Objectives of the Engagement
The object objective ive is to audit audit the financ financial ial statem statement entss of Insula Insularr Life Life Insura Insurance nce Company, LTD, which comprise the statement of financial position as of December 31, 21! and statem statement ent of compreh comprehens ensive ive income, income, statemen statementt of chan"es chan"es in e#uity e#uity and stat statem ement ent of cash cash flow flowss for for the the year year ende ended, d, and and notes notes compr compris isin in" " a summ summary ary of si"nificant si"nificant of accountin" accountin" policies and other e$planatory e$planatory information, information, for the purpose of e$pressin" an opinion on them% In additi addition, on, the company company&s &s debt a"reem a"reement ent with with 'ban( 'ban( credit creditor) or) re#uir re#uires es the company to furnish the lender a report by our firm on the Company&s compliance with various debt covenants%
Background Information
Insular Life was established on *ovember 2+, 11% Today, as the -hilippines& leadin" and lar"est .ilipino life insurance company, it ta(es pride in the role of securin" the lives of .ilipino families for over 1 years% The products of the company / ordinary whole life, endowment, and limited/payment plans, to pension, colle"e education, "roup, and investment/lin(ed plans 0 are attuned to the chan"in" needs of individuals as they move throu"h life&s different sta"es, providin" them with the means to successfully plan for and achieve their family&s financial security% security% s one of the pioneerin" life insurance companies in the -hilippines, Insular Life is credited for introducin" a number of "roundbrea(in" moves in the industry% In 13!, the onolul onolulu u branch branch was opened opened in awaii awaii,, ma(in" ma(in" Insula Insularr Life Life the first first .ilipi .ilipino no insurance company to operate overseas and in 134 the first district office of Insular Life was established in Cebu City% City% Durin" 1+3, we introduced the first school of insurance in the -hilippines% The followin" year, we lowered our premiums 0 the first insurance company to do so% In 1+, Insular Life introduced what would soon be a hu"ely successfully business line5 industrial life insurance which was intended for lower/income earnin" .ilipinos% Insu Insula larr Life Life today today is the the only only .ili .ilipin pino o Life Life insu insura rance nce compan company y amon amon" " the the industry&s leaders% It continues to deliver a solid performance, postin" -hp2% billion in consolidated net income by end of 21!% cornerstone of Insular Life&s financial stability is our stron" asset base which has consistently increased throu"h the years reachin" -hp 11%3 billion in 21!% 6ur business/in/force by end/21! stood at 23+%! billion, reflectin" a "rowin" number of policyholders%
Insular Life transferred their head#uarters at the Insular Life Corporate Centre in .ilinvest, laban" in 21 in a symbolic step towards the fast/paced and I%T based 21 st century% ere, fully in step with the demands of the modern world but rooted in its uni#ue herita"e, we continue to desi"n innovative and responsive products and services for .ilipino families to help them reali7e their dreams% 8eyond life insurance, it has diversified into related financial services throu"h our subsidiaries and affiliate5 Insular ealth Care, Inc%, Insular Investment Corporation 'IIC), omeCredit 9utual 8uildin" and Loan ssociation, Inc% 'omeCredit), and affiliate 9apfre Insular Insurance Corporation%
Work that will require specialists’ assistance
In accordance with -: ;2, the firm will consult the followin" e$perts5 ccountin" -rofessionals are considered the e$perts on accountin" matters% owever, they may encounter situations tat may re#uire special (nowled"e of a non/ accountin" nature% In these situations, the accountant may consult the followin" subject matter e$perts5
• • • • •
ctuaries 0 to evaluate pension and other post/retirement benefits%
Risk actors
Risks of Insurance !ompanies =ith the prospect of risin" interest rates and concerns that credit #uality may slip, Optimi"e risk budget insurance companies should consider optimi7in" their ris( bud"ets by balancin" conservatism with the need for income and "rowth, adjustin" their approach as needed to the chan"in" economic environment% #erform liquidit$ budgeting e%ercise Review investment governance
