Streme Fenel Peper

San Sebastian College - Recoletos
CHAPTER I
INTRODUCTION
A. Company Background
IMG is one of the few companies of its kind in the industry today, created
in the early 2000s, - a company dedicated to serving the financial needs of
individuals and families who are typically overlooked by the financial services
industry. IMG recognizes the need for widespread financial education, particularly
among middle income individuals and families who could readily benefit from
exposure to the latest financial concepts and solutions. Unlike many companies
that target only wealthy clients, IMG is dedicated to teaching everyday people how
to plan their financial futures and work toward their goals no matter what their
income. Driven by its mission to help people around the world achieve financial
independence, International Marketing Group and its thousands of associates
introduce simple financial concepts to help clients understand how to put their
money to work more effectively to move toward their goals. While many other
financial services companies have a "one size fits all" attitude with little or no
1|Page
product choice, International Marketing Group advocates the power of choice. IMG
has agreements with several of the leading companies in the financial services
and insurance industries allowing associates to offer clients a wide array of
products and services to choose from so they can find the ones that best fit their
needs. And as clients' needs change, IMG's diverse product selection can grow
with them.
IMG is one of the biggest and fastest growing financial distribution companies
in the US, Canada, Taiwan, Hongkong, Philippines and going worldwide. Main
Offices are located primarily in Makati, Davao, Cebu, and other small offices
scattered around the nation.
B. Research, Design and Methodology
Our research methodology required compiling of facts and data gathered thru
intensive research, information collected from various government affiliates online,
and provided by employees interviewed over the duration of the research. The
Insurance Committee’s website provided us the needed statistics and reports
regarding IMG’s industry. Financial Statements are brought upon to allow us a
better internal analysis of the company.
2|Page
Company Members are interviewed for explanations regarding the company’s
way of thinking and how they work. IMG has also provided a website to allow
passing individuals to learn more about the company.
C. Scope and Delimitation
The researched commenced during the summer of 2016, over a period of 2
months namely April and May. The information used in the study is limited to data
given by significant employees within the company, financial statements provided,
interviews of management personnel and sources available thru online
applications and services. The relevant range of the research covers the company
branch stationed in the Philippines, with the viewpoint of the main office in Makati
city. Other branches residing outside the country will not be included in the
research. The study will cover only the industry of IMG’s main source of income
as an insurance brokerage firm.
D. Statement of the Problem
The company is experiencing a 3 year net loss in its financial performance.
Research reveals that the company has issues regarding its liquidity, profitability
and in its financial leverage.
3|Page
CHAPTER II
EXTERNAL ANALYSIS
A. Economic Situation
The Economy of the Philippines is the 29th largest in the world, according
to 2016 International Monetary Fund statistics, and is also one of the emerging
markets. The Philippines economy grew an annual 6.3 percent in the December
quarter of 2015, accelerating from an upwardly revised 6.1 percent expansion in
the previous three months and above market consensus. It is the highest growth
since the fourth quarter of last year, as all sectors of the economy showed an
expansion: household spending, investment and exports expanded at a faster
rate while government expenditure remained robust. For full year of 2015, the
GDP Growth came in at 5.8 percent, slowing from a 6.1 percent expansion in
2014
4|Page
Figure 1
Philippine Annual Growth Rate (2015)
The
Economy of the Philippines is growing at a quite rapid rate. A Goldman Sachs
estimate determined that by the year 2050, the Philippines is expected to be the
14th largest economy in the world. According to the HSBC, in the same time
frame, the Philippines is expected to become the fourth largest economy in Asia
and the largest in the Southeast Asian region.
The economy of the Philippines has been growing at a steady rate and is
consistently showing improvements. This is for a number of reasons, including
government legislation to enhance investment and private sector job growth, the
industrialization of the Philippines and their rise as a major exporter of
semiconductors, electronic products, copper products, petroleum products and
other high-value items.
5|Page
While the economic situation of the Philippines is strong and stable, it still
faces the problems that many industrialized nations face, namely wealth disparity
and corruption. There are also growth disparities. While some regions see great
strides in economic development and wealth, others are still below the poverty
line.
Consumer prices in Philippines rose 1.1 percent in March of 2016, up
from 0.9 percent in February and in line with market consensus. A faster
increase in prices of food and non-alcoholic beverages offset a further decline in
cost of housing and utilities. Core consumer prices rose 1.5 percent from a year
earlier in March, the same pace as in the preceding month. On a monthly basis,
consumer prices rose 0.1 percent, following a 0.3 percent drop in February.
Inflation Rate in Philippines averaged 8.67 percent from 1958 until 2016,
reaching an all time high of 62.80 percent in September of 1984 and a record low
of -2.10 percent in January of 1959. Inflation Rate in Philippines is reported by
the National Statistics Office of Philippines.
6|Page
Figure 2
Philippine Inflation Rate
B. Socio-Cultural Forces
The insurance official said that the slow growth of insurance penetration
in the country may also be due to a cultural factor. We Filipinos are not long-term
thinkers. There might be some cultural that are more long-term planners.
Filipinos tend to be short-sighted. Many see insurance as a luxury rather than a
necessity, saying they do not fully appreciate and understand the benefits of
insurance. This is why the Philippines has a low insurance penetration which
currently stands at 1.7% even if it has a large population of over 100 million. The
country's penetration rate currently stands at 1.7%, below the average which is
7|Page
3% in the Asean region. But despite it having one of the lowest penetration rates
in the Asean region, industry players are optimistic on the growth potential of the
Philippine insurance sector. Insurers said better prospects for the sector are
present because of the growing middle class population, growing urbanization
and the relaxed bancassurance rules. A rise in premium income and revenue for
this year has been expected in the industry. Data from the Insurance
Commission showed the life insurance sector reported that its premium income
in 2014 went down 7% to P158.7 billion from P171.2 billion in 2013. The whole
industry including non-life insurance reported a total premium income of P188.96
billion last year, down 4.63% from P198.13 billion in 2013, official data also
indicated. Premium income is the revenue generated by insurance firms.
C. Demographic
The current population of the Philippines is 101,913,691 as of Thursday,
April 14, 2016, based on the latest United Nations estimates. The
Philippines population is equivalent to 1.37% of the population. The
Philippines ranks number 12 in the list of population. The population density in
the Philippines is 343 per Km2 (888 people per mi2).The total land area is
298,192 Km2 (115,133 sq. miles). 44.9 % of the population is urban (45,842,660
people in 2016). The median age in the Philippines is 24.4 years.
8|Page
Figure 3
Philippine Population 2016
9|Page
The number of employed persons in Philippines increased to 40047
Thousand in the first quarter of 2016 from 39779 Thousand in the fourth quarter
of 2015. Employed Persons in Philippines averaged 29371.38 Thousand from
1986 until 2016, reaching an all-time high of 40047 Thousand in the first quarter
of 2016 and a record low of 18567 Thousand in the second quarter of 1986.
Employed Persons in Philippines is reported by the National Statistics Office of
Philippines.
Figure 4
Employment rate
10 | P a g e
D. Technology
The insurance industry, like many other industries, is facing sweeping
changes driven by a confluence of business and technology forces fueled by
