Thursday, April 30, 2009

Prudentialife Crisis

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Posted on Thursday, April 30, 2009

Prudentialife CrisisTuesday morning, I was chatting with my Ate Marj online. We talked about our work, travel plans and even finances and investments. She said that she had investments in PruLife UK and has a monthly Cooperative contribution in their company.

In my case, one of my investments is a Pension plan in Prudentialife which I opened in 2006. The plan is payable in 5 years and I only have 3 installments left. Ate Marj asked me about the status of Prudentialife since the pre-need companies in the Philippines have been shaking after the Legacy scandal and the economic turmoil. I told her that it’s still okay. While I was chatting with her, I Googled about Prudentialife and was shocked with the headlines from ABS-CBN. The headlines says that the SEC revoked Prudentialife’s license to sell pre-need plans effective April 16, 2009.

I immediately sent a text message to my agent and asked the real status of Prudentialife. According to her, I don’t have to worry since the company has more than 10 Billion pesos in trust fund. I went to Prudentialife’s web site and read this letter from their President:

Letter to Planholders

The global economic crisis has affected a number of industries worldwide including the Philippine pre-need industry. The trust funds of the industry have not been earning their projected returns. The local stock market and fixed income investments have performed poorly last year causing trust fund deficits.

Compounding the problem of the industry is the ongoing investigation of the Legacy fraud case. This has dragged down the confidence in our industry whose image has already been tarnished when major preneed firms went down years ago.

To address the situation, the Philippine Federation of Pre-Need Plan Companies, Inc. (PFPPCI) was left with three options to consider for its members:

1. Option 1 – To raise new capital based on the Multi-Year Capital and Trust Fund Buildup Program approved by the SEC last December 22, 2008 and subsequently revised last February 25, 2009.

2. Option 2 – To “Orderly Exit” the industry and pay plan benefits as warranted.

3. Option 3 – To seek corporate rehabilitation that is actually a no-choice situation that could delay the procedure of refunding plan benefits.

We would like to inform you that we have submitted our proposed Multi Year Capital and Trust Fund Build-up Program last February 2, 2009. However, the SEC declined our proposed program because the assets we offered for contribution to the trust fund and capital does not qualify as acceptable assets under the SEC revised program.

Under the revised program, the acceptable assets that can be contributed to the trust fund and capital are income generating real estate and unlisted shares that are not in any way related to the Preneed company.

The assets we offered are real estate properties that have good values but are not yet income generating. Aside from this, we offered unlisted shares of profitable companies but are affiliates of our preneed company. The SEC did not accept these assets for contribution to our trust fund and capital.

In view of this, SEC has directed our company to refrain from selling new preneed plans effective April 16, 2009. Nevertheless, we will continue to operate as a servicing pre-need company and pay plan benefits of our planholders as warranted.

Prudentialife Market Resource Corporation (PMRC) will continue to operate and market our other services that include Health Plans, Mutual Funds, and Insurance products among others. Notably, our sales for these products have grown significantly last year.

We hope that these developments will be temporary owing to the prevailing economic environment and government efforts to institute much needed regulatory reforms. We are confident we could pursue new opportunities and build the business of Prudentialife beyond the pre-need industry.

We thank you for your trust and confidence for the past 31 years and hope for your continued understanding and support in these trying times.

Sincerely yours,

Jose Alberto T. Alba
Prudentialife Plans, Inc.

1 Responses to “Prudentialife Crisis”

uglykidjoey said...
April 30, 2009 at 10:22 AM

Damage control at its finest

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