (Ameadmeot)IFRIC 13 (Aneodment)

: Financiel Instruments: Ptesestatlotr -Classi6cation of Riglts Issues

: First-Time Adoption of PFRS -Limited ExemPtion ftom PFRS 7

Comparative Disclosures

: The Effects of Changes in ForeignExchange Rates

: Investments in Associates: Interests in Joint Ventutes: Fint-time Adoption of PERS

: BusinessCombinations: Customer Loyal$ Pmgrammes - Fair

Vdue Awetds Ctedis

-,'-

(c) Efcttiw Slbscqmnt tu ml I bttt ,rot Afupkd Eat

Thele ate new PFRS, ameodments, onnual imptovefiens and inte4lrctations toexisting standards that are effective for periods subsequent to 2011. Manageiaent

has initially detetmioed the following pronouncemeots, which the Comprny willapply in accot&nce c/ith th& transitional provisions, to be televant to its finnn<jal

statements:

O PFRS 7 (Ancr.dnrrrt), Finaneial lnstnne* Ditcksn: - Ttw$n of Fiaaadal

hrarr (cffective ftomJuly 1, 2011). The ameodmeot tequires additional

4;.1o$rrgs thrg will dlow users of6naocial statemene to uadetstand therelatioaship betweeo transferled Fnqnciel assets th2t ate oot derecognized iotheir entirety and the associated liabilities; and' to waluate the natue o{, and

risk associated with any continuing involvemeot of &e leporting eotity tnfinancial asses tbat atc derecognized in &eir entirety' The Company is yet toasscss the impact of tbis nenr sandard-

(D PAS 1 (Amendment), Finarilial Stabrrcstr Pnscatation - Pnsmtatios of Itins of OtbrAnpnhasiw Iaaat (effective ftomJuly 1, 2012). The anendment requLes aa

edrtity to glouP items Pres€nted io O&ff Comptehensive Income into those

thaq in eccotdance -itl, otle" PFRST: (a) will aot be reclassiEed subsequendy toprofit or loss and (b) win be redassified subseqrrcody to ptofit or loss when

-,-specific conditions are met The Compan/s rn4nqgernent exPects ftat *ris willnot affect the Presentation of items in othet compleheosive income since the

C.ompany's othet compteheosive iocome only indudes tesduation leserive onrmrealized frir vdue gains aad losses on AFS financid assets that can be

redassiEed subsequeotly to profit or loss wheo specified conditions ere meL

Qrt PAS 12 (Ameadmeirt) , bwac Taccs - D{and Tax: Reowa of UadaSingAsex(effective ftomJanuary 1, 2012). The amendmeot provides al excqltioq to tleexisting priociple h PAS 1 2 that rccovery of *re carrying amormt of investm€txt

proPetty measued at frir value undet PAS 40, bwstmnt Pnparr), will be or

""t-tty t. tL"gh sale. The ameodmeot introduces a rebuttable presumption

that the measureneot of a defeced tax liebilig or asset otr as invesb€tltptoPerty measutd at hit value should reflect the bx consequence ofrecoveringthe carrfng amotmt eotirely through sale. The presumption is rcbutted fordepreciable bvesaeot PioP€tty (e.g', buf,ding) measued at 6it value that is

held with an oblective to consume substaotidly the economic beoefits

embodied in the asset over time, ntlct tL*n th1sugh salg. As a result of the

amendm€oq Standard Intffpletetiof, Committee (SlQ 27 hcone Taxcs - Rtuutyof P*ulaat No*DqpttciahhLnarr, is eccordingly withdnwn. This amendment is

not exPected to have e signiEcant effect on the Company's finaociel statem€nts

as its invesh€st Ptoperty ooly indudes parcels of hnd which is aot covered by

this ameodment

(r9 )

-6-

PAS 19 (Amendmcnt),EaplEac Bctcfx (effective &om January 7,2073). T}reameodment made a oumber of changes as Part of the imProv€rn€obtbroughout the standerd. The main changes date to defioed beneft plans as

follows:

r eliminxlgs ths coridot apptoach under the existi'rg guidance of PAS 19

and requires en entity to tecogo.ize dl gains and losses arising in thereporting pecio@

. sEeamlifles the presentation of changes in plan assets and Iiabilitiesresulting in the disaggegation of changes ioto three main comPonents

of service costs, net htetest on net deBned benefit obligation ot asseg

and rcmeasuremeng and,

e eohances disdosute requirements, including informatioa about tlecharacteristics of defined benefit plens and tle dsks that entities are

exposed to through paticipation in them.

Curently, the Company is using the corddot apProacb and its uotecognizedactuarial losses as oiDecembet 31, 2011 amounrcd to P72'801,769 which willbe retroqpeaively rccopized as losses in other comprehensive incone in2015.

PFB.sg,Fittetciat lrctmt*: Chrsifatfu ad Mcannnent (effective ftom

January 1,2015). This is the 6rst pat of a new standard on &ssification and

measurement of financial assets and ftrancial liabilities that will replace

PAS 39 in its eot[ety. This chaptec deals c/ith two measurement categories for&rancial asses: amortized cost and fair value. All equity instrumeots will bemcaswed at fair value while debt instnrments vrill be measucd at amoxizedcost only if the eotity is holding it to collect contractual cash flows whichlepreseot Payment ofprincid aod intetesl lbe accor:nring fot embedded

derivatives in host contracts fhat ai€ Enancial assets is simplified by temovingthe requit€oent to coosider whethcr ot not they erc closely dated" and, io most-?'angerneo! does not requite sqlaratioo ftom dre host contract

For liabilities, the standatd retains most of the PAS 39 requtemans whichindude amortized-cost accormtilg for most financial habilities, with bifiucationofembedded detivatives The main change is that, in case whsrg ths fqir lug

option is aken fot Enancid liabilities, the part of a fair velue change due to an

eotity's own credit dsk is recoded in other comptehensiv6 iase6s tather than

io ptofit ot loss, uoless this deates an acsouring mismatch.

To &tg o&er "h"Ftes of PFRS 9 dealing with impainaent methodologr and

hedgc accountiog are still being completed.

The Company does not e,:q)ect to implenent and adopt PFRS 9 until its

effective &te ot rmtil dI chaprcrs of this new sbndard have been published Ioaddition, management is currently asses.ing the impact of PFRS 9 on the

financial statements of the Compaay and is comoitted to conduct e

comptehensive study of the poteatial impact of dris standard eady io 2012 toassess the impact of dl changes.

(")

- 7-

(tt PF|RS T3, Fan Val Mcasantzcnt (effeaive ftomJanuary 1, 2013). This standadaims to impmve cmsisrcncy and rcduce comple).ity by Providing a precisedefinition of fair vdue and a single source of fait value measurernent anddisdosure requlemeots for use acoss PFRS. The requirements do oot extendthe use of frir value accountjqg but Provide guidance on how it should beapplied where its use is already reguired ot pemitted by other sandards. TheCompany is yet to asscss the impact of dris new sr.ndard"

23 Fineacial Assea

Financid assets are recoggized wheo the Company becomes a Patty to the contrachralterms of the fin,'ncial instrument Financial assets otber tban &ose designated andeffective as hedging instrument are classified into the followiog cat€ories: finanqial

assets at &ir value tlrough ptofit ot loss (FVTPL), loans and receivables, held-to-maturityinvestments and available-for-sale fnancial assets. Financial assets are assigned to thediffetent categories by mon"g-t"e'nt e11 initial recopition, dcpeading on the pu4>ose fotwhich tle investoents urere acquir€d The designation of financid assets is rc-evaluatedat every rcporting dete at which date a choice of dassification or accounting Eeatment isavailable, subject to complience with specific plovisions of applicable accountingstandards. Regular purchases and sales of fnaocial assets are recognized on their tradedate. AII financiel assets that are not dassified as et FVT?L ar initidly recogrizsd s16irvalue plus any direcdy attdbutable t"o.saction costs, Financial asser ca:ried at FVTPLate initially tecognized at fair value and ttansactiotr costs related to it arc tecognized inprofit or loss.

The categories of finenrid assets tlat are cuueotly relwant to the Compaoy are fi.rllydesctibed below.

(") Llat*railRceinbh;s

Loans and receivables ate no,o-derivative finencirl ass66 slfi fixed ot deteoninable

1raymenb that ate aot quoted io an active rnarket They arise wheo the Companyplovides moncy, goods ot secvices dLecdy to a debtot with no intention oftradingthe teceivables.

Loans and receivables ate subsequendy measued at amottized cost usiog ttreeffective intetest rnettrod, Iess impaioent losses, if any. Any change ia their vrhrcis rccogrized in profit or loss. Impeirment loss is ptovided wheo thete is objectivewidence that the Company will not be able to collect all amousts due to it inaccordance wid tie original tems of the teceivables. The anrount of theimpaitmeot loss is determised as the dilFereoce betweeo the essets' carr 'ymg amormtend the present vdue of esti-'ted cash flows.

The Company's inaocial ass€ts categorized as loens and rcceivables are presef,rt€d as

Cash and Cash Equivalents, Reinsurance Balances Receiveble aod I-oans andReceivables in the statemeot of finqn.i.l position" Cash and cash equivelens atedefsed as cash on hao4 &rnad deposits aod short-teoq hig$y hquid invesmentsrcadily convertiblc to knorrn amowts of cash and which are subicct to instgnificaat

'isk of changes in value.

-8-

(b) AFS Fiuneial-*scx

This category indudes noo-dedvative fnancial assets that are eithet designated tothis qatryq' .t 6. not quali& for indusion in any of the ottrer catqlorics offirencial essets. The Company's AI]S Fnancial assets indude listed equitysec,ruitirs, colporate bonds, long-tem negotiable instnrments and govermentsecutldes.

All financial assets withh this category are subsequendy measured at Gi. velue.Gaias and losses ft6a ch"nges in frir vdue are recogoized in othetcornpr€hensive income, net of any iocomc tax effects, aad are rePorted as Patt ofthe Rwaluation Resetve accormt in equity. When the financial asset is disposedof or is detemrined to be impaired, the cumulative fair value gains or lossesrecoggized in otler comprehensive income is tedassified ftom equity to profit otloss and is presented as teclassificatioc adiusmeot within other comprehensiveincomc.

Rwecsal of impaiment loss is recognized in otler compehensive incomg cxceptfor financid assets that ar€ debt securities which ate recogaized in ptofit or loss onlyif the Ev€rsal can be obiectively related to ao eveot occurdog after the impaimentloss was tecogoized.

All income and expenses r€laring to Fngncid as5gts thal are recognized in ptofit ot Iossate ptes€nted es part of Investment and Other Income in the statement of income,excePt for imprirheot losses which are Piese ed as Part of General and AdministtativeExpenses.

For investuents that are actively uaded in organized financial matkets, fair value isdetetmined by reference to stock exchaoge{uoted market bid prices at the dose ofbusiness on the repoting pedo4 For iovestments where thcre is no quoted 'narLetptice, hir value is detetmined by teference to the cunent market vdue of anothetinstrument which is subsantially the same or is calculated based on the expected cashflows of &e uodedying net asset base of the investment

Non-compouading interesq dividend income and other cash flows resulting &omSel.ring fnancial asseB ate tecognized io stateoent of income when eamed, regardlessof how the telated erryhg amount of financial assets is measured.

The fnancial essets are derecogr.ized when the contactud dghts to teceive cash flowsft611 tf,g Gnrncial insnuments expite, or when the fnancial assets aod all substantidrists and tewards of ownership have been transferted.

- 9-

24 Pmprty aad &uipaaeat

kopeay and equipnent are stated et cost less accrrmulated depreciation ead anyitnpeirment in valuc.

The cost ofao asset comprises ie purchase pdce and directJy attdbutable costs ofbtinging thc asset to wotking condition for its intended use. Erpeoditures foradditions, major imptovements and teoewds ate capitalized; expeoditures for lq)airsand maintenance ete chatged to expesse as incrrced- Wbeo assets ate sol4 tetired orotherwise disposed of, theit cost and related accr:mulated depreciation and impairmentlosses ate temoved ftom the eccormts ald any tesulting gain or loss is teflected inincome for the period.

Depteciation is computed odr the stnight-lioe bass ovet the estimated usefirl lives ofthe assets as follows:

Condominiuo r:nits 40 years

Office improvernents 10 years

OfEce fumitures acd equipoest 5 yersTansportation equipment 5 yeanElectronic daa plsses*ing (EDP) equipment 5 yean

An asse/s carying smormt is writteo. down inmediately to is tecovereble amount if the

asseds carying amount is gteatet tlan its estimarcd rccovenble amouat (see Note 2.15).

The residual vdues and estimated usefuI lives ofptopetty and equipmeot are reviewe4and adiusted ifapproptiate, at the erd of eectr tepotting petiod.

An item of progerty aod equipment is detecopized upon disposal or wheo no fututeeconomic benefits are cqrected to arisc &om the continucd usc of tbe asset. Aay e.ain orloss arising on derecoggition of the assct (calculated as the diffetence betwe€o t}re netdisposd ptoceeds and the carying emount of the iteo) is induded in the statemeot ofiacooe in the yea.t the item is detecogoized-

25 Iavcstueat Pmp$ty

Investh€nt Ftolretg fnduded as patt of Othet Asses) is measured icitially at scquisitioncosL Subsequently, investmeflt property js stat€d at cost less accumulated

and any impairment in value- Depteciation is computed on the sttaight-line b*sis ovet theestimated usefirl life of30 years.

The cost of the investment Ploperty comprises is pucbase ptice aad dirccdy attubutable

costs of bringjng the asset to working condition fot its iatended use. Erpendio:res foradditions, major imprcvemens and renewals ale caPihlizeiL exP€nditues for repairs and

mainteoance are chatged to eqlense when ioorrred.

InvestD€nt ptopetty is dececogoized upon diqrosal ot wheoftom use and no future economic benefit is expec-ted ftom its disposal Aoy gain ot loss

on the rctiremetrt 61 diTosal of nn iovestment proPefty is rccoe"ized h the statem€ot ofincome ia tf,e year of letiremot or disposal

_1t _

26 Iaangiblc Assea

Intangible assets (ptcsentcd as part of Other Asscts accoun$ indude acquited sofware

lceoL rphich areecromted for under the mst modd The cost of the asset is lleamormt of cash or cash equivaleots paid or the fal vdue of the other considemtions given

up to acquire ao esset et tle time ofits acquisition. Acquired computet-sofbrare liceoses

are capitajizea on &e cost incurred to acquire and install tle qrccific softnrate' Coss

associlted with meintainitrg computet software and those costs associzted witl rcsearch

activities ate rccognized as expcose in profit ot loss as incutted- Capitalized costs arc

amortized on a sEaight-lioe basis ovet five years as the lives of these iotangible assets are

considered 6nite. In addition, intangible esscE are subiect to impaiment testi"g as

desctibed in Note 2.15.

2 7 Financi aI Lia bili ties

Financial liabilities, which indude Reinsutance Balances Payeble and Accorms Payable

and Accrued E;peoses [excluding defened ouput value-added tax (VAT)' defined benefit

lilability aud wi$holding taxes payable], are recognized when the Company be@mes a

party to the contnctual terms ofdre agteemenl All interest-related charges ate

recognized as an expensc in the statem€nt ofincorne.

Reinsurance Balances Peyable and Accormts Payable and Accrued Expenses are

recognizcd initiatly at their hit value and subsequently aeasuted at amottized cost, usiog

the effestive inatest method 6or maturities beyond one yeat, less setdeiaeot paymeots'

Dividead distnlbutions to shaletroldets are rccognized as financial liebilities whea the

dividends are apptoved by the shareholders.

Financiai liabifities are derecognized ftom the statemest of Enancial position only when

the obligations are extinguished either tbrough discharge' cancellatioo or exPiredon'

2.8 Pmvisions tnd Contingencies

Provisions ate tecogoized when preseot obligations will probably lead to ao oudow ofecononic resources- and they cao be estimated rcliably even if the -''ning ot amormt of the

outflow may still be uoccf,tain. A ptesent obligation ndses ftorn tle Preseoce of a legal o't

consEuctive coiositm€nt &at has resr:lted ftom past events.

Provisions ate measued at lhe estimated expenditure required to setde the plesent

obligation, based on the most teliable esidence available at the end of the repotingpoi"4 na"aUg tL tisks end uf,cdtaioties associated with the pesent obligation. Where-tho" ,t

" ou-bo of similat obligationg the likelihood that an outflow will be tequired in

settlemeot is detetmined by considering tle class of obligations as a whole' Wbeo time

vahre ofnoney is mat€dal, long-tefin provisions are discounted to &€ir Pieseflt Yalues

using pteax rate tbat reflects ma*et assessmeob and the risks qreci.fic to Se obligtion'Proiions arc reviewed at the end of each nryori4 period and adiusted to reflect &ecurncnt best estimate.

- 11.

