Pre-need sales continue sliding
BusinessWorld
June 6, 2009
MANILA – Pre-need firms continued to see their revenues slide in the first quarter despite selling more plans, data from the Securities and Exchange Commission (SEC) showed.
Revenues fell by almost a fifth to P3.2 billion, even as the number of plans sold rose to 62,882 from 53,825 in the same period last year.
The public continued to stay away from education and pension plans, preferring life plans, whose sales jumped by almost half to P2.03 billion in peso terms and by more than two-fifths to 52,173 in terms of plans sold.
Sales of pension plans, which face competition from other investment products, continued to decline, as well as of education plans, which carry the stigma of failed pre-need companies unable to pay clients.
The number of pension plans sold dropped by almost a third to 9,442, and sales, by more than half to P1.05 billion. Education plans fared worse with the number of plans sold reduced by more than half to 1,267, and sales, by more than three-fifths to P173.19 million.
Pre-need sales have been falling since January 2008.
Caesar T. Michelena, president of the Philippine Federation of Pre-need Companies, explained that customers nowadays prefer to buy more but cheaper plans.
Mr. Michelena, who also heads Cocoplans, Inc., said life plans continue to register growth because of the active effort of companies to market these products and customers’ negative perception of education and pension plans.
“We are still looking at growth but maybe not as substantial because of the economic conditions,” he said.
On Monday, the SEC ordered pre-need companies to avail the services of independent auditors that would review whether they are managing their trust funds according to its standards or not. The auditors would submit their findings on July 15.
Mr. Michelena, however, does not see this having an effect on the industry’s performance.
“It’s really more of administrative requirement… It would have no major impact overall,” he said, pointing out that pre-need companies already employ external auditors to verify the valuation of their trust fund assets.
Pre-need companies now number 22 from 24, after the regulator revoked the license of one firm to sell plans and suspended another due to financial difficulties. — Don Gil K. Carreon
as of 06/06/2009 2:26 AM
SEC denies approving Permaplans’ tea payments
abs-cbnNEWS.com
June 1, 2009
The Securities and Exchange Commission denied that it allowed troubled pre-need firm Permanent Plans to give out slimming tea and memorial lots to its plan holders in lieu of cash.
SEC commission secretary Gerard Lukban told ABS-CBN News that Permanent Plans has been misleading the public when the company stated that they had received clearance from the SEC to offer the alternative payment to their planholders.
Lukban said the letter the SEC sent to Permaplans actually called the firm’s attention to the complaints they had received about the unacceptable mode by which Permaplans was settling its obligations.
Lukban added that they did not freeze the company’s trust fund, but merely required Permaplans to secure clearance from them to ensure their payouts went to the plan holders.
Permaplans has filed a petition for rehabilitation before a court but assures plan holders of payment of its obligations.
Initial hearing on the petition is set for July 27.– with reports from ABS-CBN News
as of 06/01/2009 7:45 PM
SEC moved to DTI after pre-need mess
abs-cbnNEWS.com/Newsbreak
By Lala Rimando
May 27, 2009
The administrative supervision of the Securities and Exchange Commission (SEC) has been transferred back to the Department of Trade, according to Executive Secretary Eduardo Ermita.
In a statement on Wednesday, Ermita said President Arroyo issued Executive Order (EO) 800, to effect the transfer. Ermita said the president signed EO 800 last May 14 but the transfer was announced only today.
The SEC has been under the oversight of the Finance Department since January 2000 under EO 192 as part of efforts then to consolidate and coordinate the supervision of regulatory agencies handling financial products and services.
Under the Finance Department are the Bangko Sentral ng Pilipinas (BSP), Philippine Deposit Insurance Corp (PDIC), Insurance Commission, and, previously, the SEC. These agencies regulate banking, deposit insurance, insurance, and investment products, respectively.
Among the investment products that SEC regulates are equity and bond securities under the capital markets. It also oversees mutual funds and pre-need products.
The head of these regulatory bodies are part of the consultative body Financial Sector Forum (FSF), where they coordinate regulatory methods and policies especially for overlaps between and among the products they regulate. For example, insurance and banking products have become hybrid, as in the case of bancassurance products.
Only last month, BSP governor Amando Tetangco stressed to an audience of insurance industry practitioners the importance of the FSF since it is the nearest that the country has in overseeing the entire financial system.
The current global financial crisis was triggered by the US’ and Western Europe’s lack of a superbody over their diverse and complicated financial system.
Tetangco told the audience, “As we have witnessed in this current crisis, the lines delineating the financial institutions that make up the financial system have become at times blurred, making improved collaboration among financial regulators exigent.”
