Preneed federation plays down ‘collapse’ of industry amid crisis
Written by Honey Madrilejos-Reyes / Reporter
Jan. 21, 2009, 20:05
NOW equipped with new policies to support their operations, the Philippine Federation of Pre-Need Plan Companies Inc. (PFPPCI) said it is business as usual for them despite the continued battle with the tough environment pose by the global financial meltdown.
PFPPCI director and vice president Albert Alba said in a phone interview that the policy recently approved by the Securities and Exchange Commission (SEC) allowing preneed firms to build up capital and trust funds as protection from the crisis comes as a relief definitely needed at this time.
“I think there are still some positive news for the industry like this one,” said Alba, referring to the SEC policy.
The preneed firms have been suffering deficiencies caused by market- to-market losses. Right now, they claimed, the trust funds managed by their trustee banks are not generating good returns.
Figures obtained from an industry source indicated that as of end-June 2008, the industry’s deficit amounted to P46.83 billion.
In end-2007 the industry reportedly enjoyed a surplus of P6.8 billion based on an assumed yield of 12 percent on their trust funds.
Trust funds totaled P74.665 billion and liabilities stood at P67.862 billion. Up until February 2008, the trustee banks were confident of earning 12 percent for the rest of 2008.
But when the financial meltdown started in the second quarter of 2008, and growing worse with each passing month, the 12-percent assumption was no longer achievable. In fact, the source said, 6 percent was even a tough goal for some of the companies.
“Because of the deficit, many companies are thinking of various options, most of them unwinding the plans and paying all plan holders, whether claiming this year or years later,” the source said.
Alba said he is not privy to the industry figures.
The preneed industry earlier asked the SEC to come up with measures that would keep it afloat during the time of crisis.
“The last few months, the trust funds of our plans registered huge unrealized erosions in value because of the economic slowdown. Our trust funds were reduced significantly because of mark-to-market accounting standards. This made us realize and accept that unless and until the onerous required yields on our old business are resolved and properly addresses, there could be no certain future for our industry,” it said.
Specifically, their problem is the growing obligations on plans sold in the past, which were priced per actuarial feasibility studies that were then viable.
PEP vs Pacific Plans
Meanwhile, the Parents Enabling Parents (PEP) Coalition has questioned the sale of Pacific Plans Inc. (PPI) to businessman Noel Oñate, saying the move made by the Yuchengco group is just “an escape from settling its obligations.”
“It appears suspicious to us because it was done in haste. Even the Supreme Court, in which we have pending case filed on the rehabilitation of PPI, was not given a copy of the sales contract,” said Coalition president Philip Piccio.
According to him, once they get hold of the contract, the group plans to file before the Regional Trial Court in Makati a temporary restraining order on the sale of PPI.
“But we are open to talks with Mr. Oñate. We want to meet him, because we have many questions about the sale and most important, what will happen to us, planholders?” he added.
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