Monday, June 06, 2005

The Contagion of Creeping Loss of Confidence

Excerpted from the Sun Star Cebu May 25 2005

Public told: Life insurance plans different from pre-need plans

LIFE insurance plans are different from pre-need plans.

This is the message life insurance companies want to get across to the public, as the problems of the pre-need industry begin to affect the campaign of life insurance companies to increase awareness on the importance of life insurance.

"Pre-need is different," said Generali Pilipinas executive vice president for sales and marketing Joe Ferreria. "We want the people to realize that investing in life insurance plans is an (alternative) to investing in pre-need plans,"

The Life Underwriters Association of the Philippines has been conducting an educational campaign to make the public realize the importance of insuring lives. But the liquidity problems of pre-need companies like the College Assurance Plan (CAP) and the Yuchengco-owned Pacific Plans are now affecting this campaign.

While CAP is still assuring its planholders that it can pay its liabilities, Pacific Plans has admitted that it can pay only in 2010. It has filed in court a petition for rehabilitation, with Pacific proposing to return the money of its planholders, plus a return of seven percent per annum from the date of full payment up to July 2010.

Pre-need company Cocoplans Inc. president Caesar Michelena earlier said the selling of open-ended contracts, especially for education plans, is one of the reasons why some pre-need companies are now in financial trouble.

In an open-ended contract, pre-need firms must pay the amount of the tuition, whatever it might be, regardless of the premium paid by the plan holder. But tuition has increased significantly for many years.

Pre-need plans include educational, memorial and pension plans.

Not open

Generali Pilipinas' Ferreria said life insurance companies do not sell open-ended contracts. "The open-ended contracts are products of the pre-need industry. Life insurance companies have defined benefits."

*************************************************************************************************************************************

This article above is one of many examples of the insurance industry reacting to the demoralization of the investing public with respect to preneed plans. With the benefit of 20:20 hindsight, we sympathize with these insurance companies' position.

The preneed companies not owned by insurance companies have had great success pouring buckets of money into lobbying for the supervision of the industry by the Securities and Exchange Commission rather than the Insurance Commission (who is responsible for safeguarding the insurance industry).

During the good times, the lobbyists argued aggressively that the preneed industry could be more creative and deliver value to prospective planholders. And of course, the insurance companies were painted as sour grapes in warning about speculative excesses that the preneed companies could get into simply because prudential guidelines were and still are being formulated by the SEC (who are much less experienced than their Central Bank or Insurance Commission counterparts).

And therefore in a frustrating case of "I told you so", we now have the CAPs and PPIs of the world pleading with their insurance company brethren to come out with a united stand in saying that tuition inflation was beyond anyone's control. On top of that, the insurance companies are being dragged down and stigmatized with the failings of these two companies as they are now finding it hard to sell their offerings.

Make no mistake, thanks to PPI, there is now a crisis of confidence that is shaking the entire industry due to the lack of transparency and integrity of these erring firms.

May we suggest that the more appropriate stand is the one that Mr. Cuisia has advocated stating that there must be "accountability for results". Rather than stay silent, the correct thing for the insurance companies to do is to call a spade a spade and come out with an industry position paper stating that they support the SEC's scathing evaluation of PPI's miscarriage of fiduciary responsibility at these erring firms.




50 Comments:

At Monday, June 06, 2005 4:32:00 PM, Anonymous Anonymous said...

All pre-need companies, and I believe they have an organization, must come out as one voice in condemning PPI's attempt to defraud its planholders and force it to face up to its contracted responsibilities. This is the only way they can gain back the TRUST of the general public. Unless they do this, they are all suspect...either as fellow-conspirators or understudies waiting in the wings to learn from or improve on the success/failure of PPI.

 
At Monday, June 06, 2005 4:44:00 PM, Anonymous Anonymous said...

"Unless they do this, they are all suspect...either as fellow-conspirators or understudies waiting in the wings to learn from or improve on the success/failure of PPI."

