AMB Country Risk Report Our Insight, Your Advantage.

August 18, 2015

Philippines
Country Risk Tier s4HE#OUNTRY2ISK4IER#24 REFLECTS!-"ESTSASSESSMENT
OFTHREECATEGORIESOFRISK%CONOMIC0OLITICALAND&INANCIAL
3YSTEM2ISK
CRT-4
s4HE0HILIPPINESHASHIGHLEVELSOFPOLITICALANDFINANCIAL
SYSTEMRISKANDAMODERATELEVELOFECONOMICRISK!-"EST
CONSIDERSTHEMAJORITYOFCOUNTRIESIN3OUTHEAST!SIATOBE
Economic Risk CATEGORIZEDAS#24 OR#24 4HEEXCEPTIONSARE-ICRONESIA
AND0APUA.EW'UINEAAS#24 COUNTRIESAND3INGAPORETHE
SOLE#24 COUNTRY
Moderate

Low High
s4HE0HILIPPINESECONOMYHASPERFORMEDWELLINRECENTYEARS
WITHACONTINUEDFAVORABLEOUTLOOKINTHENEARTERM'ROSS
DOMESTICPRODUCT'$0 GROWTHISPROJECTEDATIN
Very Low Very High HIGHERCONSUMEREXPENDITURESINVESTMENTSANDEXPORTSWILL
FACILITATEFURTHERPOSITIVEDEVELOPMENT'$0GROWTHOVERTHE
NEXTCOUPLEOFYEARSISESTIMATEDINTHE RANGE
Political Risk

Moderate

Low High

Russia

Very Low Very High

Sakhalin

Kazakhstan nd
s
la
Is
Mongolia ril

Financial System Risk Russia

Ku

Georgia Kyrgyzstan
Armenia Azerbaijan
Uzbekistan
Tajikistan North Korea
Turkmenistan

Moderate South
Korea Japan
China
Iraq Afghanistan
Low High Iran

Kuwait
Pakistan Nepal
Bahrain Bhutan

Qatar
Saudi Arabia Bangladesh
U.A.E.
Taiwan
Oman Myanmar Northern Mariana Islands
India Laos Hong Kong

Very Low Very High

Macau

Thailand
Yemen Vietnam Philippines

Cambodia Guam
Dijbouti

Somalia
Sri Lanka
Palau
Brunei Federated States
of Micronesia
Malaysia
Singapore
Borneo
Sumatra
New Guinea
Seychelles
Indonesia
Papua Solomon Islands
New Guinea
East Timor

Comoros Coral Sea

Islands

Mauritius

For information on companies followed

Madagascar
Reunion Australia New Caledonia

Market Outlooks
CRT 1 2 3 4 5
Copyright 2015 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise. 1
AMB Country Risk Report Philippines

Regional Summary: Southeast Asia

Vital Statistics 2014
s%CONOMICGROWTHFORTHEREGIONWILL Nominal GDP USD bn 284.93
VARYDEPENDINGONCOUNTRYSPECIFIC Population mil 99.4
FACTORS'ROSSDOMESTICPRODUCTGROWTHFOR GDP Per Capita USD 2,865
THE!SSOCIATIONOF3OUTHEAST!SIAN.ATIONS Real GDP Growth % 6.1
!3%!. ASAWHOLEISFORECASTEDAT Inflation Rate % 4.2
FORANDFOR'ROWTHIS Premiums Written (Life) USD mil 4,420
EXPECTEDTOBEDRIVENBYEXPORTSANDAN Premiums Written (Non-Life) USD mil 1,369
INCREASEINCONSUMERCONSUMPTION Premiums Growth (2013 - 2014) % 11.5

s0OTENTIALEXTERNALRISKSFORTHEREGIONIN Regional Comparison

THECOMINGYEARINCLUDETHESLOWDOWNIN Country Risk Tier
THE#HINESEECONOMYTHENORMALIZATION Philippines CRT-4
OFTHE5NITED3TATESMONETARYPOLICY Indonesia CRT-4
POTENTIALEXCHANGERATEVOLATILITYLOWER Malaysia CRT-3
COMMODITYPRICESREGIONALUNRESTANDTHE Singapore CRT-1
POTENTIALFORINCREASEDPOLITICALINSTABILITY Thailand CRT-3
Vietnam CRT-4
s0OLITICALCHANGESANDSOCIALUNREST Source: IMF, Axco, Swiss Re and A.M. Best
HAVETHEPOTENTIALTOAFFECTFOREIGNDIRECT
INVESTMENTINFLOWSANDTOURISMREVENUES
4HEREGIONHASBEENATTRACTIVEDUETO
LOWLABORCOSTSTHEPREVALENCEOFNATURAL
RESOURCESANDTHENEEDFORNEWAND
IMPROVEDLARGESCALEINFRASTRUCTURE

