CAP vice president Bobby Café told the House oversight committee that his company, which built its fortune selling educational plans, reported as of March this year, "we had P8.5 billion in assets, contrary to reports that we had only P4.7 billion."
When asked by committee members how much of those assets were in "physical cash," he answered, "Less than P100 million, your honor."
He said CAP started encountering problems early last year when the Securities and Exchange Commission (SEC), the agency regulating pre-need companies, changed the system for computing "actuarial reserve liabilities," which represent future obligations to plan holders.
He said the new computation increased those liabilities and dwarfed CAP’s assets, including shareholders’ equity.
"Under the old scheme, we had a P6.5-billion surplus. But when the new method of computing reserve liabilities was applied, we had a P5.4-billion deficiency," he added.
He told the committee that in August, the SEC ordered CAP to stop selling educational plans until its stockholders were able to raise additional equity to wipe out the deficiency.
That was when the company’s financial problems worsened, Café said.
He said since CAP was prohibited from selling educational plans, it could not augment its trust funds which were being depleted by continuous withdrawals to pay out for plan holders’ claims.
"Before, we were selling P120 million worth of plans every month. Of that amount, P20 million went to the trust fund," he added.
Defending their decision to change the method of computing reserve liabilities, SEC officials said the new scheme increased provisions for future payment claims from plan holders.
It is actually designed to protect hundreds of thousands of Filipinos whose educational plans will mature in the future, they said.
They pointed out that if the affected companies and their stockholders had sufficient funds and assets, they would not have found themselves in a bind.
Another troubled pre-need firm, Pacific Plans, was invited to send a representative to the hearing but failed to do so.
CAP is run by the Sobrepeñas, who also have investments in Fil-Estate, a real estate development company, in the Metro Rail Transit line along EDSA and in Camp John Hay in Baguio City.
The Bases Conversion Development Authority wants to take over Camp John Hay from the Sobrepeñas, accusing them of failing to pay rentals running into billions since 1998.
In the cases of Pacific Plans, which is controlled by the Yuchengcos, business tycoon Alfonso Yuchengco has offered P250 million of his own money to honor the claims of plan holders.
CAP is the largest pre-need company in the country, with nearly a million customers who invest in educational plans.