How can they come up with these statments when the continued decline of sales of pre-need firms also affects them. Remember, all pre-need plans carry insurance benefits. Any decline of sales from pre-need has a direct impact on the sales of these insurance firms. If you would look into the pre-need industry, most of the major players have life insurance companies as their parent company. Some of these insurance companies even carry pre-need like products (Scholar Gold etc).

 
At Monday, June 06, 2005 4:45:00 PM, Anonymous Anonymous said...

"May we suggest that the more appropriate stand is the one that Mr. Cuisia has advocated stating that there must be "accountability for results". Rather than stay silent, the correct thing for the insurance companies to do is to call a spade a spade and come out with an industry position paper stating that they support the SEC's scathing evaluation of PPI's miscarriage of fiduciary responsibility at these erring ..."

How can they come up with these statments when the continued decline of sales of pre-need firms also affects them. Remember, all pre-need plans carry insurance benefits. Any decline of sales from pre-need has a direct impact on the sales of these insurance firms. If you would look into the pre-need industry, most of the major players have life insurance companies as their parent company. Some of these insurance companies even carry pre-need like products (Scholar Gold etc).

 
At Monday, June 06, 2005 4:48:00 PM, Anonymous Anonymous said...

This comment has been removed by a blog administrator.

 
At Monday, June 06, 2005 4:50:00 PM, Blogger Ei said...

and they should be forced to face up to these responsibilities, forced, absolutely I agree it is terrible.

 
At Monday, June 06, 2005 6:10:00 PM, Anonymous Anonymous said...

There's no point differentiating insurance from pre-need or for such companies to claim they don't have open-ended plans. The problem is not our fear that they will not have the capacity to pay based on all their actuarial valuations and other formulas. The fear is that even if they make tons of money, they can just move them to another company and defraud planholders. As long as the industry does not address this fear by condemning PPI's actions, the fear will not go away.

 
At Monday, June 06, 2005 6:23:00 PM, Anonymous Anonymous said...

"How can they come up with these statments when the continued decline of sales of pre-need firms also affects them."

exactly! this is the right time to "excise and isolate the cancer" which is PPI. tama! tamang-tama ang irony! tatamaan ang PPI ng sarili nilang pinakalat na virus.

 
At Monday, June 06, 2005 6:48:00 PM, Anonymous Anonymous said...

i have dealt with fil-chinese businessmen before...kamayan lang! their word is their bond!

what the yuchengcos have done is anathema to the chinese way. they are now pariahs among the fil-chinese community.

the yuchengcos should also be treated as pariahs by the pre-need industry! pag di sila lumayo sa mga yuchengco, hawa-hawa yan! pag di nila kinastigo ang nagkakamali nilang kabarkada, de lahat sila pagdududahan na iisang ugali. traydor so usapan!

likas pa naman sa pinoy ang "bahala na" attitude, karamihan yan di naniniwala sa insurance! it took a long time for insurance companies to educate pinoys and build the TRUST. i think it was the post-world war 2 experience that turned the tide for insurance companies kasi di nila tinalikuran ang mga claims na umulan after the war.

so 3 generations later, it is the bad experience naman of planholders with PPI that will turn the tide against pre-need companies. kasi isang prominenteng miyembro ng samahan nila ang tinakbuhan ang sariling kliyente.

the future hangs in the balance for pre-need companies. they will be judged according to their actions now.

will they take the honorable way? or will they doom themselves through their apathy and failure to act against their errant bro?

 
At Monday, June 06, 2005 8:13:00 PM, Anonymous Anonymous said...

To the poster below and Kit

Take note on the heading is titled "Impossibility". If Coalition cannot show an investment vehicle that copes with tuition fees, then PPI is right, the whole contract is now "Impossible" to fullfill.



If I insure my car with Malayan for 500,000 with a premium of lets say 20,000 does that mean Malayan has every right not to pay me in case my car gets carnap for the simple reason that no such investment can earn that much? What kind of reasoning is this.