Economic Risk: Moderate Economic Growth

s4HE0HILIPPINESHASAFAIRLYWELL 9

DIVERSIFIEDECONOMYTHATISBASED Real GDP CPI Inflation

ONSERVICESANDMANUFACTURINGWITH 8

REVENUEANDCONSUMPTIONSUPPORTEDBY 7

REMITTANCES4HECOUNTRYHASAHIGHLEVEL
OFPOVERTYWITHTHEAVERAGE'$0PER 6

CAPITAATAPPROXIMATELYPERYEAR 5
%

s)TSRELIANCEONCOMMODITYEXPORTS 4

PRIMARILYAGRICULTURALGOODS ANDEXPOSURE 3

TOVOLATILECYCLESINGLOBALELECTRONICS
DEMANDHASLEFTTHECOUNTRYVULNERABLETO 2

EXTERNALECONOMICCONDITIONS 1

s!SARESULTOFLOWEROILPRICESINFLATIONIS 0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

FORECASTEDATFORWHICHISATTHE Source: IMF World Economic Outlook and A.M. Best
LOWERENDOFTHECENTRALBANKSTARGETEDRANGE

s,OWERCOMMODITYPRICESWILLHELP
DRIVEGROWTHINDUETOINCREASED
HOUSEHOLDCONSUMPTION
2
AMB Country Risk Report Philippines

Political Risk: High

Political Risk Summary
Score 1 (best) to 5 (worst) s0RESIDENTIALELECTIONSAREHELDEVERY
SIXYEARSWITHTHEPRESIDENTSERVINGONLY
Philippines World Average
ONETERM4HENEXTPRESIDENTIALELECTIONIS
International Transactions
Policy SCHEDULEDFOR-AY
5

Legal System 4 Monetary Policy s4HEPOLITICALSYSTEMISCHARACTERIZED

3
BYALACKOFTRADITIONALPOLITICALPARTIES
THATOFFERBROADBASEDPOLICIES4HISLEADS
2
TOGENERALPOLITICALINSTABILITYANDWEAK
Regional Stability 1 Fiscal Policy POLITICALINSTITUTIONS
0
s4HEPRESIDENTVIEWSCORRUPTIONASAMAJOR
IMPEDIMENTTOFOREIGNDIRECTINVESTMENTAND
HASPRIORITIZEDANTI CORRUPTIONMEASURESAS
Social Stability Business Environment AMEANSTOIMPROVETHECOUNTRYSBUSINESS
ENVIRONMENT!DDITIONALMEASURESAIMED
ATDEVELOPINGTHEBUSINESSENVIRONMENT
Government Stability Labor Flexibility INCLUDEINCREASEDINFRASTRUCTURESPENDING
ANDREGULATORYSUPERVISION
Source: A.M. Best

s2ECENTCORRUPTIONSCANDALSHAVE
ADVERSELYAFFECTEDTHERULINGPARTIES
POPULARITYUNDERMININGITSABILITYTO
IMPLEMENTSIGNIFICANTREFORMS

s3ECURITYRISKSINCLUDETHETHREATOF
INSURGENTORTERRORISTATTACKSFROMA
DIVERSEPOPULATION
GDP Per Capita and Population
for Selected Countries
60,000 300
Financial System Risk: High
GDP Per Capita Population

50,000 250
s4HE0HILIPPINEINSURANCESECTORIS
REGULATEDBYTHE)NSURANCE#OMMISSION
WHICHISUNDERTHE$EPARTMENTOF
40,000 200
&INANCEACCORDINGTOTHEPROVISIONSOFTHE
)NSURANCE#ODE
Millions
USD

30,000 150

s&INANCIALSECTORSTABILITYHASIMPROVED
INRECENTYEARSASTHE"ANGKO3ENTRALNG
20,000 100
0ILIPINAS"30 HASSTRENGTHENEDITSOVERSIGHT

10,000 50
s"ANKSAREWELLCAPITALIZEDWITHLIMITED
CONNECTIONSTOGLOBALFINANCIALMARKETS
0
Philippines Indonesia Malaysia Singapore Thailand Vietnam
0
s&INANCIALMARKETSCOULDEXPERIENCE
VOLATILITYASARESULTOFDIVERGENTMONETARY
Source: IMF and A.M. Best
POLICIESINMOREADVANCEDECONOMIES
3
AMB Country Risk Report Philippines

