Pre-need firms seek time for claims

MANILA, Philippines - Pre-need companies will need more time to raise money to pay for plan holders’ claims after suffering from falling asset prices as a result of the slowing global economy, industry players said Wednesday. In a briefing, the Federation of Pre-need Companies of the Philippines moved to stave off massive withdrawals by investors, assuring them of recovering from a trust fund deficit under a relaxed regulatory environment. "We are hopeful that everyone will survive this crisis," said Jesusa P. Concepcion, president of Loyola Plans Consolidated, Inc. More than half of the 20 federation members attended the briefing, although only a handful spoke. The companies’ except for one pre-need firm, failed to detail their financial standing. The pre-need industry earlier warned regulators of its collapse due to the inhospitable investment environment, unless regulations were eased. Jose Miguel M. Vasquez, president of the federation and Permanent Plans, Inc., traced their trust fund deficit to falling prices of investments in the stock and bond markets. Pre-need companies sell pension, life, educational and other plans that guarantee returns when these investments mature. Mr. Vasquez said much of their trust funds had been invested in local government securities, whose yields have been going down, and in blue-chip stocks. He denied charges that pre-need firms have invested in toxic assets abroad, noting that the law limits their investments here. Mr. Vasquez said present plans offer lower yields, leading some investors to switch to financial products that promise higher returns. Cocoplans, Inc. President Caesar T. Michelena said the company had written plan holders to inform them that their trust fund, worth over P1.5 billion, can pay claims worth P500 million over five years. Cocoplans was the only pre-need firm that provided figures concerning its fund. "Give us a little time. We know we can overcome this," he said, speaking for the industry. Mr. Michelena said the Securities and Exchange Commission’s (SEC) move to relax rules on capital build-up and asset pricing were enough to address their concerns, which they voiced as early as August. Meanwhile, Prudentialife President Jose Alberto Alba said their situation would correct over time as the investment market recovers. Mr. Vazquez neither denied nor confirmed the pre-need industry’s reported P46.83 billion in trust fund deficit as of June 2008, saying the SEC was in a better position to answer this. Efforts to reach corporate regulators were unsuccessful. He said pre-need companies can beef up their capital over the next three years under relaxed rules or stop selling new plans and undergo restructuring. Data from the commission showed that as of December 2007, pre-need trust funds stood at P107.23 billion, almost three fourths of which were invested in government securities, roughly a fifth in equities, while the rest were in real estate, time deposits and other financial instruments. In a related development, the regional office of the Securities and Exchange Commission in Davao City has received complaints against the Legacy group after the agency denied the voluntary dissolution of companies under the investment firm. Lawyer Jayvee Paul D. Francisco of the regional SEC office could not say how much Davao residents had invested in the company, but said many were retirees who claimed to have used their retirement benefits in the "double-your-money" schemes of the group. Lawyers of the Davao City complainants claimed the number investors could go as high as 800. The SEC earlier urged plan holders of Legacy Consolidated Plans, Inc., Scholarship Plan Philippines, Inc. and All Asia Plans Corp. — three pre-need companies under the Legacy group that had closed shop without obtaining approval — to file complaints by March 31. — BusinessWorld