The table you publish shows a return of more or less about 12% net of interest for 7 year investment from the year 1995 to 2004. Now, please explain to me how can Lifetime cope up with the payment for the pension plan of my wife which she bought in 1995 with maturity in 10 years. She was to pay more or less 50,000 evenly spread in 5 years with a face value of 100.000 at the end of the 10th year. Tell me how can they earn that much using your table as their investment guide? Remember, the first 2 years of my wife premium which is about 20,000 shall more or less go to the payment of commission, overhead , taxes, etc. It is only in the 3rd year that a big part of it goes to its investable fund. How can you make 100,000 with only 30,000 as investment in a little over 5 years using your table?

If you are for real, with these revelation how sure are you Lifetime will not use the same impossibility rule when your plan matures?

 
At Monday, June 06, 2005 9:28:00 PM, Anonymous Anonymous said...

Live up to your promise, PPI told

Published on Page B20 of the June 6, 2005 issue of the Philippine Daily Inquirer

THE SECURITIES and Exchange Commission is urging troubled pre-need firm Pacific Plans Inc. to live up to its promise that it will set aside "sufficient funds" to fulfill its tuition support obligation.

PPI's obligation to plan holders for the current school year runs up to P591 million.

PPI temporarily has cut off its funding support to 34,000 plan holders after the SEC revoked the license of Lifetime Plans Inc., which used to be a subsidiary of PPI.

As a result of the SEC order, Lifetime will again become a unit of Pacific Plans.

According to PPI, the SEC's order to revoke LPI's incorporation will affect the rehabilitation of Pacific Plans.

PPI has put up P591 million in tuition fund for the present school year. Ambassador Alfonso Yuchengco personally contributed P250 million to the fund. The proposed rehabilitation plan will account for the remaining P341 million.

Of the total P591 million, PPI has yet to release P161 million to plan holders. The firm has deferred the release of the funds until it has cleared some issues with the SEC.

The SEC also said in a statement that PPI should not use the cancellation of the certificate of incorporation of its subsidiary, Lifetime Plans Inc., as an excuse to "renege" on its tuition payments.

"The incorporation papers of Lifetime have no bearing at all to the commitment PPI made to the Makati court to give tuition support to its traditional plan holders while its petition for rehabilitation is pending in court," SEC said in a statement.

It also said that PPI's tuition support was approved by the Makati regional trial court when PPI filed its petition for rehabilitation. It pointed out that the SEC did not have any participation in that action.

"It is between PPI and the court," the SEC said. "It will be recalled that PPI applied for rehabilitation while it was in the middle of discussions with the SEC for the reorganization of its corporate structure to meet alleged financial [problems]."

The SEC also said that although Lifetime's certificate has been revoked, the company can use its trust fund to pay for maturing plans even without the prior approval of the SEC.

All that is required of Lifetime is that it must inform the SEC of withdrawals from the trust fund and the names of the plan holders whose policies have been paid.

"There is no reason for Lifetime to complain that the cancellation of its certificate of incorporation has prevented it from servicing its maturing obligations," SEC said.

Two groups of planholders have asked the SEC to order PPI to keep paying tuition fees this school year after PPI abruptly stopped the release of P161 million in funds.

The Coordinating Alliance for Reform & Employment in the Pre-need Industry (CARE-PreNeed) and the Alyansang Reporma at Ugnayang Galing at Aruga sa Pre-Need Industry (ARUGA-PreNeed), representing about 5,000 PPI planholders, are urging the pre-need firm to honor its promise to provide financial aid.

"Many plan holders are pinning their hopes on such assistance to ensure the enrollment of their children this coming school year ... such an assistance should cover the whole school year and not merely the first semester enrollment," Care-PreNeed and Aruga PreNeed said.

The groups said that SEC's decision to revoke the registration of Lifetime has immediately drawn a drastic response from PPI to suspend the tuition fee assistance it promised plan holders. The members have appealed to the SEC to reconsider its decision.

"With school opening just around the corner, the grim scenario awaiting plan holders is that the enrollment of their children would be left hanging in the vine of uncertainty, while the commission and PPI engage in legal squabble," the two groups wrote in their letter to the SEC.

