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Drilon, Robredo can’t run for Senate yet

(excerpt taken only)

By Neal Cruz, As I See It
Philippine Daily Inquirer
First Posted 00:05:00 01/23/2009

The Yuchengcos have dumped the ailing Pacific Plans Inc. (PPI) on the lap of a white knight, in the person of investment banker and former airline owner Noel Oñate. The latter bought PPI for P250 million. Thus, the Yuchengcos gained P250 million while at the same time getting rid of the pesky pre-need holders who have sued them for nonpayment of their claims.

The pre-need industry used to be a growth industry. Its basic premise is that you pay now, in installments, what you will need to pay for future obligations, whether it is for education, memorial or pension. It is like forced savings: You save now what you will need in the future. In exchange, the pre-need company guarantees that it will pay your claim at the time you need it.

This went beautifully until the Department of Education lifted the limits to tuition increases. Like insurance companies, pre-need firms rely on actuarial computations to determine how much money they will need in the future. This was fine for as long as the schools limited their tuition increases to 10 percent as prescribed by law.

When this limit was lifted and the increases hit the roof, trouble began for the education plans of pre-need companies. They couldn’t keep up with the payments. The plan-holders, on the other hand, insisted that they pay the amounts guaranteed in their plans.

The memorial, pension and fixed-value educational plans were not affected, however. The Yuchengcos tried to protect these viable plans by putting them in a separate company, Lifetime Plans Inc. but was ordered to fold them back with the affected educational plans.

Burdened once more by unlimited tuition increases, PPI sought and obtained court rehabilitation. Meanwhile, the plan-holders were not paid the claims for the tuition fees of their children. Everybody was a loser.

Then came the white knight. Oñate seems to be a miracle worker. He started Asian Spirit Airlines in 1995 with only two small planes serving missionary routes in the country to become a competitive international airline serving the region. He sold it last year as the country’s fourth largest air carrier, for P1 billion, to AMY Holdings of businessman Alfredo Yao, owner of juice maker Zest-O. The airline has been renamed Zest Air.

Oñate pledged to abide by the rehabilitation plan for PPI. It is business as usual, he said. Plan-holders will be served by existing PPI branches nationwide until further notice.

PPI president Alfredo Non said: “There were other parties interested in PPI but the group of Mr. Onate was chosen, given his track record of success, his strong financial standing, and his vision for the company and its plan-holders.

“The sale was a business decision that will benefit all parties: PPI and its plan-holders, because Mr. Oñate has promised his full resources, energy and focus on his new venture; and the Yuchengco group, which can now fully focus on its banking and mainstream insurance businesses.”

As I see it, the acquisition of PPI by Oñate is the silver lining on the depressed pre-need industry. In fact, it was welcomed by the Securities and Exchange Commission.

Abundance Providers Investment Corp. (APIC), Oñate’s company that bought PPI, will take over control and management of PPI and will continue to sell and service its education, pension and memorial plans. It will also service the PEPTrads based on the provisions of the court-approved Modified Rehabilitation Plan.

Why is Oñate getting into the pre-need business when it is on the brink of a crisis? The answer of his camp: Oñate is a pioneering entrepreneur. He sees opportunity in adversity.

His move to establish Asian Spirit and service missionary routes were scoffed at in the beginning. More established airlines did not find these routes profitable. This business model proved successful and was later copied by other successful budget airlines. This is the same pioneering spirit that drives him to take on the challenges in the pre-need industry. Oñate thinks that given enough time the market will recover and the pre-need industry will survive the problems besetting it now.


January 23, 2009 Posted by | Columns and Editorials | , , , , | 5 Comments

Troubled Pacific Plans acquired by Asian Spirit seller

Manila Standard Today
Jan. 21, 2009

PACIFIC Plans Inc., the troubled pre-need company owned by the Yuchengco Group, has been acquired by a group controlled by Noel Oñate, the former chairman of Asian Spirit.

Oñate, who started Asian Spirit Airlines with two small planes in 1995, and then sold it last year as the country’s fourth largest carrier—and is now known as Zest Air—said in a statement yesterday that his Abundance Providers Investments Corp. signed the sale documents of the ailing pre-need company on Dec. 22.

Abundance was now working on a plan to grow Pacific Plans, a company with trust fund assets worth P12 billion and operating revenues of P1.2 billion, Oñate said.

Abundance would also change Pacific Plans’ name to Abundance Providers Entrepreneurs Corp., he said.