In thoee eses whete the posible outflow of economic tesource as a reult ofprcsentobligations is consideted improbable or temote' ol tle amount to be ptovidcd for-cronot

be measured teliably, no liebility is recognized io the financial statehents' Similaaln

possible inflows ofeconomic beoefits that do not yet meet thc tecoglition criteria of an

Lset are considered contingent assets, hence, ate not tecognized io ttre fiaaacial

statemctrts. Oo the othet haod, any teimbursement that the Company cas be virtually

certain to collcct &otn I thitd pa1q, q/ith resPect to the obligation is recognized as a

sepante asset not exceedilg the amormt of the deted prowision-

29 Revetue Reagnition

Rcvenue is rccognized to the extent that the tevenrrc cao be rcliably measued and it rs

probable that the economic beoefits will flow to the Company. In addition' the followingspecific recognition cdteria must also be met befole rcY€oue is recopized.

k) kinmma pnaitnt- Premiums &om short duration insurance conttacts over deperiod of thc contracc using the '24tr mcthod", except for revenues &om madne

cargo risks whcrein the ptemiums written during tle first tm months of the

cutrent year aad the last two months of the preceding year are rccogaized es

revoue io the curtent year. The "24s me&od" assumes that the evetage &te ofissue of all poli&s written duting any one month is tie middle of that month'Accotdingly, 1/24n of tle net premiums are considered earned in the montl tleteitrsu$oce conttacts ete issued and 2/24h for every month theteaftet (ot l/24sfor every l5-&y pedod after the issue month). The portion of &e rcinsulance

ptemi rms tctaiced that tdate to the unexpited pedods of the policies st the eod

of the reporting period are accouuted for as Reserve fot Uneamed Reinsurance

Premiums and ptesented in the liebility sec{ion of the sbtetnent of €na:ncial

position- The nct changes in &e account Reserve fol Uneamed ReinsusacePremiums between the end of the reporting periods ate tecopized in the

statehent of itrcome.

(b) Intctttt iuvm -Thisis recoga.ized as the intetest accrues taking into account the

effective yield on tle asset

(t) DfuitLafu -P:egr:rue is rccognized when the Company's right to receive the

paymetrt is established.

2.10 Claia Cosa Recogoition

Share in claims and losses rctating to iosumnce conEacts are accrued when insured

events occut. Tbe shate in daims (ncluding those for itrcurted but oot lePodeQ ete

based on the esti-ated ultimate cost of settling tle daims. The method of determining

such estimates and esbblishing reserves ate continually rwiewed and update{. -9h^"gtt

in estimates of &im "o.t t rrrlting ftom the continuous rcview ptocess and differences

between estirnates and payments for clqiins ate recognized as income or exp€ose in the

period in which the estinates are chalged or payoents are nrade.

Share in recoveties ofl clr.ims are evahrated io tetms of the estimated realizable values ofthe salvage recovetables. Recoveties on settled claims are recoglized in stat€oent ofincome ii the petiod the rccoveries are made while estimated tecovedes ate pteseoted

as part of Reinsurance Balences Receivable in the statement of financial position'

-u-

2.17 Acqusitioa bsr

Costs that vary with and arc primarily telated to tle acquisitioa of new aad renewal

reif,sum.nce contracts such as coomissions, certain rurderwriting coss aod inspcction

fees, are deferred and chaqged to expense in ptoportion to reinsurance premium

revenue recogniz.d. U."",ottieed acquisition costs are shown in the statenent of6nanci"l position as Deferred Acquisition Costs.

212 Coamissioas oa Refrocessiozrs

Comrnissions on reEocessions are defeted and ate subiected to the same amortization

method as the telated acquisition costs. Defetred portion ate Ptcsentcd in the

satcment of financid position as Defetred Reinsurance Commissions'

2.1iJ Izzscs

The Company accounts for its leases as follows:

(a) Cotzpay asl-rs:u

Leases which do not tmnsfct to tlre Compaoy substentidly all the dsks and

benefis of owaeship of tle asset ate classified es opetating leases. Operating

Iease payments arc recognized as expense i[ the statement of income on a

straiglt-line basis over the lease tem. Associated costs, such as maiateoance and

iosruance, arc expensed as iqcurred"

p) Conpary a: L,ctror

Leases which do not transfer to the lessee substantially all the tisks and benefits ofownership of the asset ate c,lessi.6ed as operating leases. kase income ftomopetatingleases is tecoglizcd in the stat€meot of income on a straight-line basis

ovet the lease tero-

The Company detetmines whethet ao anangemedt is, ot contains a lease based on tlesubstanceof the anaqgemeol It makes an assessment of whether the fulfillment of the

arrangement is dependeot on the use of a speci.fic asset or assets aod the affeng€o€ot

convels a dght to use the assel

2.14 Forcign Cuaenqr Tnnsactioas

The accounting recotds of the Company ate meioained in Philippine pesos' Foreign

cureocy bansactions dr:dng the year are translated into *re firnctionel cucenc1 at

exchaqge rates which those prevailing on ttansaction &tes'

Foreign cunency gains and losses resulting ftom the settleoent of such transactions and

nom ihe transtaiion at year-end exdnnge rrtes of monetery assets and liabilities

deoominated in foreign ".,rrencies

ate t""ognized in tle stateheqt of income as pat ofprofit ot loss ftom opetations.

_7r-

2.15 Impaiaeat of No*fraaacial Assee

The Comperry's pmperty and equipmeog invesbent proPerty and intangible ass€ts are

subiect to impaimeot testing. All other individual esseb ate tested for impaitmentwheoevef, events or changes in circumstatrces indicate that the carryiag amount may notbe recovetable.

Impair:oent loss is recopized fot &e amouat by which the asseds carryiog emormt

exceeds its tecovetable amount lhe rccoverable amount is the higher of frir value'

reflecting market conditions less coss to sell and value in use, based on an intemdevaluation of discormted cesh flow.

All asseb arc subsequeotly teassessed fot indications that ao impairmect loss ptevioulyrccognized may no longer exist and the carying emouat of the asset is adfusted to *re

necovdable anount resuhilg in the rwemel of the impairment loss.

2.16 Employee Beacfia

The Compeny prcvides post-employmeot benefis to eoployees through a &6nedbenefit plaa, as well as vadous defned contdbution plens.

(a) Pofi4r,rlhJrr"rrt Dcfncd Bcwft Plat

A defined benefit plaa is a post-eoployment plan that defines en amount ofpost-employmcnt bele6t tbat an employec will teceive on retiremeag usudlydqrendent oo onc or more hctots sucb as age, years of sewice and sdaty' Thelegal obligation for any beneEts &om this kind of post-emPloym€nt Plao rcoainswith the Compaoy, cven if plaa assets f61 fu1ding the defined beoefit plan have

beer acquired. PIaa assets may include assets specifically designated to aloog-term benefit fund, as wcll as qualifying insuraoce policies. The Company's

defined beaefit post-eoployment plan covers all regulat firll-time employees.

The pension plan is tax-qualifed, noncontribuory and adrninistercd by e ttustce,

The liability recognized in tle statemeot of Euncid position for defned beoefitpost-etrploymeat plaas is the prcsent value of the de6ned benefit obligtioo(DBO) at tle eod of the reporting pedod less the fait vdue of plan assets,

together with edlustugnts for un$cognized actuarial gaios or losses aod pastsen'ice costs. The DBO is calculated ennudly by independent actuaties usiog theprojected unit ctedit metlod. Thc pre.sent value of the DBO is detemined by

discousting the estimated futrue cash oudlows using intetest ntes of high gualitycolPorete bonds that are denominatcd in the curtency in which the beoefits willle paid ana tlat heve tetms to mahtity approxibating to the terms of the lelatedpost-employrnent liability.

Actuarial gains and losses are not recogni"ed as ao hcome ot expeose uuless the

toal unreiognized gain or l,oss exceeds 1 0/o of ttre gteater of the obligtion and

related plan asses. the anouot exceeding this 10% corridot is cbarged orcredited to ptofit or loss over the employees' e4recrcd average remaining

working livis. Actr:arial gins and losses withis the 10%o corddot ate &dosed

".p.otily. Past-service costs are lecognized itntnediately in profit olloss, unless

the cheoges to fte post-employment Plen ere conditiof,d on the eroPloyees

rcmaining in service for a spcciEed pedod of timc (the vesring period)' I" tbtcase, the Past-service costs are amortized oa a snarght-line basis over the vesting

period.

-14-

ft) Dcfad Bntfx Contrib*in Pbns

A defined conttibutioo plan is a post-emPloyhmt plnn rmdet phich the

Company pays 6xcd conaibutions into an iadependeot eatity' Th3 Company ha-s

ao legal oiconsnuaive obligations to pay firrther conuibutions after payment ofthe ded contribution. The conuibutions rccognized in tespect of defnedcontribution plans ate expensed as tley fall due. Liabilities and assets mey be

tecognized if uadelpayh€nt or Pt€Payrneqt has occurrcd and are induded incuirent liabilities ot cureot asseb as tley ate normally of a short tem nature'

(c) ConpcnsatcdAbntutt

Short{em employee benefits are recognized fot the number of paid bt ,&y"(including holiday entitlemen$ remaining at the end of the leporting period. They

are included in curtent pension and othet eoployee obligations at the

undiscounted anount that the Company eEPects to Pey as a result of the rnusedentidement

2.I7 Income Taxes

Tar erpense rccogrized in the sbtemeot ofincooe compdses the sum of defeted tex af,d

cun"ni tax not recognized in other comptehensive income or directly in equity' if aay'

Cu ent tax assets or liabilities comprise those "bi'n" ftom' or obligtions to, fiscdauthotities relating to the curent oi puot reporting peaod, that are trncollected or uapaid

at the end of rcporting pedod Theyate calculated using the tax rates aod tax Iaws

applicable to &i fiscd petiods to wbich they relate, based on the taxable profit for the

y"rt Al at-g". to orrtent tax assets ot liabilities arc recognized as a comPonent of tax

expeose in tlle siatemeot of iocooq

Defered tax is ptovided" using the liability metho4 otr t€rnPoraty differences at the end

of the rcporting pedod betweeo the tax base of assets aad liabitties and their car:rying

amountrfot Enancial teporting purposes. Undet the liability method' wtth cetainexceptions, defened tax-liabilitii are tecognized for all taxable teoporary diffFencgs anidefered tax assets are recognized fot all deductible temporary differences and the

carryforward ofunused tax-losses and unused Ax credits to the extent ttrat it is probable

that taxablc plofit will be available against which tLe defened tax asset can be utilized

The carying amomt of defered tax assets is rcvievved at the eod of each rcporting period

and teduced to the exteot that it is probabh that sufficierrt taxable ptofit will be available

to allow dl or pa.ft of the defeced ax asset to be utilized.

Defened tax assets and liabilities are measured at the tax rates that are erpecrcd to apply

to the peciod wheo the asset is ralized or tbe liability is setdd based ot t2x rat€s and t?'.

laws that have been enacted ot substaotively enaaed at the eod of the rcporting period-

Most changes in the deferred ux assets or Iirbilities are tecognized as a component of tax

e)q)efrs€ itr-stat€rlent ofincome. only changes in defeEed tax assets o,t liabilities tbat

teJite to iterns recopized in other comptehensive income or direcdy in equity are

rccognizcd io othet comptehensive hcome ot ditectly i" .q"ity.

-15-

218 Relztr'd Patty Tnasactioas

Related paty tmnsacdons te transfets of tesowces, services or obligations between theCompany and its telated patties, tegardless whethet a pdce is charged.

Parties are coosideted to be related if one patty has the ability to control the other partyot exercise sigrificant influence over the other party in t"alriqg financial and opetatingdecisions. This indudes: (a) individuals owning ditccdy or indirecdy through one otmote intermedianies, control or are conttolled by, ot rmdet coomon contol with theCompeny; (b) essociates; and (c) hdiriduals owning, direcdy or indirecdy, an interest intle voting power of the Company that gives them significant influence ovet theCompany and dose member of thc family of any such individuzl.

In considedng each possible related perty relationship, attention is directed to thesubst-nce of the relationship and not metely on the legal fotm.

219 Equily

Capital stock rqresenb the nominal value of shares that have beeo issued or rcissued

Additional paid-in cepital indudes any premirms teceived on the initid issuance of capitalstod<. Any trensaction costs associated with the issuance of shates are deducted ftomadditional paid-in capital net of any related income tax benefim.

Treasr:ry shetes ere st ted et the cost of ecquiring such sheres.

Revaluation rcserses comprise of gains and losses due to dre revduation ofavailable-for-sale financial asses

Retained eamings iaclude all curent and priot period results as disclosed in thestatem€ot of incohe.

2.20 Eamiogs (Itss6) Pct Shate

Eamings (osses) per sharc is dctetmined by dividing net profit (loss) by the weightedavetage numbet of shates issued, adjusted fot stock divideods and stock splig less

sbares held in teasury during the period.

Diluted eamings pet shate is computed by adjusting the weighted avemge number ofotdinary shates 6g1514vling to assumc conversion of dilutive potendal shares.

227 Eueaa Atut the Repttiag Pedod

Any post-year-end event that provides additional information about the Company'sposition at the eod of the reporting period (adjusti'rg event) is reflected in the financidst ternents- post-year-end events that are not adiusting events, if any, are disdosedwhen matedal to the Snan<ial statetnents.

- 16-

3. STGMFICANT ACCOLTNTING JUDGMENTS AND ESTTMATES

The Company's fineocial statemeots prcpared in accoldance with PFRS requirernanagFtnpnt to meke iudgments and estimates that effect amounts lePord in the

Enancigl statements and relarcd notes. Judgments and estimates are continudly evduated

aod are based oc histodcal er<pedencc rnd othet 6ctors, including expectations of funrrc

evene that are believed to be rea.soneble under &e circumstances, Actual results may

ultimetdy differ ftom these estimetes.

3.1 Ctiticel MaaagemcatJudgmeoa in Applyiag Accotmtiag PoUcies

In the ptocess of applyiqg fte Companyt accounting policies, manag€oent has made tlefollowing iudgnents, apart ftom those involving cstimation" which have the most

significant effect oo the amounts recognized in the financial staterneots:

@ InpainntoJAFS FinncialAssctr

The dctemination when an investment is other-than+emPonrily impaircd rcqulessignificant iudgment In making this judgmeng tl:e Company evaluates, among

othet &ctots, the dmetion atrd extent to which t[e fait vdue sf an investmeot is hss

than its cosq aod the financial health ofend oear-tem business oudook for the

im'estee, hduding fictors such as industty and sectot Pedormance, ctranges intecbnologr and operationd and finaacing cash flow. Io 2010, the Companyrecognized impaioent loss otr its investmeot in equity secruities eoounting toP6J97,l 50 (d in 201 1) (see Note 7). Based on the rccent waluatioa ofinfomation and circrrmsr"o""s elffgcring tle Company's AFS financid assets,

managemeot concluded thet no other AFS finascial ass€ts aie impaircd as ofDecembet 31,2011 and 2010. Futrre changes in thosc infomation and

cinmstance miglt significeDE atrect the carrying amormt of the assets.

(b) Disdaaiot futuccn Inufiratt Pnpcnir and Oucr-ocnpicd PnPtrtits

The Company determioes whethet a propety Eulifies es i'Lesbent Prcpeity. Inmaking its iu.tgmeot, the Company considers whetler the ptoperty geterercs cash

flows hqely independently of the othe! ass€ts held by atr entity. Owner-occupiedptopemies generate cash flovs tbat are attributable not only to thc poperty but also

to other assets used in ttre operations.

Some prope*ies conapdse a pottion that is held m eam renal aod anothet portiondrat is held for administatise purPoses. If these portions caa be sold eepautely

(or leased out separetely undet finance lease), the Company accounts for the

portions sryatately, If the portions cadxot be sold separately, tle property is

accormted for es investmeot ptoperty only if an insigniftant portioo is held fotedministrative PurPoses. Judgmeot is applied in determining whether ancillary

services are so sipificaot thzt a poperty docs aot quali$ as iavesh€lat ProPerty'The Co,mpaay consi&rs each proPerty seprttlgly in rnaHng its iudgm€nt

In 2011, manageoetrt traosfeced a Portion of its lnvesment Ptopetty q/ift acarying value ofP30B55,944 to Ptoperty and Equipmeot upoa commcocemeot ofovrret-occrrpetion (see Notes 9 aod 11)-

t

_ 17-

(c) Opcrahg nd Finanec Lcascs

Jlg Q6rnFeny hes entered into vadous lease agteemenb es eifher a lessor or a

lcssee, Cdtical iudgment is exercised by management to distinguish each lease

rgteernent as either an opetating ot finance lease by looh:rg at the transfer orretention of sigoiftcant tisk end rewerds of owneship of the propetties covercdby the agreemeots. Failue to make the tight iudgment will result in eidletove$tateoent or utrderstatement of assets and liebilities.

(d) Pmiion and CottNingcnciu

Judgment is exercised by management to distinguish between ptoviuons andcontingmcies. Policies o,n recognition and disdosure of provision andcontingencies are discussed in Note 2.8 and telsvant disdosures ar€ Presented itrNote 23.

3.2 Kry Sourcec of Estimatioa Uacctaiay

The following ate tle key assumptions conceming the futrue, and othet key sources ofestimation uncerainty at the end of the rcporting period, that have a significant risk ofcausing a material ediusfreot to the carrying amounts of assets and liabilities qrithin thenext finatrcial year.

(a) Athuane of Rrinnnra noUno, R ni*tt ora Laans and Rcrcir/abbs

Allowance js made fot specific and groups of accounts, where objective cvidencc ofimpaiment exists. The Company waluates these accowrts based on available 6ctsand circumstatrces, induding but oot limited to, the leogth of the Compaay'sdationship with the customers, the custome$' cua€nt dedit status based ookrornrn mar:ket fotcrs, eve$ge age of accounts; collection experieoce and histodcalloss experience.

