MAPA INSTITUTE OF TECHNOLOGY School of Industrial Engineering & Engineering Management

Prudential Life and Bluecross

External Analysis, Internal Analysis, Matching Stage

Submitted by:

Dela Cruz, Gad Michael C. Bernardo, Jeyo Martin Laxamana, Ralph Daniel M.

As partial fulfilment of the requirements of EMG166 A1 Strategic Planning and Management

4 Quarter SY 2012 - 2013
rd

EXTERNAL ANALYSIS

Industry Definition:

Health care Industry, is a sector within the economic system that provides goods and services to treat patients with curative, preventive, rehabilitative, and palliative care. The modern health care sector is divided into many sub-sectors, and depends on interdisciplinary teams of trained professionals and paraprofessionals to meet health needs of individuals and populations. One of its sector is the Health Insurance. Health Insurance is insurance against the risk of incurring medical expenses among individuals. By estimating the overall risk of health care and health system expenses, an insurer can develop a routine finance structure, such as a monthly premium or payroll tax, to ensure that money is available to pay for the health care benefits specified in the insurance agreement. The benefit is administered by a central organization such as a government agency, private business, or not-for-profit entity. Best provider of this are Health Maintenance Organizations such as Prudential Life and Bluecross Philippines.

Industry Analysis:

Industry Drivers of Healthcare in the Philippines Customer Benefits-driven Most of the people will first look towards the benefits that they will get from the insurance company. The bigger the benefit the larger possibility that society will dig in. Outcome-driven One of the benchmark for a quality healthcare today is having a high success rate of a particular insurance company in all the procedures being done.

Value-driven Most of the people nowadays want to spend their money in valuable things

Technology-driven The Program shall adapt to changes in medical technology, health service organizations, health care provider payment systems, scopes of professional practice, and other trends in the health sector. It must be cognizant of the appropriate roles and respective strengths of the public and private sectors in healthcare, including peoples organizations and community-based health care organizations

Customer-driven Currently, the customers today are more demanding for a quality healthcare experience.

Macro-Environmental Analysis:

Economic The Economy of the Philippines is the 43rd largest in the world; according to 2011 Bank statistics and it is also one of the emerging markets in the world. The Philippines is considered as a newly industrialized country, it has been transitioning from one based on agriculture to one based more on services and manufacturing. The Philippines has been named recently as one of the Tiger Cub Economies together with Indonesia, Malaysia and Thailand. The Philippine economy grew by 7.1% (GDP) in the third quarter of 2012, the highest growth rate among the Southeast Asian nations (compared over Indonesias 6.2%, Malaysias 5.2%, Vietnams 4.7%, Thailands 3%, and Singapores 0.3%).

 The Philippine health insurance industry remains to be one of the very few industries which mobilize the long-term savings of the populace. These savings are invested primarily in long-term investment instruments, and have helped put up infrastructures like roads and bridges in support of economic development.

Technological Technology will offer the healthcare industry a means to fast-track the Affordable Care Act by delivering customer-driven processes that leverage information capture and smart process technology, cloud access and mobility, making compliance affordable to insurers. Risk Management Technologies: There will be greater investment in these technologies to manage changing aspects of medical loss ratios in line with the expectations of new members previously not covered.

Political-Legal Government decided that the national government counterpart in the premium contributions of members enrolled in the Sponsored Program will only be available for families identified as poor under the National Household Targeting System for Poverty Reduction (NHTS-PR). This decision is anchored on the expectation that the use of the NHTS-PR will improve the targeting performance of the Sponsored Program largely by enabling the government to eliminate political intervention in the selection process. National Health Insurance Program which shall provide health insurance coverage and ensure affordable, acceptable, available and accessible health care services for all citizens of the Philippines, in accordance with policies and specific provisions of this Act. This social insurance program shall serve as the means for the healthy to help pay for the care of the sick and for those who can afford medical care to subsidize those who cannot. President Benigno S. Aquino III lauded medical institutions for their continued efforts towards the advancement of the administration's national agenda of Universal Health Care. "Medical institutions such as yours are vital pillars in

nation-building: They help secure the foundation of our health-care sector by providing their students with quality medical education, fostered by a culture of inquiry and innovation," the Chief Executive said in his message to the Association of Philippine Medical Colleges on the occasion of its 46th Annual Convention, February 11, 2013. Issues on the Reproductive Health Bill.

Socio-Cultural Social Solidarity The Program shall be guided by community spirit. It must enhance risk sharing among income groups, age groups, and persons of differing health status, and residing in different geographic areas; A more health-conscious individuals concerning on the intakes of food. A more demanding patients about quality healthcare benefits and at the same time giving value to the money they spend.

Porters 5-Forces Model of Competition:

Threat of New Entrant

Weak

Bargaining Power of Supplier

Rivalry

Bargaining Power of Buyer

Moderate

Strong

Moderate

Threat of Substitute

Weak

Rivalry (Strong) Every insurance company is continuously bidding with companies to sell their services. However, most companies only select one insurance company. Since, many only choose one insurance policy provided by the company, the strict competition within each insurance policies is very much intense.

Threats of New Entrants (Weak) A significant amount of capital to attract bigger companies for market is needed in this type of industry. Also having to compete with the large companies would also require a strong supporting cast. This is due to the fact that there are many guidelines that these HMOs must follow to remain open. Therefore new entrants for this kind of industry is Weak.

Threat of Substitutes (Weak) In regards to health maintenance organizations, substitutes do not really affect them. Majority obtains healthcare insurance through jobs. Most companies only have a certain type of HMO to choose. Therefore, the plan is usually chosen according to the persons finance.

Bargaining Power of Suppliers (Moderate) It can be said moderate because the bargaining power of supplier depends on the network of the company. If the physician tends to lower the cost of their services then people will not avail insurance anymore.

Bargaining Power of Buyers (Moderate) In the field of this industry, it seems as though the bargaining power of buyers is moderate. Individuals do not have the opportunity to determine sickness. Now individuals have the opportunity to choose to be insured or not, but since there are limited amounts of insurance companies within a network or limited amount of hospitals within an area it becomes very hard to have buyer power.

