Permanent Plans disallowed from selling new pre-need products

MANILA, Philippines - Permanent Plans Inc. is no longer authorized to sell new preneed products after it changed the way it paid planholders without securing government approval. However, a government decision disallowing the company from selling new preneed products “is no longer necessary," Juan Miguel M. Vazquez, the company’s president said in a statement. The company decided to stop selling new plans after its trust fund lost 35 percent in 2008 due to the financial crisis, he said. Moreover, as of March 16, the company reportedly proposed an alternative mode of paying benefits to preneed planholders, the Securities and Exchange Commission (SEC) said. Instead of paying benefits as previously agreed upon, the company reportedly tried to settle its obligations by cash and dacion en pago, in which assets are used to pay debts. These alternative payment arrangements are disallowed under rules 12.1 and 12.6 of the New Rules on the Registration and Sale of Preneed Plans, Jose P. Aquino, acting director for non-traditional securities and instruments department said. Under the said rules, no pre-need contract should be amended or modified without the SEC’s prior approval. Such amendment or modification should neither affect adversely the planholders nor impair any term or condition in the pre-need plan or other related documents. As a result, the SEC suspended the company’s “dealer's license and certificate of registration and permit to sell pre-need plans earlier granted to Permanent Plans," Aquino said in an order dated April 20. “As consequence of such suspension, the licenses granted to the general agent and salesmen of the company are likewise suspended." Next: Preneed firm failed to request changes in its benefit payments Preneed firm failed to request changes in its benefit payments The rules also indicate that an issuer must file a new registration statement if there are changes in benefits or the contract or the actuarial assumptions. "Permanent Plans did not file a petition for the amendment of its pre-need plans and registration statement to reflect the said change in the mode of settlement of pre-need benefits," Aquino said. The SEC decision suspending their license "came as a surprise" since the pre-need firm has decided not to sell new plans and to limit itself to servicing all claims since their concern is the "protection of all our plan holders and settle promptly and efficiently their claims," Vazquez said. Nevertheless, Permanent Plans maintained that its contract allows it to change its mode of payment. "Permanent Plans no longer believes in the viability of the pre-need pension industry as currently set up and given the adverse operating environment it finds itself in," it said. “That is why on April 15, 2009 instead of filing a capital build up plan, Permanent Plans formally informed the SEC that it has chosen to avail of the early and orderly settlement of claims option. Furthermore in an earlier meeting with the SEC we informed them that Permanent Plans will stop selling new pension Plans." Permanent Plans expect to pay all its planholders in the form of cash and other assets in the next four to six months. "While Permanent Plans apologizes for this inconvenience it sincerely believes it is the best option to protect all plan holders. We are not required to put in these additional assets but we are offering to do so. We also do not want to go to court for rehabilitation because this will take time and delay the payment to plan holders," he added. -GMANews.TV