 
At Monday, June 06, 2005 10:51:00 PM, Anonymous Anonymous said...

Paging BIR especially the Run Against Tax Evaders (R.A.T.E) Team:

Pacific Plans and Lifetime Plans , according to insiders, earned 600million pesos in 2004.

What they did with the 600 million pesos? It went straight to service PEP/TRAD planholders.

Meaning, they deliberately committed TAX EVASION.

Paging Commissioner Parayno! Secretary Purisima! This is the BIG FISH that you have been waiting for!

Al Capone, the infamous gangster, went to jail, not because of murder and other crimes, but because of TAX EVASION.

 
At Tuesday, June 07, 2005 12:18:00 AM, Anonymous Anonymous said...

In the business of finance, TRUST is the number one product. In legal gambling, like casinos, TRUST is important. In illegal gambling, like jueteng, again TRUST or TIWALA is needed. we've heard stories of "pinatumba ang casino", "tumulak ang jueteng" or "tinamaan ng malake ang jueteng", "dapa ang sakla", etc. But one thing is for sure, you get paid no matter what. Simply because TRUST is their main asset in staying in business.
Now compare all this in the LEGAL BUSINESS setting, say the YUCHENGCO GROUP OF COMPANIES, and you'll come up with words like Swindle, corporate fraud, "mangsusuba", "mandurugas", "mandarambong", "garapalan na", "walang hiya", "atbp". How long will they still be in business? Casinos and jueteng has been with us for decades. The Yu Change Co the rules of the game, and your gone.

 
At Tuesday, June 07, 2005 6:15:00 AM, Anonymous Anonymous said...

Sensible people agree that the move of SEC to cancel Lifetime's incorporation was a bad, knee-jerk reaction...

From the Inquirer News Service

TO HELP ease public concern over the pre-need crisis involving those "open-ended" education plans, the SEC recently revoked the incorporation of a pre-need company.

That's the Lifetime Plans, a spin-off company of Pacific Plans Inc., which belongs to the Yuchengco Group of Companies of Chinese-Filipino tycoon Alfonso Yuchengco.

Pacific Plans is asking court approval for a rehab plan for some 34,000 "open-ended" education plan holders, hoping to give back their initial investment, plus interest.

Otherwise, according to Pacific Plans, it would just have to fold up, and all those plan holders would get nothing at all. Not even a Batman tumbler or what!

But Pacific Plans had more than 400,000 holders of pre-need plans other than the problematic "open-ended" education plan.

To shield them from the problem of "open-ended" education plans, Pacific Plans officials spun off their business to another company, which was Lifetime Plans.

It was some sort of a cancer surgery in reverse. You know, you remove the good cells and then put them in another healthy body.

* * *

BUT in another one of its famous knee jerk reaction, the SEC ruled that, with or without the Pacific Plans cancer, the spin-off company Lifetime Plans could not go on existing.

The SEC, as I said, cancelled the "incorporation" of Lifetime Plans. In business, the incorporation papers are the equivalent of birth certificates for people.

Everybody needs a birth certificate, not so much to prove that you were actually born and you did not just come out of thin air, but as a legal document to prove almost everything, such as your citizenship or your underwear size.

For business, the SEC incorporation papers are the legal documents showing the birth of a legal entity -- a corporation.

By revoking the incorporation of Lifetime Plans, the SEC in effect killed an entity that, like the OB-Gyne for babies, the SEC itself delivered.

And that's it. You, Lifetime Plans, no longer exist. Just like that! I just don't know if those mothers of school-age boys wish they had the same awesome power.

* * *

AND SO, what happened after the SEC played god over Lifetime Plans, revoking its very existence?

Immediately, it should mean that Pacific Plans could no longer pursue its rehab. This was premised on the isolation of those problematic "open-ended" education plans.

Not knowing what the next panic-stricken move of the SEC would be, both Pacific Plans and Lifetime Plans thus stopped payments to its customers.

In particular, Pacific Plans was still paying for the tuition and other school fees of its "open-ended" plan holders this school year.

