MANILA –The Insurance Commission (IC) announced on Monday that it is “inclined” to place the “capital impaired” pre-need firm Provident Plans International Corp. under conservatorship if no clear improvements are seen in its financial standing by the middle of June.
The IC said the move was being considered to protect the interest of the company’s 38,000 plan holders.
A firm placed under conservatorship is assigned a conservator, which helps the company manage its assets to prevent them from losing value.
In a report to Department of Finance Secretary (DOF) Carlos Dominguez III, Insurance Commissioner Dennis Funa said that while Provident Plans has manifested before the IC in February and March this year that it has a “white knight” investor to cover up its capital impairment and trust fund deficiencies, it has yet to receive any concrete plan or Letter of Intent from this supposed investor.
“Thus, this Commission has ordered Provident Plans to submit a concrete plan and letter of intent from its proposed investor or to cover up its capital impairment and trust fund deficiencies within sixty (60) days from receipt of the directive (dated April 12, 2017) or until June 17, 2017. Otherwise, this Commission will issue a Cease and Desist Order and place the company under conservatorship,” Funa said in his report to Dominguez.
Provident Plans has three product lines focused on life/memorial plans, education plans and pension plans, but 70 percent of its clientele are life/memorial policy holders.
In his report, Funa cited four circumstances that led the IC to consider placing Provident Plans under conservatorship. These are:
• Provident Plans’ financial woes were already existing before the enactment of the Pre-Need Code and the transfer of supervision of pre-need companies to the IC;
• The primary cause of its capital impairment and trust fund deficiency is the unrecoverable investment with its previous trustee bank, the Export and Industry (EIB), and the neglect by its new trustee bank, the United Coconut Planters Bank (UCPB), in protecting the trust fund [Editor’s note: UCPB has denied this, statement below];
• The IC has already given sufficient time and opportunity for the company to infuse cash and/or additional assets to address its financial problems, which it had failed to do; and
• The IC needs to protect the interest of Provident Plans’ policy holders as it cannot allow the company to continue to operate under its present condition.
After the pre-need sector was placed under the regulation of the IC seven years ago, Provident Plans was found to be capital-impaired when its books were examined in 2011. The IC’s examination showed the company had a capital impairment of P316.33 million, a liquidity reserve deficiency of P78.54 million and a trust fund deficiency of P263.46 million.
The primary reason behind these deficiencies was the “disallowance of the unrecoverable/unqualified trust fund investment made by EIB as a trustee bank of Provident Plans, in its own bank in the form of time deposits in 2005,” said Funa in his report.
UCPB: We were never negligent
In a statement, however, UCPB disputed the implication that it had been negligent in protecting the trust fund – something that was supposedly part of the basis for the Insurance Commission’s move to consider placing the pre-need company under conservatorship.
“UCPB is coordinating with the Department of Finance to clarify the matter, but it nonetheless wishes to state that as Provident Plan’s trustee bank from 1989 until 2014 UCPB had never been negligent in protecting their trust fund,” said the bank.
It noted the news report that the primary reason behind Provident Plan’s current status was the “disallowance of the unrecoverable/unqualified trust fund investment made by Export and Industry Bank (EIB), as a trustee bank of Provident Plans, in its own bank in the form of time deposits in 2005”.
In 2009, when Provident Plans decided to terminate its trust agreement with EIB, it subsequently transferred such EIB time deposits to UCPB. At the time it was transferred to them, UCPB pointed out, “the EIB time deposits were considered as an allowable investment under the SEC guidelines and IC regulations. EIB was eventually shuttered by the BSP in 2012.”
As trustee bank, UCPB said it “had fulfilled all its obligations in the Trust Agreement approved by Provident Plans and complied with all the pertinent regulations of the Insurance Commission.”
