You are on page 1of 64

San Sebastian College - Recoletos



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
San Sebastian College - Recoletos

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.

San Sebastian College - Recoletos

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.

San Sebastian College - Recoletos



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


San Sebastian College - Recoletos

Figure 1

Philippine Annual Growth Rate (2015)


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.

San Sebastian College - Recoletos

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


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.

San Sebastian College - Recoletos

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
San Sebastian College - Recoletos

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.

San Sebastian College - Recoletos

Figure 3

Philippine Population 2016

San Sebastian College - Recoletos

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


Figure 4

Employment rate

10 | P a g e
San Sebastian College - Recoletos

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
San Sebastian College - Recoletos

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
San Sebastian College - Recoletos

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
San Sebastian College - Recoletos

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
San Sebastian College - Recoletos

Filipino Workers (OFWs) to provide some form of financial relief in the event of an


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
San Sebastian College - Recoletos

 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


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
San Sebastian College - Recoletos

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
San Sebastian College - Recoletos

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.


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


18 | P a g e
San Sebastian College - Recoletos



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
San Sebastian College - Recoletos



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
San Sebastian College - Recoletos

Figure 6

Industry Performance


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
San Sebastian College - Recoletos

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
San Sebastian College - Recoletos

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
San Sebastian College - Recoletos

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.


Figure 8

Ranking of Insurance Brokers

24 | P a g e
San Sebastian College - Recoletos

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


25 | P a g e
San Sebastian College - Recoletos

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


26 | P a g e
San Sebastian College - Recoletos

• 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
San Sebastian College - Recoletos


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
San Sebastian College - Recoletos

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
San Sebastian College - Recoletos

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
San Sebastian College - Recoletos

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
San Sebastian College - Recoletos


YEAR 2014 2013 2012

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
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
Debt Ratio
1.01 0.96 0.91
Debt to equity ratio
(125.66) 21.99 10.59
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


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
San Sebastian College - Recoletos

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
San Sebastian College - Recoletos


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


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
San Sebastian College - Recoletos


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
San Sebastian College - Recoletos


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
San Sebastian College - Recoletos

37 | P a g e
San Sebastian College - Recoletos

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


38 | P a g e
San Sebastian College - Recoletos

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
San Sebastian College - Recoletos


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


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

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
EQUITY 122,564,307 112,182,761 95,888,496

40 | P a g e
San Sebastian College - Recoletos

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 liabilities
Non-current portion of notes payable 90.79% 95.85% 100.00%
Total liabilities 141.01% 122.47% 100.00%

Share Capital 100.00% 100.00% 100.00%
Cumulative earnings -182.77% -3.70% 100.00%

-11.88% 58.97% 100.00%


41 | P a g e
San Sebastian College - Recoletos

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
San Sebastian College - Recoletos

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 liabilities
Non-current portion of notes payable 24.12% 27.82% 33.96%
Total liabilities 100.80% 95.65% 91.37%

Share Capital 4.08% 4.46% 5.21%
Cumulative earnings -4.88% -0.11% 3.41%

-0.80% 4.35% 8.63%

EQUITY 100.00% 100.00% 100.00%

43 | P a g e
San Sebastian College - Recoletos

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
San Sebastian College - Recoletos

Industry and Company Performance Analysis


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
San Sebastian College - Recoletos


Strategy Formulation

External Strategic Weight Rating Weighted Comments

Factors Scores

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
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
2. Regulatory 0.15 2 0.3 Increasing minimum paid-in capital
intervention and various amendments in the
insurance code may weaken the
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)


46 | P a g e
San Sebastian College - Recoletos

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


47 | P a g e
San Sebastian College - Recoletos


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

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


48 | P a g e
San Sebastian College - Recoletos

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
San Sebastian College - Recoletos

CPM Matrix

50 | P a g e
San Sebastian College - Recoletos

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
San Sebastian College - Recoletos


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
San Sebastian College - Recoletos

53 | P a g e
San Sebastian College - Recoletos


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


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
San Sebastian College - Recoletos

B. Objectives

We, the group researchers, uses the following objectives to guide us in our


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
San Sebastian College - Recoletos

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.


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,

56 | P a g e
San Sebastian College - Recoletos

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
San Sebastian College - Recoletos

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


Increase revenue by 8%


Activities Target Responsibility of

- 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
- Issuance of
stickers to
employees and

58 | P a g e
San Sebastian College - Recoletos


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
San Sebastian College - Recoletos

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%

Activities Target Responsibility of

- Establish key - Companies that - Marketing

partnerships to provide funeral Department

provide better services. - Top Management

insurance and

funeral services:

(St. Peters, La

funeraria Paz,


Estimated budget:

Representation expense of 1% for revenue earned due to this strategy.

60 | P a g e
San Sebastian College - Recoletos

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

Activities Target Responsibility of

- Giving one cavan Increase sales - Marketing

of rice to agents Department

for every 5 recruits - Top Management

of potential


- Giving groceries

for top 50


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
San Sebastian College - Recoletos

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%.

Activities Target Responsibility of

- 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


62 | P a g e
San Sebastian College - Recoletos

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.

Activities Target Responsibility of

- Reduction of - All IMG Members - International

number of tours department
to once a year. - Finance
- Increase Department
promotional - Promotion
milestone for Department

63 | P a g e
San Sebastian College - Recoletos

* Inflation rate is at 4% as projected by BSP reports.

64 | P a g e