Prudential Plans’ fate remains in limbo

MANILA, Philippines - The June 20 deadline for the final decision on whether to liquidate troubled Prudential Plans Inc. (PPI) has been placed on hold.

According to Insurance Commission (IC) Deputy Commissioner Ferdinand George Florendo said they are still reviewing the various options in relation to the proposed liquidation “in the light of further outside pressures to rehabilitate the pre-need company.”

“We are still at status quo,” Florendo said.

However, the IC’s management committee, composed of the commissioner and the four deputy commissioners, is poised to decide this week after the June 20 deadline has lapsed.

The June 20 deadline for a decision was arrived at after a meeting with Congressional committee on banks and finance which asked the IC for a deferment for 30 days which falls on June 20.

“We are finalizing the review of all of the documents, and we are also looking at the various options available as far as liquidation is concerned,” the IC deputy commissioner said. “For the meantime, there will be no formal undertaking.”

The IC is likewise poised to undertake a major review of all the pre-need companies that has been placed either under conservation, rehabilitation or liquidation.

Florendo said they have received instructions from the Department of Finance (DOF) to settle within the year, all issues related to the conditions of at least 30 distressed pre-need companies, aside from PPI.

The finance department had made it clear that the pre-need industry must increase its capital base to avoid cases similar to College Assurance Plan (CAP), Pacific Plans Inc. and PPI.

As a result of these failures, hundreds of thousands of plan holders lost billions of pesos. It likewise cast a dark cloud over other financial sectors such as the life insurance industry.

The bigger capital base allows the company to reduce overhead, increase its investment pool, trust funds, and reduce the firm’s costs per client serve.

The present capital requirement for the pre-need industry is P100 million to get a license to sell education, pension or life/memorial plans.

A pre-need company is different from a life insurance company, wherein the former sells short term plans while the life insurer sells protection (and in some cases savings/investment) that is longer in maturity.

The Insurance Commission (IC) is the regulator of both sectors, although the Securities and Exchange Commission (SEC) originally oversaw the pre-need industry.

Presently, there are only 20 licensed pre-need companies after reaching over 100 players during its stint under the SEC.

The authorized pre-need companies, as of May 2012, are: Abundance Providers & Entrepreneurs Corp. (APEC), AMA Plans, Ayala Plans, Caritas Financial Plans, CityPlans Inc., Cocoplans Inc., Destiny Financial Plans, Eternal Plans, First Union Plans, Himlayang Pilipino Plans, Loyola Plans Consolidated, Manulife Financial Plans, Mercantile Care Plans, Paz Memorial Services, PhilPlans First Inc., Provident Plans International Corp., ST. Peter Life Plans, Sunlife Financial Plans, Transnational Plans, and Trusteeship Plans Inc.