innovation. Insurance companies understand they likely need to become more
customer-focused, easier to do business with, more nimble, and increasingly
knowledge-rich. The interconnectivity between insurance technology and
consumers’ lives is increasing rapidly and insurers' insatiable desire for more
data to make better decisions and to reflect risk accurately while simultaneously
driving costs down never ends.
Application programming interfaces (APIs) have been elevated from a
development technique to a business model driver and boardroom consideration.
Public application programming interfaces (APIs) are proving to be successful in
multiple industries, and these models can inform the insurance industry’s
attempts. While at first glance, insurance may not appear to align with many of
the current market uses, taking a closer look at the interactions between insurers
and distributors, business partners, consumers, and regulatory bodies highlights
where opportunities for APIs exist, and–in fact–are succeeding. Looking though
this lens, both public and private APIs can provide value in four distinct ways:
through core insurance systems, in developing common insurance services,
through government regulatory agencies, and via intermediaries.
11 | P a g e
E. Political, Legal, and Government Forces
Amended Insurance Code
Republic Act No. 10607, signed by Philippine President Benigno S.
Aquino III last August 15, 2013, amended the 38-year old Presidential Decree
No. 612, otherwise known as “The Insurance Code.”
An increase in the paid-up capital requirements for both life and non-life
insurance companies was introduced in the amended Insurance Code to
strengthen the country’s insurance sector.
The amended law is requiring domestic life and non-life insurance
companies to possess paid-up capital equal to at least PHP1 billion. Provided
that a domestic insurance company is already doing business in the Philippines,
the following minimum net worth requirements have been imposed which will
increase every three years until 2022:
12 | P a g e
Figure 5
Minimum Net Worth Requirements
Minimum net worth consists of sum of paid-up capital, retained earnings,
unimpaired surplus and revalued assets as may be approved by the Insurance
Commissioner. The objective of the said increase is to ensure that insurance
companies will be in a position to meet their obligations to their policyholders at
the time of a catastrophe event.
A fixed six-year term for the Insurance Commission
The new Insurance Code also established bancassurance, a partnership
between a bank and an insurance firm where the latter can sell its insurance
products to the bank’s clients without requiring the bank to have equity ownership
of the insurance company.
13 | P a g e
Micro-insurance business was also institutionalised to provide protection
to low-wage earners against specific perils in exchange for regular premium
payment proportionate to the likelihood and cost of the risks involved.
Finance Secretary Cesar Purisima said the new Insurance Code will pave
the way for a stronger insurance sector that can better compete with foreign
counterparts. This will also help the insurance industry become a key link in
savings mobilisation and capital market development and making insurance more
affordable and relevant to the clients’ needs.
The amended law also gives a fixed six-year term to the Insurance Commissioner.
Regulatory updates
A new schedule of fees, charges and penalties as per IC Circular Letter
No. 2014-15 dated 15 May 2014 was imposed by the Insurance Commission
which have taken effect starting 31 May 2014 as duly approved by the Secretary
of the Department of Finance.
Compulsory insurance coverage for agency-hired migrant workers was
designed and imposed by the Insurance Commission covering all Overseas
14 | P a g e
Filipino Workers (OFWs) to provide some form of financial relief in the event of an
accident.
Other Legalities/Government Forces
 The Regulator
The Insurance Commissioner is the insurance regulator. The position is the
head of the Insurance Commission, a government agency under the Department
of Finance.
The Commission supervises and regulates the operations of insurance and
reinsurance corporations, mutual benefit associations, health maintenance
organisations and rating organisations, all of which need to be authorised.
Pre-need companies – companies that provide pre-need contracts, being
contracts for the provision of future payments or services including life, pension,
education and interment – must also be licensed by the Insurance Commission.
Insurance agents, general agents, resident agents, underwriters, insurance
brokers, adjusters, actuaries, and trustees for charitable uses must be licensed.
Authorisations and licenses must be renewed every three years.
15 | P a g e
 Control approvals
No person, other than an authorised domestic insurer, may acquire control
of any domestic insurer without giving 20 days’ prior written notice to the
domestic insurer of its intention to acquire control, and without obtaining the prior
written approval of the Insurance Commissioner.
Control means power to direct or cause the direction of the management
and policies of the domestic insurer, and is presumed to exist when one person
owns, controls or holds, 40 per cent or more of the voting shares of the domestic
insurer.
Directors and officers must satisfy fit and proper criteria.
F. Natural or Environmental Forces
Natural disasters are considered catastrophes and insurance companies
purchase their own insurance coverage, called reinsurance, to protect themselves
against these types of losses. Not only premiums are affected by unexpected
catastrophes – virtually every phase of an insurer’s operations is affected. Insurers
must respond, and respond swiftly, to their policyholders and this means more
than just paying out claims. Internal and external adjusters are assigned, third
party restoration and repairs firms must be retained and policyholders must be
16 | P a g e
reassured that they will be taken care of. Resources in the area of the loss become
scarce because of high demand and additional resources must be brought in from
far away areas, unaffected by the event, and this costs the insurer more dollars
than expected. This also holds true for large, non-catastrophic losses.
Recent catastrophe events
Typhoon Rammasun, locally known as Glenda, was the first typhoon to hit
the Philippines this year, following eight months after super typhoon Haiyan.
Catastrophe modelling firm AIR Worldwide reported that with sustained
winds of 157 kph (98 mph), typhoon Rammasun made landfall in the province of
Sorsogon on July 15, late afternoon local time, and headed toward Manila.
According to updates from National Disaster Risk Reduction and
Management Council (NDRRMC), as of 23 July 2014, a total of 98 people were
reported dead, over 118,000 houses were damaged, of which nearly 29,000 were
totally destroyed while over 89,000 were partially damaged. The cost of damages
reached over PHP10.46 billion (US$243 million), 85% of which accounted for
agricultural damage.
17 | P a g e
Based on the Philippines industrial cluster catalogue of Risk Management
Solutions (RMS), another catastrophe modelling firm, the industry is clustered
around Metro Manila and in areas to the north and south of the capital in Central
Luzon, which are located within the affected area of Rammasun.
Given that insurance penetration rate in the Philippines is relatively low,
insured losses are not expected to be significant as a result of this typhoon.
Conclusion
Due to the current legal requirement to increase capital and the recent
exposure of the Philippines to significant catastrophic events (earthquake, super
typhoons and floods) resulting in the rise of reinsurance spend, the challenges that
the industry confronts are becoming more and more complex.
The industry is on the verge of a paradigm shift as more and more
companies look for ways to effectively manage their risks and improve bottom line.
Analytics capabilities are becoming more prevalent within the market to assist
insurers and reinsurers in the challenges they face around catastrophe
management, actuarial, rating agency advisory and risk and capital strategy
expertise.
18 | P a g e
CHAPTER III
INDUSTRY ANALYSIS
A. Definition of the Industry
An industry is defined as a classification that refers to a group of companies
that are related in terms of their primary business activities. In modern economies,
there are dozens of different industry classifications, which are typically grouped
into larger categories called sectors.
IMG being an insurance brokerage firm, belongs to the insurance industry.
Return on Investment
Return on Investment 2015 2014 2013 2012

