Pre-need sales continue sliding

BusinessWorld

Posted at Jun 06 2009 02:24 AM | Updated as of Jun 06 2009 10:26 AM

MANILA - Pre-need firms continued to see their revenues slide in the first quarter despite selling more plans, data from the Securities and Exchange Commission (SEC) showed.

Revenues fell by almost a fifth to P3.2 billion, even as the number of plans sold rose to 62,882 from 53,825 in the same period last year.

The public continued to stay away from education and pension plans, preferring life plans, whose sales jumped by almost half to P2.03 billion in peso terms and by more than two-fifths to 52,173 in terms of plans sold.

Sales of pension plans, which face competition from other investment products, continued to decline, as well as of education plans, which carry the stigma of failed pre-need companies unable to pay clients.

The number of pension plans sold dropped by almost a third to 9,442, and sales, by more than half to P1.05 billion. Education plans fared worse with the number of plans sold reduced by more than half to 1,267, and sales, by more than three-fifths to P173.19 million.

Pre-need sales have been falling since January 2008.

Caesar T. Michelena, president of the Philippine Federation of Pre-need Companies, explained that customers nowadays prefer to buy more but cheaper plans.

Mr. Michelena, who also heads Cocoplans, Inc., said life plans continue to register growth because of the active effort of companies to market these products and customers’ negative perception of education and pension plans.

"We are still looking at growth but maybe not as substantial because of the economic conditions," he said.

On Monday, the SEC ordered pre-need companies to avail the services of independent auditors that would review whether they are managing their trust funds according to its standards or not. The auditors would submit their findings on July 15.

Mr. Michelena, however, does not see this having an effect on the industry’s performance.

"It’s really more of administrative requirement... It would have no major impact overall," he said, pointing out that pre-need companies already employ external auditors to verify the valuation of their trust fund assets.

Pre-need companies now number 22 from 24, after the regulator revoked the license of one firm to sell plans and suspended another due to financial difficulties. — Don Gil K. Carreon