SEC tightens watch over pre-need firm

Another pre-need firm has come under fire from the Securities and Exchange Commission (SEC) for its failure to submit pertinent information regarding its financial health, fuelling speculations it is facing liquidity problems like what other firms that sold open-ended plans are presently experiencing.

Tightening its noose on errant firms, the SEC has issued an order directing pre-need firm TPG Corp. to explain why no administrative sanctions should be imposed against it for failing to submit its actuarial valuation report (AVR) and annual financial statements.

The AVR is deemed important because it is used as a tool in determining the solvency of a pre-need company.

"When a pre-need company is remiss in filing its financial statements and AVR, this would only mean that it is in financial distress," an SEC official said.

TPG is the sixth pre-need firm issued a show-cause order by the SEC for violation of the rules governing pre-need plans.

The companies that were earlier issued a show-cause order are College Assurance Plan Phils. Inc., AMA Plans, Primanila Plans, Pryce Plans and Platinum Plans.

The SEC has been keeping a close watch on pre-need companies, following the collapse of the Yuchengco-owned pre-need firm Pacific Plans and Platinum, to safeguard the interest of the investing public.

TPG is set to meet with SEC officials to make a presentation on its financial position.

TPG, which owns Professional Financial Plans, has introduced a new plan called Scholars Trust Fund with Equitable Pay-out for Unified Prevention(STEP-UP) intended to address the problem of continued availments by planholders of open-ended educational plans and ensure that more scholars still benefit from their plans.

TPG said the program, which proposes a 15-percent cap on the average return on gross price for planholders, ensures equitable pay-out to both availing and non-availing planholders. It currently has about 20,000 planholders.

TPG is likewise in the final stages of completing a program that calls for preserving the company’s trust fund and reserving a portion of planholders’ availment benefits as equity in the company.

"The STEP-UP program seeks to define the allocation of availment benefits based on the priorities and concerns of the scholars. At the end of the day, availment benefits may not be based on actual returns but rather a balance between both returns and liquidity," TPG said.

TPG’s STEP-UP program was adopted following a resolution submitted by the Philippine Federation of Pre-Need Plan Companies, Inc. (PFPPCI) to the SEC, calling for member firms to put a ceiling on open-ended education benefits.

TPG said there has been a dramatic increase in miscellaneous fees, which in many cases account for 30 percent of total availments.

Industry estimates show that without a ceiling on availment returns, only one out of 20 open-ended plan scholars will get a chance to go to school.

"It is this situation that provided us with a framework for a program that redefines pay-outs to planholders," TPG said.

PFPPCI officials said the uncontrolled tuition increase that began in 1993 had inflicted great damage to the pre-need industry.

Industry studies on tuition increases in the country showed that from 1990 to 1995, the average tuition increases among private higher education institutions was estimated to have hit 275 percent.

Likewise, records from the Commission on Higher Education (CHED) showed that over the past five years, tuition hikes had averaged 12 percent annually. At this rate, the national average tuition per unit would have risen by 1,257-percent rise since 1990.