(Insurance Industry) 2.41% 1.90% 2.66% 2.57%
Return on Equity (IMG) 2014 2013 2012

IMG 596.26% -69.57% 8.70%
Industry 5.73% 8.46%
Return On Assets (IMG) 2014 2013 2012

IMG -4.78% -3.03% 0.75%
Industry 1.61% 1.64%
19 | P a g e
INSURANCE INDUSTRY
INSURANCE INDUSTRY NET INCOME ROSE BY 65.80% IN Q3
As of OCT. 29, 2015. | By the Insurance Commission
The insurance industry in the Philippines, composed of the life and non-life
insurance sectors, continued to report good financial performance and remained
in sound financial condition. The insurance industry posted an impressive growth
of 65.80% year-on-year in terms of net income during the third quarter of this
year, mainly due to the increase in underwriting and investment income. Based
on the preliminary data on the quarterly reports submitted by both the life and
non-life insurance companies. Much of the credit to the continued growth of the
insurance industry is attributable to increase in the two major sources income of
the industry: underwriting income and investment income.
20 | P a g e
Figure 6
Industry Performance
2015 TO BE A RECORD YEAR FOR THE INSURANCE INDUSTRY
lC Commissioner Dooc said that "This year, the insurance industry shall
surpass its highest premium production of P198.1 billion total premium recorded
in2013. The year 2015 promises to be the best year ever for the insurance
industry in the Philippines." Earlier this year, lC Commissioner Dooc projected a
combined premium income of P240 billion despite a slight decrease in last year's
performance compared to 2013. "Taking into account the industry's consistent