The cairying value of reinsuance bdances rcceivables and the analysis ofallowaace fot imFairment on such financial assets are shon'n in Note 6. Thecarrying value ofloans aad receivables is shown in Note 8"

(b) Vahatior oJFbvncial Assch Othcr tbar Lnaw ond Reuivobbs

The Comprny caries ccrtain financial assets at hir value, whidr tequires theextensive use of accounting estimates and iudgment In cases when active rn^rket

quotes arc not available, fair value is detetrrined by rcference to the qnaent marketvalue of anothet instnrment which is subsuntially the same ot is c*lculated based o<r

the expected cash flows of the undedying net base of the instruhenl The emoutof changes in fair value ciould differ if the Company urilired different valuationmethods and ass--Ftions. Any change in fair value of these filancial assets andliabilities would effect profit or loss and other comprehensive income.

The carying values of the Company's AFS ftrancial assets and the aeoulrts offrit value changes re<lgnized during the years in those asseB ete disclosed inNote 7.

(c)

-18-

lJqfil liw: of Pnpag and Eqtipncnt, lnusment Papag and lrrtangibh Ass'ts

The Company estimate s the usefi.rl lives of poperty and equipmeng investment

property and inangible asses besed on the petiod ovcr which the assets ate

expected to be available for use. The estimated usefirl lives ofplopety and

equipmeog hve$thent propety and inargible assets erc rwiewed pedodically an!are updated if expectations differ ftom ptevious estimates due to physical wear and

tcat, iecrbnicel or comnetcial obsolescence aod legal or othet lirnis on the use ofthc asseb. The carrying arnounts ofpro,perty and equipmeot ate enalyzed inNote 9, and of investment ptopaty aod intangible assets in Note 11' Based onnqnagcrnent's assessm€nt as at Deceobet 31, 2011, thete is no change in estimated

usefi:l lives of ptopety and equipmeng investment property end int'€hle asses

druing tre year. Actual results, howsv€t, rnay vary due to dranges h estimates

brought about by tle changes in factors mentioned above.

hnpainnt d Nn-fnaaciat A::cts

The Company's policy on estimating Se impair:nent of nou-Enancial assets G

discussed in Note 2.15. Though management believes that the assrunptions used intbe estimation of fair values rc{lected io the finencial statements arc apptc'ptiate and

reasonable, significanl "hqnges in these essumptions may materially affect the

assessment of tecovetable vdues and any resulthg impaiment loss could have a

matctial adverse effect on the rcsults of operations.

No impritment losses were recognized on oon-financial asses h 2011, 2010 and

2009.

kalipbb Anont of DcfcmdTacArscts

The Compeny teviews is dderled tax assets at the end of each rcporting periodand reduces the carrying asount to the ext€ot that it is no longer probable that

sulf,cicnt taxeble pro6t will be available to dlow all ot part of the deferted axasset to be ub:lized. As of Deccmbet 31,2017 nd2010, no defered tax essets

were tecognized by the Company since management believes that they will oot be

able to utilize the amount prior to its exPirition.

P u t+ np b1 an t D $n ed Bc n cf tt

Tte detemination of the Compeny's obligation and cost of Post-€tq oym€ot

de6oed benefit is dqendent on the selectioo of certain assumptions used byactuades in calculating zuch amounts. Those assumpdons indude, among others,

discount ntes, exPectid tate of retum on Platr assets, sdary rate incease, and

employee tumovet. In accordance with PFRS, actul results that differ ftom the

assumptions are accumulated aod amortized ovet futrue periods and therefote'ger,oity

"ff."t the recognized e:rpeose and tecoded obligtion in such futurc

periods.

The amounts of retirement benefit oblisation atrd €xpense and ao anelysis of the

morrements in the estioated ptcsent vaLe of rcuremeot beoefu obligation are

orescnted in Notc 16.2

(d)

k)

(/)

-19-

4. RrSK MANAGEMENT OBJECTTVES AND POLTCTES

The Company is e.rposed to a vedety of financial risks which result &om both itsoperati'rg and investing activities. The Company's main dsl mitigation suetegiesgcnerally indude adoption of underwriting and investmeflt policies and guidelines,annual budget ptovision and intemd audit checks and assessments,

The Company's risk "'a"agemeot, in close coopemtion with tbe rcspective dulyconstituted Board Committees oo Underwdting" Investment and Budgeg RiskManagement and Audig focuses on implementing risk conbol measures eddres"irgundetwtiting ecceptaoces, clains conttol secudng shott-to-medium tetm cash flows byminimizing exposune to fnaociel markets while maaaging long-terrn fioancialinvestheots to geDstela lasting retums.

The nost significant finencial risks to which the Company may be erposed to aredescribed bdow.

4.7 Reiosunaca Risk

As e professional reinsurer, the Company underwdtes reiosuance business ftom lifeand non-lifc hsuraoce compaaies aad brokers, with the objective of tealiziog profitssnd leing a d€p€n&ble patmet o ic dients. To attain this obiectivc, it is essential forthe Company to have a balanced pordolio, wherein there is diversifcation of dsks. Fornon-life business, each risk that is accepted or treaty affangement eatered into iscarefirlly evaluated based on the Company's uaderwdting pidelines, such as maximumlimis per type of tis\ cxisting exposures, preoium adequacy, fimocial condition of theclieot end the like.

The Company's retcotioo oa the la:gcr risls that the Cornpany accePts, or Possibleaccumuletion of the same in a giren area, indurling losses that could adse ftomcatasnophes zuch as earthquakes and typhoons, is protected by an excess oflosscoverage to limit tbe Company's exposue up to a specified amormr Significant dskconcentrations oay result in potential losses not ooly in cettaia areas but also within aperticuler type of busiaess such as propelty, motor car and casudty. The Companytherefore always monitots and cootrols its exposues in various lines.

The Company's reinsurance and reEoceded premiums per liae of dsk for the years

ended arc shown below.

Reiqsurance RehocededPremiums Premiums Reteation

December 31, 2011casualty P 1,883,019,992 P1,462,942,310 P 420,077,682Fire 907,568,017 615,649,126 291818'891Life 47r,265,379 200,522,435 270,742,944Madne and aviation 262.44'l -1Oa 118.736.176 743-77D-932

P--il52ililXl^496 E-23v1-&59Mt E--rl2IiA50,49

-m-

Reinsurance RetrocededPremiums Ptemiums Retention

December 31, 2010CasudtyFireLife

P \134,742,4511p96p36,85s

491,439,546

P 1,586,590,665 P641:t41964753,977,655

548,151,786448?94,891337,467,891

Marine aad aviation 557 -794-786 295.290280 263-904-506

P--4279A85i8 P-J,-681-5945@ P---$gXUg0Zt

December 31, 2009casudty P 1,651,954,464 P1,211,491,631 P 440,462,833Fine 977,167,470 578173,522 392,694,148Ufe 53r,77r,628 227987,793 304,089,835

Madne aod aviation 3U-O81-749 768.934.964 215,746-785

P--3^538115111 r-2185^981110 P---1352l9r-CI1

ReEocession or reim"dng what the Connpany hed eadier accq)t€d es ieinsurance is

rcsoted to enable the Company to wdrc dsk whose amounts are ic excess of isreteodon, and to teduce the volatility ofits results and protect its caPital Ifl doing so'

the Company also 5sts mioimrrm lsquiremeots and standards in determining with whomit wjsbes to reinsure witl, foremost of which is the rating of thc paticular security byintemational rating ?g".cies such as Sandard and Poor's and A.M- Best

On the other hand, life business, which constitutes about 1370 ofgross ptemiumwritten, follows a schedule ofretention per life ot gtoup Iife as deternined by theactuarial departmeol Any amount in ercess of this is fttroceded or leinsured udthrcputable foreign reinsurets whose tatirgs ftom the same rating agencies ate above parand meet the Company's steodards.

The Company has implemented eo Entelprise Risk Mao2gement Process, which is ao

orgarrization-wide apptoach to the identificatior; assessmeot" coomunication andmqnag.m€ot qf enterprise dsk, de6ned as issues which may ptevent the Company ftomachieving its stretegic objectives. This ptocess has beeo firlly iategrated into the

Company's opaations aod is overseen by a Risk Maoagement Cormcit comprised ofmembers of seoior managemenr At the same time, a Risk Management Cotmittec has

been estzblishcd by the Company's BOD to assist the Boatd io the development aad

ovetsight of the Company's risk management Prcgram. The Risk Management Councilis required to provide the Board with a comptehensive ente+rise risk assessmetrt atleast annually acd to esteblish plass to erasute that dsks are beicg maoaged and

monitored effectively. The Risk Menagem€nt Committee's m4in task is to oversee that

fs[ m'nq8rmeaf is an integtal part of the planning and opetations of the Co'nFany inorder to meet cotpoiete goals and obiectives.

Also, the Company continues to pnctice prudent underwriting with the obiective ofattaining undcrwritirg profs. In evaluating a daim, the Company follows set

guidelircs such as setting up of reserves upon its reccipt of a prelimioary loss advice,

and tequiting the cedatrt-clailleot to submit othet necessary documens such as the

adjusteds rcporg affi&vits and proof ofloss, anong othets.

-21-

the Company's outstandjng daims and the retrocessionaires' share in such daims per

line of tisk ate shown below.

Qg616ding Retrocessionaires'Claims Strate in Claims Net

Decembet 31, 2011Fire P 7,737,565,947Madne end aviation 1230,741,339Casudty 1,641994279Ufc 51.125.515

December 31, 2010Fire P 7,812,747,166Merine and aviation 1,257,352,299C$ualty 1,561,882,859Life 32-405.329

P 7,075,634493 P 667,933,454375,394141 855,346,898

1,114,086,599 527,907,6a024-412,792 26.652-723

P---4^661rt27.010 E--2l8gl8fiZf P--2JlZt84llJ55

P r,180,636,029 P 632,105,137

417,572/67 839,779,8327,121,225,029 440,657,830

6.247,676 26.757-773

I---4.66rL3&L653 P---2125-6L1J4I P-Jsi&JjJ0sl.2'

Deccmber 31, 2fi)9FireMatine and avietionCasualtyLife

P 1,371,288,71078494r,7s2837$43J7956-823-130

P 848,145301 P

2A,565,06061s,604278

523,1$,q9500,376,692721,439,501

13,914-915 42.908-275

P-jUE&(D23?1 P---JJSg229l54 P---12'87'K173L7

The Company ensures ttrat all valid claims are settlcd prompdy and judiciously' as part

of its commitment to its dicnts.

Most of the risks reinsued by the Company ate situated in the domestic matket with

only a small portion coming ftom ovets€as market'

12 Crcdit Risk

Genenlly, the maximum credit risk exposute of fioancid assets is the camTing amount

of the financiel assets as shown in the .t t.-.ott of financid position (ot in the detailed

analysis ptovided in the notes to the Enancial stat€taents) as summadzed below:

Notes 20n 2010

5 P 1"699,771367P 673,252,054

6 3,892,ft3,f13 4210'444'502

7 4,685567,341 5363'752'653

8 584523-402 360.688-116

P-10162^8ile1 PlO548.13?125

Cash and cash equivdensReinsurance bdances

teceivable - netAvailable-for-sale

financid assets

I-oans aad teceivables

-z-

The CornFany contiouously monitors defaults of ceding companies and othercormtetparties, identified eidrer individually ot by goup, and inco4rorate tlisinfomation into is credit risk controls. Where available at a reasonable cost, externalcredit tatings end/or reporb on ceding companies and othet counterpaties are obtainedand used. The Company's policy is to deal only widr creditworthy cowrte+arties. lnaddition, for a significant proportion of sales, advance peyments are teceived to nitigetecedit tisk.

The ComFany's rn^nagement conside$ that dl the ebove fnancid assets drat are noti'nFaircd ot past due for each rcporting period are of good credit gudity.

The credit tisk fot cash and cash equivalents is coosideted negligible, since thecomterparties are r€putable bar rs with high qrulity extemd credit tatinp. Fot tledetermination of cedit ris\ cash end cash equivalents do not include cash on handamormting to P35p22 aod P35,000 as of December 31, 2011 and 2010, rcspectivdy.

Some of the udmpaircd reinsurence belance teceivables are past due as at the end of thereporting petiod. No other financial assets rre past due at the end of the tqrortingperiod. The reinsurance balaoce receivables that are past due but not impaired are asfollows:

Not more than three monthsMore than tlree months but not morc

thao six monthsMorc tlran six months but not more

than one yearMote than one yeat

2011 2010

P-P-

4J86,48s3s5-992238 477-978.082

n_-_fi0,x18,xn P-_-a7J98.482

43 LiquidityRisk

The Company mo"rges its cash and investment position to meet its obligatioas arisingftom reinsurance agteements and otlet Enancial liabilities. Crurendy, the Company'sexcess cesh is iovested ir avaihble-fot-sale Enancid assets.

As of Dccember 3 1 , 201 I , the Company's obligations arising ftom reiasutancea$eements and other financial liabilities heve contactral maturities which are presentedbelow.

Reinsurance bdaoces payableAccounts peyable and accrued expenses

Current

P 4Js0,82111852-541-192

P__4.50i,3,n2.674

Non-currcnt

P 977p09,579

P___9r1-W95lL

_23_

This cornpares to the maturity of the Company's fisncid liabilities as ofDecembet 31, 2010 as follows:

Rcinsurance balaoces payable

Cunent Non-cunent

P 4,479,424,564 P 983388,319Accounts payable and accrued expenses 46,576-252

P--452i-94!'316 P----98318&.119

4.4 ltlatktRhk

The market risks to which the Company may be exposed arc as follows:

(a) Fon;&, Cnn tE R*k

Most of the Cor.Fany's transections are cattied out in Philippine pesos, itsfunctional cutency. E4losues to crrrrency exchange rates e;se ftom thedollar-denomiaated investrnents, receivables and payables. The Companyrecoetrized net foteign cuttency gins ofP7,754$21 in 2011 and net foreigpcutency losses otP2l,0944!.2 in 2010 and P24,337,582 n 2009 (see Note 13).

Exposues to curneocy exchange retes arise ftom the Company's foreign curencyreinsumnce tmnsactions, which are primaily denominated in United States(US) dollan, Iodonesiao rupiah, Thailand baht, MalaFian ringgit, Euto, Singepoteaadollers, Indian tupee, Japanese yen, Sbuth Koreao won, Pakisan rupee, NewZealand dollars, Honglong dollam, Bdtish pound and Ausadian dollar. TheCompany also holds US dollar-deoominated casb and cash equivdens andinvesment in equity sccutities.

To mitigate tle Company's erposure to foreigr cutency risk, non-Philippine pesocash flows are monitored.

Foteign-cutency denominated financial assets and liabilities, hanslated intoPbilippine pesos at the dosing rate are as follows:

Fiaocid rsscsFiuacid liebilitics

Totrl net crposu!

US Orbcr US othciIlothc -fJumCiS- nol'r Curcocirs

P ?42,69661'8 PtZr,9E,885 P 823,041,545 P 132,144,838(-rzlfiu.6f2 ) (l&5u0980) ( 144-744-60A ) (--J92M2&)

P, !s^El6 uD^4D.gl5 P--478.8A9fr rt11zM05?0

-24-

The following teble illustrates the seositivity of the Company's profit before taxwith tespect to cbanges on Philippine peso (Php) against foreign cunendesexchange tates. The petcenage changes in rates have beeo detetmined based onthe average t"orlret volatility rates, using standard deviation, io the previous 12

months at a 997o confidencc level. If &e Philippine peso had streogthcncd against

the foteign currencies, the effect would be as follows:

?i)io

Rarodrbly Eficci io Eft.c. R.tsonzbry liffect in |tff'rtPo.stuh Ch.tgc Prof(B.forc iD t'o66iblc Chens'! l,{)ss ltoforc i'

in nan Td Ft"'ry -jo34tq- 1s l\dtY

t' $5,721,4t1 l, 1t5,121,$7

21,189,8,1{t 21,1n9,1148

2,0?9s66) ( 1t:t71s(t1)

Phn - USDollnti

Rutn"hPtrp - liun)ry ' MallFiin

Rh&{r.Php - lluihnd BrhtPhp - Singefnren

l)ollanI'hp - Indian R'.lPcc

i)hn -Jnpan(*c \'.nl,hn - Nlw :4jalefld

l)olhf"I'hp - I k'ngk(ng

l)ollarsl\ ' hhith loundl'hp - li.'uth l.(i,.!tln

l'hp - iustml;m DonrtI'lT ' lhkisbn ltufxr!

l otel

\65nJ663,O46,9M

1,856,9{X323,546146,On) (

13,823) (

16LT/. (P 94?50t3E C n$0738l 2r.14',',o

23.73./. ( 19,t99,tv' ( 19,199,134) n.2?!^3r.ss./. ( zr18,e{3) ( 7,u8r13) 3)-760l" (

r4.1{rh ( 2,9s5,150) ( 1966.i1'0t r8.36v"rx7tr/. ( 2JE2,703) ( 2,sEpi703' r8.73o;

2r.61% < 11l,.272t ( \t4ml fl.1vnr7,cv. ( s10t02) ( 510J04 rs.94\i79.1sU. 179987 119,9A1 39.14% (

4L7l'/. 53,009 $,mS 15 5?ri' (

41n 4n( 10s) ( r05)

(E-r464!41!) G--12c4&Sl)

1,8{)( &30 (

r 15,890

103( vt885) ( "r nst

l--llZ5gL68Z P-1125E6,682

\650,7K,3,O46,9U

1,856,904323,54(,

146!029)

43,8X3)

16,gqt/.z7,v/.

. ./,39.41U.17.1ff/.