The company set aside almost P600 million, with P250 million coming from the old man Yuchengco himself, for those plan holders.

It has released more than P300 million. Now it is holding back the release of the more than P200 million.

As for the more than 400,000 plan holders of Lifetime Plans, particularly those with fixed-value education plans, they too could not get their benefits.

Well, nothing is clear at this time, because both Pacific Plans and Lifetime Plans have no idea what the SEC revocation would mean to their 400,000 plan holders.

Would it mean that the SEC wanted the two firms to fold up, taking down everybody with them, or should they just sweep the problem of open-ended plans under the rug?

* * *

BUT amid such a mix-up, the SEC is saying that, well, it actually does not have the power to force either Pacific Plans or Lifetime Plans to pay for the benefits of their plan holders.

Such power, according to the SEC, properly belongs to the court. Aray!

Does it mean that all those more than 400,000 plan holders must wait for the court to decide whether they can or cannot get their own money?

And how long do you think such a decision will take? Will it take a lifetime?

Come on, boss, we would have expected the SEC to have thought out well such a drastic measure as killing an existing, ongoing concern like Lifetime Plans.

It has never been done before. I thought the SEC should have something like an action plan, for example, to deal with the consequence of its move.

Did it have a plan at all? Well, it had a plan, and its plan was, well, to tell us that everything would be up to the courts.

Heaven help us all.

* * *

SURELY the SEC has expected Pacific Plans and Lifetime Plans would be doing something about the SEC measure that, in effect, killed the rehab plan for the "open-ended" plan holders.

But then again, the SEC also perhaps did not have what it takes to anticipate problems. It could have been just a knee-jerk reaction to the media-aided pressure from those noisy "open-ended" plan holders.

It is also possible that the SEC was taking orders from somebody upstairs who is not in heaven but who must be god to the SEC.

Somebody above the SEC has been insisting that the Pacific Plans spin-off of the more than 400,000 pre-need plans to another company was bad.

Instead of going to court, the SEC cancelled the license of Lifetime. Without any hearing whatsoever! Basta, you, Lifetime Plans, no longer exist.

* * *

AND the reason of the SEC seemed to be fickle. It said that Lifetime failed to submit reports on the car plans of its employees and on some P40 million in receivables.

That, in accounting term, only means that Lifetime had some P40 million in possible revenue. The SEC wanted Lifetime to report what happened to the account.

Lifetime claimed that it already reported the matter to the SEC, precisely in the letter of its auditor, the Punongbayan & Araullo accounting firm.

But the SEC said, no. Lifetime did not report the matter. And, without much ado, without any hearing or what, the SEC proceeded to kill the entity.

Look, in this case, you miss one freaking report, you lose your life.

But if you engage in, say, some pyramiding schemes, the SEC would only revoke your license to sell securities-not your incorporation, mind you.

And then, the SEC would renew your license to sell securities, if you merely promise never to sin again.

 
At Tuesday, June 07, 2005 6:20:00 AM, Anonymous Anonymous said...

So what do we do now? We can boycot ALL YGC companies, products, etc. But what next? Where do we go from here?

 
At Tuesday, June 07, 2005 7:53:00 AM, Anonymous Anonymous said...

"So what do we do now? We can boycot ALL YGC companies, products, etc. But what next? Where do we go from here?"

Make them pay!

 
At Tuesday, June 07, 2005 8:34:00 AM, Anonymous Anonymous said...

"Sensible people agree that the move of SEC to cancel Lifetime's incorporation was a bad, knee-jerk reaction..."

The "sensible people" this commenter is referring to is Conrado Banal, who wrote this piece which appeared in the Inquirer the other day. Banal is a lightweight among all those who have commented on this issue. His name alone describes the quality and depth of his writing. Or should I say, the lack of quality and depth.

 
At Tuesday, June 07, 2005 8:44:00 AM, Anonymous Anonymous said...