21 | P a g e
performance during the first three quarters, our target is still achievable if both
the life and non-life sectors will have a strong finish during the fourth quarter but
it will be a tall order.” said lC Commissioner Dooc.
- Size
 The company is an expansion made by its mother company
(WSB) to tackle the world. IMG has already established several
branches across the world: Hong Kong, Singapore, Macau,
Taiwan, Kuala Lumpur, Dubai, Abu Dhabi, Jeddah, Qatar,
Kuwait, Milan, Rome, Barcelona, Athens, Norway, Paris,
Belgium, Israel, Canada, and the US
 IMG has 3 main offices stationed in the Philippines. One in
Makati, Cebu, and in Davao as of the year 2016. Small offices
held by different IMG members are scattered throughout the
nation and works independently.
22 | P a g e
B. Industry Trends
The country’s life insurance sector ended 2015 on a high note with the
possibility of returning to 2013’s record highs. Insurance Commissioner
Emmanuel Dooc expected 2015 to be a record year for the industry after a
moderate decline a year earlier.
In the nine months to September last year, the Philippine insurance
industry generated over P172.4 billion in total premium income, up 29.7 percent
from P132.87 billion in the same period a year ago.
Given the sector’s upward trajectory, insurance firms predicted a repeat
of the record 2013 performance.
In 2013, the combined premiums from life and non-life insurance sectors
reached an all-time high of P198.1 billion while total premiums dipped 4.63
percent to P188.9 billion in 2014.
Industry net income, however, steadily increased in the past two years,
from P14.6 billion in 2013 to P16.4 billion the following year.
Over the past years, new players entered the industry, reflecting.
Insurance Commissioner Emmanuel Dooc said profitability was not the issue for
23 | P a g e
the industry in general, but rather the growth in premiums for both life and non-
life continued interest in the multi-billion-peso sector.
These include Ageas Insurance International Life of Belgium and Allianz
AG of Germany, one of the world’s biggest insurance and financial institutions.
MARKET SHARE (IMG)
Figure 8
Ranking of Insurance Brokers
24 | P a g e
Being ranked 58, competition will be tougher for IMG. Given that the
industry is still growing, IMG will need a deeper strategy to overtake its
competitors.
25 | P a g e
C. Industry Problem
Despite the insurance industry’s positive outlook, disruptions still occur
deep inside the sector.
Three of the biggest drivers of disruption include:
• Customer expectations – The widespread adoption of new
consumer technologies in all industries has created new needs for
and expectations of insurance solution and interaction channels.
• Pace of innovation – So far, incremental innovation has helped
insurers meet most new customer expectations. But, with the
demands of the shared economy, usage-based models, internet-of-
things (IoT), autonomous cars, and wearables, they have an
opportunity to do more radical innovations and experiment with new
business models. In this context, customers have a need for new
insurance solutions, and established carriers (i.e., incumbents) have
an opportunity to provide tailored products and services for different
segments.
26 | P a g e
• Start-ups – With easy access to open source frameworks, scaled
cloud computing and development On-Demand, technology barriers
to entry have been lowered. New players that have the ability to
innovate quickly are taking advantage of the opportunity to fill the
gaps that incumbents have not.
27 | P a g e
G. OPERATIONAL/PRODUCTION
I. Process
IMG mainly works as an insurance brokerage firm. It recruits and trains its
members to be brokers or agents. The members are then sent out and left to
themselves to devise their own strategies in selling and marketing IMG’s
products and services.
An insurance broker is a specialist in insurance and risk management.
Brokers act on behalf of their clients and provide advice in the interests of
their clients. Sometimes an insurance broker will act as agent of an insurer, but
where this occurs the situation should be fully explained to you.
A broker will help you identify your individual and/or business risks to help
you decide what to insure, and how to manage those risks in other ways.
An insurance broker might specialise in one specific type of insurance or
industry, or they might deal with many different types.
Insurance brokers can give you technical advice that can be very useful if
you need to make a claim.
28 | P a g e
Brokers are aware of the terms and conditions, benefits and exclusions
and costs of a wide range of competing insurance policies, so they can help you
find the most appropriate cover for your own circumstances.
Brokers can help arrange and place the cover with the chosen insurer
and can often provide advice on how to make the most of your insurance budget.
II. Capacity
The largest amount of insurance or reinsurance available from a company
or the market in general. Capacity is determined by financial strength and is also
used to refer to the additional amount of business (premium volume) that a
company or the total market could write based on excess (unused) capital—that
is, surplus capacity.
IMG’s capacity on its product and services are as limited as its business
partners. IMG shows no problem in the number of agents and brokers they
provide. IMG increases its manpower every day to supply its labour force.
29 | P a g e
III. Quality
With more than 10 years in the insurance industry, IMG makes sure to
provide satisfaction in their services and assurance in their products. The
company listens well to the customers and adjusts their gear to conclude a
mutual agreement in both parties in regards to their business.
Figure 18
Kaiser Ultimate Health Plan
30 | P a g e
IV. Technology
The company uses online applications to communicate to both its members
and clients. IMG has shown a large network over the internet, as its members
created blogs, videos, surveys and various types of online reviews made by both
affiliates and external parties. IMG also provides a website for ease of access
and as a way to market its services online. Members are granted their very own
online accounts where they are able to manage their resources and documents
within the company.
V. Research and Development
IMG’s top employees, advisers, and its very own owners handle all financial
and marketing-related strategies. Long-term planning has been observed in the
company. Daily improvements and adjustments in their trainings, seminars, and
internal processes are felt inside by everyone inside the company. Surveys are
handed out by its members to external parties and used to evaluate their
services. IMG makes sure to read reviews published about them and tries to
implement actions to ensure they work in a high quality fashion.
31 | P a g e
H. FINANCIAL PERFORMANCE
YEAR 2014 2013 2012