145191,d'

46,519zpl

1,U)&]lt

115,u9(l103

2t;75e',.31.61"n

.99,i38.41q;2t.lt]pk

If the Phitippioe peso had weakened against the foteigt curreocies, the effect wouldbe the teverse of the above.

Exprosues to foteign cucency tates valy durisg the yeet depeddhg olr the volune ofoveseas transactioos. Nooetleless, the andysis above is considered to be a

rcprcs€fltetiyc of the Company's currency risk-

(b) Mtrkrt Pticc PJtk

The Compeny's investrDents are regulated undc the pertinent ptovisions ofPresidentid Dectee No. 1460 (as amended), othcrwise known as The If,surance Codeof the Philippines (the Insutance Code). The Insuance Code geoemlly requircs allinsuance conpanies to obtain ptior approval of tle Insutance Commission (C) forany and all of their inrestments. It furthet rcquires cohPanies to submit to the IC amonthly report oo all inveshents made dudng the ptevious month, The IC rcviews

the investuents and may require the im,3edi'ate sde ot disPosal of investments

deemed too risky.

In the erea of equity inveshents, Section 200 of the Insuance Code firrthetptovides, among other thiogs, that iosuraflce comPanies may only invest io commonstock ofPhilippine cotpontions n hich have a priol three-year divideod Paym€nt -tecord- Motmvet, the saoe section linits exPosure to any one institution to TOoh ofan insurer's total admitted asscts.

-25-

Beyond the plovisions of the Insurance Code, rhe Company, through is InvestuentCommittee, has esteblished additional grridelines to conrol the risks inherent inequity invesmens. The Company's owu itrvestment policy requires that thcComllany invest only in shares of common stock of compenies listed in the PSE'

Further:notg desc listed companies must have profitable business operations and

ma*et capitalizations wbich are on a scde that would quali$' them as blue drips'

The Investment Coomittee regulady reviews end app:oves a list of publidy tndedstocks authorized for inveshents on the basis of the fotegoing consideratjons'

Furthernote, the lsvestment Committee seeks to avoid uawarranted cotrcenttetiooof funds in a single assct cless by tegulady 56ai1q'ing and limiting the ptoportion ofequity investnents to the ComPany's total iovestment pordolio. As ofDecsmber 31, 2011 and 2010 investrrents ia listcd equiues arnounted to 8yo

and 1070, espectivelS of &e Company's total inveshent podfolio.

The observed volatility rates of the fair velues of tLe Company's investments hddat fair value and their impact on the Company's othet comprehensive income (loss)

as of Decembet 31, 2011 and 2010 arc summarized as follows:

2070Eficctinothcr liftcct in Oihcr

Obsclvcd Comprchcoeivc Obasncrl CrrnPrlh('|sivcvritrnlirv RrrF

---l.o!s- Jr[ A&ti5- ------]Dget-

Govctnrrrcot bo&F4ui9 scouitics littcd in

the Philippincs:Coorno slurcsPrcfcrred sheres

Corporatc boldsMutud tuods

5. CASHAND CASHEQUTVAI,ENTS

Ttris account consists of

Short-term placementsCasb oo hand and in battks

3.0fi/. P fi\'47'674 2'34%

ff.9€i 98,476105 16.51%

3.6t/o 6P4?)52 | .86%

6,8?P6 36F!6,971 839o/o

6.76% t3.lil4.&33 9.96'/o

P 78,436,969

r 13:05,0853,663,91t

153743397 895232

I_____218126i36

k) Intcn$ Rax Ri:k

The Company has limited erposure to intetest rate tisk because of its 6xed income

inv€sheots which amounted to apptoximately 89% and 85% of the Company'stotal iflvestm€ot pottfolio as of Decembei 31, 2011 and 2010, respectively. The

Company anempts to Iimit intetest rate tisk by establishing limits on tle duratioa

end average maturity of its vadable income Podolio.

r---2551529r

mll 2010

P 1,63,8692A9 P 582,577,993

35-937J41! 30.71s.061

P-1^6!DJl0dl89 P--613237^454

_ztt_

Shoit-terb placehents include dme deposits and qrecial dq>osit accoults made forvaryiog periods between one &y and one month depsndi"g on the liquidityrequiremeots of the Company. Peso shoit-tenn placements eam ennual intetest ratesranging ftom 7.25oh to 4.75o/o in 2011 and ftom 7.25o/o to 4.25Vo h 2010 while dollershoft-tem placements eam ennual interest rates rangirg ftom 0.02% to 1.?5% in 2011and ftom 0.02% to 1.630/o n 2070. Cash in banks genetdly eam intetest at rates basedoa daily bank deposit tetes. The Cash and Cash Bquivalents accormt indudes foteigncurreocy denominated cash of US$4,906,842 (otP275,547,761) as of Decembe 31,2077and US$3,824,365 (ol P16?,832p71) as of December 31, 2010.

6. REINSUNANCEDALANCES

lhs d6r.ils 6f leinsurence balances are as follows:

mu 2010

Reiosusnce balaaces receivableReinsumnce rccoverable on

unpaid lossesDue ftom ceding 6qtnpaniesReinsurance recoveteble on paid lossesFunds held by ceding comFanies

Allowance for impairment

Reinsurance baisnces payable:

Claims payableDue to rettocessionairesFrmds held for retrocessionaires

P 2,589,586$25 P2,72s,681,1411076"598,889 7,180,189,544396,607,866 454,499264145.010.052 r33-2M-5r2

4,207,803,732 4,493,574161( 315.629.e59) L 283.129.9s9)

Pl^E9UlZLrn rA2t!444.il2

P 4$61\427$80 P4664,381,653677,808,010 706,510,34688595.907 91.820-884

P-tutz1.8tlLED Plrffi2IA883

Reiasuance balences rec&able pertains to the following

e Reinsurance recovetable on .npaid losses reptesents emounts due ftom reftocessionairesrmder treaty and facukative agreements as tleir share in losses-

r Due ftom ceding sompanies refe$ to tlre premiums receivable ftom the cedents as a resultof treaty aod frcultetive acceptences.

r Funds held by qeding compenies pertains to the portion of reinsutance premiums withheldby ceding co"'Fanies in accordance with treaty atrd feq tetive agtee(nents.

Reinsurance bdances payable relates to t}re folloqdng:

r Claims payable ate losses and daims due to ceding companies under treety end fecultetivergie€ments.

. Due to retrocessionaires are unrernitted share in premiums of rctocessionaires.o Funds held for retrocessionaires rcpresents portion of the teinsurance prcrrrium ceded to

rctoccssiooaites which was widrheld by the Company in accotdance with treaty andfacultative agreements.

-n-

All of the Company's reinsurance balances teceivables have been teviewed fot bdicators ofimpaireenl Certain reinsuance balences receivable wete found to be impaired aad provisionshave been recorded accordilgly.

A reconciliatioo of the dlowance for imp.irmsnf a1 ths beginning and end of 2011 and2010 is shown bclow.

Note zDn 2070

The fair values of &ese short-tem finaacial assets and liabilities are not individuallydetermined as thcit carying amounts are rcasonable approximation of tleit frir values.

?. AVAII.I\BI.E.FOR-SAIE FINANCIAI ASSETS

The amouots in the statemeots of fnancial position conprise of the following fnancialassets:

Balaoce at beginoing ofyearImpairment losses duriog

tle year 15

Balance at ead of vea:

BondsEquity secuiities - netInvesheot in Asian Re sbaresVadous funds

Due within o,nc yearDue after one yeat $pngh five years

Due after five yeas through ten years

Due rfter ten yearc

P ?33,129,959 P 267,920,033

32.500.000 7s.209-926

P_:[5529J59 P_-28L129-959

nf 2010

P {,570,453,93 P 5293,842,80960\079356 860,s23,38777,897,X2 72,a59,527Its2LlAt8 69.909.844

2011 2010

P 332,831,836 P 327,292

782A94$U 29s4,923,r97\073,433?59 416J92,6s12J8L694J04 121.80s-669

P_AJ7 A5L,ID.1 P5.n3-W23M.

P5165^644^659 P-S,gIl35.56;L

Bonds include investuents in corpolate boods, long-tero negotiable instrumeots aodgovernrnent securities. This also includes govemmeot securities amountingP187,500,000 and P190,00O,000 h 2011 and 2010, rcspectivdy, which arc oo depositwith the IC as security fot the benefit ofpolicyholders and crediton of the Company ioeccordance with the provisions of tlre Insurance Code.

Boads eam intetest at enaual tates ranging fuom3.7\oh rc 15.0trlo both 2011 aad 2010.

Intetest iocome recogo.ized are preseoted as part of Investmeot and Other Iacome inthe stetements of income (see Note 13).

The following presents tle feit values ofinvestments if, bonds by contractual matulitydetes:

-28-

The beLnce of equity securities dassified as available-for-sde financid assets

consists of:

P--ill?-fi9156 P--361L52I:[Z

Equity secrrrities consist 'nqioty of ;ovestmens in companies listed il ths PSE.

The shares of Asiao Re have beeo issued in tle name of tle (i6vetnm6a1 sf tlrsPhilippines (GoP) as the Pbilippioe govemmeoCs participation in the loint underteking

ofAsian countries to orgaaize a rcinsuiance compaoy that will service the needs of the

rcgion. The GoP assigned such shates, including any interest eccmiog tbeteoo' to the

Company. The GoP designated the Company as ttre national institution authorized tosubscribe and pay for tbe iaid shares of stoclc The shates of stock 6f A*ian f,g, n'hilg

not fot sale, were classided under this category since these do not qudifi for inclusion

in any ottret categories of financial assets. These shaces of stock are measuted at fairvalue and changes in the feit velues rre recognized rmdet Other Comptehensive lncome(Loas) in the statement of comPrebensive income. The fair value of investment in-i\sian Re sh.res anrouoted to P77 ,897,962 ndP72,859,5n , as of December 31, 201 1

and 201 0, respectively.

The reconciliation of the cartying amoults of available-fot-sale financial assets is as

follows:

Cosc

Quotcd in the sock exchangeNot quoted in thc stock exchange

Feit value gsins (osses):

Quoted in the stock cxchange

Not quoted in the stock exchenge

Bdance at beginning of year

AdditionsDisposals/maturitiesFair value gains (osses) - netForeip currency losses

Impaimrent losses

Balance at eod ofyear

20tl 2010

P s39,093850 P s72,02s89940.636-l3E 792.795.157

579.730.685 764-227-7s6

43,803,877 177,760,265( 2r-4ss206) ( 20.8s8.034)

n348-67r 96-302231

?J.fl 2010

p 6297J35,567 p 6,048,736,164

7273,870,63 1,698,465,088( 8,086308,824) ( 1,809p3,516)( 59,004,832) 375,?26,237

( 147,91s) ( e,627,2s6)( 6.397.1s0)

P--5J65^644i59 P-j,297-135.567

Changes in fair vahrc of available-for-sale financial assets, net of taxes, tecognized as

Feir Value Gains Q.osses) accormt rmdet Other Compteheosive Income ('oss) in the

statements of comprehensive income emounted toP59,004,832 bh value losses in 2011

atdP375226237 end P1881'55331 fair value gains in 2010 and 2009, tespectively'

-a-

The fair values of available-for-sale firancial assets have been detetmined direcdy byreferencc to published pdces in active market For some investorcnts whete fair value is

not rcIiably determinable eithet through reference of similat instruments ot valuationtecb.oiques, these are carried at cost,

LOANSAND RECETVABLE

This eccount indudes the followirg

CurreotT"tm loansAccrued interest rcccivableOthers

Non-curientTerm loansLoans receivable

20tt 2010

P 150,000,000 P 150,000,000

?5,807,780 92,526,029146395-665 30-593.197

372,m3$4s n!1!9.226

200,000,000 80,000,000

t2.419557 7.568.890

TA.4$'957 87-568.890

P-__5&t^62r-42 P-160-688116

I-oans and receivables are usually drrc within one to t€n y€ars. These financid essets

are subiect to credit tisk exposwe. However, the Compaoy does oot identi$ specificconcentrations of ctedit tisk with regard to loaas and teceivables.

Term loans naidy pettain to the Company's participation in syndicated loans of otlercompanies. These loans ete unsecued interest-bearing loans with a tetm of2 to 5 years. The annuat effective interest tate otr these loans raages from 5.50% to6.625Vo n 2017,5.75Yo to 7 .40oh m 2010 ard 6.18Yo to 7 .40oh in 2009.

Loaos receivable includes unsecured housiog aod car loans to Company employees

which have annual effective interest tates of TlYo to 13% both in 2011 aod 2010, and

70o/o to 22To is,2009. These loaas ate collected through sdary deductions with a temof 5 to 20 yeats.

In 2011, Others indudes receivables ftom sale ofvarious stocks emounting toP145.5 million.

The fair value of these financial assets is not individually determined es the calryingamount is a reasonable apptoximation of tlis fair value since tle int€f,est rates ate

apptoximately the same as the matket interest mte.

-30-

9. PROPERTYANDEQUIPMENT

The gtoss carying amounts and accumuleted depreciation and emortization at the

beginning and end of 7.077 ail 2070 ate shown below.

drrlrsi$ i'

co!.Ldlu olEe o6e FcdntF TlEPdrdd EDt

--j:==:g- -4g:!gr3- rsn'@ ---IolI@l-

r l5r,sq!11 I ltr2r1.6tl ! r0J55J2! lt 1]pt.1rrl ! $.m.102 ! 305r6'$s

(--------!l!Jztuz)(----------o.6ar.!li) (---i.166256) (-----Lztcili) (-----JI'EL2D) ( --J!tr '2'r)

t!dq,'!t*"*er L=i.4ru6 t----i!r9r.( t-!szr6 fJOg t-.J8Sglg lJl4lfg

(ini t'I lol.2zr.7]l P lltr82lt I 9.?t10.!l{ P loj99'o!t P 22,32313 P 155'129'16(

sr*.rarin ( 4MN)t 6(lt! (11) (--------52!eI) t-----5.3iA$ (------l5JsLGd( ----jruErllr:)

N.tcrti*rt|4t ll--dt i6jUli !-l.s|r111 !-------IEr&l !-!215-6!A !--------Ll95l!2 !.-.ailgl3l

O',i I t('!',ut,lat r l|:Al,l02 P 9jt0.93ll P tlJoo.t?t P 20,l ll)'6'6 l l6li{!'Ull

,ir-;,i- (-----3!9ixs) (-----.lZ0dJ6) (----lJsUlA) (---3lz@) (----"llllz]:A ( ---l!!q5n)N',D!rli,'r.frd, !L-6114&4 r-tiSUAl l..'.....@]E1 ll-!f5&-"1

A teconciliation of the carrying amouna at the beginoing acd end of 2011 and 2010' ofpropeffy and €quipment is shown bclow.

C6dod/oo Ode OGa FDDi@ TntP..tdd BDt

Eirlit , Ji6y l, 4lqs09,str p t3li3j3l rldr,ir5 ,.22u18

( r,210,605)

4?trtP, P 345?6.rr]aflat6l) {,8tpl!- ( 1,250,605)

t{.t55.9t1

r' 6?.ttl.?66 P -2,230J36

P

r'3l!J!6 P 'Tl,gf,O

$r!,.152 ?5,r,9rS

I 12ta,rs r I,lti.?al ! Tllrlo'tzl

!0,955t|rs,1s9272 l6Jr6J36 ,J63\r33

( 272"$t) ( ,4t43)

(-----JEr.fJA) (------quD l-----)a'.aa (---2-llllll) (--------1le's! (----J!J[llr)

t-----JLA0!l( r---$!tlrfi t---------!r fi l----rz4&r EJ'lE&l& !---j"'rE!itr

m** L-------rrurds5 !-...J!! r:is,E0 L-r3E4u rlJJ:llllt r-----zr,',,r

In 2011, the Comp.ny rr4nsferred pordon of its Itrvestrnent Pmperty (a condoninium

unit) with e catrying value ofP30,955,944 to Propcrty aod Equipmcot upon

(-------.104ra!) (------! tr4 G---3r.9!) (----l(rD-1t[] (-------u!5$s5] (---l;5AEr)

of ownet-occupetion (see Note 11).

- 31-

10. DEFERRED REINSURANCE PREMIT]MS AND RESERVE FORI,'NEARNED REINSURANCE PREMII,]MS

The moveoent of tlese accounts follows:

mtt 2010 wE 2010

Brh*r rt begioaiog ofycet P 514'257$25 P ??1,688'5't6 P 902'887,425 P 1,f?9,0?5555

Incrcese (dccrtesc) dutiag

the ycer 5o22s-Gzr. ( 2s?-430-?21 ) (--54l8Jfl) ( ---276JE&11{D

ftrlaarcc rt cnd of ycgt f--164^4ff.44? P-5A.251l.25 P--&n-4d/IM 2--W.8L4E

Defered Reinsurance Pr€rniums pertains to the portiof, of re.insuance premiums cededout that rclate to the uaexpired periods of the poticies at the end of cach teportingperiod.

Reserve for Unearned Reinsurance Ptemiums is the portioo of reinsutance premiumsassumed that telate to the uoexpired periods of the policies at the end ofeach tepotting

Period-

Tlre difference betwe€o the ind€ase in Defened Reinsuance Premiums and Reserve

for Uneamed Reinsuance Prcuriums for the year is pteseoted as Decrease (actease) ioReserve for Unearned Reinsurance Premiums in the statements of income.

