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[Photo of Atty. Gerard M. Lukban]One can't blame plan holders for losing sleep over their investments. Two more firms have joined the long list of pre-need companies in need of immediate help.

It's official. Two more firms have joined the list of pre-need companies that either had their licenses revoked or suspended, or had totally gone belly up.

The Securities and Exchange Commission (SEC) revoked and suspended the dealer's licenses of Prudentialife Plans and Permanent Plans on 20 April 2009. And although the recent orders were issued based on reasons totally different from those that put several firms under receivership early this year, the news caused panic among plan holders still reeling from the aftermath of the Legacy episode in February.

Little Cover

To save plan holders, Prudentialife applied for a Multi-Year Capital and Trust Fund Build Up program. SEC spokesperson Atty Gerard M. Lukban explained that this was aimed at helping the outfit cover its capital and trust fund deficiencies. “They intend to cover the deficiency by contributing certain shares of stocks in Prudential's affiliated companies.”

The problem arose when the SEC checked these associated businesses. According to Lukban, they could not evaluate the value of the organizations since they were not listed in the Philippine Stock Exchange (PSE). The SEC also thought that stocks from the enterprises were not readily marketable, meaning they're not easy to sell once their values have risen.

As a result, the SEC revoked the license of Prudential Plans to sell new pre-need plans. But, Prudentialife Plans Inc. president Jose Alberto T. Alba, in his letter to plan holders, said they “will continue to operate as a servicing pre-need company and pay plan benefits of the plan holders as warranted.”

No Clearance

Permanent Plans' license, on the other hand, was suspended because the company decided to take certain actions without the SEC's approval.

The firm resorted to dacion en pago (payment in kind) to settle their obligations to their clients. Permanent gave away products like slimming tea and medicines as partial payment to plan holders. Company president Juan Miguel Vazquez said the move was meant to augment the money in their trust funds. “We can continue to pay maturities this year, next year, etc. But what about the maturities four, five, or 20 years from today? If the trust fund continues to lose money or does not earn its yield target, the longer term maturities will not get the amounts committed to them,” he explained.

But the argument did not convince the SEC. “Although their (Permanent Plans) contract may have that provision... they will have to get the consent of the SEC and the consent of the plan holders before they can do that... This doesn't have the approval of the SEC,” said Atty Lukban.

Still Standing

Today, there are 22 pre-need companies that are still operating. These are AMA Plans, Ayala Plans, Caritas Financial Plans, City Plans, Cocoplans, Danvil Plans, Destiny Financial Plans, Eternal Plans, First Country Plans, First Union Plans, Grayline Plans, Himlayang Pilipino Plans, Loyola Plans Consolidated, Manulife Financial Plans, Mercantile Careplans, Paz Memorial Service, Philam Plans, Provident Plans International, St Peter Life Plan, Sun Life Financial Plans, Transnational Plans, and Trusteeship Plans.

Whether or not they would all stay on their feet depends on the SEC's evaluation of the firms' financial statements that were submitted in April. SEC's Lukban said he's “hoping that they wouldn't be needing any extra help on this. We are also hoping that after this fall, the industry would come out stronger.”

Print ed: 06/09


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