PROFITABILITY RATIOS
Return of net sales to
assets 0.46 0.44 0.34
Return on Sales
(0.14) (0.08) 0.70
Gross Profit Margin
0.50 0.49 0.52
Operating Margin
(0.10) (0.02) 0.04
LIQUIDITY RATIOS
Current Ratio
0.72 0.78 0.84
Accounts Receivable
turnover 5.00 4.86 7.94
Accounts Receivable
turnover in days 72.02 74.03 45.31
LEVERAGE RATIO
Debt Ratio
1.01 0.96 0.91
Debt to equity ratio
(125.66) 21.99 10.59
EFFICIENCY RATIO
Current Asset Turnover
0.80 0.77 0.73
Fixed Asset Turnovers
1.17 0.99 0.72
Asset Turnover
0.44 0.41 0.35
PROFITABILITY RATIOS
Ratio of net sales to asset - is an indicator of how profitable a company is
relative to its total assets, it gives an idea as to how efficient management is at
using its assets to generate earnings. From 2012 to 2013 return of net sales to
32 | P a g e
assets increases due to increase in commission income by 37% while assets
increased by 17%. Management efficiency in using the asset is almost the same
on 2014.
Gross profit margin – is a ratio that measures how much of every peso of
revenues is left over after paying direct cost. IMG’s gross profit margin is almost
consistent, in 2013 it drops by 3% but eventually after a year they can recover at
least 1%x
Operating margin – is a ratio used to measure a company's pricing strategy
and operating efficiency. Operating margin is a measurement of what proportion
of a company's revenue is left over after paying all of its expenses. IMG gross
margin is almost half of its income but it is not enough to cover its operating
expenses, resulting to net loss starting 2013-2014
Return on Sales - is a ratio used to evaluate a company's operational efficiency
and it is computed by dividing net income to net sales. As seen in the graph IMG
experience net loss, although commission income increase it’s insufficient to
cover it operating expense and interest expense.
33 | P a g e
LIQUIDITY RATIOS
Current Ratio – is a ratio that measures a firm's ability to pay off its short-term
liabilities with its current assets. IMGs asset are efficient enough to cover its
liability.
Accounts Receivable turnover – is the number of times per year that a
business collects its average accounts receivable. The ratio is intended to
evaluate the ability of a company to efficiently issue credit to its customers and
collect funds from them in a timely manner. The accounts receivable collected
per year was 8 times but it decreases to 5 times per year starting 2013
Accounts Receivable turnover in days- is a ratio to determine how many days
they can be able to collect is receivables. IMG are able to collect their average
accounts receivable within 72-75 days from 45 days, due the decrease in its
accounts receivable turnover
34 | P a g e
LEVERAGE RATIO
Debt Ratio – is defined as the ratio of total – long-term and short-term – debt to
total assets, expressed as a decimal or percentage. It can be interpreted as the
proportion of a company's assets that are financed by debt. IMGs total debt
exceeds total asset in 2014.Meaning that the company tends to use loans to pay
for its assets.
Debt to equity ratio – is a debt ratio used to measure a company's financial
leverage, calculated by dividing a company's total liabilities by its stockholders'
equity. The D/E ratio indicates how much debt a company is using to finance its
assets relative to the amount of value represented in shareholders' equity. The
ratio shows that IMG tends to use loans and payables to finance its equity.
35 | P a g e
EFFICIENCY RATIO
Current Asset turnover – that indicates how efficiently a firm is using its current
assets to generate revenue. IMG is somehow showing inefficiency regarding to
the use of its current assets to generate revenues.
Fixed Asset Turnovers –This ratio specifically measures how able a company
is to generate net sales from fixed-asset investments. Ratio shows that the
company has made a large investment in fixed assets, with a time delay before
the new assets start generating revenues starting from 2012 and has slowly
starting to generate overtime.
Asset Turnover – Asset turnover ratio is the ratio of the value of a
company’s sales or revenues generated relative to the value of its assets. The
Asset Turnover ratio can often be used as an indicator of the efficiency with
which a company is deploying its assets in generating revenue. Shows that the
company shows weakness in efficiently using its assets to gain revenue
36 | P a g e
37 | P a g e
Horizontal Analysis
2014 2013 2012

Commission Income 162% 137% 100%
Direct Costs 172% 147% 100%
Gross Profit 153% 128% 100%
Operating Expenses 200% 146% 100%
Operating Profit (Loss) -384% -80% 100%
Interest Income 126% 141% 100%
Interest Expense 647% 673% 100%
Profit (Loss) Before Income Tax -767% -362% 100%
Income Tax Expense 656% 103% 100%
Net Profit (Loss) -815% -472% 100%
A horizontal analysis is a procedure in fundamental analysis in which an analyst
compares ratios or line items in a company's financial statements over a certain
period of time. Based on the percentage given, IMGs commission income every
year increase but direct cost and operating expense increases more than the
commission income. While interest expense rapidly increase to 600+% due to
the 30million loan from a bank with a 7% interest per annum. Resulting to a net
loss
38 | P a g e
Vertical Analysis
2014 2013 2012

Commission Income 100.00% 100.00% 100.00%
Direct Costs -50.44% -51.03% -47.55%
Gross Profit 49.56% 48.97% 52.45%
Operating Expenses -59.47% -51.39% -48.26%
Operating Profit (Loss) -9.92% -2.43% 4.19%
Interest Income 0.03% 0.04% 0.04%
Interest Expense -4.65% -5.71% -1.16%
Profit (Loss) Before Income Tax -14.53% -8.09% 3.07%
Income Tax Expense 3.70% 0.69% 0.91%
Net Profit (Loss) -10.84% -7.41% 2.16%
Vertical analysis sometimes is referred to as “common-size analysis” because
all of the amounts for a given year are converted into percentages of a key
financial statement component. Looking at the ratios starting 2013 the
percentage of direct cost is higher than its income by 51.03% and it cannot cover
operating expense plus the interest expense of a 30million loan from a bank
resulting to a net loss.
39 | P a g e
STATEMENT OF FINANCIAL POSITION

