PEP Coalition

We fight for truth, justice and good corporate governance!

Pre-need firms assure the public

By Doris Dumlao
Philippine Daily Inquirer
First Posted 00:19:00 01/29/2009

MANILA, Philippines — With plan-holders shaken by the collapse of pre-need companies of the Legacy Group, the pre-need industry association on Wednesday assured the public that the 40-year-old industry could survive the current global turmoil.

Many of the companies will likely take the option of building up capital using the leeway allowed by the Securities and Exchange Commission, said Juan Miguel Vazquez, president of the Philippine Federation of Pre-need Plan Companies.

“Companies can now file for a capital buildup plan and those with approval can do so,” Vazquez said at a news briefing. “The plan holders will have no problems at all.”

Companies that cannot or are not willing to raise capital will have to stop selling new plans and inform all their plan-holders, Vazquez said.

“An orderly restructuring can be worked out between the company and plan-holders to protect all plan-holders,” he said.

Pre-need company officials at the briefing said the second option — to stop selling and undergoing restructuring — would likely be the exception rather than the rule.

“If there will be some going to option 2, what we can assure you is that it will be transparent and orderly,” Vasquez said.

The federation admitted that the tough global environment has diminished the value of the trust funds in which pre-need companies deposit their sales proceeds and are the source of payments for future obligations. Yields on these trust funds have gone down to six percent from the 12 percent assumed by most pre-need companies in the past.

The trust funds’ values are booked based on prevailing market prices, and consequently they have sustained huge losses, at least on paper — Vasquez emphasized that these were not actual losses.

Over 95 percent of them are invested in the Philippines, including about P65 billion in government securities, and some in the stock market.

Prudentialife Plans Inc. president Jose Alberto Alba said, “Historically, there were times when pre-need companies had deficiencies but it was corrected over time. These can be corrected over time.”

In a statement, Philam Plans chairman Jose Cuisia Jr. said: “Our plan-holders can be assured that their interests are protected with the company’s financial strength and investment expertise. We remain focused on the daily execution of our business and continue to provide our plan holders with the highest levels of service, as we continue to write new business and remain committed to meeting our plan holders’ needs.”

Philam Plans’ unaudited and interim financial statements submitted to the Securities and Exchange Commission show its trust funds at P30 billion as of end- 2008. The company said this was significantly more than the required reserves.

Philam Plans has over 300,000 plans in force. It said its liabilities were adequately covered by its trust fund investments, most of which were in liquid assets, such as government securities, and less than four percent in real estate and blue-chip stocks.

Sun Life Financial Philippines also said its local pre-need firm, Sun Life Financial Plans Inc., was well-capitalized and had enough funds to meet all obligations to all plan-holders.

“We are a prudent company by nature and we have always brought this prudence to our pre-need company,” Sun Life Financial Philippines president and chief executive Henry Herrera said in a statement.

“Rumors relating to the state of the industry are not reflective of Sun Life’s pre-need business, which continues to be strong and well-capitalized…. At Sun Life, our message to plan holders is crystal clear — we can and will continue to fulfill our obligations to our plan holders,” he added.

He said Sun Life’s capitalization was one of the highest in the industry and the company had a conservative investment portfolio of government bonds locked in at interest rates sufficient to cover its obligations.

“After 113 years of experience in the Philippines we have always met our obligations, no matter what the crisis and we will continue to do so. Of this we are very proud,” Herrera said.

The SEC has drafted a package of measures to provide breathing room to the battered pre-need industry, given a tough global financial environment. It has agreed to give the industry more time to build up capital. Talks are underway to allow more investments in real estate, unlisted shares of stock, as well as plan holder loans.

Vazquez said, “We did not ask for a bailout like what the US and other countries did to anchor their industries. We just requested for regulatory relief to tide us over. And relief solutions were already put in place by the SEC in their recent circular.” Edited by INQUIRER.net

January 29, 2009 - Posted by | Philippine Newspapers/Web News | , , , , ,

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: