SEC extends deadline for pre-need firms’ capital build-up programs

MANILA, Philippines - The Securities and Exchange Commission (SEC) has given troubled pre-need companies two more months to file their capital build-up programs from the original deadline of Feb. 15. The extension would allow pre-need firms to prepare a scheme based on their end-2008 audited financial statements, also due on Apr.15, SEC Chairman Fe B. Barin said in a text message. But an industry official said they needed more time, adding that most troubled pre-need firms have yet to decide whether they should continue operating. "Is it enough time? Probably not, since each company is assessing whether to continue, should continue and can continue," Jose Miguel M. Vazquez, Federation of Pre-need Companies of the Philippines president, said in a text message. "It is not just a question of capital. Each company is reviewing whether there is still a future [in this business] and this cannot be determined in such a short time," he added. In December, the commission relaxed rules on capital build-up and asset valuation, after the pre-need federation warned that the industry could collapse if regulations were not eased. The group said some companies were considering stopping operations and were just trying to pay plan holders due to their huge trust fund deficits. The commission’s nontraditional securities and investment department said a pre-need company applying for a longer period to build up capital must submit a letter acknowledging the trust fund deficiency or capital impairment based on the valuation report or audited financial statements for 2007. The SEC may shorten the period if the financial conditions of the company improve during the implementation of the program. The pre-need industry was said to have posted a P46.83-billion trust fund deficiency at the end of June 2008 due to shrinking earnings from investments following the slowing global economy. The figure was expected to have worsened at the end of last year. Industry figures showed that as of December 31, 2007, the industry’s trust fund recorded a surplus of P6.8 billion based on an assumed yield of 12%., which was viable until February last year. When the US-led financial crisis worsened in the latter part of last year, companies lowered growth projections due to sliding demand. — Don Gil K. Carreon, BusinessWorld