Assets 2014 2013 2012
Current Assets
Cash 26,865,538 24,140,680 16,149,842
Accounts receivable 11,196,314 10,445,470 8,405,166
Creditable Withholding Tax 27,892,864 23,701,674 19,957,348
Other Current Assets 1,261,169 1,253,039 1,473,389
Total Current Assets 67,215,885 59,540,863 45,985,745
Non-Current Assets
Property and equipment-net 45,989,657 46,169,889 46,199,857
Deferred Tax asset 4,772,677 2,237,691 1,474,857
Other Non-Current Assets 4,586,088 4,234,318 2,228,707
Total Non-Current Asset 55,348,422 52,641,898 49,903,421
Total Assets 122,564,307 112,182,761 95,889,166
LIABILITIES AND EQUITY
Current Liabilities
Accounts Payable and accrued expenses 92,337,044 74,743,210 53,806,504
Current portion of notes payable 1,648,340 1,350,132 1,247,863
Total Current Liabilities 93,985,384 76,093,342 55,054,367
Non-current liabilities
Non-current portion of notes payable 29,562,085 31,210,425 32,560,557
Total liabilities 123,547,469 107,303,767 87,614,924
Equity
Share Capital 5,000,000 5,000,000 5,000,000
Cumulative earnings -5,983,162 -121,006 3,273,572
-983,162 4,878,994 8,273,572
TOTAL LIABILITIES AND SHAREHOLDERS
EQUITY 122,564,307 112,182,761 95,888,496
40 | P a g e
Assets
Current Assets Horizontal Analysis
Cash 166.35% 149.48% 100.00%
Accounts receivable 133.21% 124.27% 100.00%
Creditable Withholding Tax 139.76% 118.76% 100.00%
Other Current Assets 85.60% 85.04% 100.00%
Total Current Assets 146.17% 129.48% 100.00%
Non-Current Assets
Property and equipment-net 99.55% 99.94% 100.00%
Deferred Tax asset 323.60% 151.72% 100.00%
Other Non-Current Assets 205.77% 189.99% 100.00%
Total Non-Current Asset 110.91% 105.49% 100.00%
Total Assets 127.82% 116.99% 100.00%
Current Liabilities
Accounts Payable and accrued expenses 171.61% 138.91% 100.00%
Current portion of notes payable 132.09% 108.20% 100.00%
Total Current Liabilities 170.71% 138.21% 100.00%
Non-current portion of notes payable 90.79% 95.85% 100.00%
Total liabilities 141.01% 122.47% 100.00%
Equity
Share Capital 100.00% 100.00% 100.00%
Cumulative earnings -182.77% -3.70% 100.00%
-11.88% 58.97% 100.00%

TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 127.82% 116.99% 100.00%
41 | P a g e
A horizontal analysis is a procedure in fundamental analysis in which an analyst
compares ratios or line items in a company's financial statements over a certain
period of time. Analysis shows that IMG has a problem of a sudden increase in
liabilities and its equity being negatively affected due to net losses.
42 | P a g e
Assets
Current Assets Vertical Analysis
Cash 21.92% 21.52% 16.84%
Accounts receivable 9.14% 9.31% 8.77%
Creditable Withholding Tax 22.76% 21.13% 20.81%
Other Current Assets 1.03% 1.12% 1.54%
Total Current Assets 54.84% 53.07% 47.96%
Non-Current Assets
Property and equipment-net 37.52% 41.16% 48.18%
Deferred Tax asset 3.89% 1.99% 1.54%
Other Non-Current Assets 3.74% 3.77% 2.32%
Total Non-Current Asset 45.16% 46.93% 52.04%
Total Assets 100.00% 100.00% 100.00%
Current Liabilities
Accounts Payable and accrued expenses 75.34% 66.63% 56.11%
Current portion of notes payable 1.34% 1.20% 1.30%
Total Current Liabilities 76.68% 67.83% 57.41%
Non-current portion of notes payable 24.12% 27.82% 33.96%
Total liabilities 100.80% 95.65% 91.37%
Equity
Share Capital 4.08% 4.46% 5.21%
Cumulative earnings -4.88% -0.11% 3.41%
-0.80% 4.35% 8.63%

TOTAL LIABILITIES AND SHAREHOLDERS
EQUITY 100.00% 100.00% 100.00%
43 | P a g e
Vertical analysis is a method of financial statement analysis in which each entry
for each of the three major categories of accounts (assets, liabilities and equities)
in a balance sheet is represented as a proportion of the total account.
Percentages shows that, the companies liabilities, which shows a larger
percentage than its assets, are steadily increasing and retained earnings
gradually being decreased over time is alarming to the company.
44 | P a g e
Industry and Company Performance Analysis
2014
Per Industry Per IMG
Total assets 113.95% 109.25%
Total Liabilities 115.46% 115.14%
Total Networth 165.43% -20.15%
Total Paid-Up Capital 107.61% 100.00%
Total Investment 156.72% 66.61%
Total Premium 95.37% 118.01%
Total Benefits Payment/Losses Incurred 110.42% N/A
Total Net Income (loss) 112.02% -72.70%
The industry percentages are used as a benchmark to gauge IMG’s
performances in each category. The analysis shows that IMG has been able to
meet and maintain acceptable amounts in certain areas, but it also shows that
IMG is having profitability issues and must therefore be looked upon.
45 | P a g e
CHAPTER V
Strategy Formulation
External Strategic Weight Rating Weighted Comments

