Economic evaluation of a mutual benefit association: the case of the armed forces of the Philippines mutual benefit association, incorporated
Date
1986-04
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Abstract
This research paper focuses on the insurance system of the Armed Forces of the Philippines (AFP) called the Armed Forces of the Philippines Mutual Benefit Association, Incorporated (AFPMBAI). While the military bureaucracy believes that the establishment of the system is beneficial to the whole military organization, the sentiments of many independent soldiers against its existence can not be discounted.
As such, this paper aims to show whether the associa- tion is advantageous or not to the soldier from the economic point of view. Specifically it attempts to examine its social adequacy; how it is a form of savings to members; how the association functions as a financial institution and its comparison to other domestic life insurance companies. The study covers the active members of the Armed Forces of the Philippines, the Integrated National Police (INP) and cadets on training for the period 1975-84.
Using the cost-benefit analysis through the present value method, the association's social adequacy and effectiveness as a savings form to members are determined. The study takes into account the absence and presence of inflation in the economy. The cost consists of the soldier's monthly contributions (premiums) and the benefits are composed of the face value of insurance, dividend payments, and various loan subsidies. The present values of cost and benefits were calculated for the officer and non-officer as well as cadets on training.
Results showed that the insurance system of the AFP is beneficial to the individual soldier. The survivor of the insured is adequately supported although the support is less when there is inflation in the economy. The higher dividend payments and lower loan rates offered by the association provide the soldier an edge over his civilian counterpart. However, in terms of service loan benefits, officers are benefited more than non-officers.
The study also evaluated the portfolio of the association over the 1975-84 period and assessed the efficiency of the firm using standard financial tests. Analysis showed that the firm had passed the test for the ten-year period. Net income was positive in all years and all financial ratios showed an acceptable percentage of growth. The result indicates that the AFPMBAI is functioning well and therefore capable of extending service and benefits to its members.