Elijah Joyce M.

Anilao September 18, 2021

Auditing for Specialized Transaction A18-25446

Look for an audited financial statement (AFS) of a company under the specialized industry in
the Philippines and list down observations from audit report and the financial statements.

Unlike other business model insurance company generate profit differently. Insurance
firms take money from their customers, invest it for a period of time and then pay out claims to
policyholders. Insurers take on and manage risk in exchange for a fee and any money that
remains after deducting expenses is profit for the insurance company. Thus, an insurance
company’s policyholders’ surplus serves as a financial buffer against catastrophic losses as well
as a source of funding for expansion. It is true for the audited financial statement of AIG
Philippine Insurance Inc., as they retained excess retained earnings over its paid-up capital as of
December 31, 2019 amounting to P76.5 million. According to the audit report this serves as an
additional reserve for future contingencies and to comply with the more robust RBC and
reserving requirements implemented by the IC effective January 1, 2017.

The financial statements of insurance companies show assets just like any other
company except for the appearance of reinsurance assets which is unfamiliar to me.
Moreover, insurers are liable for paying claims arising from the provision of insurance
contract unique to this specialized industry. Unique accounts like prepaid reinsurance
premiums, premiums receivable, and deferred acquisition costs are often stated following its
unique business model. Audited insurance company also includes risk management controls
which includes policies on underwriting, reinsurance, claims, credit control, finance, system
infrastructure and business continuity and recovery and serve as minimum guidance for the
Company.

Moreover, the minimum risk-based capital ratio for insurance companies was capped at
100% which is 90% higher than ban institutions which is deemed a unique characteristic for the
special industry. The purpose of this ratio is to make sure that an insurance company does not
assume more risk than it can handle.

2019-audited-financial-statement.pdf (aig.com.ph)