“With our fresh perspective and focus, we will work with our plan holders initially to ride out the present economic challenges and then further gain strength and momentum moving forward,” Oñate said.

“There were other parties interested in [Pacific Plans], but the group of Mr. Oñate was chosen given his track record of success, his strong financial standing, and his vision for the company and its plan holders,” Pacific Plans president Alfredo Non said.

“The sale was a business decision that will benefit [Pacific Plans] and its plan holders. The Yuchengco Group can now fully focus on its banking and mainstream insurance business.”

Pacific Plans was among the Philippines’ biggest pre-need companies until it started having problems with its open-ended educational plans. That was when the government allowed schools to increase their tuition by as much as they wanted starting in 1990.

The yearly tuition increases eventually overwhelmed the premiums and their income, although Pacific Plans’ other plans—memorial, pension and fixed-value educational plans—remained viable.

The old management tried to protect Pacific Plans’ viable plans by putting them in a separate company, Lifetime Plans Inc., but then it was ordered to fold them back with the affected educational plans.

Burdened once more by tuition increases, Pacific Plans sought and obtained court rehabilitation in 2005.

Oñate yesterday pledged to abide by the rehabilitation plan for Pacific Plans, saying it was business as usual for the company and that plan holders would continue to be served by the company’s branches nationwide until further notice.

Oñate aside, the other major stockholders of Abundance Providers are Carlotta Montinola, Rodolfo Serrano Jr., Rita Linda Jimeno and Ronaldo Geron.

Abundance Providers has an authorized capital stock of P500 million of which P250 million is subscribed and fully paid.

Analysts said Pacific Plans’ 300,000 customers and sales force of more than 10,000 could have been the main factors that attracted Abundance to take over the pre-need company.

Last year, Oñate sold his Asian Spirit Airlines to Alfredo Yao’s AMY Holdings, and reportedly for P1 billion. With Jenniffer B. Austria

January 21, 2009 Posted by | Philippine Newspapers/Web News | , , , , | Leave a comment

When Good Plans Go Bad

Written by Lala Rimando
Monday, 23 May 2005

As Pacific Plans grapples with liquidity problems, holders of pre-need educational plans feel they’re left holding the bag.

To Luzvimina Hipolito of Quezon City, the problem involving her and the company that sold her an educational plan is basic: she who makes a living running a carinderia never missed a single payment of her premiums, even during the times “that I had nothing left to pay for house rent.” If the company is in dire straits now, she asks, “Should I let my children stop schooling?” The answer, to her, is as clear as a summer day: “Raising the money should not be my problem; it should be the Yuchengcos’.”

The Yuchengco family, one of the country’s most venerable names, is embroiled in the latest scandal to hit the pre-need industry because it owns the Pacific Plans Inc. (PPI) that is in default in its payments to 34,000 planholders.

Pre-need companies like PPI had offered traditional educational plans that guaranteed to cover 100 percent of the tuition of the planholders’ child. (These were apart from the fixed-value educational plans, which had limited value coverage.) In 1990, the government lifted the 10-percent ceiling on tuition increases. With deregulation, tuition charged by schools soared. Because of the unlimited guarantee offered by the traditional educational plan, a holder may have paid only P40,000 in total premiums but could reap more than P300,000 in benefits.

PPI, a 38-year-old company, stopped selling the traditional plans in 1992 but continued to service existing ones until last school year. Last April 13, the company won a Makati court ruling that allowed it to suspend payment to planholders.

On the surface, this appeared to be PPI’s effort to stop the company from hemorrhaging. But questions have been raised about its motive.

In December last year, the company thought that its trust fund—the pool of premium payments from planholders that had been invested—was healthy. It had reached P3.2 billion, more than enough to cover the P2.7 billion Actuarial Reserve Liability (ARL), or the amount that PPI should target to ensure enough funds to cover current and future tuition payments.

But to service all tuition requirements of the planholders for the coming school year in June, the company had to raise about P600 million. The trust fund had P341 million worth of cashable assets, and PPI president Ernesto Garcia said they had hoped to augment the balance with the sale of US$51.8 million in zero-coupon Napocor bonds where part of the trust was invested.

The bonds had been bought at a discount. Their US$51.8-million face value and seven percent coupon rate will be realized when they mature in 2010, although they are traded in the bond market. However, the Napocor bonds were affected by the credit downgrades of international credit rating agencies in the first quarter, Garcia said. The company had two options: to cash in the Napocor bonds so it could fully pay planholders this year—which would mean absorbing losses of up to P550 million—or suspending payment to planholders.