Pre-need
The SEC, however, has lately been a whipping boy for the sins of the bankrupt Legacy Group, which is now facing multiple cases of syndicated estafa. Billions of pesos of its 12 rural banks’s depositors and thousands of its three pre-need firms have been preliminary found to have been siphoned off to fund personal and political purposes of its businessman-turned-politician founder, Celso de los Angeles.
Unlike the BSP, which had tried to shut Legacy’s banking operations early, the SEC officials appeared unaware of the scam and were surprised when Legacy’s pre-need firms closed shop last January. SEC officials were grilled during the senate hearings carried live by media, and two top SEC commissioners were exposed for allegations of improper dealings with Legacy’s officers months before the financial troubles of the firm became scandalous.
SEC chair Fe Barin has repeatedly explained that the agency does not have the budget, manpower, nor expertise to oversee the pre-need industry. But her explanations fell on deaf ears, even if the legislators have yet to act on a six-year old proposal to transfer the oversight of the pre-need industry to the Insurance Commission, which experts say is the more appropriate regulator of pre-need products.
Legacy, however, was just the latest pre-need firm to join a list of high profile failures, which include College Assurance Plan, Pacific Plan, and Prudentialife. Yet, the proposed reforms, including the creation of a pre-need standby fund, much like that provided by the PDIC for bank depositors, are not expected to be acted upon as most legislators prepare for the national elections in 2010.
While other governments work on the glaring lesson of the global financial turmoil—that a coordinated approach, or better yet, the creation of a superbody, to oversee the entire financial system is paramount—the EO 800 essentially means the Philippine government is defying that lesson.
Ermita justified SEC’s transfer to the DTI, which is not part of the FSF, by saying that the transfer is “necessary and practical” in order to “facilitate the coordination of trade, industry and investment programs and policies.”
He added that, as expressed in the EO 800, the “primary role of the DTI is coordinator, promoter, facilitator and regulatory arm of the Executive Branch in trade, industry and investment.”
as of 05/27/2009 11:00 PM
Cocoplans gets P61-M cash infusion for trust fund deficiency
abs-cbnNEWS.com
May 8, 2009
Cocoplans Inc. assured its planholders that it has enough cash and other assets to meet its obligations, with its parent company Cocolife set to infuse P61 million to cover for its trust fund deficiency.
According to Cocolife President Alfredo Tumacder Jr., the move is a show of continued optimism for the country’s pre-need industry despite weak public reception caused by the economic downturn and controversies surrounding the Legacy Group.
“We will be putting in cash to address the capital deficiency of the Cocoplans,” he told reporters. The cash infusion is part of Cocoplans’ three-year capital and trust fund build-up plan, which was submitted to the Securities and Exchange Commission (SEC).
At present, Cocoplans’ trust fund deficiency is at P200 million, but it has a total trust fund of P1.3 billion as of January this year.
“Management of Cocoplans has seen to it that the required funds to comply with the SEC circular will be deposited as a sign of its continuing commitment to its planholders,” said Cocoplans President Caesar Michelena.
“We see to it that all benefits are paid on time. In fact, checks are prepared and notices are issued one month in advance to make sure that there are no delays,” he added.
With some 50,000 planholders, Cocoplans has the license to sell education, life, and pension plans. Last year, its sales grew 67 percent. With a report from Zen Hernandez, ABS-CBN News
as of 05/08/2009 1:13 AM
Who benefits from CAP’s trust funds?
abs-cbnNEWS.com/Newsbreak
by Lala Rimando
Apr. 28, 2009
Who are benefitting from the sale of assets in the trust fund of pre-need industry’s poster company, College Assurance Plan (CAP)?
In a congressional hearing on Monday, representatives were aghast when they learned that Sobrepena-led CAP sold its MRT III bonds and that the $9 million-worth sale proceeds were used to pay off two firms also controlled by the Sobrepenas.
These reactions came amidst complaints by plan holders who were present at the hearing that they had only received a measly P400 to cover tuition costs per semester.
In a statement Tuesday, CAP countered that they sold the MRT bonds to the government, which acquired a majority stake in the Metro Rail Transit Corporation (MRTC), the operator of the MRT II line. It did not clarify if the, or a portion of the, proceeds indeed benefitted the companies related to the Sobrepenas.
It added, however, that “Proceeds of this transaction will be used to pay plan benefits according to the amounts and schedule of payments set by the court in the revised rehabilitation plan approved in 2006.” It said among those that are scheduled to receive such benefits are enrollees for school years 2005 to 2009.
