SEC extends deadline for pre-need firms

MANILA, Philippines - The Securities and Exchange Commission (SEC) has decided to give pre-need companies more time to submit their capital build-up programs. Instead of February 15, pre-need companies will now have until April 15, 2009 to “prepare their financial statements for the entire 2008, instead of just interim reports, allowing them to fully reflect their financial conditions," SEC commission secretary Gerard M. Lukban said. The deadline for submission of 2008 financial statements is also April 15 so all pre-need firms are expected to have these requirements ready by then, he added. For her part, SEC chairperson Fe B. Barin said that the extension “is in response to the request of the Federation of Pre-Need Plan Companies to enable them to meet the requirement." The Philippines’ pre-need industry has incurred a P46.83-billion trust fund deficiency as of June last year, due to shrinking earnings from investments. December’s results are expected to be much worse since the impact of the global crisis was stronger in the second semester last year. The trust fund deficit has prompted many companies to explore various options, most of which include paying all planholders so no customer would be left out. As of December 31, 2007, the industry had a surplus of P6.8 billion based on an assumed yield of 12 percent on their trust funds. Trust funds totaled P74.67 billion and liabilities stood at P67.86 billion. Up until February 2008, the trustee banks were confident of earning 12 percent for the rest of 2008. When the financial meltdown started in the second quarter of 2008, and grew progressively worse with each passing month, the 12-percent assumption was no longer achievable. Some companies even found it difficult to reach six percent. At 12-percent assumed rate of return, the deficit of the industry as of June 30, 2008 was supposedly only P3.63 billion. But since 12 percent was not attainable and six percent was roughly the realistic rate, income dropped and the deficit as of the said date based on 6 percent yield, shot up to P46.83 billion. Earlier, the SEC responded favorably to the plea by pre-need companies to relax its rules and allow the industry to build up capital and shore up their trust funds and prevent their collapse amid the global financial crisis. The SEC has set the requirements and conditions for the application of multi-year capital and trust fund build-up and the terms and conditions they must observe once the applications are approved, Jose Aquino, SEC non-traditional securities and investments director, said. Among the conditions set by the SEC, the pre-need firm must first submit a letter acknowledging the trust fund deficiency or capital impairment based on the actuarial validation, valuation report or audited financial statements for 2007. The firms must also undertake that, should the financial conditions of the company improve during the implementation of the program, the pre-need firm may be required by the SEC to shorten the period. Applicants are also required to submit a five year period projected financial statement together with assumptions taken as well as a 15-year financial program addressing the old basket of plans that are commercially impracticable, taking into consideration the respective maturity values of the plans. - GMANews.TV