PPI chose the latter, explaining that to cash in the Napocor bonds would further endanger the trust fund and might prevent the company from servicing tuition requirements of 19,000 planholders who would enroll in the future.

In the rehabilitation plan, which PPI submitted to the court and could still be contested by planholders, the proposed solution was to hold on to the bonds until maturity in 2010. PPI would disburse the P341 million to cover a portion of the planholders’ first-semester tuition requirements, but for the second semester and succeeding school years, planholders were being asked to wait for five years.

In essence, the planholders would shoulder the company’s liquidity problem. They were left holding the bag. In the past, Garcia said, the profits generated from the more than 400,000 fixed-value contracts—the safer and more viable pre-need product because the tuition and other benefits are predetermined—were used to meet the planholders’ tuition needs. But since the fixed-value contracts had been spun off to another company, the PPI was left only with the traditional planholders’ investments.


About 3,000 parents who had bought the plan have formed the Parents Enabling Parents (PEP) Coalition to protest this arrangement. They’re not buying the official line that the spin-off and the court plea were part of a corporate strategy to protect all the 34,000 planholders’ interest in the long term.

Philip Piccio, PEP spokesperson, told NEWSBREAK, “The move to shield themselves [the Yuchengcos] through the court was premeditated. Therefore, there is malice and probably fraud.”

The coalition questions the August 2004 spin-off of the assets and trust funds of the 400,000 fixed-value planholders to a new company, Lifetime Plans Inc. The stake of PPI in Lifetime was subsequently sold to GPL Holdings, another Yuchengco company. “The [corporate restructuring] was to ensure that our share in Lifetime’s profits would be out of reach,” said Picco.

The spin-off is a business approach that isolates the good assets from the bad. The bad assets are either sold to another investor at big discounts, or nursed back to profitability. This strategy has been implemented in the case of the United Coconut Planters Bank (UCPB) and the Philippine National Bank (PNB). Both banks created separate departments to isolate their soured loans from the rest of the earning assets. PNB turned in modest profits because of this, while UCPB is recuperating.

In PPI’s case, the “good assets” were spun off to Lifetime Plans while the “bad assets” were left with PPI. Garcia said they had equitably apportioned the assets, liabilities, and trust funds between PPI and Lifetime. “We asked ourselves if we wanted to wait until [another pre-need] would go belly up,” Garcia said. “We could just ride the tide and not to put too much focus on ourselves. But our decision was to immediately protect the interests of the greater good. And we thought it was the most prudent thing to do.”

But even the Securities and Exchange Commission (SEC), the pre-need industry’s regulator, was caught off-guard when PPI sought relief from the court. Fe Barin, the SEC chairperson for the past eight months, said, “They pulled one over us.” Filing for suspension of payment is a strategy that companies use to overtake their creditors, suppliers, and other stakeholders who might go after the companies’ assets once they smell financial trouble.

In hindsight, the SEC could have seen this situation coming, especially after it approved the spin-off in August 2004. But Barin explained that the circumstances then were different. The SEC allowed the Lifetime spin-off because the apparent game plan at that time was for the company to find an investor and not go to court.

Since 2002, PPI, the College Assurance Plan (CAP) and 10 other pre-need companies that offered traditional educational plans have been on the SEC watch list. Reforms followed more than 10 years of lax regulation of the pre-need industry, thus the belated order to stop the sale of traditional plans only in 2002.

A source said PPI was one of those with faulty computations of their ARL, or the present value of all current and future tuition availments. The ARL is based on inflation, interest rates, and expected tuition fee increases, among others. A measure of how healthy a pre-need company is whether its trust fund is equal to or exceeds the ARL. The company’s ARL in 2002 was only P8.9 billion. The correct figure, the source said, should be about P15 billion. In other words, PPI’s trust fund was short by almost P7 billion then because it only had P8.6 billion. The Yuchengcos reportedly sought a two-to-three-year leeway to address the deficiency. The SEC agreed because CAP and the other pre-need companies were also allowed to amortize their deficiencies.

Of all the pre-need companies on SEC’s watch list, CAP was the big bang; it had 780,000 planholders. Its trust fund deficiency was climbing every year and reached P17 billion in 2004. The public gauged the SEC’s capability as regulator by the way it handled CAP. Did SEC fail to anticipate PPI’s moves because it was lax with CAP and others? Or did PPI take advantage of the situation, hoping it would be treated with the same kid gloves as CAP?

