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GSIS writes off P5-b loans

by Elaine R. Alanguilan
[ ] December 19, 2011

The Government Service Insurance System has written P5 billion worth of foreclosed housing units off its books this year as part of a review of the pension fund’s assets.

Robert Vergara, GSIS president and general manager, told reporters the pension fund had been cleaning up its books and made provisions for bad debt that could only drag its balance sheet.

“We are reviewing all our assets, which ones are better off sold now and which ones we can hold on to. So far, we have written off about P5 billion as provision for roughly 25,000 socialized housing units all over the country that have been foreclosed over the years,” said Vergara.

He said while the pension fund wrote off P5 billion of housing units, it would still pursue their sale in the future, most likely in groups depending, on the location.

“We don’t know if we could get a better price for the assets than what we’ve written off but market conditions are such that we opted to make a write-off in our books now. If we do make a sale in the future, then it would add up on our cash,” said Vergara.

Many GSIS members who availed of loans to finance their housing units failed to continue the amortization, prompting the GSIS to foreclose on the properties.

A write-off refers to an investment in which a return is impossible or unlikely. The item’s potential return is, thus, canceled and removed from the company’s balance sheet. Common write-offs include spoiled and damaged goods as well as bad debt.

Vergara said the adjustments made in its accounting had actually shortened the pension fund’s actuarial life to 2045, about three to four years shorter than previously stated as a result of the re-statement of assets. This means the GSIS can address the needs of members and pensioners only up to 2045.

However, he said the actuarial life of the pension fund was still a lot better than its peers in the region and even in developed economies.

GSIS’ asset base as of end-October has reached P600 billion from P571 billion in the same period last year. The asset base is projected to hit between P630 billion and P640 billion by yearend.

Of the assets, about 42 percent or roughly P252 billion are invested in fixed-income instruments like sovereign bonds; 29 percent (P142 billion) in loans to members; 10.5 percent (P63 billion) in equity placements; 6 percent in cash; and about 5 percent in real estate holdings.

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