Prudentialife Plans told to stop payment of claims
The government has ordered preneed firm Prudentialife Plans to suspend payment on all claims but continue payments for some terminated plans as it awaits action from the Insurance Commission (IC) on its proposal for relief and rehabilitation.
Prudentialife failed to keep itself afloat after losing its license and permit to sell new plans in 2009, and now is short of at least P10 billion in funds to cover obligations to some 300,000 clients.
At the same time, Philippine Prudential Life Insurance Corp. was quick to clarify that it is not the company that is in financial trouble.
In a stay order that Prudentialife received on February 6, conservator Rosario S. Bernaldo of the IC told the company that payments of claims has been suspended indefinitely until the regulator has decided with finality on the firm’s proposal for rehabilitation.
Prudentialife has been placed under conservatorship—in particular, under the authority of the IC through Bernaldo—since September 2010, a year after the Securities and Exchange Commission stripped it of its license and disallowed the sale of new plans.
The order also prevents Prudentialife from disposing of any property and paying any of its liabilities, as the company itself requested through the proposal.
Plan holders, creditors and stakeholders are advised to file with the IC their comments on the rehabilitation proposal, and to attend hearings on March 2 and 13.
In its proposal filed last December 9, Prudentialife asked to be allowed to undergo rehabilitation instead of liquidation.
Company president Jose Alberto T. Alba said in its rehabilitation proposal that Prudential wants to keep its life-insurance operations and spin off its pension and education plan businesses.
Alba said that as of Sept. 30, 2011, Prudentialife’s assets were valued at a total of about P9.15 billion while its liabilities were estimated at P19.67 billion.
While Prudentialife has enough funds to cover life plan claims, it expects to pay a total of some P10.5 billion on pension and education plan claims.
The company blames the deterioration of its finances to “an old basket of plans that guaranteed high benefits” but which were based on “assumptions that were proven then, but were not sustained due to subsequent events beyond (the company’s) control.”
Also, Alba said company obligations mounted because of “open-ended traditional education plans,” which were based on the assumption that the tuition hike ceiling of 10 percent a year would be maintained.