Garcia said that PPI had made earnest efforts since 2003 to contain its exposure to traditional plans. Proposals to schools were made wherein PPI would advance the entire four- or five-year college tuition of planholders. The proposal included a cap of 10 percent on yearly tuition increases. None of the schools agreed. PPI said they tried to buy back the plans, but most of its planholders declined. The company also decided against negotiating directly with each planholder because it was time-consuming.

Obviously learning from CAP’s experience, PPI isolated the profits earned by its 400,000 fixed-value planholders to protect these profits from being used to subsidize the withdrawals of traditional planholders. CAP, meanwhile, continues to deplete its trust funds to meet current tuition requirements.

Sentiments are mixed. Parents say CAP’s strategy continues to give hope, while PPI doused it. Others say CAP is leaving them in the dark, while PPI is more forthcoming about what planholders should expect.

Damage Control

Last April, PPI planholders received individual letters detailing the amounts due them based on the proposed rehabilitation plan. They were told they could sell back their plans if they decide not to wait for the Napocor bonds to mature in July 2010. Or they could let their money remain in the trust fund, earning seven percent from the year they finished paying the premiums until the bond matures.

The planholders were not pleased. Piccio stressed that they bought PPI educational plans on the assurance that PPI was backed by the financial muscle of the Yuchengco Group of Companies. The group includes major players like Rizal Commercial Banking Corp., Malayan Group of Insurance and Great Pacific Life Assurance Corp., and House of Investments. Other sister companies include Bankard, Mapua Institute of Technology, Honda Cars Manila, Manila Memorial Park, and Nippon Life Philippines.

PEP is also getting inspiration from CAP, which recently filed a class suit. For their part, PEP members are preparing documentary evidence of fraud and pooling their financial resources for the cases they plan to file soon.

Garcia admitted they underestimated the intensity of the backlash from planholders, especially against the person of the patriarch, former Ambassador Alfonso Yuchengco. The initial plan was to dissociate the family and the conglomerate’s other companies from PPI, but, in the end, the Yuchengcos found themselves committing bulk of the P2 billion funds to meet the withdrawals before 2010—a decision that could have saved them all the brouhaha in the first place.

An insurance executive summed up the entire affair with this comment: “Financial services are fiduciary businesses. We should always remember that we are handling other people’s money.”—With reports from Dwight Agulan

May 23, 2005 Posted by | Philippine Newspapers/Web News | , , , , , , , , , | 2 Comments

Tuition Hikes Disastrous to College Assurance Firms

May 1-7, 2005
by Carl Marc Ramota

The deregulation of college tuition through the enactment of the Education Act in 1982 opened the doors for a sharp rise in tuition, making higher education more elusive if not impossible to many students for the last two decades.

Pacific Plans check

In turn, this has prompted many parents to avail of educational plans to secure their children’s college education. In the beginning, the budding pre-need education industry seemed to provide the remedy. To date, the P150-billion industry is growing at a phenomenal double-digit rate with some four million plan beneficiaries.

To many parents however the recent unexpected downfall of the first pre-need firm in the
country – Pacific Plans Incorporated (PPI) – following the same fate of
industry leader College Assurance Plan (CAP) paint a grim picture.

Worse, more pre-need firms are expected to follow PPI’s fate. As early as 2002, the Securities and Exchange Commission (SEC) admitted that more than 90,000 pre-need plan holders were left high and dry when 13 pre-need firms were either suspended or gone bankrupt.

In the end, the plan holders are the biggest losers. With the successive collapse of pre-need firms, the dreams of thousands of parents and their children for a college education are left in a shambles.


Last April 23, some 2,000 PPI plan holders converged at Saint Paul’s College’s Pasig gym to protest a recent court ruling allowing PPI’s petition for rehabilitation.

Earlier on April 14, Makati Regional Trial Court Judge Romeo Barza issued a stay in order allowing PPI “to stop paying its obligations until the company is rehabilitated.” In its petition for rehabilitation, the 38-year old company is given five years or until 2010
to put its fiscal house in order.

In a statement, the Yuchengco-owned company blamed the incessant tuition hikes for its financial woes. “The deregulation of tuition,” a company statement said, “has caused a tremendous rise in the cost of education, which in turn put an enormous pressure on traditional (open-ended) plans and their respective trust funds considering that pre-need companies dealing in such securities could not pass on the additional cost to their planholders.”

PPI also blamed the devaluation of the peso which has “resulted in a poor business climate, compromising a pre-need company’s ability to meet its obligations.”

