New accounting rules pushed GSIS in the red for 2020

The new accounting standard, which reflects current and future claims pushed another state financial institution into the red—nominally, at least —with the Government Service Insurance System (GSIS) swinging to a net loss of P101.7 billion in 2020 under the revised reckoning rules.

The state-run pension fund for government workers’ latest audited financial statements on Friday showed a reversal from the P17.5-billion adjusted net income posted in 2019.

To recall, Finance Secretary Carlos Dominguez III had ordered the GSIS, the Social Security System (SSS), and Philippine Health Insurance Corp. (PhilHealth) to adjust their books to the Philippine Financial Reporting Standards (PFRS) 4 scheme, which provided a more accurate financial situation of the government’s social institutions.

Prior to using PFRS 4, the GSIS’s unaudited financial statement back in February showed a net income of P62.8 billion in 2020, which was two-fifths lower than its P104.9-billion gain in 2019, mainly due to higher pandemic-induced expenses.

At the height of last year’s most stringent COVID-19 lockdowns, the GSIS offered various loan programs while releasing benefits on time in consideration of the harder times wrought by the pandemic

It also shouldered insurance benefits to families of medical front-liners in public health institutions who died amid the fight against COVID-19.

Under PFRS 4, the GSIS’s negative bottom line in 2020 was due to the P152.8-billion changes in insurance contract reserves deducted from the GSIS’s profit. These reflected payouts to pensioners and members, which increased from P112.2 billion in 2019.

Also deducted from the GSIS’s 2020 profit were P97.9 million in net financial assistance, subsidy and contribution, which increased from 2019’s P88.6 million.

Its audited statements of comprehensive income showed the GSIS’s income declined to P351.1 billion in 2020 from the restated P361.8 billion in 2019, while expenses climbed to P299.9 billion last year from 2019’s P232.1 billion.

The GSIS’s comprehensive 2020 loss was a bigger P108.2 billion as these included changes in fair value of investments, re-measurement of insurance contract reserves, and revaluation surplus, among other losses.

Dominguez had said the insured public needed not worry despite bigger liabilities and net losses expected to be posted by the GSIS, the SSS and PhilHealth because “booking and reporting the social benefit liabilities do not affect the institutions’ cash flow and funding situations.”

The Finance chief had assured that benefits to members and pensioners of these three government social institutions will not stop. At present, the GSIS’s funds won’t be depleted until 2053.