In 2005, CAP wiggled away from the supervision of pre-need regulator Securities and Exchange Commission (SEC) when it sought refuge from the local courts.
CAP blamed SEC for the collapse of its pre-need business. SEC then required CAP to submit a plan on how it would plug the deficit or the gap between how much it had and should have set aside in its trust funds to cover obligations to its about one million education, pension and memorial plan holders.
CAP was adamant that the deficit was not real but a result of SEC’s strict implementation of an accounting standard that even the accounting industry association said was prudent.
However, the deficit eventually became real when checks issued by CAP to cover tuition costs of educational plans bounced. For months, plan holders and the schools where the plan beneficiaries were enrolled in, beseiged CAP offices nationwide.
CAP became illiquid–then insolvent–when the funds from its then-profitable pre-need business were diverted into real estate, MRT, and other ventures of the Sobrepenas during the hubris years in the 1990’s. The expected high returns from these ventures, however, failed to come to fruition when the 1997/98 Asian financial crisis hit, eventually bursting the property bubble.
The Sobrepenas held stakes in Fil-Invest Group of realty companies, John Hay Development Corporation (operator of former American base in Baguio), mid-sized Bank of Commerce, among others.
The value of CAP’s trust fund dwindled as most of these companies also took a dive.
Of the assets in the trust fund, the MRT III bond was considered the most liquid.
CAP said in its Wednesday statement that the sale of the bond was approved by the rehabilitation court, the Makati City Regional Trial Court. It added that the bonds were sold “at the best possible price.”
It also said that the real estate assets in the trust fund are projected to appreciate, thus “could be a major source of fund” that would allow CAP to sustain its future payments to clients.
CAP said it is currently supporting over 100,000 enrollees–a far cry from the almost 800,000 student-beneficiaries it had in 2004.
CAP’s woes were remembered after the pre-need industry was again rocked by controversies hounding the Legacy Group of financial services. This month, the SEC decided to revoke the license of Prudentialife and Permanent Plans to sell new plans after the pre-need companies failed to submit a plan how to address deficits in its trust funds. – with ABS-CBN News
as of 05/28/2009 2:37 AM
Feedback: S.E.C. still sleeping on the job
By Pompeyo Pedroche, reader
Apr. 27, 2009
as of 04/27/2009 3:49 PM
Memorial lots, anyone?
abs-cbnNEWS.com
Apr. 25, 2009
Instead of giving slimming tea, chocolates, and other wellness products, troubled pre-need firm Permanent Plans is giving memorial lots to partially settle their obligations to plan holders.
“Some plan holders are asking for alternative payments other than wellness products. But it is not forced,” Permanent Plans president Juan Miguel Vazquez told ABS-CBN News.
Vazquez also said the plan holders who already availed of the wellness products can opt to return these in exchange for memorial lots.
The company, which had about 10,800 plan holders as of end-December 2008, said they will infuse more assets in the next four to five months in order to meet its obligations.
Last week, the Securities and Exchange Commission revoked the license of Permanent Plans after the pre-need company did not submit a proposal to plug the gap between how much it has and should have set aside to meet obligations to clients.
The SEC had said it had not permitted Permanent Plans to offer products instead of paying their clients with cash, and that it was considering sanctioning the pre-need firm.
Vazquez was the president of the pre-need industry association that had lobbied for softer regulation and accounting standards. In a statement Tuesday, Vazquez said, “Permanent Plans no longer believes in the viability of the pre-need pension industry as currently set up and given the adverse operating environment it finds itself in.”
In February, another cash-strapped pre-need firm Pryce Plans Inc settled its obligations to clients with medicines, cooking gas, and memorial lots. — with reports from Zen Hernandez, ABS-CBN News
as of 04/25/2009 1:01 PM
Pre-need firms move to assure clients
BusinessWorld
By Don Gil K. Carreon
Apr. 24, 2009
Following a week where two of their number lost their licenses due to financial problems, pre-need companies moved to issue assurances that they have enough money to keep operating and service clients.
In separate interviews, officials of Philam Plans, Inc., Transnational Plans, Inc., Caritas Financial Plans, Inc., Eternal Plans, Inc. and City Plans, Inc. all declared their firms as solvent. BusinessWorld was unable to reach of officers of the 14 other pre-need firms under scrutiny by the Securities and Exchange Commission (SEC).
On the sidelines of an Institute of Corporate Directors event on Wednesday, Philam Plans Chairman Jose L. Cuisia, Jr. said the company was doing fine, which is why it decided not to avail of an SEC plan that gives pre-need companies up to three years to erase their capital and trust fund deficits.
“We’re doing well. We will continue to be strongly capitalized … Our plan holders need not worry,” he said.