External Factor Evaluation Matrix (EFE Matrix):

Threats Increase of government regulation Increase in competition Increasing daily cost Increasing expectation of customers Oppurtunities Incorporate as profit making HMO Emphasize service in cardiac, cancer, and other specialties Increasing population Total

Weight 10% 15% 20% 15% Weight 10% 18% 12% 100% 5 - highest, 1 - lowest

Rating 3 3 4 3 Rating 3 2 4 22

Weighted Score 0.3 0.45 0.8 0.45 Weighted Score 0.3 0.36 0.48 3.14

Bluecross and Prudential Life reacts to the factors that are important to them. They stay in the average pricing of service despite the increasing daily cost. Also, the increasing population will be a great opportunity for them because of their average profile.

Market Size:

HMO companies such as Bluecross and Prudential Life targets most adults and young adults as their market because this are the stages wherein they are in labor. A low percentages for senior citizens for most of them are not insurable for having a high risk. Teenagers and young ones can already be insured for proper allocation of money as part of savings.

Major Players:

Some of the players of Healthcare Industry nowadays are the following: Insular Life Blue Cross Health Care, Inc. Cocolife Fortune Care, Inc. Globus Care, Inc. Maxicare PCIB Cigna Healthcare Corp. MedicardPhils, Inc. Omni Care Health Organization, Inc. Philam Care Health System, Inc. Prudential Life

Strategic Group Map:

High
Maxicare

Prudential Life

Price

Bluecross

Low Low Benefits / Service Offered High

The strategic group map state that among the HMO industry MaxiCare as the NO.1 has the highest service offered and at the same time high cost. Prudential and Bluecross is at the middle in the group map, meaning they offered their service at a reasonable price and cost. May be they can compete to Maxicare to gain more profits.

Competitor Analysis: Maxicare One of the pioneer health maintenance organizations in the Philippines was established in 1987 by an esteemed group of doctors and businessmen with a vision for a better healthcare delivery system in the country. It is already the 3rd time Maxicare leads the industry in terms of gross revenues.

PhilAm Life Philam Life has the strongest brand name in the industry and has acclaimed management strength and leadership. The company has reaped numerous awards that are testaments to its reputation for excellence and responsiveness to customer needs.

Cocolife COCOLIFE Healthcare was established in 1997 to complete Cocolifes array of risk protection services. Initially, COCOLIFE Healthcare provided reimbursement type of health insurance. With the changing demands of the market, a card -type service was introduced in 1999. Since then COCOLIFE Healthcare has continuously expanded its reach and to date has the widest network of service providers, with more than 400 hospitals and 400 clinic partners and more than 11,000 top calibre physicians in different specialty fields accredited nationwide.

Fortune Care Has continuously provided quality health care to most Filipinos. In 1985, it has paved its way as one of the pioneers in the health maintenance organization (HMO) industry in the Philippines with a mission to make comprehensive and quality healthcare services available and affordable to all Filipinos. To date, it has paid over P3 billion in health care benefits to its members. Equipped with confidence and fueled with passion, Fortune CARE continues to be among the top players in the industry today.

Omni Care Directly, and through subsidiaries, Omnicare provides a broad array of pharmacy-related services to long term care facilities and to other customers in the health care environment. While senior care has long been an Omnicare specialty, we also serve other targeted populations.

Possible Strategic Moves of Competitors:

Some of the possible moves of the competitors are the following: Market penetration o Nowadays even young ones can put value in their money by availing health insurance. Most companies implies savings whiles paying for the monthly bill. Product differentiation o Benefit from the product extends over price. Merger o Companies inclines to merging with private hospitals.

Key Success Factors:

Shown below are some of the major concerns of the Health care Industry; Health Insurance: financial stability - all stems from creating niche or group programs that fill a need among insureds or associations skilled actuaries - adequate rates and forecasting smart investing skilled agents - front line gatekeepers - full disclosure of risk quality claims people - timely handling - adequate reserves conserve overhead expenses - no wasteful spending treat your employees very well - offer a professional stress free environment

Assessment of Industry Attractiveness: Nowadays, the Healthcare Industry in the Philippines is on its way to a brighter future and more opportunities to have and be discovered. With the effortsof the Philippine government to pave the way for the medical t ourism in the country, HMOs in the Philippines has more opportunities and at the same time are challenged to have their services to be appropriate to the standards and requirements for them to be able to deliver a state-of the-art services.

INTERNAL ANALYSIS.

Blue Cross A. Nature of the Business Model The nature of business of Blue Cross Insurance is in the retail industry that caters to various need of our clients. We are committed to providing our clients with value for their money by professional and personalized customer service coupled with reliable and fair claims servicing. We consider privacy of client information, attention to detail, open communication across the Company and with the market, and financial awareness as key principles in our operations. The medical plans offered by Bluecross: Medical Plans for Individuals and Families

DOLLAR PLANS Ideal for: AB market, high net-worth individuals, senior executives and their extended family, expatriates BLUE ROYALE: A worldwide Dollar plan that allows freedom of choice for the best medical care. Maximum aggregate limit per year is up to US$2 million. Also offered for Senior Citizens under Blue Royale-Premier and for non-Philippine residents and expatriates under Blue Royale Plan A +. CRITICAL COVER EXTRA: A rider to our Blue Royale Medical Plan, this product helps address your fears and anxieties about the future by providing a lump sum cash benefit for critical illnesses such as cancer, heart attack and stroke. PESO PLANS Ideal for: Middle income to broad upper income individuals, families and senior citizens (for Premier) SELECT STANDARD: A Peso plan that allows you to choose your own medical provider and reimburse medical benefits up to PhP3 million for each disability per lifetime. SELECT PLUS: Benefits are similar to Select Standard, but with an aggregate limit per year of up to PhP3 million. ACCESS Coverage Enhancement: Add the ACCESS facility to your Select Plus & Select Standard Plan. Available under Semi-Private and Private, and sharing the same inner benefit limits as those of Select Plus and Select Standard, ACCESS allows you to avail of no-cash-outlay in-patient medical treatment using our accredited network of hospitals. However, in the event that you choose not to go to an accredited medical

provider, you still retain the option of filing your eligible claims for reimbursement with Blue Cross. PREMIER: A Peso plan for Senior Citizens (66 years old and above). Maximum coverage is up to PhP1.5 million for each disability per lifetime.