"The "sensible people" this commenter is referring to is Conrado Banal, who wrote this piece which appeared in the Inquirer the other day. Banal is a lightweight among all those who have commented on this issue. "

What do we say then about Mareng Winnie, Mary Ann Reyes, Adrian Cristobal and Federico Pascual?

 
At Tuesday, June 07, 2005 9:06:00 AM, Anonymous Anonymous said...

Are you talking of CONRADO GOIN BANANAS. Look at all the articles his written in his column for the past few years. This guy is really weirdo. I have shifted to Phil. Star for a long time now due to his lunacy. Perhaps management shoud get a survey to find out how the readers rate him. He shoud work instead at the mental hospital.

 
At Tuesday, June 07, 2005 9:44:00 AM, Anonymous Anonymous said...

"spunking new RCBC Plaza with two 40-storey towers and multi-level basement parking (state-of-the-art at that) cost US$340M (roughly PhP17B)"

If they have to sell RCBC Plaza to pay for our childrens tuitions, then sell they must! This is the only way they can recover the planholders and the publics TRUST.

 
At Tuesday, June 07, 2005 9:50:00 AM, Anonymous Anonymous said...

REMINDER TO: ALL PEP COALITION MEMBERS

See you and your scholars at the SENATE LOBBY, Senate of the Phils. {at the back of GSIS}, Reclamation Area, Roxas Blvd., Pasay City, Metro Manila.
before 2pm today, June 7, 2005.

Wear white or black shirt.

Let us UNITE for the SAKE OF OUR CHILDREN!

 
At Tuesday, June 07, 2005 11:46:00 AM, Anonymous Anonymous said...

the problem with ppi should not be viewed only on the basis of their inability to pay planholders what was due them but alo the way they the way they deliberately evade fulfilling their obligations. Pre-need may be different from insurances but if pacific plans can get away from their obligations through dirty corporate practices, we cannot blame the public for having second thoughts about investing their hard earned money in firms where the word "TRUST" means everything. What will stop these insurance companies to follow the yuchengo brand of trust e.g get as much premiums and contributions as you can and when the day comes and you don't feel like living up to your obligations, make it appear that your company is losing and file a rehab to avoid suits. Moreover, if the planholders became restless and "noisy", emote a crying scene that you are making sacrifices by contributing a personal fund to help planholders although in reality you are making money since the contribution is a loan suject to interest. The real issue is "Government should not tolerate in whatsoever form corporate entities from reneging on their obligations to the public". We have a history of a lot of scam e.g. pyramid scam, bank closures, etc. wherein the public at large specially the income wage earner are most of the time the victims. They who with their limited income but who dreams of making a better future are most vulnerable to these unscrupulous and immoral corporate entities needs government the most, but where is the government during these times. Unless, corporate entities and their officers are finally punished, there can be no end to all these scams. Corporate entities are emboldened to follow their predecessors without fear and continue their devil ways all in the name of "Integrity to Money and Money is God". Thanks to the Yu-change=Co.

 
At Tuesday, June 07, 2005 12:17:00 PM, Anonymous Anonymous said...

"See you and your scholars at the SENATE LOBBY, Senate of the Phils. {at the back of GSIS}, Reclamation Area, Roxas Blvd., Pasay City, Metro Manila.
before 2pm today, June 7, 2005.

Wear white or black shirt."

Can we wear our white coalition t-shirt? Or is that not allowed in the Senate?

 
At Tuesday, June 07, 2005 2:12:00 PM, Anonymous KIT said...

"Now, please explain to me how can Lifetime cope up with the payment for the pension plan of my wife which she bought in 1995 with maturity in 10 years. She was to pay more or less 50,000 evenly spread in 5 years with a face value of 100.000 at the end of the 10th year. Tell me how can they earn that much using your table as their investment guide? Remember, the first 2 years of my wife premium which is about 20,000 shall more or less go to the payment of commission, overhead , taxes, etc. It is only in the 3rd year that a big part of it goes to its investable fund. How can you make 100,000 with only 30,000 as investment in a little over 5 years using your table?"