GUIDE TO BESTS COUNTRY RISK TIERS

A.M. Best defines country risk as the risk that country-specific factors could adversely affect the claims-paying ability of an insurer. Country risk is
evaluated and factored into all Bests Credit Ratings. Countries are placed into one of five tiers, ranging from CRT-1 (Country Risk Tier 1), denoting
a stable environment with the least amount of risk, to CRT-5 (Country Risk Tier 5) for countries that pose the most risk and, therefore, the greatest
challenge to an insurers financial stability, strength and performance.
A.M. Bests Country Risk Tiers are not credit ratings and are not directly comparable to a sovereign debt rating, which evaluates the ability and
willingness of a government to service its debt obligations.

Country Risk Tiers

Country Risk Tier Definition
Predictable and transparent legal environment, legal system and business infrastructure; sophisticated financial
CRT-1 system regulation with deep capital markets; mature insurance industry framework.
Predictable and transparent legal environment, legal system and business infrastructure; sufficient financial system
CRT-2 regulation; mature insurance industry framework.
Developing legal environment, legal system and business environment with developing capital markets; developing
CRT-3 insurance regulatory structure.
Relatively unpredictable and nontransparent political, legal and business environment with underdeveloped capital
CRT-4 markets; partially to fully inadequate regulatory structure.
Unpredictable and opaque political, legal and business environment with limited or nonexistent capital markets; low
CRT-5 human development and social instability; nascent insurance industry.
Country Risk Reports
A.M. Best Country Risk Reports are designed to provide a brief, high-level explanation of some of the key factors that determine a countrys Country
Risk Tier assignment. It is not intended to summarize A.M. Bests opinion on any particular insurance market or the prospects for that market.
Categories of Risk
Country Risk Reports provide scores for three categories of risk for each country. These scores are (1) Very Low; (2) Low; (3) Moderate; (4) High
and (5) Very High.
Category of Risk Definition
The likelihood that fundamental weaknesses in a countrys economy will cause adverse developments for an insurer.
Economic Risk A.M. Bests assessment of economic risk evaluates the state of the domestic economy, government finances and
international transactions, as well as prospects for growth and stability.
The likelihood that government or bureaucratic inefficiencies, societal tensions, inadequate legal system or
international tensions will cause adverse developments for an insurer. Political risk comprises the stability of the
Political Risk government and society, the effectiveness of international diplomatic relationships, the reliability and integrity
of the legal system and of the business infrastructure, the efficiency of the government bureaucracy, and the
appropriateness and effectiveness of the governments economic policies.
Financial system risk (which includes both insurance and non-insurance financial system risk) is the risk that financial
volatility may erupt due to inadequate reporting standards, weak banking system or asset markets, and/or poor
Financial System Risk regulatory structure. In addition, it includes an evaluation of whether the insurance industrys level of development and
public awareness, transparent and effective regulation and reporting standards, and sophisticated regulatory body will
contribute to a volatile financial system and compromise the ability of an insurer to pay claims.
Political Risk Summary
To provide additional detail on the political risk in a given domicile the Country Risk Reports include the Political Risk Summary. The Political Risk
Summary is a radar chart that displays scores for nine different aspects of political risk scored on a scale of one to five with one being the least
amount of risk and five being the highest amount of risk.
Category Definition
International Transactions
Measures the effectiveness of the exchange rate regime and currency management.
Policy
Monetary Policy Measures the ability of a country to effectively implement monetary policy.
Fiscal Policy Measures the ability of a country to effectively implement fiscal policy.
Business Environment Measures the overall quality of the business environment and ease of doing business.
Labor Flexibility Measures the flexibility of the labor market, including the companys ability to hire and fire employees.
Government Stability Measures the degree of stability in a government.
Social Stability Measures the degree of social stability, including human development and political rights.
Regional Stability Measures the degree of stability in the region.
Legal System Measures the transparency and level of corruption in the legal system.

Country Risk Tier Disclosure

A Country Risk Tier (CRT) is not a credit rating, rather it represents a component of A.M. Bests Credit Rating Methodology that is applied to all
insurers. A CRT is not a recommendation to purchase, hold or terminate any security, insurance policy, contract or any other financial obligation
issued by a government, an insurer or other rated issuer, nor does it address the suitability of any particular policy, contract or other financial
obligation for a specific purpose or purchaser.
Copyright 2015 by A.M. Best Company, Inc. Version 091714

Copyright 2015 by A.M. Best Company, Inc.

All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise. 4