SEC extends deadline for pre-need capital buildup plans


Posted at Feb 20 2009 03:40 PM | Updated as of Feb 22 2009 01:11 AM

Following several requests, the deadline for the submission of pre-need firms' capital buildup programs has been extended to April 15, 2009 from February 15, the Securities and Exchange Commission (SEC) said Friday.

SEC chairperson Fe Barin said the new deadline would allow member firms of the Federation of Pre-Need Plan Companies to meet the requirement.

For his part, SEC commission secretary Gerard Lukban said the extension will allow pre-need firms to prepare their financial statements for the entire 2008, instead of just interim reports, so they can fully reflect their financial conditions.

He explained that the submission of 2008 corporate financial statements is also due on April 15 so all pre-need firms are expected to have these ready by then.

Early on, the SEC responded favorably to the plea of pre-need companies by relaxing its rules and allowing the industry more time to raise capital and shore up trust funds amid the global financial crisis.

The pre-need industry recorded a P46.83-billion trust fund deficiency at end-June 2008 due to shrinking earnings from investments, and the December 2008 figure is seen to be worse since the impact of the crisis was stronger in the second semester last year.

Because of the huge deficit, many companies are thinking of various options, among them, unwinding the plans and paying all plan holders claiming this year or years later. The idea is that all plan holders should be able to get a piece of the limited pie.

Industry figures showed that as of December 31, 2007, the industry had a surplus of P6.8 billion based on an assumed trust fund yield of 12 percent.

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 hit in the second quarter of last year, and grew worse with each passing month, the 12 percent assumption became unachievable. In fact, 6 percent was even a tough goal for some of the companies.

SEC non-traditional securities and investments director Jose Aquino said the commission has set the requirements and conditions for pre-need firms' applications on multi-year capital and trust fund buildup and the terms and conditions they must observe once these are approved.

For one, the SEC asked pre-need firms to first submit individual letters acknowledging their trust fund deficiency or capital impairment based on the actuarial validation, valuation report or audited financial statements for 2007.

Applicants were also required to submit a projected financial statement covering a period of five years together with assumptions taken.