Pacific Plans’ trust fund is estimated at $50 million, consisting mostly of the liquid assets in the U.S. dollar-denominated National Power Corp. (Napocor) bonds maturing in 2010.

”Surprised” SEC

Apparently, even the SEC was caught off guard with PPI’s move. SEC Chairman Fe Barin admitted that the Commission was “caught by surprise,” as there was no sign of a liquidity problem with Pacific Plans based on the financial statement submitted to the

Before the PPI folded up, SEC even approved in August 2004 the company’s application for a “corporate restructuring” which effectively transformed it into a “special purpose vehicle” left holding all the problematic pre-need investments.

Curiously, the safe pre-need products, those offering fixed benefits, were transferred to a new company, Lifetime Plans. After securing the divestment, PPI’s board of directors led by its chairperson and president, Helen Y. Dee, resigned en masse.

The Yuchengcos brought along with them about 400,000 pre-need plans into Lifetime Plans, leaving Pacific Plans with 34,000 open-ended, traditional education plans. In the open-ended education plans the company is obliged to pay tuition at any rate, unlike fixed-value plans.

Angry plan holders

To appease angry plan holders, PPI offered an interest of seven percent on educational plans for those who can wait until 2010. The interest offer is lower compared to prime time deposit accounts offered in some banks which give 8.5 percent earnings.

PPI said it can still pay the tuition of plan holders but only as “tuition support,” the amount of which will still be determined by the school type.

In a statement, PPI spokesperson Jeanette Tecson said “the company will pay most of the educational claims for non-exclusive or less expensive schools but will only shoulder less than half the claims of those enrolled in schools with high tuition.” In this payment scheme, Pacific Plans will provide only P28,000 for semestral plan holders, P29,000 for annual plan holders and P22,000 for trimester plan holders.

But the tuition support is not enough, angry plan holders reacted, adding they “felt deprived and cheated of their money.” In the recent April 23 PPI plan holders meeting, a plan holder commented that the company pledges were all part of “a greater scheme to legitimize their position to file a petition for rehabilitation.”

Another plan holder said the PPI brouhaha can be considered as a “grand-scale estafa.” They also blamed the SEC for being “toothless” in protecting the welfare of pre-need consumers.

Among those who flocked to St. Paul was Elizabeth Centeno on behalf of her sister Anabelle Macalinao, who is working in Dubai. Macalinao, a widow, availed of an educational plan for her 13-year old son John Paul before she left for Dubai four years ago.

Centeno said she was surprised when she first heard the news and quickly called her sister abroad.

Nagulat din yung sister ko. Shocked siya. Iniisip niya safe na yung edukasyon ng anak niya nung kumuha siya ng plan” (She was also surprised. She was shocked. She assumed her son’s education was already assured when she availed of a plan.), Centeno said quoting her sister.

Centeno admitted she and her sister fear for John Paul’s college education now that it is uncertain whether they can still refund their payment from Pacific Plans. “Hindi rin natin masasabi na laging may pera para sa pag-aaral ng bata” (We really can’t tell if we will
always have the money for the child’s education), she told Bulatlat.

Distressing signal

In a statement, Anak ng Bayan Youth Party Vice President Raymond Palatino blamed the Education Act of 1982 for the current pre-need industry crisis. “Pacific Plans and CAP’s downfall merely highlight how the cost of education, particularly in the tertiary level, has
dramatically increased after the deregulation of tuition,” he said.

He predicted that more pre-need firms are doomed to close this coming school year unless the government starts to arrest the incessant tuition hikes in tertiary schools.

In a recent study, Anak ng Bayan (nation’s youth) projects that if the average tuition
rate increase of 12 percent continues over the next five years, the national average per unit would reach P590.20 by 2010. By then tuition would have increased by as high as 1,257.41 percent since 1990.

Palatino said the closure of pre-need firms sends a distressing signal to college hopefuls. “Parents and students apply for pre-need plans to ensure that they may be able to shoulder the high cost of tertiary education,” he said. “With pre-need firms now closing, access to higher education has become more elusive to many.”

He also predicted an upsurge in the rate of college dropouts and number of out-of-school youth in the coming school year. Bulatlat

© 2004 Bulatlat Alipato Publications

Permission is granted to reprint or redistribute this article, provided its author/s and Bulatlat are properly credited and notified.

May 1, 2005 Posted by | Philippine Newspapers/Web News | , , , , , , , | Leave a comment