11. OTHERASSEf,S

The Othet Assets accouot indudes the followiog

Notes

26.7

20n 20fi

Dcfcrlcd Rcinrurancc Prcpirlm!R€scwe fd UDc.rncdn.infiFrnc. Prcrnir[rtc

77,43/.$5569965,70962314,28438,@5,2199,200,1812,949,9092,500391

6,2,3V919?.,888

3267-621 2.688.920

E_"i6ll!4J66 Pl8L0tLt10

Cttditable witbholdhg taxDefered input VATInangible assets - netInput VATDefefi ed withholding VATIovestuent propetty - netPrepaymentsDepositSecurity fundOthers

P 58,147,77074128,56976,s66,9s324,095,3349,113,038

34,655,1062,er'.7332

575,200192,888

26.126.1

9

-32-

Intangible asses pertain to acquired computel software liceoses used ilproductioo aniadmjistration. 1'h. g.o." o$tg amounts and accumulated amortizetioa of inaagibleassets et the begrnning and eod of Decemb et 31,2011 and 2010 follows:

A reconciliation of the cerrying amounts at tbe begrnning aad end of2011 and 2010' ofiotasgible assec is shoqn bdow.

mfl 2070

CostAccumulated aaortization

Bdance at end of yeer

Balance at January 1 , 201 1 , net ofaccumulated amortization

AdditioasAmortization charges fot the year

Balaoce at end ofveat

2011 2010

P 89,629,8V2 P 86,599,432( 2?J1.ri.s18) ( 10.032.47e)

P--623A,?.M P---J-65655i

P 76"566,9533,030J70

P 47,458,66039,709,337

Investment Property coosists mainly of building with implovemeots which are owned

to ""ro..odb i. fot capital appreciation. The changes to the catrying aoounts of tbe

investm€trt prop€rty can be sum.ma.tized as follows as of Decembet 3 1 :

L 17p83,039) ( 10.001.044)

P----62$4Je P-J5.5i6953

P 341655,106 P 36,349,456

( 30'955'9ig)

( s4eps3) ( 1-6e4-3s0)

t-__-ll49Jm P-3465L106

Notes z0.ll 2070

Balance at begj.ning of yeatTtamfer to ptopelty and

equipmeot 9

Depreciation and amottizatioochqrges fot the yeat 15

Balaoce at end of year

TXe estimatcd fair value and tle tdated caryiog v*lue of the building withimprovenents included in iovestrnent ptoperty amouoted to P5,760,000 in 2011 and

P3?pS0,000 in 2010. Rental income eamed ftom invesbent ProPerty amo[nted toP770,988 io 2011, P1,639553 in 2010 and PU04,151 in 2009, and is tecotded as patt

of othet income (loss) undet Inveshent e.ad oth€r Income xccount itr the sbtemeats

of income (see Note i3;. R."l oat" t"*es incured on investment PtoPerty amounted

to P1,16,837 in 2011,2010 and 2009.

Defeced input VAT relates to the value-added tax on uapaid conmissioo to ceding

conpanies.

Iaput VAT pertahs to input VAT cn sgt''r'.i"sisa6 paid to cediog cooPanies'

Deferred withholding VAT tePlesents unapPlied ioPut texes resulting ftom unpaid

pteoil'ms on ccdcd out transactions.

Prepayments include substantially prepaid insutance on ptoP€rty and equiPment and

group life insurance.

-3i-

Security fund represents enount dePosited u'ith the IC, as required by the Insurance

Code, to be used fot the paym.ent of valid claims agaimt insolvent hsurence corrrpanies.

The balance of the fund eams interest et rates determioed by the IC amually.

12. ACCOT]NTS PAYABI.E A}ID ACCRUED EKPENSES

This account indudes the following:

Manageoent considers the carrying amounts of accouots payable and accrued erpenses

recogaized in the st4tesents of fineocid position to be a teesonable aPproxination oftheir fair vdues due to their shott duation.

13. IT.MSTMENT AND OTHER INCOME

The detailc of t}is accouot follow:

Accormts peyable andother liabilities

Defetred ouqut VATDefioed beoefit liebilityAccrued expenscs

\f itbholding taxes payable

InterestTtading gainGain on sale

of stocksDividend incomeForeigp curency

gai::s Qosse$Gain on sale

ofptopetty andequipbeot

Othet income

khalg€s)

NoGs mI 2010

P 43,935,951 P 10,311,'145

26.7 +439fi3 41,79332s16.2 l'1 5373,44 13273,056

8,fi524t 362M,807L957,104 7,049204

E--fi-qal/i P--ru8^631-841

Notes zOn 2070 2009

5,7 P 371,450,855 P 378361,661 p 382,426,679

n0,020931 10,389J76 33528,64

83,98U62 88,938,727 17,076,148

37,n0582 33,790,447 29,972,727

4.4 7J54,U ( 2159441.4( 24,337,s82)

6,786 5,407

77,16,79 ( 3,m/5295) A7.770 28-490-33r

P-58J80^45i1 v--[v-?2J.w P--466-656.885

-34-

14. T]NDERWRITING DEDUCTIONS

14,1 Sheft in Claims aad Insses

Tlis account teptesents fhe aggregate amount of the Company's shate in net losses andr-lritns detiv6 to i5 accq)teoces undef Eeaty and facultative teinsurances.

74.2 C.ommicsioas - aet

This account consiss of the following

2011 2009

Cornmissioa expensc P 626'520'050 P 740,628,870 P 700,650'988

Reitrsurance revenu€s ( 28L011,432) L 304.931-348X 293-677 214)

E-145^dl6^6lE P--AL5A9LM2 P-446573J14

Commission expense refec to fees deducted by ceding companies ftom reinsuranceptemiums assumed during the period under teaty and facultative agteements.

Reinsuance revenues pertain to fees charged by the Company related to reinsulancepiemiums GEoceded during the pedod undet treaty and facultative agreements.

-35-

15. GENERAL AND ADMIMSTRATIVE E)(PENSES

The dctails of this account follow:

Sdades eld employeebenefits

Impaiment lossesDepreciatioo

and amottizationProfessiosal fees

Tares aod licenses

Rqlesentttion aodentertaiim€nt

Light and watetAssociation end

pool expense

Transportation andtraveling

Repairs andmainteoaoce

Contract laborComounication and

PostagesAdvertising and

publicityRenat 231paisring and office

suppliesInsuranceMiscellaneous

Sdades and wages

RetirementAllowances and bolusCompenseted ebseoces

Social security cossOthers

2009

P 723,769,4U72A325,4O1

10,765,00824,507,265

7,774,769

4,369,r582,670,166

2,932,945

3,957,372

1378,s223,963,964

2,278,551

1,313,1827,653,628

1,628,0581,0F'8,442

Notes 2011 2010

16.1 P rnJ85?9lP 129,999,226

6,7 32,500,000 21,6W,076

9, 11 28,843,853 20,057,975

9J3t 499 r4,674t6526.7 8,535220 7,309,048

7,670p00 4p75,4465,003,744 4,992,256

4,879,W 2,950,579

4,684,800 5375,887

3,421,830 11991,196

3292,570 4,762,207

41i10J42 2,187,897

1b864t93 1,329,774

1510,719 2,689,750

\4MA72 1,893,0601\1M,78 1,06981943?2.530 4.076-325 2J96-647

E-24SJ?9118 r--2CI^et1]t80 l--32t1)72508

SALARIES AND EMPLOYEE BENEFTTS

16.1 Salaties and EaPloyee Ber'efrrs

Expenses rccognized fot employec bcoefts are presented below'

P 79542,99121169,633

':l,7l9,tl34,068,095

1in1873,5{1-6t2

2010

P 79,808,51278,572,3D218257,0526,139,9451,166,2965.455.119

2009

P 75,596,45227,767,79777,471,9762,888,2301J9r,6755-720-074

E-Jrug,,U, P--LES992% P--123J69-84

-$-

76.2 Post-eml olrmeat Defrned Benefrt

The Compeny maintaios a who\-fimdd tax-quali6ed, non-contdbutory rctitemeotplan that is bei"g administered by a Eustee covedng all tegular firll-time einployees.Actuatial valu.ctions are made regulady to update the tetirement beneft costs atrd thea:nount of contributions.

The amounb of defned benefit liability (preserted as patt ofAccormts Payable andAccued Expenses - see Note 12) recogpized in tbe strtements of finansial pssitistl alsdetemined as follovs:

The movemenb in the present value of ttre retirement beoefit obligation ate as follows:

Present value of ttre obligationFair value ofplan assets

Deficieocy of p.laa assesUnrecogn:ized actuatial

losses

Defined benefit liability

Balaace at beginning of year

Actuarial (gains) losses

Current sewice costand iaterest cost

Benefits paid by the plan

Balence at end of year

2011 2010 2009

P t52,043,509 P 167,377,632 p 137244,682( 67.?M39q ( 63.1s6-618) ( s6,468.323)

84339,rL1 1O4221p14 80,776,359

( 72,80L?69) ( 90.947.9s8) ( s8.7s9.900)

E--J1 fl- P_--13273.0s6 P--22.0L6459

mfl 2010 2009

P 167fi7,632 P 737,244,682 P 129J57,565( 13,84$031 44,765,577 ( 3J40,728)

19,06r,083 19,336,815 79,549243( _-_21"2@.691)( 33.96e.444 (, 8"327-3981

P_lszlUSJlD PJ61-ttJsx2 P-Jnla582

The movement in the 6ir value of plan assets is presented below.

mn 2070 2009

Balance at beshniqg of yar P 63J56,618 P 56;468323 P 32,808,081Conttibutions paid ioto the plan 22,905,345 27,315,705 28,M2,646Benefits paid by the plan ( 21,260,603) ( 33,969,444( 8,321,398)Expected tetum on plan assets 3,599,927 4,517;466 2524,647Actuarial gain (osses) ( 696.891) 8-824,566 7-374347

Balance at end of year P----:67J1U,396 P--63156i4 P---56-46814

la 2009 contribution paid into the plan indudes P19J94J47 representiog fimds tansfenedfton cormon &ust ftrnd of Univemal Mdayan Reinsunnce Co4)outiod (merged withCompany in 2006), The sa.me amount is recogaizcd as patt of Othet Income (Charyes)

under thc lnvestrnent and Othec lncome account (see Note 13) in the 2009 statemeot ofincome.

-37-

The plan assets as of December 31 consist ofi

20ll 2010 2009

Cash and cash equivalents P t2,801"321; P 5,651,395 P 3'392,517

Government secutities 41375,637 37,850,827 52'208'248

Equity securiries 12,199'683 19,352,045 447,A29

I-oans and receivables 13n3il 302-351 425'729

Balance at eod of year P---67JM396. r---63l5i-618 r--56^468123

The amouts recognized as tetirement expense ate as follows:

2011 2010 2009

P 9,355313 P 8,357,240 p 7,871,062

9p05370 10979,s?s 1r,678,181

( 3,s99927)( 4,s17,466)( 2,624,647 )

53tr8.471 3:15295! 4:36-601

P--2Ll69.eX P--J85123M' v---21J61J97

For detemination of the rctitement benefit obligtion, the following acu.ruial

assurnPtions werc used:

Discoutrt late s

Expected ret3 of rehrrtr on Plaoassets

Eqrected tate of salary increase

zan 2010 2009

5,5Vo 5.5o/o 8'OVo

Curent sewice costsInterest costsExpected tetum on plan assets

Net actuadal loss tecognizeddudng the yeat

5.?V. 8'0o/o

6.0% 6.0%

8.OVo

6.Oo/o

Assumptions rcgatding futurc motality and disability are based on published .gtitlT-

"na mortality ena disability tables. The discounts ntes assumed are based on thc leld

of long-term govemment bonds es of the valuation dates as published by the Phili-ppine

Dealing and Exchange Cotpomtion (PDEX), approximating tle average expected

futue wotking lifetime of employees.

The ovetall expected long-temr rate of retutn on plan assets es$med at 5'7yo and 89/o

are based on a rcputable 6rnd tustee's indicative yield rate fot a risk pordolio similer to

that of a 6md with considetation to thc find's past petfomance'

Preseoted below are the historicd infotnation related to the Present value of the

rctirernent benefit obligation, frit value of plan assets and exCess ot deficit in the plan'

mfi N ----20s- M7

Pl6at vrtruc of thc obligrtiod P152'043,t09 p161)77,6n PB7244S9 P129,757,565 P 6al3aE30

Frit vrtuc of ttc p6o rsitr dt.?tnj96 63-1s6618 --.5iJ4!lZ1 328{18-081 30 tl90-823

Dcficnia ihc olza E-!4lr0lu PI042Zu)J4 P-$26.:159 r-1694!S4 r-ra(tsZlxE

-38-

17. CURRENT AND DEFERRED TAXES

The components of tax expcnse as tqtorted in statemens of income and otlercomprchensive income follows:

2011 2010 2009

Curent tax expense:Final tax at 20% and,7.So/o P ?2'02a408 P 74677,644 P 69'499'923

Minimun co4roateincomc ax (MCIT) nLn[ ----..:- 364-428

P--J2JL3,582 P---1251L@ P----i9-8effi51

The reconcilietion of the tex on pretax po6t (loss) computed at the aPplicable statutoryr:ltes to tax expsnse in ptofit or loss is as follows:

Tax on pretax income $oss)

^t30YoAdiustmert fot incomesubiected to lowe! tax rates (

Tax effects ofUnrccognized defetred tax

essets

Non-taxable income (Non-deductible expeoses

Tax expense rqlortedin stetements of incone

2070 2009

P 123,745222 P 122,209,U6) P s1,871,112

60,468,827)( 68,1s4,437)( 42,956,335)'

99,9%J9 270,828J89 90,3948849t\7r4,793\( 9,772,O0n( 29,883,56s)

575,181 7-919-745 438,255

E--12J1i-fi2 P---J2.61L@ P---69-8eil51

In accordance with the applicable accounting standards, the Company has taken a

conservative position by not recognizing the net defered tax assets on the followingtemporary differcnces as of Decemb et 37 , 2077 and 201 0:

a)10Trlg n'r. T.r 46out 'li\ lla{ 'lit Airunt

P t fis;tol,4n P MJl0,42i 1' 1,s4r,743r3 P 441sr6'69r3rtj29,959 9,1'68&988 U3,11),959 ll4'938,98tt

t 327831 8,198J50 r1,('O\819 5'lttt846r!s3?,3s 3,461103 r3,2l3,os(, 3p8r9r-l3,691,091 r,tfi3n3,455,?ft U6?tl 3,421'ff5 I'026319

475,6U2 4.8,602 364,4fr 364,48

( 26E,05r,18) ( 80,a15,933 ) ( 399,904'814 ( ll9'9?l'441)

( 55p33,e62) ( 16,?80,188) ( v)9rr,ml( ls31!'1!8)( 35,6s?,455) ( 10,6vt2t6)- ( a,ea1le! ( 1i,{1!l!)i m-erl-:6\ (-324a) rroro?51 r 17io7st

E-J- Z.$)!!Z P----4ElgUgl ll--:115933El.!1 r----anzxJzl

NOII]OAlk^vrncL tor imnlirrrrltUm.rnoniT.qj p$t NLnicc cosit)cfind b(ft6t li$ilitt

Acctucd Lar'( bcncfihMCl l'

l)cft nl1l tl.I liabilitier:I lxcces of rcscd (s for uncamcd

rcins.rencc prcmiums pcr b<xirscr res bar's

Ite alwti(n rct(*-$ onAtN F$utEi.l rss.t|

l)cfcirlrl rq.pisition c(Nts

Un.€"ili,cJ foeign cuncncy $in s

N.t Un(r('ttri?cd l).f(arLd 'l r\ Assc6

-J9-

The deails of the unrecognized NOLCO is shown below.

Y€arIocuttd Asount E"pitd Balance Uotil

2011 P 164,504,088 P -201 0 1 ,@02532492009 110,944,0752m8 3&.s24-979 ( 3n.s24979)

PXM26397 E3&52A979) PL365J]J1A72

The Company is subiect to MCIT which is computed at 27o of grcss income, or regulatcotporate income tax (RCIT), whichevet is higher. The Company tecog:rized MCITamouoti"g to P11 1,174

^ndP364A28 in 2011 and 2009 respectively, as these ate highet

than the co"'Futed RCIT. Thc 2011 and 2009 MCIT can be applied aginst futureRCIT until 2014 aad 201! respectively.

In 2011, 2010 and l)09, the Coopany opted to claim itemized deductions.

18.EQUTY

1&1 Cqielstock

The Company is authodzed to issue 3,000p00,000 shares of comrnon stock with a parvalue ofPl per share.

On ApnI 27 , 2007, thc SEC approved the listing of the Company's shares

totalling 741,902,600. The shates wete initially issued at an offer pdce ofP3.80 pershare. As of December 31,2011, thete are 286 holdets of the listed shates. Such listedshates closed at P1.86 per shate as of Decembet 31, 2011.

18.2 Tteesury Sbetes

In 2011, the Co"'Fany acquired 36,072,000 of its ourn shates at a totel cost ofP60,443,627.

I8J Appmpiation fot Coatiogeacics

On April 18, 1989, the Compan/s BOD approved the establishment of a special

reserve which will setve as cushion to the paid-up capital in the event of extraotdinatilyhigh loss occutteoces or severe catastrophic losses. The amount ofP5p00p00 was

iaitially appropriated ftom tetained eamings for this purpose oo Apdl 30, 1989.

