SEC revokes pre-need license of Prudentialife

THE Securities and Exchange Commission has revoked the dealer’s license of Prudentialife Plans Inc., the Prudentialife Group’s pre-need arm, for failing to cover its trust fund deficiency.

The commission en banc reached the decision because the assets Prudentialife Plans was proposing to include in its trust fund to cover its liabilities did not meet its requirements, SEC Chairman Fe Barin said in a telephone interview.

Prudentialife Plans would no longer be allowed to sell new pre-need policies, she said.

Over a million Filipinos hold policies in Prudentialife Plans, which in 1978 started as a pre-need company led by founder Francisco Alba, a former ambassador to the Holy See. Later on it diversified into financial services, non-life insurance, memorial plans, real estate and travel and leisure.

In 2006 Prudentialife Plans’ trust fund reached P16.2 billion, generating an income of P1.75 billion and a return on investment of 16.8 percent a year.

Barin said the pre-need firm obtained a dealer’s license for 2009 last December, and on the condition it build up its capital by putting in cash or assets to cover its deficiency.

But when the company applied for the SEC’s multi-year capital-buildup program, the commission did not find its assets acceptable. Under that program, the acceptable assets that may be contributed to a company’s trust fund and capital are income-generating real estate and unlisted shares that are not in any way related to the pre-need company.

In a statement, Prudentialife Plans president Albert Alba said that while the company was no longer allowed to sell pre-need policies, it would continue to operate as a servicing pre-need company and to pay benefits to its plan holders.

“We hope that these developments will be temporary owing to the prevailing economic environment and government efforts to institute much needed regulatory reforms,” he said.

“We are confident we could pursue new opportunities and build the business of Prudentialife beyond the pre-need industry.”

Meanwhile, Barin said the SEC had approved the application of Coco Plans to avail itself of the capital-buildup program.

She said only Coco Plans and Prudentialife had applied for the program, which allows ailing pre-need firms to build up their impaired capital and trust funds in four to five years as a result of the poor investment climate.

Industry figures show that the total trust fund deficiency of pre-need companies stood at P46.83 billion at the end of June 2008, and due to shrinking earnings from investments. That means pre-need firms will have to increase their capital and put more assets in their trust funds to cover their deficiencies.

 source: manilastandardtoday

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