Mr. Cuisia said Philam Plans, a unit of Philippine American Life and General Insurance Co., ended 2008 with P30.1 billion in its trust fund with claims against it reaching P28 billion. He also pointed out that Philam Plans’ paid-in capital of P700 million remained the highest in the industry.
In a phone interview, meanwhile, Caritas Plans President and CEO Eliseo P. Dizon, Jr. said the pension plan firm, being just two years old, did not have any trust fund deficiency with its earliest maturing plans coming in 2017.
“We are also not capital deficient. For a one plan firm, the minimum paid-in capital is P50 million, but we have P150 million,” he said.
Mr. Eliseo added that the firm’s board planned to add P92 million to its trust fund this year, which is currently worth P18 million and has P11 million in liabilities.
“This is to give the public and our plan holders comfort that Caritas Plans is solvent and solid,” he said.
Mr. Eliseo, who was founding president of Philam Plans, said the pre-need industry remained viable and was only burdened by old plans that promised up to 15% in returns, which companies cannot meet now given poor economic conditions.
Amor B. Masigla, assistant vice-president at Eternal Plans, was likewise confident about her company’s financial position, but did not provide specifics.
“We have enough in our trust funds whatever the results of the 2008 valuations are, which is why we did not apply for the buildup,” she said.
In an e-mail, Transnational Plans President Veronica S. Lao Guico also claimed the firm did not need relief as it did not have a trust fund deficit.
“As to how much is our trust fund and our liability, we have just submitted to SEC our 2008 Actuarial Valuation Report and we would like to wait for the results of the review of SEC,” she said.
Cityplans, a unit of listed Cityland Development, Inc., echoed this in a statement. It declined to provide figures, also preferring that these come from the SEC. Cityland Development’s latest financial report shows Cityplans’ trust fund assets at P63.5 million against potential claims worth P63.86 million.
Sun Life Financial Plans, Inc., meanwhile, issued a statement on Wednesday saying that profits hit a record P117.5 million last year. It did not provide 2007 figures. The pre-need firm also said its trust fund jumped by over a quarter to P5.3 billion, but also did not say how much its liabilities to clients were.
Following an April 15 SEC deadline for 24 pre-need firms to submit financial statements and capital/trust fund buildup plans, the regulator announced on Monday that it was revoking Prudential Life Plans, Inc.’s license to sell after rejecting its proposal to fund a P4.49-billion trust fund deficit via shares in affiliate firms.
The following day, it said it had also taken back Permanent Plans, Inc.’s license even as the firm announced that it was shutting down and had told the regulator a week before of its plans.
The SEC has so far approved the capital and trust fund buildup plan of Cocoplans, Inc., while Danvil Plans, Inc.’s proposal is under review.
as of 04/24/2009 11:39 AM
Permanent’s plan holders to get slimming teas, medicines
abs-cbnNEWS.com
Apr. 22, 2009
Clients of Permanent Plans Inc. flocked to the Makati headquarters of the pre-need firm Wednesday after news that the Securities and Exchange Commission has revoked its license to sell new pension plans last week.
In a statement Tuesday, Permanent Plans president Juan Miguel Vazquez promised to honor all their obligations to their plan holders. The mode of settlement, however, worried the plan holders.
In an interview with ABS-CBN News, the plan holders said the company has informed them that they will be reimbursed their pension plan investments through the following: 60 percent “in kind” and 40 percent in cash.
The “in kind” payment includes slimming teas and medicines, both products of companies associated with Permanent Plans.
The cash portion, meantime, will be paid through post-dated checks.
On Tuesday, SEC spokesperson Gerard Lukban said they did not approve this settlement plan, which was proposed after the company incurred trust fund deficiencies, or the amount the company has and should have set aside to settle its obligations to clients.
In his statement, Vazquez insisted they do not have to get SEC’s nod for the settlement plan since their contracts with clients allow them to change payment mode.
Permanent Plans is one of the small players in the pre-need industry with just about 10,800 plan holders as of end-December 2008. But its president, Vasquez, led the highly influential Federation of Pre-Need Plan Companies that had lobbied for softer regulations in recent years.
In February, another cash-strapped pre-need firm Pryce Plans Inc settled its obligations to clients with medicines, cooking gas, and memorial lots.
At the time, a pre-need plan holders association had warned that more pre-need firms were on the brink of collapse due to their funding shortfalls.
On Monday, SEC told a senate hearing that it had stopped 31-year old Prudentialife Plans Inc from selling new products due to funding shortfalls. – with reports from ABS-CBN News
as of 04/23/2009 7:34 PM
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