Pre-need sector suffers 9% drop in 10-mo sales

The pre-need industry suffered a 9.14 percent drop in sales for the first 10 months of the year to P15.84 billion from P17.43 billion a year ago.

Data culled by the Securities and Exchange Commission’s Non-Traditional Securities Department showed that the number of pre-need plans sold during the period January to October this year declined by 25.78 percent to 197,079 from 265,530.

Education plans suffered the biggest drop in sales as the number of plans sold shrank by 36.59 percent to 27,976 valued at P3.43 billion or 32.87 percent lower than the previous year’s P5.11 billion.

Sales of life plans also declined by 35.84 percent to 63,655 from 99,216 the previous level. In terms of the contract value, sales of life plans amounted to P2.28 billion or 30.85 percent lower than the year earlier’s P3.29 billion.

The number of pension plans sold likewise declined by 13.71 percent to 105,448 from 122,198. In terms of the contract value, sales of pension plans, however, increased by 12.23 percent to P10.12 billion from P9.02 billion.

Initial collections from the plans sold amounted to P2.01 billion, 10.08 percent higher than the year ago figure of P1.83 billion.

Pre-need plans are contracts which provide for the performance of future services or the payment of future monetary considerations at the time of actual need for which planholders pay in cash or installment at stated prices, with or without interest or insurance coverage and includes life, pension, education, and interment.

For this year, the industry has expected to post a flat growth due to unfavorable in business environment. The adoption of the International Accounting Standards (IAS) in the preparation of financial statements for the year 2005 is also expected to temper the industry’s performance this year.

Under the SEC proposal, the IAS will increase the liabilities of companies since premiums collected will no longer be booked as income but as a liability. This could make healthy companies with good cash positions look bankrupt.

The industry reported a 44.3 percent drop in sales last year to P20.55 billion as investors adopted a wait-and-see stance due to the cashflow problems hounding major pre-need firms.