Ax falls on Permanent Plans this time
Apr. 21, 2009
The pre-need industry’s most vocal advocate admitted Tuesday that the once lucrative industry is no longer viable.
In a statement, Philippine Federation of Pre-need Plan Companies president Juan Miguel 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.” Vazquez is the president of Permanent plans.
Vazquez also admitted that Permanent Plans is in financial trouble. He said the global financial crisis has slashed their trust fund–the amount the company has set aside and invested to meet future obligations to clients–by up to 35 percent. He did not indicate the specific period the company has realized this loss.
Based on SEC documents, Permanent Plans’ trust fund was worth P445 million as of June 30, 2008. This was more than the required P402 million “pre-need reserves”–the amount the company should be aiming to meet clients’ needs at any one time.
However, Permanent Plans’ trust fund was only growing by 1.87 percent at the time. This was one of the lowest investment returns being realized by the country’s 24 pre-need companies. This was even before the US-led financial crisis swelled to a worldwide scale in September 2008,
Industry observers said Permanent Plans must have been experiencing slower sales. Its trust fund was reduced to P445 million in June 2008 from P531 million in December 2007, while its pre-need reserves decreased to P402 million from P407 million in the same period.
Gerard Lukban, spokesperson of the Securities Exchange Commission (SEC), confirmed with ABS-CBN News that the pre-need industry’s regulator has suspended the dealers’ license of Permanent Plans. Pre-need companies need to comply with SEC documentary requirement before they are granted dealers’s license, or the permit to sell new plans.
Vazquez said in the statement that the SEC need not have suspended their license since Permanent Plans had already volunteered to stop selling new pension plans. Instead, Vazquez said they have limited themselves to just servicing the claims of their clients.
On April 15, the deadline set by the SEC for financially troubled pre-need companies to submit their proposal to plug the deficiencies in their trust fund and capital funds, Vazquez said Permanent Plans decided not to submit one. Instead, he said they formally informed SEC that they have opted to “avail of the early and orderly settlement of claims option.”
SEC’s Lukban said Permanent Plans proposed to pay their obligations to their plan holders not with cash but through an “alternative settlement.” Lukban said this “alternative” includes properties, which “the SEC did not approve.”
In his statement, Vazquez said that instead of filing a rehabilitation case with the court, which would just “take time and delay the payment to plan holders,” they have proposed a 4- to 6-month leeway to make up for the trust fund losses. He added that they need this period “in order to settle fully all the claims of our plan holders, which we will pay in the form of cash and other assets.”
He added, “Our concern is the protection of all our plan holders and settle promptly and efficiently their claims.” – with Lala Rimando, abs-cbnnews.com/Newsbreak and Zen Hernandez, ABS-CBN News.
as of 04/22/2009 2:11 PM
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