Preneed firms viable – group
Written by Honey Madrilejos-Reyes / Reporter
Thursday, Jan. 29, 2009 03:25
NO reason to panic.
This was the collective message of the member-firms of the Philippine Federation of Preneed Plan Companies Inc. (PFPPCI) in a press briefing on Wednesday, as they dismissed earlier reports that the industry is nearing collapse because of the impact of the global financial crunch on their operations.
Federation president Juan Miguel Vazquez said the leeway recently granted to them by the Securities and Exchange Commission (SEC) to build up their capital is a relief, although it is a work in progress.
Under this rule, the preneed firms will have to submit next month their respective five-year capital programs that will show simulations of how their trust funds are affected by the future developments in the economy and capital market; and, should there be an impact, they should present steps to address it.
“The SEC has approved our request for leeway to build up our capital. Companies can now file for a capital-build-up plan and those with an approval to do so. The plan holders will have no problems at all,” Vazquez said.
But not all preneed firms are seen to comply with the rule as the extent of the damage caused by the global financial crunch varies from one company to another.
Vazquez said if companies which cannot or are no longer willing to raise capital will stop selling, all plan holders will be informed and an orderly restructuring can be worked out between the company and the plan holders.
But he stressed that companies are more inclined to submit their capital- buildup plans rather than settle for restructuring.
As of end-2006, the preneed industry still posted a surplus of P440 million as its trust fund amounted to P95.08 billion versus an actuarial reserve liability of P94.64 billion.
However, the picture completely turned around following a drop in the yield from 12 percent to 6 percent.
“What happened in 2008 is totally a different story,” said Vazquez.
The bulk of the trust fund, as managed by the firms’ trustee banks, is invested in government securities and the stock market.
“Prices of these stocks dropped because of the crisis. And suddenly, the trust funds are showing unrealized market losses in billions.” he said.
An industry source earlier said that as of end-June 2008, the industry’s deficit amounted to P46.8 billion and this number is seen to balloon to nearly P100 billion as the crisis worsens.
‘Put them under IC’
Meanwhile, United Opposition president and Makati City Mayor Jojo Binay on Tuesday pushed for placing the preneed companies under the jurisdiction and control of the Insurance Commission.
Binay said this was one of the immediate actions necessary amid growing concerns over the liquidity problems of the preneed sector.
At present, the SEC is tasked to oversee them. But, said Binay, the Insurance Commission is more rightly equipped to perform that function, since preneed companies are similar to insurance companies in that they are concerned with future liabilities to plan holders.
Binay also said the national government should be very careful in entertaining possibilities of a “bailout” for such companies. While it may be true that plan holders will be the eventual losers, he said it should first be determined which preneed companies had any negligence or wrongdoing that led to their financial problems.
“Companies that were at fault should not be bailed out by government without any form of sanction.
He also proposed freezing the corporate assets as well as those of the stockholders and directors of preneed companies.
Philam assures clients
With the growing concern among preneed plan holders that these companies might not be able to meet their obligations when they fall due, Philam Plans Inc. assured its plan holders on Wednesday that the company remains financially strong and capable of meeting its obligations.
In 2007, the SEC publicly stated that “Philam Plans’ Trust Fund has sufficient assets that can be liquefied to cover availments as they fall due,” noted the company’s press release.
Based on unaudited and interim financial statements submitted to the SEC as of December 31, 2008, Philam Plans’ Trust Funds stood at P30 billion, which it said is significantly more than the required preneed reserves of the SEC.
Philam Plans has over 300,000 plans in force. The company’s preneed liabilities are adequately covered by its trust-fund investments, majority of which are in liquid assets, such as government securities, with less than 4 percent in real estate and in blue-chip equities, the company added.
In the last four years, Philam Plans released a total of over P3.7 billion in benefits to plan holders. Of this amount, more than P1.3 billion was in educational benefits.
Philam Plans chairman and Philamlife president and CEO, Jose Cuisia Jr., said, “Philam Plans is financially sound, as it remains to be a stable and strongly capitalized company. 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.”
IN PHOTO — JUAN MIGUEL VAZQUEZ, president of the Philippine Federation of Preneed Plan Companies, briefs reporters at a news conference where he played down reports that the industry was nearing collapse. NONOY LACZA
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