Medical Plans for Groups

Ideal for: Small or large companies, and offered as employee benefits BLUE CROSS FLEXI: Group medical plans that can be tailor fitted to suit clients' needs. Open to groups of at least 20 to 50 members, or to groups of at least 50 members. Available under reimbursement only or reimbursement and no-cash-outlay plans. HEALTHLINE TPA: A Third Party Administered Agreement, which allows the client to finance their own health plan via a revolving fund, using the Blue Cross network of accredited medical providers for the no-cash-outlay facility. Our Medical Plans may also be offered as second layer insurance to groups. Blue Royale DuoProtect International Group Medical and Travel Plan especially designed for the Overseas Filipino Worker. Maximum medical coverage of US$50,000. Blue Cross Flexi for Groups of At Least 50 Members A group medical plan for groups with at least 50 employees. We can tailor-fit healthcare benefits to suit clients needs. Available under reimbursement only or reimbu rsement and no cash-out plans. Blue Cross Flexi Baby Group (20 to 49 Members) A group medical plan for groups with 20 to 49 employees. We can tailor-fit healthcare benefits to suit clients needs. Available under reimbursement only.

Healthline TPA A Third Party Administered Agreement, which allows the client to finance their own health plan via a revolving fund, using the Blue Cross network of accredited medical providers for the no cash-outlay facility.

B. Value Chain Analysis

Payers

Fiscal Intermediaries

Providers

Purchasers

Producers

Research and DevelopmentCreate Customer PoliciesContract with SuppliersMarketingCustomization of plans-

Sign insurance policyCustomer Service-

C. Financial Statements

Assets Current Assets Cash and cash equivalents Trade and other receivables Prepayments Total Non- Current Assets Trade and other receivables Available-for-sale financial assets Property and equipment- net Investment property Deffered income tax assets Other assets Total Total Assets Liabilities and Equity

BLUE CROSS HEALTHCARE, INC. Financial Statement 2011 10003120 58849249 1244836 70097205

2010

2009 3693884 32346387 4596269 40636540 366302 8094730 3411866 502120 497408 90000 12962426 53598966

9601018 37969575 2579654 50150247 766302 7984730 2013034 502120 394123 90000 11750309 61900556

14735315 1527503 502120 1656977 716591 19138506 89235711

Liabilities Current Liabilities Advances from customers Accounts payable and accrued expenses Income tax payable Claims payable Unearned enrollees fees Total Liablities

1206071 6986642 3950021 1609501 34698916 48253151

3384678 4851204 1440616 2166477 19390948 31233923

3411635 5458518 1510377 1031069 15828085 27239684

Equity Authorized -1000000 shares at 100 par value per share 100000000 Capital stock Accumulated losses Reserves Total Equity Total Liabilities and Equity

100000000 100000000 85000000 -56560718 -2080000 26359282 53598966

85000000 85000000 -42805900 -52,143,367 -1211537 -2190000 40982560 30666633 89236711 61900556

https://ireport.sec.gov.ph/iview/login.jsp

FINANCIAL RATIOS 1.LIQUIDITY RATIOS 2011 Current Ratio Current assets Current liabilities = Quick Ratio Current assets minus inventory Current liabilities = 70097205 48253151 1.452696944 2010 50150247 31233923 1.605633945

70097205 48253151 1.452696944

50150247 31233923 1.605633945

2. LEVERAGE RATIOS 2011 Debt-to-Total-Assets Ratio Total debt Total assets = Debt-to-Equity Ratio Total debt Total stockholders' equity 48253151 89235711 0.540738124 48253151 40982560 2010 31233923 61900556 0.504582269 31233923 30666633

= Long-Term Debt-toEquity Ratio Long-term debt Total stockholders' equity =

1.177406951 0 40982560 0

1.018498607 0 30666633 0

3. ACTIVITY RATIOS 2011 II. Fixed Asset Turnover Revenue Fixed Assets = III. Total Asset Turnover Revenues Total Assets = IV. Receivable Turnover Annual Credit Revenue Accounts Receivable = V. Average Collection Period Accounts Receivable total annual revenue/365 = 4. PROFITABILITY RATIOS 2011 Gross Profit Margin Sales minus Cost of Goods Sold Sales = Operating profit Margin EBIT Sales = (5762492137239858) 57624921 0.35375429 2010 ( 44368124 32336907) 44368124 0.271168035 57624921 0 0 2010 44368124 0 0

57624921 89235711 0.645760765

44368124 61900556 0.716764547

57624921 58849249 0.97919552

44368124 37969575 1.168517794

58849249 161230.8192 365

37969575 104026.2329 365

12902108 57624921 0.22389806

6259901 44368124 0.141090054

Net Profit Margin

Net Income Sales =

10315927 57624921 0.179018501

4307351 44368124 0.097082108

Return on Total Asset

Net Income Total assets =

10315927 89235711 0.115603124

4307351 61900556 0.069585013

Return on Stockholders' Equity

Net Income Total Stockholders' Equity =

10315927 40982560 0.251715047 10315927 850000 12.13638471

4307351 30666633 0.140457252 4307351 850000 5.067471765

Earnings Per Share

Net income - dividends Number of shares of common stock outstanding =

5. GROWTH RATIOS 2011 Growth Sales Ratio = on (value at the end of the period - value at the beginning of the period) value at beginning of period = 2010

(5762492144368124) 44368124 0.298791019

(4436812429265990) 29265990 15102134

Growth Ratio on Net Income =

(value at the end of the period - value at the beginning of the period) value at beginning of period =

(103159274307351) 4307351 1.394958526

(43073512870606) 2870606 0.500502333

Growth Ratio on EPS =

(value at the end of the period - value at the beginning of the period)

(12.136384715.067471765)

(5.06747176 53.377183529

) value at beginning of period = 5.067471765 1.394958526 3.377183529 0.500502333

Financial Analysis BLUE CROSS HEALTHCARE, INC. Financial Statement Assets Current Assets Cash and cash equivalents Trade and other receivables Prepayments Total Non- Current Assets Trade and other receivables Available-for-sale financial assets Property and equipment- net Investment property Deffered income tax assets Other assets Total Total Assets Liabilities and Equity Liabilities Current Liabilities Advances from customers Accounts payable and accrued expenses Income tax payable Claims payable Unearned enrollees fees 1.35% 7.83% 4.43% 1.80% 38.88 5.47% 7.84% 2.33% 3.50% 31.33 6.37% 10.18% 2.82% 1.92% 29.53% 35.35 % 128.00 % 261.53 % 156.10 % 219.22 99.21 % 88.87 % 95.38 % 210.12 % 122.51 100.00 % 100.00 % 100.00 % 100.00 % 100.00 16.51 % 1.71% 0.56% 1.86% 0.80% 21.45 % 100.00 %

vertical analysis 2011 2010 2009 11.21 % 65.95 % 1.39% 78.55 % 15.51 % 61.34 % 4.17% 81.02 %

Horizontal Analysis 2011 2010 2009 270.80 % 181.93 % 27.08 % 172.50 % 259.92 % 117.38 % 56.12 % 123.41 % 47.80 % 98.64 % 59.00 % 100.00 % 79.24 % 100.00 % 90.65 % 115.49 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 %

6.89% 60.35% 8.58% 75.82%

1.24% 12.90 % 3.25% 0.81% 0.64% 0.15% 18.98 % 100.00 %

0.68% 15.10% 6.37% 0.94% 0.93% 0.17% 24.18% 100.00%

0.00% 182.04 % 44.77 % 100.00 % 333.12 % 796.21 % 147.65 % 166.49 %

Total Liablities Equity Authorized -1000000 shares at 100 par value per share

% 54.07 %

% 50.46 %

50.82%

% 177.14 %

% 114.66 %

% 100.00 %

112.06 % 95.25 % 47.97 % -1.36% 45.93 % 100.00 %

161.55 % 137.32 % 84.24 % -3.54% 49.54 % 100.00 %

186.57%

100.00 % 100.00 % 75.68 % 58.25 % 155.48 % 166.49 %

100.00 % 100.00 % 92.19 % 105.29 % 116.34 % 115.49 %

100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 %

Capital stock

158.59%

Accumulated losses Reserves Total Equity Total Liabilities and Equity

-105.53% -3.88% 49.18% 100.00%

Based on this Vertical Analysis Bluecross performance last 2011 compared to 2010 because cash increased by 4.61%.Their total liabilities increased by 3.61% from 2010 which indicates that the company probably borrowed money from other corporations to further continue operations. The capital Stock decrease by 42.07%.

D. STRENGTHS AND WEAKNESSES Strengths Financially Stable

Blue Cross is one of the leading and most financially stable companies in the industry today. Our Premiums Earned in recent years put us in the top 20non-life insurance companies in the Philippines. Brand Awareness and capable partners Blue cross is a international Healthcare insurance. Blue Cross has partnered
with selected and respected companies from various industries in order to reach and serve our clients better. Its partners are Assist America and Retirement healthcare Coalition International Good service Quality

We are committed to bringing nothing but the best to our clients. Our decisions are based on an intricate understanding of our clients' needs, demands and expectations. We strive to create and innovate programs that will best serve our customers. Fifty Five years in the industry
The Blue cross draw from more than fifty years of experience in the insurance industry. Their actions are guided by a deep insight brought about by the knowledge have gained through the years Good Marketing skills The main assets of the company is their staff so that they give them proffer training and seminars to communicate in the customers. Efficient Customer Service The customer service can reach 24 hours a day, 365 days a year with trained multilingual and medical personnel.

Weaknesses Poor Information Technology Their website is not updated so this can affect the system if the clients wants to know about the new offer or promo by the blue cross. Low Profit Margin The profit margin cannot provide a high net income due to a large expenses

Internal Factor Evaluation: Factors Strengths Blue Cross is Financially Stable Good Service Quality Weight 0.1 Ratings 3 Weighted Score 0.3

0.15 0.15

3 3

0.45 0.45

Fifty Five Years in the Industry Good Marketing skills Efficient Customer Service

0.15 0.1

3 4

0.45 0.4

Brand Awareness and capable partners

Weaknesses Poor Information Technology Low Profit Margin TOTAL

0.1

0.4

0.1

0.3

0.15 100%

3.5 28.5

0.5 3.25

Ratings: 5- Highest , 1- Lowest

Values, Ethics and Corporate Social Responsibility

Our core values include personal and corporate integrity, total customer delight, teamwork, sense of responsibility, competence and professionalism, as well as being results and achievement- oriented.

Evaluation of Present Corporate Strategy

Vision: Blue Cross is grounded in a vision to become the preferred medical and travel insurance provider of discerning clients. Mission: Blue cross mission is to consistently deliver excellent, dynamic and flexible products to the marketplace. We are committed to providing our clients with value for their money by professional and personalized customer service coupled with reliable and fair claims servicing. We consider privacy of client information, attention to detail, open communication across the Company and with the market, and financial awareness as key principles in our operations.

OWNERSHIP STRUCTURE
Board of Directors:

Barry N. Clark, Chairman

Theodore V. Awad, Member

John D. Casey, Member

Stuart R. McCarthy, Member Atty. Ma. Belina B. Mariano, Member

Noel L. Rosas, M.D., Member

Atty. Emilio S. Teng, Member

Executive Officers: John D. Casey, Chief Executive Officer

Atty. Ma. Belina B. Mariano, Corporate Secretary

Noel L. Rosas, M.D., Medical Director

Celia D. Imperial, Vice President and Chief Finance Officer

Ma. Victoria R. Munsayac, Vice President, Medical Sales Rodelio A. Bajar, Assistant Vice President, Policy & Underwriting

Gerardo S. Salas, Vice President & Actuary

Lucia Z. Asia, Assistant Vice President, Travel Sales

The total number of employees of Blue Cross Insurance here in the Philippines is 199 as of February 2013 Source of Competitive Advantage
Blue Cross is one of the most financially stable companies in the market today. We have a current premium revenue of around PhP664 million per year, and assets amounting to more than PhP1 billion. With a steadfast commitment to growth and progress, Blue Cross aims to surpass these figures in the years to come.

