Pre-need firms say their ‘worst days are over’

The pre-need industry believes their worst days are finally over as investments slowly trickle back in — thanks to wide-ranging reforms adopted by pre-need firms to regain the confidence of the general public, according to the Philippine Federation of Pre-need Plan Companies Inc.

"The bad times are already dissipating and it’s just a matter of time before we could convince everyone that we are here for the long haul and will deliver commitments to our planholders. We’re on a journey for continuous improvement," said PFPPCI president Juan Miguel Vazquez.

Confidence in pre-need firms plummeted after some of the industry’s biggest players like College Assurance Plans and Pacific Plans ran into financial difficulty, leading to non-payment of maturing obligations to clients.

While pre-need officials did not give out sales projections, they are optimistic that this year will be much better than last year.

"We’re all definitely looking for growth. People will not stop going to school. The need for this product is always there," said Philam Plans president and chief executive officer John Howell.

Loyola Plans Consolidated Inc. director Christopher Concepcion, for his part, noted the uniqueness of pre-need plans as they address the most pressing necessity of every family.

"We do not only want to promote the awareness of the presence of pre-need but of its role in making dreams come true for every Filipino as well," Concepcion said.

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.

Meanwhile, Prudentialife Plans president Jose Alberto Alba said he welcomes the Securities and Exchange Commission’s proposed guidelines on the establishment and management of pre-need firms’ trust funds, particularly the provision allowing trustee banks to invest in offshore markets.

"It s good we can look at opportunities elsewhere. We should have the flexibility in allocations," Alba said.

Based on the proposed rules, pre-need firms may invest in instruments issued by foreign institutions provided the transaction is done here and that the value of investment shall not exceed 15 percent of the total trust fund equity. Among these instruments are those issued by the government of any foreign country with a credit rating that is at least at par with the rating of the Republic of the Philippines’ bonds, and mutual funds with positive fund performance for the past three years.

The proposed rules also limit the investment of the trust funds of a pre-need company in fixed-income securities to not less than 10 percent of the trust fund equity. The maximum exposure to commercial papers shall not exceed 15 percent of the total trust fund equity while investments in equities shall be limited to 25 percent of the total trust fund.

Investments should be limited to preferred or common stocks listed on the main board of the Philippine Stock Exchange. These investments shall include stocks issued by companies that are financially stable, actively traded and possess good prospects of growth in major business activities.

Investments in real estate, on the other hand, should not exceed 10 percent of the total trust fund. These investments shall be limited to income-generating properties located in strategic areas of cities. These properties shall be appraised every three years by a licensed real estate appraiser and accredited by the SEC to reflect the increase or decrease in the value.

The guidelines are intended to ensure the liquidity of the trust fund to guarantee the delivery of the benefits provided for under the contract. Based on the new rules, no less than 10 percent of the net value of the trust fund assets per type of plan shall be set aside as a liquidity reserve to cover the benefits due to the planholder during the ensuing year unless the actuary determines otherwise.