POSTSCRIPT / June 11, 2006 / Sunday


Philippine STAR Columnist

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CAP is worst problem, but no relief is in sight

PRE-NEED STATUS: The pre-need industry is in trouble. Sales of policies have plummeted in the first four months of the year by 43.2 percent to 79,638 plans sold from 140,285 recorded in the same period last year.

Educational plans saw a 55-percent drop from 25,339 plans sold for the same period last year, to 11,430 plans.

It is obvious that confidence has dropped. The public no longer differentiates between open-ended educational plans, which were the main problem, and those plans with fixed returns such as fixed educational plans, fixed pension plan and fixed memorial plan.

In open-ended educational plans, the pre-need company agrees to pay whatever is the tuition being charged by the school at the time (usually before enrolment) the claim is made. In the fixed-returns plans, the tuition is only what was contracted in advance.

Industry figures show that due to the overall loss of confidence, even the sale of fixed life plans also dropped by 56 percent to 12,347 from 28,132 the previous year.

This, despite the fact that no pre-need firm sells open-ended plans anymore as the Securities and Exchange Commission (SEC) banned its sale four years ago.

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CAP WORST HIT: The problem of open-ended educational plans is industry wide. First to experience liquidity problems was College Assurance Plan (CAP). This was followed by Pacific Plans Inc. (PPI), Platinum Plans Phils. Inc. and The Professional Group (TPG).

Of the four firms, two have been ordered by the courts to be rehabilitated. First was PPI, then Platinum.

The most problematic of them, CAP, has filed for rehabilitation before the Makati regional trial court but no decision has been handed down.

It has been reported that close to 900,000 planholders are affected, with CAP having the most number at 781,000 fixed plans and open-ended educational planholders.

Of this total, about 50 percent are reportedly holding open-ended educational plans. The rest have fixed plans.

All availing open-ended planholders for the industry this school year are estimated at close to 210,000 with CAP with the biggest at about 170,000.

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SENSITIVE CASE: The case of PPI is an interesting study of how a crushing problem is being carefully handled with the involvement of various parties, some of them not that friendly to one another.

On the bottom line, PPI gave a tuition support amounting to P591 million to 16,000 availing planholders for the previous school year.

The company said it would comply with the rehabilitation order with another tuition support for the incoming school year running to hundreds of millions of pesos, subject to the approval of Bangko Sentral ng Pilipinas.

The amount awaiting BSP approval will be parceled out to about 18,000 planholders, possibly next week. Each claimant could receive about P20,000 each year.

The firm has been left with about 34,000 open-ended educational planholders from an original 92,000, of which 58,000 were serviced completely at a cost of P7.5 billion from the late 80’s until school year 2004-2005.

The liquidity problem of the company started in the in 2005-2006 or the previous school year. In spite of being a corporation with limited liability, the Yuchengcos have supported PPI with an additional P250 million for last year’s tuition support.

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ELITE GROUP: Although PPI has fewer open-ended planholders than other pre-need firms (such as CAP), it is dealing with the most articulate planholders coming from upper class families with children going to expensive exclusive schools.

Based on records, 22.5 percent of availing open-ended planholders are getting more than 36 percent of the total benefits. These are planholders sending students to exclusive schools.

Extrapolation shows that this small group gets an estimated P754 million of the total benefit packages while contributing only P132 million to the fund. This comes down to a return on investments of about 570 percent.

This contrasts with the great majority sending their children to average schools and universities.

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INVITING TARGET: The open-ended planholders using non-exclusive schools comprise 52 percent of the availing planholders who had paid over P172 million. They are getting a 29-percent share of the total funds or a pool of P605.8 million.

Actually, PPI voluntarily ceased selling open-ended educational plans in 1992 or 10 years before the SEC ordered a stop to the sale of this type of educational plan. On one hand, other companies stopped selling only in 2004, or when the SEC revoked their dealership licenses.

It has been noticed that while PPI has continuously paid out entitlements including tuition support, the other companies have repeatedly defaulted on their obligations.

Despite this difference, PPI is getting the brunt of media scrutiny. I think this is because it happens to be dealing with well-connected and very active planholders. The fact that PPI is owned by the taipan Alfonso Yuchengco also makes it an inviting target.

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NO MINGLING: In 2005, an estafa case was filed by lawyer Maricel Lopez against the Sobrepeña family and the officers of CAP. As of today, not much has been reported on the status of the case.

On the other hand, six planholders of PPI filed syndicated estafa charges against the officers of PPI before the Manila City prosecutor’s office.

Incidentally, the companies under the umbrella of the Yuchengco Group have different and distinct stockholders and lines of business. The liability and assets of one company are distinct from that of the others.

In the same manner, the rehabilitation court has made it clear that even within PPI, the trust funds of the open-ended planholders cannot be co-mingled or mixed with the other fixed value plans held by the company, as this is against the law.

Hence, the trust funds of the fixed planholders can only be used for these types of plans and cannot be touched to augment the open-ended funds. What more with funds of other companies within the group that are under the supervision of various government agencies.

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FLORO’S BOOK: Whenever I bumped into columnist Floro Mercene, suspenders and all, I would greet him with, “Have you finished that book yet?”

Since the martial law days when he was kibitzing in tourism, Floro has been threatening to write a book on the thousands of Filipino seamen on the Manila galleons who ended up in Mexico and the Americas from the l6th Century onward.

When I saw him last Friday at the Starbucks-West Avenue in Quezon City where a knot of us journalists and former Mayor Mel Lopez would analyze to death the country’s plight, Floro announced that he finally has the book.

If I now mention his masterpiece — to be launched in September — it is not because he promised to give me an autographed copy, but because I know the quality of Floro’s research, reportage and writing style, as well as the historical value of his book.

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PINOY HANDS: The Manila galleons sailed between Manila (actually Cavite) and Acapulco, Mexico, for 250 years — from l570 to l8l5 — to carry out Spain’s trade monopoly encompassing two oceans, the Atlantic and the Pacific.

Almost all of the l08 galleons employed in the trade were built in the Philippines. Only a handful of Filipinos served as crew in the beginning, but as the trade progressed they comprised about 80 percent of the deck hands.

A few of them were sacristans or assistants of priests who traveled all the way to Peru and Chile. There were also women from the Ilocos who were brought to Mexico for the sole purpose of repairing the sails of the galleons.

One estimate places the number of Filipinos on board at 60,000 in two and a half centuries. Half of the men reportedly jumped ship upon reaching California and Mexico, or married local lasses and settled down in the New World.

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VIGNETTES: After the expedition of Miguel Lopez de Legazpi in 1565 led to the conquest and colonization of Cebu, Panay, Mindoro and eventually Manila, hundreds of Mexicans also came to the islands and stayed.

The inflow of Mexicans — including traders, soldiers, priests and even convicts — followed the ebb and flow of the galleon trade. Infidentes or rebels in Mexico were sometimes hustled aboard the galleons and exiled to the Philippines.

Early in the l9th century, Mexican creoles living in Manila were actively agitating for independence for the Philippines and a kindred relationship between the Philippines and Mexico.

Other vignettes in Floro’s book that should be of interest even to historians include the discovery of a Filipino settlement on the banks of the Mississippi River outside New Orleans in Louisiana dating back to l763, the invasion of California by a band of South American pirates that included Filipino adventurers, and the feat of a Filipino building two ships for the Jesuit mission in Baja California in the middle of the l8th Century.

The University of the Philippines Press is publishing the book. Watch for it.

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(First published in the Philippine STAR of June 11, 2006)

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