Competitive Profile Matrix

Prudential Life
I. Value Chain Analysis Value Chain Activities of Philippine Prudential A. Primary Activities Service The company is committed to providing professional sales and service for its wide variety of insurance customers. The company has established an excellent reputation in the Philippines. Some of the services are claims handling or processes and monitoring of renewals, we also have 24 hour assistance hotline clients policy inquiries and change in mode of premium payment.

Sales and Marketing The company has produced various brochures for each type of insurance product based upon the new concept with the intention of raising the awareness level in insurance markets of both clients and producers. The company also uses advertisement, mostly print-ad and internet website to reach the customer.

Distribution As of December 2012, Philippine Prudential has over 1.8 million policy holders. They are mostly depositors at rural banks, as group insurance accounts for a large share of the company's sales.

The company has six distribution channels:

Traditional individual marketing, conducted by insurance agents selling insurance policies to individuals.

Traditional group marketing, mostly through rural and thrift banks, with some business coming from security guards, OFWs, corporate accounts, and micro-insurance.

Direct marketing, through direct response and direct mail campaigns. Retail marketing, conducted through sales offices located in malls. Telemarketing, in which leads are generated though phone calls and text messages, after which telemarketers draw qualified prospects to sales offices to speak to sales professionals.

Alternative marketing, established to expand the ways for the company to reach out to more Filipinos in a manner novel to the insurance industry

II. Financial Analysis Financial Ratios

Balance Sheet

Philippine Prudential Company Balance Sheets

2011 Assets Current Assets Cash and Cash Equivalent Life insurance premium due and uncollected Trade and Other Receivables Due from life insurance pools Due from reinsurers Prepaid Expenses Total Current Assets 155,770,912 24,731,912 46,383,469 308,893 1,333,752 17,649,437 246,178,374

2010

104,139,488 35,873,712 32,414,018 223,525 14,873,866 187,524,610

Non Current Assets Loans Receivable Investments Property and Equipment, net Total Non Current Assets 35,716,872 439,211,532 112,479,669 587,408,074 27,348,530 351,469,177 115,361,331 494,179,038

TOTAL ASSETS

833,586,448

681,703,648

LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Current Liabilities

Accounts Payable and Other Accruals Income Tax Payable Claims Payable Due to Reinsurers Total Current Liabilities

38,403,328 2,675,687 21,326,141 14,659,754 77,064,910

37,623,264 3,611,630 17,658,093 16,079,092 74,972,079

Non Current Liabilities Unearned Interest Income Loans Payable Legal Policy Reserves Total Non Current Liabilities Total Liabilities 124,657 28,130,393 405,629,380 433,884,430 66,523 26,691,125 351,071,665 377,829,313

510,949,340

452,801,392

Stockholder's Equity Share Capital Contingency Surplus Special Surplus Retained Earnings, end Total Stockholder's Equity

193,766,710 4,861,852 18,241,011

143,215,240 4,952,200

105,767,534 322,637,107

80,734,816 228,902,256

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

833,586,447

681,703,648

Income Statement

Philippine Prudential Statements of Income

2011

2010

Premiums

1,012,061,110

890,891,791

Direct Costs: Reinsurance Premium

(32,475,597)

(62,738,044)

Increase in Legal Reserve Underwriting Deduction

(54,557,715)

(69,654,571)

(408,029,535)

(309,900,233)

Total Direct Costs

(495,062,847)

(442,292,848)

Net Underwriting Profit

516,998,263

448,598,943

Operating Expenses

(494,249,087)

(425,143,655)

Operating Profit

22,749,176

23,455,288

Other Income

8,695,063

6,785,281

Net Income Before Tax

31,444,238

30,240,569

Provision for Income Tax

(6,590,047)

(6,382,022)

Total Comprehensive Income

24,854,191

23,858,547

Profitability Ratios

Profitability ratios are financial metrics that are used to assess a business ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. For most of these ratios, having a higher value relative to a competitors ratio or the same ratio from a previous period is indicative that the company is doing well. 2011

Net Profit Margin

Net Profit before tax

31,444,238 1,012,061,110

Sales

3.1%

Net Profit Margin After Tax

Net Profit after tax

24,854,191 1,012,061,110

Sales

2.5%

Operating Expense to sales

Operating Expenses Sales

494,249,087 1,012,061,110

48.8%

Operating Profit to sales

Operating Profit

22,749,176 1,012,061,110

Sales

2.2%

Return on Assets

Net Profit Average Total Assets

24,854,191 757,645,048

3.28%

Return on Equity

Net Profit

24,854,191

Average Total Equity

275,769,682

9.01%

Strengths and Weaknesses

Strengths: Marketing Skills Basis: Value Chain- Sales and Marketing, Human Resource Well trained staff that has specialists in commercial insurance that can properly service and underwrite local business.Quality and depth of the products and staff.

Accessibility Basis: Value Chain - Distribution The company is accessible Nationwide through its 6 distribution channels

Customer support service center Basis: Value Chain - Services The offices are open five days a week but it has a website and email that you can use anytime.

Ability to build close relationships with customers Basis: Value Chain Sales and Marketing The company has a policy that makes sure that Marketing officers are always visible to its customers to build rapport and loyalty. This also gives clients greater knowledge and understanding of the companys products and services.