SEC states that a maximum of 10% can go to commissions. Let us deduct a total of 15% yearly(up to year 5) to cover additional expenses which brings us to:

Let CE= Commissions/Expenses
Let CO = Cash out
Let PI = Principal + Interest
Let COE = Cash out less expenses/commission

            CO    CE     COE     PI  
year 1 10,000 1500 8,500 9452
Year 2 10,000 1500 17,952 19962.62
Year 3 10,000 1500 28,463 31650.43
Year 4 10,000 1500 40,150 44647.28
Year 5 10,000 1500 53,147 59099.78
Year 6                     59,100 65718.95
Year 7                     65,719 73079.48
Year 8                     73,079 81264.38
Year 9                     81,264 90365.99
Year 10                  90,366 100486.98


Interest Rate used 1.112

Effective interest rate of 11.2 percent can cover this plan. If expenses are as low as 1% or commission is lower than 10%, then only a 10.6 or lower interest rate is needed to cover this plan.

This plan can be easily covered by 7 year T-bonds.


"If you are for real, with these revelation how sure are you Lifetime will not use the same impossibility rule when your plan matures? "

Because I know that there are existing investment vehicles with interest rates to cover my plan, that is why I know they can't use the same argument on my plan.

 
At Tuesday, June 07, 2005 3:21:00 PM, Anonymous KIT said...

Below is my understanding on the stand of Coalition. Please share your views on below:

1) Is it for PPI to be whole again?

Yes.

Implication:

The coalition is precariously bringing the fixed value planholders into the picture. If YGC refuses to put in money(will never happen by the look of things), are you effectively stating that fixed value planholders will subsidize you. It can be easily shown that profit of PPI for the next decade will not be able to make the traditional planholders' trust fund sufficient. Are you insinuating that fixed value planholders reduce their plan values so that you can get your exorbitant returns?


2) Is it for or against the rehab plan?

Against.

Implication:

This will imply that you want PPI to be business as usual in the hope in the future that you can pressure YGC to pay for the deficit. If this never happens, future availing traditional planholders will be left with nothing while the availing planholders got their share.

Is this what the coalition believes to be an equal distribution of resources?

 
At Tuesday, June 07, 2005 5:20:00 PM, Anonymous Anonymous said...

"Because I know that there are existing investment vehicles with interest rates to cover my plan, that is why I know they can't use the same argument on my plan."

Was that not the assumption also of PPI when they gave us our open ended plans?

 
At Tuesday, June 07, 2005 9:44:00 PM, Anonymous pikachu said...

The SEC allows a maximum of 10% for commissions may be right but what you failed to note and which was also mentioned in the Senate Hearing on the Pre-need Industry (May 30, Tuesday) (where by the way the leanings of Angara towards favoring the Yuchengcos and blocking the opportnity to hear the side of the planholders was unmasked)was that Mar Roxas suggested that instead of the usual practice of depositing 5% of the gross price of a pre-need plan to the trust fund on the first year, 20% on the second year, 70% on the third, fourth and fifth years, it should be the reverse. Cause what happens is that on the first year, 95% is used to pay the commissions and other operating expenses of the pre-need firm, 80% on the 2nd year and 30% on the third to fifth years. So if my mathematics is still correct, only about 47% of the total premium paid for a pre need plan goes to the trust fund. So how on earth can a pre need company pay the pension of the lady who pays P50K and expects to be paid P100K after the 10th year? Read the Inquirer last June 1, 2005 on "Reverse process, senator urges pre-need firms". As to the comment that the fixed plans will pay for the deficiency of the open ended plans, I think that distinction of separation of trust funds is only for accounting purposes but a pre need company's liability is taken as a whole and thats why if one product cannot earn the rest have to pitch in. Sen Osmena also cited in todays Senate session that if San Miguel Corp which has several products ends up with one product not profitting, does it have the right to segregate the other earning products and transfer it to another company and leave the unprofitable product alone to die? So lets stop acting as if you, the fixed plans, have no fiduciary responsibility. Actually, i shall correct myself, its not the fiduciary responsibility of the fixed planholder but of the pre need company and its owners. I guess, if you had a sibling with AIDS you guys would just have your sibling quaranteened and left to die, right?