Subscqueltly, at Decembet 31 of each year where therc is profrt" 107o of such pto6tshall be set aside as edditiooal reserve fot contingencies. The resere balance, which isshown as Apptopriated undei Retaioed Eamings account in the statements of chenges

ia equity, should not excced, at roy time, the amount of paid-up capital The balance ofepptopdation fot contioEencies amouoted to P2655?5J62 as of Decembet 31, 2011'end P231,638J 13 as of Decembet 3 7,2070 al.d 2009.

P 164,504,0887,u)o253249

110,944,075

ml4m1,201220tr

-40-

18.4 Declantioa of Cash Dividends

The BoD approved the declaration ofcash dividcods of P0.02 pet sharc (or a total ofP43,193,55i); May 19,2071,P0.047 per share (or a total ofP101,504'84| on

U"y zO,-ZOtO "rLaP0.04

(or a toal of P-S6,387,104) onJung -16-, !009' g-ayable to.

stockholders of record as ofJune 3,2011,June 4' 2010 and July 3,2009, respectively'

The dividends were paid wi*in their respCctive year of dedamtion and apploval

RELATED PARTY TRANSACTIONS

The Company's related parties indude its Priflcipel stockholders, the Company's key

menagemlnt petsonnel end othet rclated parties with which the Company had

transections as described below.

19.1 Reiosuraace haaece with Reland Patties

The Company accepb and cedes insurance business rudet various Eiosurance contracts

with r&ted parties. The deails of which follow:

2011 2010

P 1,146J01,458 P1p7s,476,8707833ry70 167,442,479

10,6ft,793 24,9N,998190,804J67 780,043,737

208J0f,660 439,040,794

L069,069 7,199,638

[ug ft66 6sding conpaniesReinsurance tecoverable on losses

Funds held by ceding comPanies

Claims payableDue to tetrocessionairesFunds held for rettocessionaires

mll 2010

As a result of the aborre ttatrs ctioos, reinsurance balances receivable hom and payable to

rclated parties are as follows (see Notc 6);

20ll 2010

P 349,f17,M7 P 471,908,276

s6,78r,4D 90,555,856

5r,280,65 52,225,478

933,975,767 944,497,72536393,883 46267347

164,032 164,032

PremiumsRetocessionsCommission incomeCommission expenses

Losses incurredLoss recovedes

Savings and curent lccouotsTime dcoosits

P 4,4579M P 2,838,88484-000-0m

The balance of drre ftom ceding companies petaining to relzted parties is prcseoted net-

of P30,?00,236 and P67,87081-0 alovnce fm imrPairmeot as of Decembct 31 , 201 1 and

20tQ respectively.

19.2 BaakAccouog

The Company meintains swetal saving and curr@t accounts,and timc deposits with

Bank of the Pbilippine Islands (BPI), a sockholder. The deuils of which follow:

P_----+$ilM P-86338^8&t

-4t-

193 Iavanat Mznzgneat and Gstodieaship

The Company has enteted into agreements known as "Invesheot Manag€metrt

Agreemend' and 'Custodi'.ship Agreemend' s'ith BPI for the managemeot and

cristodianship of cerUin investible funds of the Compaoy subiecl to terms atrd conditions

in the satd agreements. These invesh@ts were presented is their respective statement offinancid oosition eccounts as follows:

Cash and cash equivdensAvailable-for+ale financial essets

Loans aad receivebles

mfl 2010

P 290,649,1m P 359

t276,il7973 1,509,452,819

120.6L626r 700.626.261

Pl^687-921141 L16190?9-439

In consideratioa for the services renderd the company pays BPI se$'ice fees equivalent

to a cerain percenuge 6f drs hrtket yalue of ttre investmests. Total service fees paid forthe years enied Decembet 31, 2011 and 2010 amormted to P3,330,594 and P2'880J75

respectiveJy, and is cherged egeinst Othet Income (Charges) under Invesment and Othec

Income rccount (see Note 13) in thc statements of income.

19.4 Retircmeat Ftmd lavesneat Maaagemeat

In 2006, the Company ente.ied into a 'Retitemeot Fund Investment Management

Agreemend' with BPI fot the menagraent of the investments of the Compaay's

tetfuement frmds subiect to the teims and cooditions in the said agrcemecr

19.5 Kq Managemeat Persanael Compnsatioa

The compensation of key managemeot personnel is btoken dovn as follows:

20fl 2070 2009

Short-tem beoefits p 46,7:4,804 P 49,351,635 P 46,766,449

Post-eDployheot benefits 3.239.?99 3.063-600 2-615-57!

P---rtg.9g-601 2---52415235 t--A9]8z422

20. MARGINOFSOLVENCY

Undet the Insurance Code, a oon-life insuance cmpany doing business in the

Philippines shall maintain at all times a matgin of solvency equ:l to P500,000 or 10"/o ofthc Gial amount of ic net premiums wtittea duting the pteceding year, whichever is

higher. The m'in of solvency shall be thc excess of the value of its admitted assets

$ a"eo.a ""aJthe same code), exdusive of its peid-up capiat over the amount of its

liabilities, unexpired dsks aod teins\uence teselves'

The final amount of the margin of solvency can bc detemined only aftet the accounts

of the Company hao" b".n i.min d and classi6ed as to admitted afld non-admitted

assets, ils definid in the In"uraace Codc of the Philippines, by the IC'

-12-

2L RECONCILIATION OF NET PROFTT (LOSS) UNDER PFRS TOSTATTTTORY NET PROFIT pOSS)

The teconciliation ofnet profit (ioss) under PFRS and statutofy net PtoEt (oss) follows:

PFRS oct profit (loss)

20lr 2010 2009

P 34{1J50,490 (P 479,977,800) P 103,039,357

Differcnce in change ia rescrve

for rmeamed rcinsuanceptemiums - net 13t'S5t 695 ( 201,883,076X 70,851'172)

Diferred acquisition costs - net 9.2S5J40 199-158 24'18r'.'634

Statutory net pto6t (oss) E--481^4S2525 e-68ffflJ1q P--j6312372

22. EARNTNGS (L€SSES) PER SHARE

The eamings (losses) pet share emounts are as follows:

2011 2010 2009

Net ptofit (oss) available tocoi-on shadholders P 340'350,490 G 479977,800) P 103,039357

Divided by the average numberofoutstandingcommooshares 2'158.184.230 2J59-67?.600 2-159'677'600

P---------016 e----------022\ r----------0i5

Diluted eatnin$ flosses) per share is not determined sioce the company does not have

dilutive shates as of Decembet 31, 2011,2O7O am.d2009.

23. COMMITMENIS AhID CONTINGENCIES

The following ate tle significant commitments and contingeocies involwing the

Company:

2.1 Apeatiag I'case ComminelE - ComPany as Lcssee

The Company is a lessee under various oPerating l€ases cov"iqg warchouse and

parking lots having a term of one yezr with rcnewal options. The future minimum

ieatels payable undel this nol-cancellable operating lease as of Decemb et 11 , 2017

and 2010 ere P94 320 atdP237,728, respectively.

Rentel enpense recognized rt"ounted to PI,510,?19, Pe689,750 and P1'653'628'JI

201 1 , 201 0 and 20091 respectively, and is plesented io the staterneots of income as

Rental eccount under G;era] and Arlministetivc Expenses (see Note 15)'

23.2 I*gaI Claims

The Company is a dcfend"nt in a third party claim filed by a gov€rnmrnt agcnq ry- :lthe CompLy and othet reinsurets. Managernent beliwes that as of December 3 1 , 201 1 ,

the t rero" "Lt

,rp relating to this case is adequate to cover any liability that may adse

ftom the ultimate outcome of the case.

-43 -

23J Otbcrc

Ia the nomal coutse of business, the Company makes vadous commihents and incursccrtain contingent liabilities that arc not given recopition in tle accompanying financial

statemeflts. Managemmt believes that losses as of December 31, 201 l, if eny, that mayarise ftom these corrmiherts and contingencies will not have any matedal effect onthe finaocial satcment.

24. CATEGORIES A}ID FAIR VALUES OF FINANCIAL ASSETS ANDLIABILITIES

2aJ Coapixn of Canying Amont and Fait Values

The carrying amoma aod fair values of the categodcs of financial assets and liabilitiespresented in the st tements of financiel positiroo ee shown below.

--l$t r!-C.r.eiqrlyduca |';rvilu." Crlgil8fd&! _3ir-ydu$-

l,rnns and rccrireblcs

Ca6h xnd ccrh cl+rimllis

Rcirl{urrncc tEltncat rccciublcs

laan! xrt{l (!rLi!*)ka

A\l1ihbl€-for-silc fi .nncirl axsc6:

l)etrt marritirs 'l

F:guit) 6c.r,riti$ 7

Iflv6trrrcnt io Arian Rc sharc* 7

vanous funds I

Fitsnci li.bihticeRcmsumfl cc ba.l.rccs payeblc

Accounts prFblc rnd otht:r

rccrucd c\Ircrrr:s

P t"699,E06J89 Pt 699,E06,389

3,EY1tt3,Itt 3,891,,165'006

38{"621{02 584121.4{Yr

P-6.U6dlZ9il !6125.894,2U

P 4F?0,4S3923 Pt5?0,{53,q}3

@079.3.56 642gr9,i*t

n,tvr962 nwp62t 2li-118 Its.zi-lrg

Pll65.6l'.6r9 r5i65.644.6t9

P q4a,8Ct,997 P5,44330,9qt

a?q4L1q2 A2l1l-r92

l, 613,237954 P 613,287,054

4,210,14,5fi2 4,210,444,5112

-__Je.6!!11! 3(r{1688-116

PlJuSDril2 l5184rt1lM72

P5,?):r,M2,8rn l5:93,8448r)t

1a60,523,387 4fi,5T,3U7

711t$,527 71asrj27

60 qtn 844 69 qD 844

lL29 ril57. It-P1$55(r7

Ps,46q?12,881 P5,462"11?,883

-----gr$!)E 46 \1(' 1\2

lirrgLt?ztEg P5rtglln2,l8g ll55Ir22l-X5 EStpl2LIIS

See Notes 2.3 4nd 2.7 for a descdption of the accounting policies for each category offinancial insttument induding the deterrnination of fair values. A des"riFtion of theCompeny's risk management obiectives and policies fot financial insttuments isprovided in Note 4.

I

-.t4-

2t2 Fait Valrc lliennb

The uble below pteseots the hiemrchy of bit velue oeasutements used by theCompany (amounts shown in thousands).

L€?cl1 Lrccl2 Level3 ---IgEtL-

Dcccnbct 3t, 2011

Availablc-fot-selc Goencidrsscts E--3'Wfli P---JJ-ZIL P--Lrt18i40 P---5,365:W

Dccembcr 31. 2010

Aveilable-fot-salc Eo.ncid.sscts P--A124^M P----59-gE P-LflX3.2& P---6-?9jJ]6

Ttre differeot levels heve been de6ned as follows:

(a) I-rvell: quoted prices (rmadfusteQ in active markets for identical assets otliabilities;

(b) I,evet 2: nputs othec t}an quoted prices induded within kvd 1 that ate

obsetvebh for the xsset or licbility, either ditectly (as prices) ot indirecdy(derived ftom prices); and

(y' I*vel 3; inputs for the asset or liability that are not based on observable market&ta (unobservable inputs).

25. CAPITAL MANAGEMENT OBIECTMS, POLTCIES AND PROCEDURES

The Company's capiEl rnrnagemeot objectives are

t to €osute the Company's ability to continue as a going conccm; and'

. to Provide ao adequate retum to shareholdets

by complying with tle capial reguiremens aad limitation enfolced by the IC and bydtniqg ttr 6o-nany's opemtional stretegl to its co4)orate goals. The capialrequirements and limiations are as follows.

25.1 Minimum Capializatioa

Undet the Department Otdet No. 27-06 pO No- 27-06)' any teins"'e"ce cohPany

existing operating or otherwise doing busioess in the Philippines' must Possess

nininum -capiutizatioa

in eccotdance with the fotlowing schedule of compliance:

December 31' December 31 ,2010

Minimum statutoty net wolth P 2,000,000,000 P 1'500'000,000

Miniraum paid-upcepital 1o0tD,000,000 750$00'000

-45-

As defined by DO No. 2?-06, statutory net rsorth rePresef,ts the Compaoy's paid-upcapita! capitel in excess ofpat value, contingency sutplus, retained eamings, andrevaluation incremeats as may bc approved by the Insurance Conmissioner-

The Company has met the minimum capital requireoents for both years.

25.2 Risk-Bescd Capial Requircmcaa

As pet Insuance Memonndum Circular No. 7-2006, every uon-life insurance comPany

is annudly tequted to maintein a minimum Risk-Based Capital (RBQ ratio of 100%.

RBC ratio is compued by dividing thc Company's oet worth by an RBC reguirement

presctibcd by the IC. The RBC tequircrnent is determioed after coasidering theadmitted vdue of ccraio filancial stat€ment accounts whose 6nal amounts can bedetetmined only after the examination by the IC.

25.3 Liaiatioa n Diuidead Dechntion

The Company's BOD is authodzed to declale divideods. A cash dividend declaration

does not require any frutler apptovd ftom tle stockholders. However, a stockdividend declaration rcquires furthet approvd of the stockholdets holding otrepreeentirrg not less then two-tbirds of the Compaa.y's outstaodiag capital stock.

Dividends rmy be declared and paid out of the uoresticted ret*hed eamings whichshall be payeble in cest\ propetty, ot stock to all stockholders on the basis ofoutstanding stock hdd by them, as oftea and at such times as the BOD may detetmineand ia accordance with law.

Section 195 of the lnsuraoce Code provides that a domestic insurance company sbdldeclare or disttibute dividends on is outstanditrg stock only ftom proits renaining onhand after reqini.g unimpairee

. the eotire paid-up capitel stoclqo the matgin of solveacy rcquiredr the legal rcserve 6rod tequLed;, and,r a sum sufdcient to pey all net losses reported or in the couse of setdement

aad dl liabilities for e4renses and axes.

The Company is requited to rcPort such dividend declaration or distribution to the ICwithin 30 davs ftom the darc of such dederatioo.

-/t6-

Moreovet, the SEC, through its Memorandum Citcular 1l dated December 5, 2008

has set guidelincs in detetmining the approp'riate amount of Rctained Earnings available

fot dividend distibution. This shall be besed on the net profit for the yeai besed on theaudited financial stateocnts, adiusted fot unrcalized items which are considered notavaileble fot dividend declantion. These uorealized items consist of the following:

I 5h"te/gquity ill net income of the associate ot ioint venturer

" unrealized foreign cutrency gains, cxcept those attributrble to cesh andcash equivalents

r unrealized actuadd gains arising ftom the exetcise of the option ofrecognizilg ectuerial gains ot losses direcdy to the stateroeot ofcomprehcosive income

r fair value adiustm€nt adsing only ftom matked-to-matket valuatioa wlrrch ale

not yet realizc d. the amount of defered tar esset that reduced the amount of income tax

exP€nse

. adiusment due to deviation ftom PFRS/Generally Accepted Accounting. Principles which results to gain

r other rmrealized gains or adi\rstmetrts to the reained eemings

26. SUPPLEMENTARY INFORMATION REQUIRED BY THE BUREAU OFINTERNAT REVENIJE

Presented below is the supplemeotary information which is rcquired by the Bureau ofIntemal Revenue @IR) '.der its od5ring revenue reguletions @R) to be disdosed as

pat of the notes to financial statemeDts. This supplementary information is not arequired disclosue uoder PFRS.

2li-1 Rcquircaeao Uadct Revcnuc Regahtioas 1.621)10

The infonation on taxcs, duties and license fees paid or accued during the taxable yeartequired under RR 15-2010 issued on November 25, 2010 are as follows:

(a) OttutVAT

In 2011, the Company declared output VAT anounti.g to P33,17O151, which is setsff ag.insl inpul VNT (see Note 26.1b), based on the followiog gtoss receipts:

Tax Base - OulPut VAT

Qsmhississ eemed otr letocession P n5'ffi,934 P 33,077,632Rental income 770,989 92-519

P--J6Av923 P--nuo$rPursuent to RR 0,1-0? effective April 6, 2007, "Non-life insuraoce premiums are

subiect to VAT vhereas not-life reinsruaoce pr€miuns ere not subiect to VAT' thelatter being already subiect to VAT uPon receipt of the irxurance ptemiums. Fotaxable year 2011, the Company's VAT exempt receipts amounted to P906286,675'

_47_

As of December 31, 2011, the Company also has Deferred Output VAT amouuri"gto P41,439,173 pertaining to tmcollecrcd commission income ftom retrocessionaires

(sce Note 12).

(b) tquuAT

The movements in input VAT in 2011 ats 5"m'na"izsd lelqv/.

Bafance at beginning ofyear P 24,095,334

Services lodged undet othet accounts 46274339Goods othet than for resale or manufacture 2579,612Capital goods subiea to amortization 744,899

Capitd goods not subject to amortization 34'329

Applied aginst output VAT ( 33,170,151)

Input VAT on exempt sales (, 2-052-043)

P---IE^6062U

The balence of Input VAT as of Decembet 31, 2011 is tecorded rmder Othet Asses

accouot in the 2011 statement of financiel position.

As of Decembet 31, 2011, the Compeny dso has Defened Input VAT amounting

to P69,065,709 peraining to VAT on unpaid commission te sg'ling csmpa.nies, and

Deferred Withholding VAT ar:rouoring to P9200,181 tepresenting VAT onunapplied input VAT ou unpaid ptemiums ob ceded out transactions (sce Note 11)'

Taxs on ln|onation

The Company does not have afly customs duties ot adff fees fot the yeat ended

Deccmbet 31, 2011 sincc it does not have any importatiol.