Wide and diverse product offerings Basis: Value Chain Product

The company has a wide array of product offerings to meet the customers need and their financial capability

Weaknesses:

Low Profit Margin Basis: Net Profit Margin In relation to the poor information technology, the company can not monitor the production and losses real-time. This is very crucial to the company since this will be the basis for acceptance of risk and rating scheme. If the company can not monitor very well the result of the rating scheme then it would not know if it has to increase or still has the capacity to decrease its rate to compete in the market and still comes up with a profitable result

The management consists of officers at their prime age Since the senior officers, most of them do not believe in what the new technology can do for the company. Most transactions are still done manually and they are very skeptical with getting things fully automated. These decisions affect the growth of the company because of failure to adapt to technological change

MATCHING STAGE Prudential Life TOWS Matrix

Strength Marketing Skills Accessibility Customer support service center Wide and diverse product offerings Ability to build close relationships with customers Weakness

Low Profit Margin The Management consists of officers at their prime age

Increased govt regulation Increasing competition Increasing cost Increasing expectation of customers Incorporate as a profit-making HMO Emphasize cardiac, cancer and other specialties Increasing Population

Maintain loyal customers and grant rewards and other incentives (S1, S5, T2, T4) Continually provide diverse product to meet the expectations of the customers (S4, T4) With good marketing skills and being easily accessible, the company can easily exploit the increasing population (S1,S2, O3)

Reduce unnecessary cost to maximize the profit (W1, T3) Hire new and efficient employees to cope up with the increasing competition (W2, T2, T4) Higher population, higher opportunity of earning profit (W2, O3)

Threat

Opportunity

Space Matrix
Financial Stability (5 - Highest, 1 - Lowest) 1. Premium Income 2. Large Assets 3. ROI Total Average Environmental Stability (-1 - Highest, -5 - Lowest) 1. Demand Elasticity 2. Number of Competitors 3. Price Range of Service Total Average Competitive Advantage (-1 - Highest, -5 - Lowest) 1. Premium Benefits 2. Innovation & Growth Leader 3. High Market Share Total Average Industry Strength (5 - Highest, 1 - Lowest) 1. Financial Stability 2. Few Substitutes 3. High Entry Level 4. Profitable Total Average Rating 5 4 3 12 4 -4 -2 -4 -10 -3 -2 -1 -2 -5 -2 5 5 4 4 18 5

Conservative
4 3 2 1 -3 -2 -1 -1 -2 -3 1 2 3

Aggressive

Defensive

Competitive

Prudential Life should pursue an aggressive strategy. They already have a strong competitive position in the market with rapid growth. It needs to use its internal strengths to develop a market penetration and market development strategy. This also includes product development and integration with other companies.

Boston Consulting Group (BCG) Matrix

Star

Question Mark

Cash Cow

Dog

Using BCG matrix, the strategy falls cash cows which is a hold/harvest, having the product development. I come-up to this result because Prudential Life has a high internal strength through its name and market share but only at an average rate. Also strong intensity of rivalry among competitors is evident because there are also other international based companies out there that want a share of the market.

Internal External (IE) Matrix

Strong Average Weak 3.0 - 4.0 2.0 - 2.99 1.0 - 1.99 High 3.0 - 4.0 Medium 2.0 - 2.99 Low 1.0 - 1.99
Market Penetration, Intensive Integrative Intensive Integrative Product Development Market Penetration, Intensive Integrative Product Development Market Penetration, Product Development Divestment Divestment

Divestment

EFE IFE

= 3.14 = 3.35

This IE matrix tells us that the Prudential Life should have a Grow & Build strategies in order to grasp the number 1 position in the market. They should focus on market penetration, market development, and product development. From the operational perspective, a backward integration, forward integration, and horizontal integration should also be considered.

Grand Strategy Matrix

It is best place Prudential life at Q1 because of the industry which has a high rate of Market Development, Product Development and Innovation in terms of the services offered. This also makes for strong competition between rival companies because they are also furnished with the same resources as Prudential Life is.

Strategy Summary

STRATEGY OPTIONS INTEGRATION STRATEGIES 1. Forward Integration 2. Backward Integration 3. Horizontal Integration INTENSIVE STRATEGIES 4. Market Penetration 5. Market Development 6. Product Development DIVERSIFICATION STRATEGIES 7. Concentric Diversification 8. Conglomerate Diversification 9. Horizontal Diversification DEFENSIVE STRATEGIES 10. Joint Venture 11. Retrenchment 12. Divestiture 13. Liquidation

TOWS SPACE

IEM

GSM

TOTAL

1 1 1

1 1 1

1 1 1

3 3 3

1 1 1

1 1 1

1 1 1

1 1 1

4 4 4

1 1 1

2 1 1

Based on the summary of possible strategies, Prudential Life has the following choices: a. Market Penetration b. Market Development c. Product Development The following choices can be derived from the different strategies because Market Penetration is an opportunity for Prudential Life. Market Development and Product Development can make Prudential Life reach the number 1 spot in giving quality service and increased the benefit or service provided.

RELATED LITERATURE

Prudential Life Financial Strength As of December 31, 2012, the Company has over Php 120 Billion Business-InForce, Total Assets of over Php 833 Million and Total amount of Claims paid of over Php 135 Million for the year. Total Investments are at over Php 439 Million. Its Total Premium Income in 2012 is recorded at Php 1.025 Billion. http://www.philippineprudential.com/company/corporate-profile/