Factors Scores
Opportunities
1. Continuously 0.20 3 0.6 Due to the increase in net income
improving of the insurance industry, the future
economy looks good for IMG
2. Increasing no. 0.15 4 0.6 This should provide IMG with
of Market plenty of clients and members to
increase the company’s strength as
a whole
3. Availability of 0.1 3 0.3 IMG provides online sites and apps
Technology to cater the needs of its members
and clients alike. This shows the
company is flexible to its
technology
Threats
1. Growing 0.2 3 0.6 Competitors are showing rapid
competitors growth combined with the
emergence of new insurance
companies puts IMG in a tough
position
2. Regulatory 0.15 2 0.3 Increasing minimum paid-in capital
intervention and various amendments in the
insurance code may weaken the
company
3. Natural 0.05 2 0.1 Natural calamities may increase
Calamities insurance company liability.
TOTAL 1 2.50
Scores: 4 (Superior response), 3 (Above average response), 2 (Average response), 1
(Poor response)
EFAS MATRIX
46 | P a g e
Based on the External Strategic Factors Analysis System table,
International Marketing Group rated 2.50 out of 5. This means that the
company’s response is average and that it responded very well to one threat,
specifically growing competitors. IMG has expanded globally throughout the
years with its presence. Continuously improving economy and increasing
number of middle class is a big opportunity to IMG it means more clients,
potential investors and a bigger market.
Fortunately international marketing group responds well to the regulatory
intervention and expanding distribution preferences, in which it scored above
average. Having natural calamities is always a challenge and sometimes out of
IMG's control due to climate change.
Overall, the company is showing its awareness to both factors and responds
accordingly.
47 | P a g e
INTERNAL STRATEGIC
FACTORS WEIGHT RATING WEIGHTED AVE. COMMENTS
Strengths
their adaptability
to situations
1. Flexibility of system and proved favourable
its agents 0.11 4.00 0.44 to the company
diversification used
by the company
2. Versatility in the financial gave them some
industry 0.05 3.00 0.15 financial leverage
Focusing on
clients satisfaction
makes their
3. Quality Products and arsenal formidable
Services 0.10 4.00 0.40 in the industry
Hardworking and
4.Passion and dedication of persistent in their
its employees and members 0.10 4.00 0.40 business
Weaknesses
1. Increasing admin. May proved fatal if
Expenses and debt 0.27 1.00 0.27 kept unchecked
Liability exceeds
the company’s
2. Liquidity and insolvency 0.15 1.00 0.15 assets
costs that could be

avoided but
essential to their
3. Operating Expenses plan should at least
0.15 1.00 0.15 be minimized
Inevitable number
of agents are
4. Declining of existing backing out due to
agents 0.07 2.00 0.14 wrong mind-sets.
1.00 2.10
IFAS MATRIX
48 | P a g e
Judging by the score, IMG is struggling in its financial stability due to its increasing
expenses. The company must maximize its strength to offset its weaknesses. As of now
we could say that the company’s expenses are growing faster than its revenues and it
has been neglected resulting into the company’s net loss. The company must address its
issues to it payables and expenses.
49 | P a g e
CPM Matrix
50 | P a g e
IMG scores lower than the other three insurance brokers. Financial
stability for IMG rates 2 while BDO, Intertrade and Marsh scores 4 due to
becoming the top 3 insurance brokers in the Philippines. Service quality and
public image is the same among the four companies based on the customer’s
loyalty and satisfaction. Geographical location are same among the four
companies because they are all in the trade and financial heart of the
Philippines, the Makati city and taguig city. Strategic partnership and alliance
are also present in IMG, in fact it has some of the strongest partners in the
industry having 4 of the top 10 companies. Staff orientation scores low
because based on the organization the company also has a problems
regarding its people inside. Also there research and development has its plans
of expanding their market by financial literacy seminars. BDO, Intertrade and
Marsh are generous regarding benefits to its customer that’s why IMG only
scores 3. Charges and fees are relatively cheaper in IMG.
51 | P a g e
IE MATRIX
With the score of 2.5(EFE) and 2.1 (IFE) the point falls in the middle, signalling
that the company should Hold and Maintain its current position in the industry.
The company is encourage to pursue on increasing market penetration and
product development.
52 | P a g e
53 | P a g e
CHAPTER VI
Strategy Implementation
A. Recommendations
By analyzing and studying all compiled data and information regarding
the company’s internal and external factors, we have presented the following
recommendations:
1. To focus on minimizing operating costs
2. Take advantage of the Philippines growing market
3. Improve membership trainings and seminars for empowerment
4. Keep track of ever-changing economy and industry trends
5. Maintain and avoid decline of members thru increase recruitment
By doing so, the company will be able to hold out during the long run
and avoid being burdened by their expenses. This also allows them to
maximize returns of the company’s growing market.
54 | P a g e
B. Objectives
We, the group researchers, uses the following objectives to guide us in our
strategy.
I. Short Run:
1. To minimize its growing costs
2. Avoid net loss in its income statement.
3. Increase workforce
4. Maintain current market standing
II. Long run:
1. Gain favorable market position to allow IMG to compete
against top competitors in the industry.
2. Company expansion
55 | P a g e
C. Program outline and breakdown:
Program Title: Strategical Membership and Recruitment Training (SMRT)
Objective: A workshop to instill new marketing strategies and techniques to the
members of the company, developing skills on par with professionals. To provide
members a dose of fresh motivation and confidence within themselves.
Expected Output:
 Recruitment – increase by at least 10% to 15%
 Sales & Productivity – increase by 6% on y1, 8% on y2, 10% on y3.
Details:
Activities Target Responsibility of
- Seminars and - Members ranking - Members with

training Senior Marketing ranking of EVC and
meetings to be Director and Below CEO
held in IMG’s - Top Management
main offices - HR department
(Davao, Makati,
Cebu)
56 | P a g e
Estimated Budget:
Guest Speakers (P3,000/hr x 3hrs x 2

sessions) P 54,000
Food and Drinks (300 persons x P50) 15,000
Training materials (300 persons x P35) 10,500
Total P 79,500
*Amounts Are based on a per session basis, 3 hours each session.