 
At Tuesday, June 07, 2005 10:33:00 PM, Anonymous Vicente said...

Kit,

I was the one who wrote that I was dying to hear your ideas.

May I please remind you that, in case of a deficiency in the trust fund vis-a-vis the actuarial reserve liability, it is not the job of any planholder to subsidize any other planholder. That is the responsibility of the pre-need company.

In fact, PPI's income statements bear this fact out. In their 2003 financial statements, among their expenses was an item entitled "Increase in actuarial reserve liability" for the amount of P1,582,915,603. For 2002, that amount was P1,007,577,707.

What is the meaning of that, you might ask? Among that FS's notes was this paragraph on "Actuarial Reserve Liability":
"Actuarial reserve liability which represents the accrued net liabilities of the Company to its planholders are actuarially computed based on standards and guidelines set forth by the SEC. The increase or decrease in the account arising from actuarial valuation is charged or credited to operations."

Please take special note of that second sentence.

So, if we are to believe this set-up, then you must agree that it is PPI and its shareholders who must take the hit, not any of the planholders. They were doing so in the past but now, for reasons of their own, are refusing to do so.

So, please do not fall for their line that the fixed value planholders will suffer because the open-ended planholders have to be serviced. That is an artificial argument cooked up by PPI to generate conflict among the planholders.

 
At Wednesday, June 08, 2005 9:56:00 AM, Anonymous JAM said...

I think, you, yuchengco family, are the CANCER of the pre-need industry. What did you do with the cancer that is traditional plan? You isolated it, right? May you experience the same ISOLATION strategy you yourself implemented. You should be ISOLATED from the pre- need industry because you are THE CANCER that is detroying the image of the whole industry. Dinamay ninyo ang iba dahil sa mali ninyong strategy.

 
At Wednesday, June 08, 2005 10:22:00 AM, Anonymous Anonymous said...

Well said Vicente.

Kit - let us work together. We can share our resources and unmask the criminals and cohorts and bring them to jail.

Gee, it's really nice to see a lot even new faces at the Senate hearing yesterday. Sulit na naman ang leave from office work.

 
At Wednesday, June 08, 2005 10:39:00 AM, Anonymous Anonymous said...

To Kit


Let CE= Commissions/Expenses
Let CO = Cash out
Let PI = Principal + Interest
Let COE = Cash out less expenses/commission

CO CE COE PI
year 1 10,000 1500 8,500 9452
Year 2 10,000 1500 17,952 19962.62
Year 3 10,000 1500 28,463 31650.43
Year 4 10,000 1500 40,150 44647.28
Year 5 10,000 1500 53,147 59099.78
Year 6 59,100 65718.95
Year 7 65,719 73079.48
Year 8 73,079 81264.38
Year 9 81,264 90365.99
Year 10 90,366 100486.98

I’m an ex agent of Pacific plans. Your computation are totally wrong. Why are you using 10,000 at the start of each year as investable funds when my wife was paying quarterly. I was entitled to 10% commission on the first year. What about the over-riding commission of my unit manager, Branch manager, etc. all the way to the top. Certainly the 15% your using is way off target not counting the other expenses like taxes, overhead etc. still to consider. And as mentioned with the poster before me. The pre-need companies themselves admitted that 95% goes to commission and others on the first 2 years. Even Philam, & Ayala Life plans which are considered conservative companies are not putting aside that much for their trust fund as envisioned by you above.

So please show me another table that would convince me because up to now I’m still waiting for a logical explanation otherwise you can’t get my sympathy.

 
At Wednesday, June 08, 2005 3:50:00 PM, Anonymous Anonymous said...

"Gee, it's really nice to see a lot even new faces at the Senate hearing yesterday. Sulit na naman ang leave from office work."

How was it? What happened? Was planning to go but something suddenly came up at the office...tsk, tsk, sayang. Balita naman?!

 
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