http://www.census.gov.ph/old/data/sectordata/2003/2003FIEsA_Tab3.pdf

http://www.congress.gov.ph/download/basic_15/HB01197.pdf

Philippine Prudential remains stable, says exec Friday, April 12, 2013 THE top executive of Filipino-owned insurance company, the Philippine Prudential Life Insurance Company Inc. (Philippine Prudential), assured Friday that the firm has remained "financially sound," and will continue to protect the interest of its 1.8 million policyholders and their families. "Philippine Prudential is financially sound, as it remains to be a stable and strongly capitalized company, duly-licensed by our government regulator, the Insurance Commission," Philippine Prudential president and CEO Gregorio D. Mercado said in a statement. Philippine Prudential immediately issued the statement following news reports, quoting the Insurance Commission, the liquidation of Prudential Life Plans Inc. (PPI) will soon push through. Mercado said Philippine Prudential has no filial or business relationship whatsoever with PPI, a pre-need company that deals in pension, education and memorial plans. "Our valued policyholders can be assured that their interests are protected with the company's financial strength and business expertise," he said. Mercado said the company has remained focused on the daily execution of its business and continue to provide clients with the highest levels of service. "We continue to expand and write new business, while remaining committed to meeting our policyholders' needs," Mercado assured. Philippine Prudential, founded in 1963, continues to be an industry leader in innovation and growth in the life insurance industry in the country. It is a reputable 100 percent Filipino-owned financial services company committed to providing the best financial advice and diversified and affordable products, such as endowment plans, whole life plans, group and permanent plans, healthcare coverage, educational and pension policies and Credit Life Insurance, to its valued clients through its multiple and accessible distribution channels, through a nationwide sales office network manned by over 1,200 sales agents and employees. Celebrating its 50 years of operation in the country, Philippine Prudential continues to grow and serve the best interests of its more than 1.8 million policyholders and their families, with over P120 billion business-in-force.

As of December 31, 2011, it has total assets of over P833 million. Its total premium income is recorded at over P1,012 billion, a record of over 600 percent growth since 2006. Total amount of claims paid is over P135 million for the year while the Legal Policy Reserves, the funds invested to be used for future claims, is recorded at over P405 million. With total investments at over P439 million, Prudential Philippines is now the Top 15 among all life insurance companies in the country, and the Top 5 among all Filipinoowned life insurance companies.

http://www.sunstar.com.ph/davao/business/2013/04/12/philippine-prudential-remainsstable-says-exec-277299

Bluecross

TOWS MATRIX

Strength Blue Cross is Financially Stable Brand Awareness and capable partners Good Service Quality Fifty five years in the insurance industry Good Marketing skills Efficient Customer Service SO Strategy They can easily exploit opportunies because they have financilal stability and quality of service (S1, S2, O2, O3) D evelop their marketing skills and company experience.( S4,S5,S6, O3) ST Strategy Always depend on government regulation for the quality of service( S3, T1) Estublished further the strength of brand (S2, T2) Forecast the demand of customer and improve marketing skills and the customer service (S5,S6,T3)

Weakness Poor Information technology Low Profit margin

Opportunity

Incorporate as a profitmaking HMO Emphasize cardiac, cancer, and other specialies Increasing Population

WO Strategy Improvement or outsource the Information Technology department ( W1, O3)

Threat

Increased government regulation Increasing competition Increasing cost

WT Strategy Bluecross ,minimize the weaknesses and threats by impoving their system information and the availability of service and product and analyze the macro envbironment ( W1, T2,T3,)

Increasing expectation of customers

Based on the TOWS analysis Blue Cross needs to address their weakness that is low profit margin and lack in Information technology. TOWS matrix needs to develop the opportunities to gain competitive advantage. Blue Cross has improved this by outsoursing their information technolgy department.

SPACE MATRIX Internal Strategic Position

Financial Strength a. ROA b. Liquidity c. ROE d. Net Profit Margin TOTAL AVE

Rating 5 3 4 3 15 3.75

Environmental Stability a. Inflation b. Demand Elasticity c. Price of service

Rating -3 -4 -3

TOTAL AVE

-10 -3.33

External Strategic Position

Competitive Advantage a. Brand Awareness b. Market Share c.Product and service Quality d.technological knowhow

Rating

Industry Strength

Rating

-3 -2 -3

a. Financial stability b. Strong competition c. Low Substitute

5 5 3

-2

d. Profitable

TOTAL AVE

-10 -2.5

TOTAL AVE

18 4.5

External Strategic position = 2

Internal strategic position= 0.42

Based on the results, Blue Cross Health Care Insurance should adapt an Agressive strategy. They already have a strong competitive position it the market with rapid growth. It needs to use its internal strengths to develop market penetration and market development strategy. This can include product development and integration with other companies.

Boston Consulting Group (BCG) Matrix

Star

Question Mark

Cash Cow

Dog

Using BCG matrix, the strategy falls cash cows which is a hold/harvest, having the product development. I come-up to this result because Blue Cross has a high internal strength through its name and market share but only at an average rate. Also strong intensity of rivalry among competitors is evident because there are also other international based companies out there that want a share of the market.

Internal External (IE) Matrix

(EFE = 3.14 , IFE = 3.25)

This IE matrix tells us that Bluecross should do intensive and integrative strategies to maintain strong in the market. They should focus on market penetration, market development, and product development. From the operational perspective, a backward integration, forward integration, and horizontal integration should also be considered.

Grand Strategy Matrix

Based on the Grand Strategy Matrix BlueCross need to maintain their strategy using the Product and market Development, Market penetration, Backward Integration, Forward Integration, Concentric Diversification. This Matrix help to grow rapidly our company in the market

STRATEGY OPTIONS INTEGRATION STRATEGIES 1. Forward Integration 2. Backward Integration 3. Horizontal Integration INTENSIVE STRATEGIES 4. Market Penetration 5. Market Development 6. Product Development DIVERSIFICATION STRATEGIES 7. Concentric Diversification 8. Conglomerate Diversification 9. Horizontal Diversification DEFENSIVE STRATEGIES 10. Joint Venture 11. Retrenchment 12. Divestiture 13. Liquidation

TOWS SPACE

IEM

GSM

TOTAL

1 1 1

1 1 1

1 1 1

3 3 3

1 1 1

1 1 1

1 1 1

1 1 1

4 4 4

1 1 1

2 1 1

The top 3 Results are 1.Market Penetration 2. Market development 3.Product development

The Decision Stage Quantitative Strategic Planning Matrix (QSPM)

Market Penetration Market development Product Development

Key Factors OPPORTUNITIES Incorporate as a profit-making HMO Emphasize cardiac, cancer and other specialties Increasing Population THREATS Increased govt regulation Increasing competition Increasing cost Increasing expectation of customers STRENGTHS Financially Stable Good service Quality

Weight 0.1

AS 3

TAS 0.3

AS 3

TAS 0.3

AS 4

TAS 0.4

0.18

0.36

0.54

0.54

0.12

0.48

0.24

0.24

0.1

0.3

0.4

0.3

0.15

0.45

0.45

0.3

0.2 0.15

4 3

0.8 0.45

3 4

0.6 0.6

3 4

0.6 0.6

100% 0.1 0.15 0.15 3 3 3 0.3 0.45 0.45 4 3 2 0.4 0.45 0.3 3 3 3 0.3 0.45 0.45

Fifty Five years in the industry

Good Marketing skills Efficient Customer Service

0.15 0.1

3 3

0.45 0.3

3 4

0.45 0.4

2 3

0.3 0.3

Brand Awareness and capable partners

0.1

0.4

0.3

0.3

WEAKNESSES
Poor Information Technology Low Profit Margin 0.1 3 0.3 2 0.2 3 0.3

0.15 100%

3.5

0.5 6.38

0.45 6.08

0.3 5.68

In the result shown above, Market Penetration is the highest score.