Exeis Tax

The Company does not have excise tax for the year ended Decembet 31, 2011 since

it does not have aay transactions which ate subicct to excise tex.

Donncntaq Slanp Tax

Reinsurance contncts are not subiect to documeotary stamp tax pST). The

Company is liable to DST when it issue otigind shares of stocls ot tmnsfet

certidcate of stoclc The Company did not issue oligif,al shares of stocls nottmnsfet certificate of stocks for the year ended Decembet 31, 2011.

k)

(d)

k)

-4{t-

(fl Tan: ad Uansu

The details of Taxes end Licenses account for the year ended Decembet 31 , 201 1

presef,ted undet Geoeml and Administrative is btoken down as follows(see Note 15);

Municipal license and permitsDeficiency taxesReel estaG texesSEC registration fee and PSE listingFiling feesVehide registtation fees

Residence taxMiscdlaneous

Compeosation and benefiaExpandedFinaIFringe benefits

P 4,276,85r2,994,223

573,773442372135,500

55"+69

10,500106-552

E____1135J20(g) WitbloldizgTaxct

The details of total withholding axes fot the yeer ended December 31, 2011

are shown below.

P 24,655,8163367,3s82362aso

284-284

B-10.559J0f

(b) Dcfzdery Tac Asttssmenx atd Tax Cascs

As of Decembet 31, 2011, the Company does not have any 6aal deficiency axassessments vrith the BIR or tax cases outstanding ot pending in couts or bodies

outside of the BIR in any of the open years.

262 Rcguircmen* Uader RR 192017

On December 9, 2011, the BIR issued RR 19-2011 which prescribes the new fotm thatnrill be used fot income tax filing cov"rrng and starting widr periods endingDecembet 31 , 201 1 end oawards. This recent RR *quires schedules of taxable

revenues and other non-operating income, costs of sales and services, and itemizeddeductions, to be disclosed in the notes to fnancial sat€ments.

The amounts of taxable rcveoues and income, and deductible costs and expeoses

presented bdow are based on televant tax regulations issued by the BI\ hence, may

not be the same as the amounts rcflected in the 2011 statement of comPrehensive

hcome.

(a) Taubh Brun*a

the Company's taxable rcqenues &om rendeting of serrices emounted toP1 ,31 3,945,826 for the yeat ended Decembet 31 , 201 1 .

-49-

(b) Dcdrutibh Co$s oJ Sanius

Deductible cost of sewices fot the year ended Decemb t 37 , 2011 comprises tlefollowing

Claims and Iosses

CommissionSalaries and allowancesInterest expense

P 943,404,577336,327,27950,686,754

3,142-833

I-Lit13"555r141

76,938,0725,154,548,, ,'78 1\'7

770,98829,209

E_-J5J68294

(d) Ite*iryd Dcduttioat

The aloolrnts of itenoized deductions for the vear tnded Decembet 31, 2011 are as

follows:

(c) Taxabh Non-operating and Othr Inane

J[s dsteils sf td{able oon-operating and othet income in 2011 which are subject toregular tax rate are shown below.

Interest inconeRealized foteip curtency gains

Dividend incomeReotal incomeOthets

Salaries and allowances P

Depreciation and amottizetionRealized foreip cunency losses

Professional feesRqlresentation and entettainmeotTaxes and licensesAssociation dues

Light and weterDirecto.Cs fees

Tr:ansportation and travelOt}|er investment eq)eascsConttact labotMeetings and conferencesCommunication and postagesAdvmisingRentelPrinting and officc supplicsRepairs and "'ainte""nceInsuranceFringe beneEtsMiscellaneous

64,053,7?228,843,85314,303,7949,73r,4997,604,0606,677,9514,82l.:0214,688,4944,6sOp604,267,4773,798,7W3,052,5522,855,7792,r64.f941,851,9931510,7191,400,075

1?l,0,7301J47,728

284,2841223J79

P-_-120.0CIJn5

() nrnongbayan &Araullofrnbg.finn u hh Grar lhomton Inbnrdq|d LM

Supplementary Financial Statements andIndependent Auditors' Report

National ReinsuranceCorporation of the Philippines

Decembet 3'l.., 2011, 2070 and 2009

() nrnongbayan &Araullo

Report of Independent Auditorsto Accomparry SEC SchedulesFiled Separately from theB asic Financial Statements

The Boatd of Directore and the StockholdersNational Reinsurence Corporation of the Philippines18th Floot, Philippine AXA Life CenterSen. Gil J. Puyat Avenue comer Tindalo Stteet

Makati Citv

PI'NONGBAYAN&ARAUIIO

B5l Leonardo D' Cuaresma, Jr.Partner

CPA P.cg. No. 0058647

r]fti 109-27-862PfR No. 3174799,J'ou'ry a 201a M*rti CittSEC GtouP A Accrcditetion

p.to"t - 1.t". OOOI-^AR-3 (untilJeo- 1$ m1$Firm - No. 0002-FR-3 (rmtilJao. 18' 2015)

BIR AN 09002511-?-20U (qctil S€Pr 21' 2014)

Fimr's BOA/PRC Ccrt ofRcg. No 0002 (uotil Dcc' 31' 2012)

M*ct15,2072

Cstn d Pu$clc.jt ntrPr 6 . nnbd fm rdthin G6nt Tbanbn Intlrn.rh.rl LtOlfi6 h C.6o, oso, C&i.Bol/"RC cdt d R.g: No.0oO2SEC Gdp A Acrldlr.dr td 0002+R-3

20lh Floor, Tower IThe Entepds€ Center

6766 Ayala Avenue1200 Makati OtyPhilippines

T +63 2 846 5511F +63 2 886 5506r +63 2 886 5507www punonSbayan-ararllo.c!m

We bave audited in eccordance with Philippine Sandatds oo Auditing tle financial

statenenb of National Reinsruance Corporation of the ?hilippioes for the year ended

Deceober 31, 2011, oo wbich we have reodered out report dated ldarch 75,2072'

Our audit was mede fot the pu4nse of fotming an opinion on the basic financial

ste.tements taken as a whole. The applicable supplemeoury information (see List ofSupplenentary lnformation) are presented fot pu4)oses of additional analysis incornpliance with the tequirements of Securities Regulation Code Rule 68, and ate not

a required patt of the basic fiuosial statenents PlePated io accordance withfn[ppine financial Reporting Stendards. Such supplemectary infometion are tleresponsibility of rn"n'g-r"ent The supplementary infosnation have beea subjected

to tle auditing procedures applied in tbe audit of the basic financid statements and, iloot opinion, are faidy stated itr dl Eateritl respecs in relation to the basic financial

statenents Eken as a whole.

Schedule Content

Schedulec Required uadet Aroex 58-E ofthe Securities Regulation Code Rule 68

A Financial Asses

B Arnouots Receivable ftom Directors, Officers, Employees, Related Parties,

aod Ptincipal Stockholden (Othet than Related partieQ

NATIONAL REINSURANCE COR}ORATION OF THE PHILIPPINESList of Supplementary Information

December 31, 2011

Amormts Receivable &orn Related Parties which are Elminated dudagthe Corsolidation of Financial Strtements

Inangrble Assets- Other Assets

Long-Terrn Debt

Indebtedness to Related Partics

Guarantees of Secutitics of Other Issuers

Capital Stock

Othet Rcquircd Informadon

Reconciliation of Retained Eamings for Divideod Declaration

List of Staadards and Inteqrrctatioos undcr

Philt'ppine Finaacial Reporting Standads Effective as of Decembet 31,2011

Map Showing the Relationship Between the Company and its Related Entities

No. of Pagcs

3

N/A

1

N/A

N/A

N/A

5

1

N/A

D

E

F

G

H

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B.nt d th. Pi{. rrlt(bc.h' rbdnc4 nE

O$q Hol(tt$

F|{ Ffl. Ho&! AGlald E !..{o!ort

fldra ol lv{tmlllrllrrEtiloi.l Coiblrr

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,kto P-ttu, cdlLdlfdt i Bd* 0 lru.l C..

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S$ RtF Hol*4!Ud..r 8s* ot !r Pr{+faf,!

ar.b co,pa{d Pr, a

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a!r.n R.h.an6 coo

6d|q6t cd!..lddrt

Evrq!.I GCt Ct$ AtLrtbar Pri€sLn

M.r$ SDdb Cllb AOttlrrl Gdr CL C

R*.io tub v€Fh.

RorbH.- OtfrRoE PEt Sdb!' C

Stt i Conlqrysolo

qtg'mr lFoR 9locK3

EOMIEFlrd R.b Tlr.nty rarb.

FXTN105:lFXrNtO53

RIG I(xI

RrE rttFXTN20|7FXTtr 290

MANjREO

721.001

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9,211.?a16,404.4414,953.793345.10

r5.1?.ES16,050.1015,74.q1o.a51,217,35S,51

7,62r.1015,210.366,715.25

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18,V1.A2:t,s€9.s51254-295,92.2tt

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vrc. P''tidrr 247-62€.10FEtvL.ltr.tid-t I,181,572.4,1

s.do.vkPE.ld.rt 449,2:l€.grgAsrf,vF.RBsrn 554,EE2-@F..* f, Fn 36,091-23

2a5,tF?.7A 245,Ui?.?a1,084,063 1,@6.053

lm1.590.10 40r,5S-rA284,831.30 284,a3r.30

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t,a!4,2r2it to5oa,aa6.a:t a,3!o,66266 - t,ie7,aat.60 12,1791112.6! ls,6tt,!ol.!2

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3.1,656,16

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lt c.mb.r l l. 2{,1|

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Inb of blus .nd typ. otob[!trdon

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NANONAL REIIISURATCE CORFORANON OF THE PHILS.Schsdule F - lnalebtortne€a !o Relrted Pa a! lLong.TGnn Lo6ns trom Retabd

Docomber 31. 201{

N.mg ot rolalrd pdrly I Balanco at b€glnnlng ot I Balance at ond of pe.lod(t) Fe.lod (t)

NOT APPLICABLE

RATK)T{IL REI}ISURAI{CE CORp()RATION OF THE PHILS.Sctradula G - Gu|.rnta6 ol Sacurlt€3 ql Othcr l.3ucr3

Dec,ernbor 3l, 20ll

lfarnr ol b{frrg.ndly of !€cuddea

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|{ATIOITAL REIIISURAI{CE CORPORAIIOII OF T}IE PI{LIPPIiIESscn dul. }|.c.pltrl slocl

DacamDar tl. 20 l'l

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63

ANSAT-oO, GODINEZ eCO NC.FAO: iIARK V.

ALEGAR CORPGATIONAUIED BANKERS IiEURANCE COffP.ATPHA INSIJMNCE A SUREfi CO., INC,

AITSALDO GOOT}TEZ & @. tt{C.AP TUDRIGAL STEAMSHIP CO. INC.

ARAVAL INC

ASIA I,,I.IITED INSURANCE. INCB.F, GENERAI INSUMNCE CO..INC.a^NC6i OEIELOPI'BJT CORP.

BANK ff IHE PHILIPPINE ISLANOS

BENEFICIAL LIFE INSURANCE COMPANY I}I(BF LIF€ INST,RANCE CORP.

BPI' S NSURAI{CE CORP.

CENIENNIAL GIJARANTEE ASSTJR'NCE COi

CONSOLIDA]ED INSURANCE CO., INC.

COOFERATI\G INSURANCE SYSTEM OF THI

CO\JNINY B'$IKERS |lIS. CORP,

COUNTRY BANKERS LIFE INSURANCE CORI

EASIERN ASSTJRANCE A SURETY CORPOREMPIRE INSURANCE COi'PANYEOUfiABLE INSIJRAI\|CE CORPORATIOT{FEOEML PHO€NIX ASSURANCE COIIPATYFGU INSTJRANCE CORPORANON

FIDAJTY INSUMNCE COMPAN' INC.FIRST GUAMNIEE LIFE AS9URANCE CO.FIRST II{TEGRAIED BOiIDNG A NS. CO, INI

FIRSI MTIONWIDE ASSI,RANCE CORP.GEI.IERAL INSUMNCE I SUREW CORPORIGREAT DOMESTIC INS. CO. OF IHE PHILS.}M}€E IIANIGEIIENT & RESOURCE CORF(Iif,}USTRIAL INSUR,|NCE CO., INC.INSI,R^NCE CO, OF NORTH AUERICAll{sr-|R NcE oF rHE Pr{tL tSr-AM)S CO., tN(INVESTOR'S ASST,RANCE CORP.LUZON INSUR|NCE & SIRETY @., INC-

u.J. soRhNo TR^otNG, tNC.M^A GENER,AI. ASSURANCE PHILS., IiIC,MABASA & COMPANY, II.IC,

MAIAYAN II|STJRANCE CO,, INC.

IIAN|LA INSI'RAN6E COIIPANY INC.

I.IANILA STJREW I FDETFY CO., INC.

TIERCANNLE NSURANC€ CO., INC.

TIEROIA}I ASSTIM}EE CORP-

MOiIARCH INS(.RANCE CO., INC.

NEW INOIA ASSURANCE CO.. LID.NORNN4EST INSJRANCE A SLRETY CO., trORIENTAL A*SIJRANCE CORPORAIIONPACIFIC UNION INSURAIrcE CO.PAMMOINIT UFE A GENERAT NS. CORP.rcD NOIiIINEE CORP,IF)PCD NOMINEE CORP, II{F}PEOPI.ES TRANSEAS.r AS|A INS. CORP,

PHII- BRM${ ASSUMNCE CO. INC.

PHIL. INTI- LIFE IN6URA CE CO.,INC.PHIL. PHOENIX SUREW A INS.INC,PI L. 9RtlO€N nAL L|FE tNS. CO_, ttc.PHILIPPIIG AITERICAN LIFE INSURANCE CC

PHILIPPINE C}|ARTER INSI'RANCECORP.PHILIPPINE GENERAL NST'RANC€ COFP.PHILIPPINE REMNANTS CO., INC.

PHILIPPINES FIRST INSURANCE CO., INC-

PTARIDEL SI.IRETY & INSLNANCE COMPAII]

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1,578,9m2.451,000

3,3m77.100

1.252,300

36,S00

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290,795.500

3,1$.5m397.$0

3,347,500

265,200

144,600

72,900

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6.184.900

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35.610.r00

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3,560,80|,35r.6q13.790,i(x|

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8,628,6015,305,90

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313,300

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€27,882,033

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35.610,100.m

820,183,3(x) 2,O2t,0(x)

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6.' PNB GENERAL II{S{JRERS CO., INC.65 PREMIER IiISIJRANCE 8 SURETY CORPORA

66 RER,ELIC SURETY A NSURANCE COIIPA|I67 RNA LEGARDA,,II.IC,

68 R|VARA. tNC.

69 Slr SAVTNGS & LOIN ASSOCTAIO70 SOTJIH sEA SURETY E INS. CO.. INC.7' S]ERLNG INSURANCE CONPANY, INC.7r srRotGHq.o NSURANCE CO., $.tC.

73 SUN LIFE ASSURANCE CO, OF CAMOA74 SUS\NA REATY75 TABACAT.ERA INSURANCE CO.INC.75 TIMES SURETY A NSURAT{CE CO., INc.77 TRAVELLERS INSURA\rcE & SURETY CORP78 UMO BANX OF T}G PI{ILIS.

79 UNION INSURAXCE SOCIETY OF CAMION t'80 UNNED NSIJRANCE CO.,INC81 UNITEO LIFE ASSURANCE CORP.

E2 TMLITY ASSURA}NE CORP.

83 VISAYAN SURETY & IN$JRANCE COAP,E4 TITORLDWOE INSIJRANCE A SURETY COMP.85 ZENIr}I NSURANCE CORPOMTIONES ABAR,ENTOS, FLOREI{T$IO A.87 ADELTTA VERGEL OE DOS88 AFRICA. FAAELO P.

E9 IAERTAWAT)90 ALTCTAS. CRUZ

91 ALMEDA, VALERIANO !r'OR TITA JANE92 ALVEITO|A. JOSE P.

$ AM)RES E, SIOCHI

94 ANGELTTA U. REYES

95 ANTONIO P. UADRIGAL96 ANTOMO ROXAS CHIIA97 ANTOMO S. ROXASCHUA JR.

98 ARA@N. BIENVENIDOM.99 ASTRA SECURIIIES CORPlM AYLLOII, VICENIE R.

101 BAQUIRAN, IiARCELINO B.

102 EASCO,AMERFILV.IO3 BELTR^N, AURELIO II.1O' BERMROO. ROIGO L.IO5 BETIYRC YAO

to6 BoNtFACto, vtvENcto JosE MA. F.rO7 BUEMVENTURA P. DURAN

'6 BUENO, FRANCIS ED'/VIN I.

,IO9 CABAN@N CHI,A, ANTOT'NO L.

110 CALLAR. CYRIL C. D€L CAILAR &/OR JOSEP.I11 CARREDO. RAMON M.

112 CASTANEDA JR., COiIS'ANCIO T,

113 CHAVEZ. JOSEPH C.

114 ChrENG, GEriA O.T15 CHUA. CARLOS IIlG CONCEPCION S, ARANSTA

tt? coitRADo SEN|TEZ

I 18 CONSUE.O P, MADRIGAL

ll9 coRPus, sERGto120 COTOCO, DOMTNGO

12r COTOCO. i{AZARTO

122 CRTSO{_ ROBERTO B.

123 CRIIZ JR.. ROMAN ^-12' CRI,V, E IUO M. OELA

,I25 CRUZ, NAPOL,EON D. CRUZ SR. A/OR LUISA

'I2G CUEVAS. FELIMON R.