!onduct an investment health checkups &evelop clear performance standards and management information &etermine the optimal blend of internal and e%ternal resources Incorporate environmental' social and governance (E)*+ factors
&eliverable
The ability to hold less li#uid investments 'hi"h yield loans, private e#uity, infrastructure, real estate) can provide diversification and improve investment outcomes% Insurers are often too conservative in ta(in" advanta"e of the illi#uidity premium 0 they can determine whether an allocation to private assets is ri"ht by performin" a li#uidity bud"etin" e$ercise% periodic "overnance review to determine if clear policies and "uidelines are in place, if a robust process to evaluate, select, and monitor e$ternal mana"ers e$ists, how the reportin" lines for the portfolio mana"ers are or"ani7ed, and other related considerations will ensure that nothin" falls throu"h the crac(s% n investment health chec(ups coverin" areas such as ris( appetite, "overnance>process, mar(et ris( mana"ement, liability hed"in", portfolio construction, mana"ers>mandates and decision efficiency is (ey% Insurance companies should benchmar( a"ainst best practices and develop an action plan based on materiality of "aps identified% Then, they can consider the effort needed to brid"e the "ap and associated benefits to help prioriti7e (ey actions% Insurers should ma(e sure that mana"ement information for investments is appropriately clear and includes tri""ers and associated actions to mana"e ris(s% :ettin" clear investment objectives is critical to ensure that investment teams are ali"ned with or"ani7ations& needs% :ettin" investment "uidelines, identifyin" appropriate portfolio benchmar(s, and settin" clear performance e$pectations are (eys to ensurin" that assets are wor(in" properly to meet or"ani7ational "oals% Insurers should e$amine their use of internal and e$ternal resources in an effort to ma$imi7e ris(/adjusted yields and total returns in a low/interest/rate environment% It is important to consider en"a"in" an independent e$ternal advisor and evaluate the merits of subscribin" to a robust investment mana"er database to identify best/in/class e$ternal mana"ers and strate"ies% Companies may be affected by the chan"e in the fre#uency and intensity of natural catastrophes caused by climate chan"e, to consider the impact such events may have on their investment portfolios% Thou"htful consideration of material <:? factors and active ownership can have a meanin"ful impact on ris( and return outcomes% There are many options for incorporatin" <:? factors into investment decisions in "eneral or with respect to specific hi"h/profile issues%
The followin" are the final output to be submitted to the users5 • • •
9ana"ement Consultancy @eport udited nnual .inancial :tatements :
#roposed time table' staffing and allocation of roles and responsibilities
a% Timetable 5 The followin" are tentative dates of importance pertainin" to the audit en"a"ement5
c#uire copy of the audited financial statements for the year 21! @eview of financial statements for the year
:eptember 2;, 21; :eptember 2, 21;
Create =or( pro"ram and chec(lists Create letter to client or third parties Create memos to or from :upervisors Draft the mana"ement consultation report -roofreadin" and @evision of the draft of mana"ement consultation report :ubmission of final 9ana"ement consultation report
6ctober 1, 21; 6ctober 3, 21; 6ctober +, 21; 6ctober A, 21; 6ctober 1, 21; 6ctober 11, 21;
b% :taffin" and allocation of roles 5 The individuals who will be assi"ned to the en"a"ement are the followin"5
-artner in Char"e 9ana"er :taff in Char"e ssistants
Engagement ,pproach
Bohn -aul @% 6lais Chiena Christienne % Cabucos arl .rancis @%
Considerin" the different aspects that affect the financial factors of Insular Life Company, LTD, the products and services, the shareholder policies, the customer support, the mar(et performance and applicable ris(s, the team shall use the :trate"ic 8usiness @is( pproach in this consultancy en"a"ement% This approach is deemed to be efficient in dealin" with financial institutions that are involved in the Insurance industry% This decision is because of the main focus of :trate"ic 8usiness ris( approach coincides with the normal business flow of Insurance Companies that involves business strate"y, business ris(s, and mana"ement plans with re"ards to adaptive responsibility in the business environment%