RELATED LITERATURE
Republic of the Philippines Congress of the Philippines Metro Manila Third Regular Session Begun and held in Metro Manila, on Monday the twenty-fifth day of July nineteen hundred and ninety-four. ___________oOo__________ [REPUBLIC ACT No. 7875] AN ACT INSTITUTING A NATIONAL HEALTH INSURANCE PROGRAM FOR ALL FILIPINOS AND ESTABLISHING THE PHILIPPINE HEALTH INSURANCE CORPORATION FOR THE PURPOSE Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled: SEC. 1. Short Title This Act shall be known as the National Health Insurance Act of 1995 Article I. GUIDING PRINCIPLES SEC. 2. Declaration of Principles and Policies. Section II, Article XIII of the 1987 Constitution of the Republic of the Philippines declares that the State shall adopt an integrated and comprehensive approach to health development which shall endeavor to make essential goods, health and other social services available to all the people at affordable cost. Priority of the needs of the underprivileged, sick, elderly, disabled, women, and children shall be recognized. Likewise, it shall be the policy of the State to provide free medical care to paupers. In the pursuit of a National Health Insurance Program, this Act shall adopt the following guiding principles:

a) Allocation of National Resources for Health The Program shall underscore the importance for government to give priority to health as a strategy for bringing about faster economic development and improving quality of life; b) Universality The Program shall provide all citizens with the mechanism to gain financial access to health services, in combination with other government health programs. The National Health Insurance Program shall give the highest priority to achieving coverage of the entire population with at least a basic minimum package of health insurance benefits; c) Equity The Program shall provide for uniform basic benefits. Access to care must be a function of a persons health needs rather than his ability to pay; d) Responsiveness The Program shall adequately meet the needs for personal health services at various stages of a members life; e) Social Solidarity The Program shall be guided by community spirit. It must enhance risk sharing among income groups, age groups, and persons of differing health status, and residing in different geographic areas; f) Effectiveness The Program shall balance economical use of resources with quality of care; http://www.philhealth.gov.ph/about_us/ra7875.pdf

Blue Cross marked a milestone last 10 November 2009 as it celebrated its 60th year in the insurance business. To start off the anniversary celebrations, a thanksgiving mass was held at the Blue Cross basement. Employees gathered to say a prayer of gratitude for 60 years of insurance innovation, customer service and business stability. Our CEO, Mr. John Casey, also delivered a message to all employees, encouraging everyone to keep up the good work and to endeavor to make Blue Cross a better and stronger company for many more years to come. A simple yet delightful lunch was also served to the head office workforce. The 60th anniversary activities of Blue Cross will be a prolonged affair and will continue until 2010. http://www.bluecross.com.ph/index.php?id=news&page=28

q
The Philippines, because of its geographical location, is disaster prone. Natural disasters in the Philippines cost the government around US$15 billion a year in damages. We feel the effects of around 20 typhoons a year. Recent storms such as Ondoy and Pepeng cost the country 2.7% of its GDP. We have over 300 volcanoes and luckily, only 20 are active. There are major fault lines in the Philippines , including Metro Manila. While we are no stranger to earthquakes, we have not had a major quake for some time now. These realities, along with the recent natural disasters around the world, such as the earthquakes in Haiti and Chile, and the volcanic eruption in Iceland, should cause us to review our insurance policies. How prepared are we for natural disasters? Are we insured for property damage? Many car and fire insurance policies do not automatically include coverage for certain natural disasters. However, additional coverage may be obtained at a significant extra cost, depending on the type of coverage and location. If we did include cover for selected natural disasters, are our policies up to date? Have we paid our premiums on time to ensure continuity of cover? This point is very important as the following example highlights: I have a house which has always been insured for "acts of God". In wanting to reduce the annual premium, I took out a new policy with another insurer which was to start at the beginning of the month following expiry of the existing policy. Expiry of the old policy was seven days before the end of the previous month. During that seven-day period, we were hit by Ondoy and there was major damage to the property - and we didn't have insurance coverage! Now, that's what I call an "act of God"! As with motor vehicle, house and fire policies, the treatment or inclusion of coverage for natural disasters under medical insurance varies. Some health maintenance organizations (HMOs) include medical coverage for injuries or illnesses arising out of natural disasters or catastrophes, while other HMOs don't. Most insurance companies tend to exclude cover arising from natural disasters. Certainly, personal accident cover which pays a lump sum benefit as a result of injury

or

illness

arising

from

natural

disaster,

is

excluded.

Here at Blue Cross, we continue to look for ways to make our contracts more responsive to the times and to the needs of our clients. Most recent examples of these efforts include the consideration we have extended for claims related to the Iceland volcanic eruption and typhoon Ondoy. We have approved claims for trip termination, trip cancellation, flight delay and baggage delay for clients affected by the Iceland volcanic eruption. In a similar fashion, we have provided coverage for clients who fell ill as a result of typhoon Ondoy. We have done these because we understand that it is in times of a crisis that you need your insurance the most. We regularly review our policy exclusions to determine if coverage can be extended to cover natural disasters. As your insurance company, we remain steadfast in our commitment to find better ways of serving you. http://www.bluecross.com.ph/index.php?id=news&page=30