**Duration of workshops will be held twice a month.
57 | P a g e
Program Title: “Getting to know each other “
Objectives: To increase possible recruits and product awareness by
reaching out to areas unfamiliar to the company. To
increase Market Share and customer familiarity.
Expected Output: By doing so will increase brand awareness and open new
opportunities to market the company’s products and
services.
Increase revenue by 8%
Details:
- Sponsorship - Company members - Marketing

thru company and employees Department
anniversaries - Middle class - IT Department
and events Netizens. - Promotions
- Online Department
advertisements - Finance
thru social Department
media and video - Top Management
presentations.
- Issuance of
company
stickers to
employees and
agents
-
58 | P a g e
ESTIMATED BUDGET:
Events sponsorship ( 30,000 x 30) 900,000

Stickers ( 8 x 3,600) 28,800
Print Ads (Tarpaulin – Events:
6x4xP25x3pcs) 1,800
Total 930,600
59 | P a g e
Program Title: “Till death do us part”
Objective: To gain leverage on areas not usually covered by the
company and product development.
Expected Output:
 New business partnerships
 Increase Revenue by at least 8%
- Establish key - Companies that - Marketing
partnerships to provide funeral Department
provide better services. - Top Management
insurance and
funeral services:
(St. Peters, La
funeraria Paz,
etc.)
Estimated budget:
Representation expense of 1% for revenue earned due to this strategy.
60 | P a g e
Program Title: “We will Rice again”
Objective: To boost agents’ motivation and attract potential customers
Expected Output:
 Inactive agents will become active
 Expand our market
 An increase in commission income by 7% annually
- Giving one cavan Increase sales - Marketing
of rice to agents Department
for every 5 recruits - Top Management
of potential
customers
- Giving groceries
for top 50
hardworking
agents per branch
Estimated Budget:
Cavan of rice (annually 2,000 x 144) P288,000
Groceries (500/person x 30 x 12 x 3) 540,000
Total P828,000
61 | P a g e
Program Title: “Lessen the load.”
Objective: This is to lower the company’s payables improving financial stability
Expected Output: Decrease long term payables by 34% and interest expense
by 58%.
- IMG Owners must - Liability - Top Management
achieve an Deduction - Finance
additional Department
investment of 30
million by the end
of the year.
- 10 million goes to
long term payables
and 20 million to
short term
payables
62 | P a g e
Program Title: Challenge Accepted
Objective: To minimize operating expenses and challenge each member to
work harder for their goals.
Expected Output: Costs reduction of 10% annually.
- Reduction of - All IMG Members - International

number of tours department
to once a year. - Finance
- Increase Department
promotional - Promotion
milestone for Department
agents
63 | P a g e
* Inflation rate is at 4% as projected by BSP reports.
64 | P a g e

Streme Fenel Peper

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Streme Fenel Peper

Uploaded by

Copyright:

Available Formats

San Sebastian College - Recoletos

in the early 2000s, - a company dedicated to serving the financial needs of

independence, International Marketing Group and its thousands of associates

and insurance industries allowing associates to offer clients a wide array of

scattered around the nation.

B. Research, Design and Methodology

intensive research, information collected from various government affiliates online,

Insurance Committee’s website provided us the needed statistics and reports

regarding IMG’s industry. Financial Statements are brought upon to allow us a

better internal analysis of the company.

Company Members are interviewed for explanations regarding the company’s

passing individuals to learn more about the company.

C. Scope and Delimitation

The researched commenced during the summer of 2016, over a period of 2

given by significant employees within the company, financial statements provided,

interviews of management personnel and sources available thru online

as an insurance brokerage firm.

D. Statement of the Problem

The company is experiencing a 3 year net loss in its financial performance.

and in its financial leverage.

quarter of 2015, accelerating from an upwardly revised 6.1 percent expansion in

expansion: household spending, investment and exports expanded at a faster

Philippine Annual Growth Rate (2015)

Economy of the Philippines is growing at a quite rapid rate. A Goldman Sachs

and the largest in the Southeast Asian region.

consistently showing improvements. This is for a number of reasons, including

industrialization of the Philippines and their rise as a major exporter of

semiconductors, electronic products, copper products, petroleum products and

other high-value items.

Consumer prices in Philippines rose 1.1 percent in March of 2016, up

increase in prices of food and non-alcoholic beverages offset a further decline in

of -2.10 percent in January of 1959. Inflation Rate in Philippines is reported by

the National Statistics Office of Philippines.

Philippine Inflation Rate

Filipinos tend to be short-sighted. Many see insurance as a luxury rather than a

present because of the growing middle class population, growing urbanization

industry including non-life insurance reported a total premium income of P188.96

indicated. Premium income is the revenue generated by insurance firms.

The current population of the Philippines is 101,913,691 as of Thursday,

Philippines population is equivalent to 1.37% of the population. The

Philippines ranks number 12 in the list of population. The population density in

people in 2016). The median age in the Philippines is 24.4 years.

Philippine Population 2016

The number of employed persons in Philippines increased to 40047

of 2015. Employed Persons in Philippines averaged 29371.38 Thousand from

Employed Persons in Philippines is reported by the National Statistics Office of

The insurance industry, like many other industries, is facing sweeping

changes driven by a confluence of business and technology forces fueled by

innovation. Insurance companies understand they likely need to become more

customer-focused, easier to do business with, more nimble, and increasingly

knowledge-rich. The interconnectivity between insurance technology and

driving costs down never ends.

Application programming interfaces (APIs) have been elevated from a

development technique to a business model driver and boardroom consideration.

Public application programming interfaces (APIs) are proving to be successful in

and distributors, business partners, consumers, and regulatory bodies highlights

through core insurance systems, in developing common insurance services,

through government regulatory agencies, and via intermediaries.

E. Political, Legal, and Government Forces

Amended Insurance Code

Republic Act No. 10607, signed by Philippine President Benigno S.

No. 612, otherwise known as “The Insurance Code.”

insurance companies was introduced in the amended Insurance Code to

strengthen the country’s insurance sector.