SEC says CAP has enough assets to cover debts

The Securities and Exchange Commission (SEC) said yesterday that pre-need industry leader College Assurance Plan Philippines Inc. (CAP) has enough assets to cover its maturing obligations and that it is doing everything it can to further strengthen its trust fund.

SEC Chairman Lilia R. Bautista said CAP’s real estate properties and Metro Rail Transit (MRT) bonds are sufficient to settle its liabilities.

"Maturity of the plans will not occur now but in the future. Liquidity issue is no problem because they have other assets which they can sell like their properties in Canyon Woods and Nasugbu, both in Batangas. They also have their MRT bonds which are saleable or have a market," Bautista said.

Bautista said the MRT bonds are valued at P3.4 billion and have a net present value of P10 billion.

The SEC chief said CAP’s trustee bank will make a presentation to the SEC sometime this week on its plan to further build up its assets to reassure its planholders that it can meet all maturing obligations.

"They will make a presentation to show that their assets will grow as liabilities grow," Bautista said.

A trust fund refers to the money set aside by a pre-need company to service the future needs of its planholders.

It is considered insufficient when it is lower than the projected liability or the total amount of payment to be settled in the future. The deficiency is referred to as the actuarial reserve liability (ARL), which is computed on the basis of assumptions on interest rates, inflation rates and percentage of lapsed plans or contracts cancelled resulting to incomplete payment.

A source from CAP said the pre-need firm’s projected ARL is 20 percent more than its actual payments based on its updated financial statements for 2003.

"The ARL computation is more like an actuarial prediction of the future liabilities – which refer to plans that will be maturing between 2005 and 2021," the source said.

The same source emphasized that CAP has more than P20.6 billion in trust fund assets that are expected to grow in time to match the P17.2 billion maturing plans.

"That’s P3.4 billion more than the predicted liability," the source said.

The CAP official also pointed out that CAP’s P2.5 billion trust fund shortfall in 2002 was fully covered in Sept. 30 the same year.

The official said the firm’s revised financial statements do not have an adverse opinion.

"It says that the parent company financial statements present fairly the financial position of CAP as of Dec. 31, 2003,"the official said.

Moreover, the CAP official said the company has not violated any accounting principles nor understated its liability for 2003.

The CAP official said the firm will meet anew with its trustee banks to review their asset growth figures so as to account for those assets which were not included in the computation of the ARL yield rate.

Meanwhile, Bautista said the SEC has appointed Noni Ambat, assistant director of the SEC’ s Non-Traditional Securities Department, as CAP comptroller.

He replaced Mar Aguas who was said to have problems with the management and was charging too high.

As comptroller, Ambat will be tasked with ensuring that CAP covers its maturing obligations.