I27 CWEGKENG. ROSARIO W128 OANILO J, CABERO

129 DAVIO C. CO\IK|ATI3O OAVID C, MERCADO

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'131 DEE, HELEN Y. C;dnmoal

r32 DGSID€R|O JR., JOSE O. Cornoldrl1l D€S|DERIO. RODOTFO O. Cdnrioit3a ETOMINO, JuAN Cornmoo

135 EDr}iAA.G€RONIMO Corfi|ofl136 EOUAROOECTTAUZ Cornnloo137 ENRIQUE M. REYES Co|rrrcn138 EUCEI{A G. SILVA Co n n139 FERMNOEZ. JAIME C- Conmur1.lO FERNANDEZ. VICENTE T. Cdffrnl4l FLORES,WAIIX)Q- Coftndl142 FRANCISCOCOFFUS Co|'nnol|14:i FR^NCISCO JOSE ELIZALOE YTURRALDE CommonIiL FRANCISCO M. EAYOT ComnEo145 FR^NCISCO. CI.EOIILD€ B. CornrEi'146 FR^}ICISCO. ROLAi{DO B. Comnbnr47 GABAT, MA. ANGELA C. Cofirnorl1,O AABAT. ROM NO. Common149 G LLAGA. R^F ELC. Co|'ynsr15O GALVEZ.N{rONOR. Cqnmonlsl GAPUZ. CO KlqN CHAY a/OR RITA Cqrnnon152 GARCh,W|NSTONF. Commoo153 G€RARDO A.S M DRICAI- Confio.l154 GIU JR., G'JILIERi OF. go|r'ftn156 GO,GEORGEL Comrnal156 GO,IRENE CIiAN Co rndl157 GOZO. tlANllOA. ComnBr154 HANSIiENZI Commcn159 ll RI,ABDONM. Coftnoi160 HONORITA S. LUCOS Colnmdr!61 INOON, REYNAT-ID P. Cqfinoi162 ISABELITA U. CAOANGiJNAY O.B1I[M'163 JACINTO JR., FERMNDO P. Co.nrrto.l164 JACQUELINE M. }tALlLtCO Co|rfioi155 JAYIIERLIC. EAUTISTA Conmt|l166 JENNIFER C- |l,ARnN Co|lrrlql167 JGSER. RODAS Colllnsl'168 JUAN, FRISCO F. SAN Commdrl@ JUI{TEREAI JR.. FI|EMONA. Co(nmqlt70 KOPIqROOERICKC. Cdrvrsl1?1 KOPIO,RUFFYC. Co|ntrbi172 XOPIO.RUFINOH. Connroi17J XOH.ANTONIOM. Comnroll171 LA'O. LUIS C. Cqrl(Iwr175 LEEJOSEC. Cqfinon176 LE€, LEA B. Cdmnqr1? I-EON. BEATRIZ P. DE Corfinal178 I-EON,JAIMES.DE Csnmon179 UCAROS JR.. GREOORIO B. Co.nmdl180 LICAROS, AAEIARDO B. Commonl8l LILY VICTORIA G. GALO CmlmnlSiI UM, IAN VINCEN' a/OR FLoRA &/oR ERNES Conrnort'183 LIM,JAMESORTEGA Corrnql184 Lllr. PEDRO C. Colrrn .r185 Ltlr. R@UE A. Connm18lt LIM,THOMASY Comfifrl187 LIMCAOCO, JOSE TEOOORO K. Comrnor,188 LO.JOSEPHINENG Cqnnonlag LOCSIN, JULIAN J. Ccnmdll9O LOURO€SS.RODAIi Conxnon191 Lt CIM OCAMPO LEGASPI C,o.nmoo

192 LUCiTAR.C. LIMPE Cofimon19:l LUZNERCRUZ Connrlorl

194 MA, LUISA MADRIGAL VASQUEZ Corn'non

195 MACARIA P. MADRIGAI- Cofirnon

19lt lt|ACRoHoN JR., IGMCP Corrnon197 UALLILLIN, MELECIO C. Conmo

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1m14.500

t@2C],800

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1$ MALONG, ALEJANDRO Y Cdrrnon199 UAIIJIERTAANOAYA Co|rtrroi200 IiAMNSALA, CSISUEIO D. Corrno.r

201 li^NUEL A. TORRESJR. Co.rndl202 lrlaNUEL A. EIIRIOUE Corrmal2C| ITANUELDYTOC Co|rmoom4 MANUELU.CO Cofimdl205 t ARlicNO JR., JORGE T. Corrmor|

206 UAUROPRIETO ColrYio.l

2o7 ENDIOI^JORGET. Conrr|on

2oO MERCADO JR-. DiNIEL M. Comrnoizlx) MERCADO JR., DAVID P. Cornrnon

2r0 MERCED€S U. @NZALES Co.nmoi211 MORALES. RIIOOORA B.

212 NAPA ERMIIAIIOO O.

21 3 NATIVIDAD CANIAJAL

214 NELIA M. MALUBAY

215 NERA, UEDELI216 NORMANOO ANTONIO S. AGIJILAR

217 oLBES, ANTONTO O.

216 OLIVA, DULCE MARIA S.

210 ONGKIiIGCO. FLORENCIO N.

220 PA, ANA GO &IOR GO KIM

22T 9ACITAP, MADRIGAL

222 PACITA RODRIGUEZ

223 PAOIERNOS, GAY G,

22' PAZVDA. OERODA9225 P€DRO P. BENEDICTO JR.

220 PETER T. ROXA$CHIIA

227 PRIETO JR., BENITO R228 PRIETO. MARTIN L.

229 PRIETO. T'AURO R.

23o PRIETO, MERCEDES R.

231 PUYAI. ATFONSO G.

$2 AULOP. CARMEN J.

233 MFAEL C. GA'IAGA234 R,qt r O, HONORTO J.

235 REMO JR., JOSE H.

236 REYES. CARLOS. R,

237 REYES, OSCAR C.

?3E RO AN, VTCTOR 8_

23S ROMEO ECHAT'|Z

240 ROIIUALDEZ, FEROINAND MARNN 6.241 ROSARTO M. |!ORA2I2 ROSARIO RODAS

2{I ROSARIO, PAJL GEMRD B. T'€L2.I4 SALCEOO JR.. ALFONSO L.

2,I5 SALVADOR. BIENVENIOO C.

2'6 SAMTOS, BENIL.DA S,

2.47 SAUCO. i|ORBERTO V.

2.I8 SEVERINO T. ROXAS€HUA

2.I9 SOLIVEN, SIEPHEN G.

250 SUDHAKAR, RANIPSTA RANI

251 SUNGA, PETER EOWIN J. SI^GA &/OR ROS Co.nmoo

252 SU}IGA PROAPERO S. SUNGA &rOR CL R|] Cdrrndl253 SUSANAB.ORTIGAS Comllron

254 SY.!V|IfREoOL C.rnnfil255 TAN KIM CHIONG DE ROXA$CHUA CdnnErl256 TAN,IOZANOA. Cdtxmfi2s7 TANCO,EUSEBIOH. cm'En258 lE, MACARIO U- CdrYrlon

259 IEO. STEPHEN T, TEO &IOR TERESITA R, CdfiT'on260 TEODORO, UONICA P. Co.wno?t

261 T(I'IGCO. AMCEU G. TONGCO ,.iOR FMN{ Cdrmon262 TRlNloAD, ARMANm C. 9ofimon

263 IURNER, PtllUP E/OR ELtlORA Cdnmon

264 UNSON JR.. A-EJANDRO F. Cqnrnon

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UY JR., CARLOS F-

I.|Y. FRANCISCO A.

vAr.fxclA, JEsus s^l{ LUtsVALERA JO€EFIM L.VERGARA, RO8€RT G.

VICENTE A,S. MADRIG/AL

VICEMTE B. VILLAM'TA JR.

VICENTE I'. BAYOT

vrcT()Rt^t'ro G. EEt JzARtoVN.IAMAYOR. ANTONIO S.

VILIANUEVA NICERATA C.

h/of{GAtM . ANIHOiIY T.

wti,JoLtcoYAN, TT'CIO W, YAN &€R CIARA Y.

YAO, BONIFACIO N.YAO, WILSON A.

\TJ. GREGORIO T.

\T,'. JOHN PETER YU I/OR JIJAN

Y\,|, JIIAT'I G. \T,| &/OR JOHN PETER C.

\I.|CHENGCO. Y\rc 'lE S.

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NATIONAL REINSUMNCE CORPORATION OF THE PHILIPPINES18th Floor, Phillippine AXA Lite Center, Sen. Gil Puyal Avenue

comerTindalo Slreet, Makati City

RECONCTLIATION OF RETAINED EARNINGS AVAILABLE FOR DMIDEND DECLARATION

UnappropiaH Retalned Eamings, as adiusted to available fot dividend dislribution, beginning 161 '965'640

Add: Net Income ac{ually eamed/realized during lhe period

Net Income during the p€riod dosed lo Rebined Eamings

Less: Non-acluauunrealized income net of taxEquity in net income of associate4oid veoture

Unrealized foreign exchange gain/loss - nel (except those atkibutable to cash andCash equivalents) Unrealized acluarial gain

Fair value adiustrnenl (M2M gains)Fair value adjustmeri ot in\r$tment Prperty resulting to gain

Musiing due to deviation lrom PFRS,GAAP - gain

Other unrealized gains or adjustments to the retained eamings as a result ofcertain transac'tions accounted for under PFRS

SuFtotal

Add: Non€c1ual lossesDepFciation on revaluation incremenl (afrer tax)Unrealized toreign exchange gain/loss - net (excaFt those attributable to Cash and

Cash equivalents) Unrealized actuarial lossAdjustnent due lo deviation ftom PFRSi/GMP - lossLoss on fuir value adjustrnent of inYestmenl property (after tax)

Nel Income actually eamed during the period

Add (less):Dividend declarations during the period

Appropriations of Retianed Eamings during the period

Reversals of apprcpriationsEffecls of prior period adjuslrnentsTreasury shares

TOTAL RETATNED EARNINGS, END AVAILABLE FOR DIVIDEND

340,350,490

u7,34A,nO

- ----g-228'601l

6,998,220

6,998,220

(43,'193,s52)(34,035,(X9)

43'2,0|'5,719

NATIONAI REINSUMNCE CORPOMTION OF THE PHILIPPINES

Lisr of $md.rd .nd lotcrp.cLltiois ondcr Philippiltc Fio.trcid Reponidg Strnd.nkEfrcctivc rs ofDcccmbcr 31, 2t11

Philippioc Finzncizl Rcponiag S6ndtr& (PFRS)

P|.RS 1 I rint-timc Adoption of I'hilippinc lrinancial Rcporting Standads Adofrted

PIIRS 2 rherc-bNcd Prymqrt Not pplicablc

PlrRs 3 Busincss C-ornbinations Not Applicablc

Pl,Irs 4 lnsrrsrace C,ootrecs Adoptcd

Pt jRs

5 Nor-curteni Asscts I tcld fot Salc anrl Dircrntinucd OpcT atioos Not Anpliceblc

Pt rt|"s 6 lixDlorrtion for end livrluati(x| of Iqincrrl l{csourccs Not Apphcablc

Pt rlts 7 rmancid lnst umcnt$ l)isclosurcs Adoptt\i

Pt rlLs 8 (\rratiog Iict'mcots Not Applicablc

Philippinc Accouating St'nd"d. (PAS)

PAS T I)rcscrtaoon of lrinanciel Stat(mmt$ Adopted

PAS 2 Noi Applicabte

PAS 7 Stltcm$t of C.a.\h I'lows Adoptcd

PAS 8 Accounting Policics, Chrngcs in Accounting Iistimatcs and lirrors Adoptcd

PAS 10 I i,vcnts afrc.r thc Rcporting Pcrirxl Adopted

PAS 1I f lonstruction (irntra€ts Not AlTlicabl€

PAS 12 Incomc'l'rrcs Adopted

PAS 16 l'ruFny, llhnt afl d l4uipmcnt Adoptcd

I'AS 17 Adopted

r''As 18 Itwmuc Adoptcd

PAS 19 l.':mploycc Bcncfits Adolted

PAS MAccounting &rr (iovcmmmt Gi.nr$ and Disclodure ofCov(Tnflmt Assisteocc

Not Applicablc

I'AS 2l I}c tiffcch ofchrng{s in Forcign lixchangc ltercs Adopt€d

PAS 23 &mlwiog Costr Not Applicablc

PAS 24 Rditcd Prrq Disclos re$ Adoptc{

PAS Accounting and RcponinS bt Rctk€mcnt Bc'flcft Plms Adoptcd

t,As 27 Consolidatcd rnd ScTffrtc Fifl ,.nchl Stat!'orcnts Not Appli.able

PAS 28 InvL'stmmts in n ssociarcs Not Appli.able

I'AS 29 I.inancial Rcporting in I lyperinflationary ttonomtcs Not pplicablc

r'AS 31 lotcrt$ts in Jdnt Vcnturcs Not Apptcablc

PAS 32 rinmcirl losrnrments: Prcillntlti(m Ado?t€d

PAS 33 liamiqqs Pci lilhrfl: Adoptcd

PAS 34 IntcYim llnericial ltc?orting Adopted

PAS 36 lmpaitmtnt of Asscts Adoptcd

PAS 37 P$visiors, (imtingcrlr liabilidcs and (imlisgcnt Asscts Adopted

PAS 38 lntangiblc Asscts Adopted

PAS 39 rinrnci.l Instrumcnts: RccorFiti(m .nd [rc2.\urc'rncnt Adoptcd

PAS 40 Invcstmcnt I'rotrcrty Adoptcd

PAS 4I Ag.iculturc Not Applicrblc

NATTONAL REINSURANCE CORPORATION OF THE PHIIJPPINES

Li.t of Srtad.td .nd totcrpcl..ions undc. Pbilippiac Fioaacid Rcporritg Sttnd"d!' Eficctive .s ofDcccEb€r 3L m1l

Phitippinc IDE pattd'o*r - Intanetioael Fintnciet nqrortiry InE prcadons Connittet (IFRIC)

ltrRtc 1ChmXps h tiristing l)ccommis$oning, Rcstontior and

iimilar IiabiliticsNot Applicablc

rRtc 2 Nlctnbcrs'Sharc in (iFopctativc Fntiti6 and Simihr lnstdmcnts Not Applicablc

tFRlc 4 t)ctr"rminiog \\4rcthct en Antnlpmcrrt (imtrins a I Aasc Adopted

ltrRtc 5Rights to Intcrcsts A.isifig from t).{unmissioing, Rcstttntion

rnd l.lnvinxrmcotel ltchebilitatios ltundsNot A|plicablc

rRtc 6,irbilitics Ari\ing f()m Prnicha.ing in a s'Pccific Markct - wasrc

Iilccttical end ltlcctt<nic l\uigmmtNot Applic*lc

rRt(:7 Appllng thc Rcsutcmcnt ApProaci lmdcr I'AS 29, ftoa cidllqxrting in I typcinflationaty ltonomics

Nor Applicablc

lt.Rtc 9 Ru"\Bc$smmr of I tmbcdded Dcrivativcs Not Applicable

lrRl(; l0 Intcdn lrinmcid Rqrotting and lmpaitmcdt Adoptcd

rRt(: t2 Scfr.iae (:onccssion Arl|'lgcmcrtts Not Applirblc

rr{{tc 13 (iurtomcr I lydty l)rqgammcs l.ht Applicrble

I'RtC 14PAS 19 -'t\c l,irnii tm a Dcfmd B€nc6t Assct, Minim$nliunding Rquircmcnt$ and thcir Inreractioo

Adopt(ll

lt.l c 16 kd8cs of a Net Iovcslmcni h a Ftrci*n OFratron Not Afrt li@ble

.lltc t7 l)istributiods of Non-ce"dr Asscts to ClwncG Adopt€d

'l c l8 'l'rarNfcrs of Asicts ftom Customcfs Not l,plic$lc

IIIRIC'I9 llhtinguishing lrinencial Jjrbiliti(s with thuity losuumcn$ Adopted

Phifipltiac htErpatt.iors - Stt"ding I c4ttctttiodc Cant ti t€.c (SIC)

sr(:7 lntrrx.luction of thc ljuto Not Applic&lc

src'10Govcmmcnt Assistaocc - No Spccifrc ltcladon to OpcretingActivitics

Not Applicablc

stc 12 Crnv idetion - Spccial l\nposc l'intitics Not Applicable

stc t3 loirrdy Contn cd ]intitic* - Noo-Mmctary Cgrtribulions Not Applic.ble

slc 15 Ofrc..tinB I &aces - ldccitives Adoptcd

st(: 21 lncqnc 'l'rxes - Rc.covcry of Revrfucd Non-Dqtrcchblc Asscts Not ipplicablc

sr(: 2sIncome 'l'rx€s - Charrgcs in thc l'ax Slrtus of tn fiotity o.its shrrcholdcrs

Not Apphc$le

src 27livdrrding thc Subsrrncc of l'ransactions lovolvin{t thc l.6rdlrofm ofr laasc

Adoptcd

stc 29 Servicc (inc<:rsion A rrangemcn ts: Disdosurcs Not Applicablc

sl(:31 llcvmuc - Bertcr '[..ns.cti(ms tft$lving Advccising liarvices Not Applicablc

st(: 32 I trngiblc As\ci$ - Wcb Sirc (ixts Adopad