ETERNAL Plans, Inc. said that it expects to address its financial difficulties in a “short period” after the regulatory body placed the company under a conservatorship for failing to plug a cash deficiency in its trust fund.

The company said its financial troubles are twofold: benefits payouts are still exceeding estimates as education tuition fees surge.

At the same time, the industry has been experiencing decades of weak investment portfolio returns.

“Pre-need plans sold before the passage of the Pre-Need Code of the Philippines, dubbed as ‘old basket of plans’ have double-digit growth rates that current investment portfolio cannot sustain,” Eternal Plans said in an e-mailed statement on Friday.

“To address the fund shortage, pre-need plan companies have to contribute yearly to fill the gap. This out-of-pocket contribution adversely affected all pre-need plan companies, causing a lot of them to fold.”

The company said that the coronavirus pandemic worsened the industry’s problems, especially amid company closures and low investments.

“We have the resources, and we want to maximize earnings on alternative investments because traditional investments are not earning and even in some cases at a loss,” Eternal Plans, Inc. President Elmer M. Lorica said.

Insurance Commissioner Dennis B. Funa placed the company under conservatorship on Jan. 20 due to the company’s “unwillingness to comply” with the orders of the regulator.

The Insurance Commission, in a letter to Eternal Plans in November 2021, directed the company to put cash into its trust fund to make up for the deficiency. The deadline was Dec. 28 after the company was granted an extension, the Department of Finance said on Thursday.

After the company failed to meet the deadline, Mr. Funa said it asked for a regulatory reprieve and for time to undergo rehabilitation.

“We find this request consistent with the regime of conservatorship. Hence, the case of the company falls under the conservatorship process under the Insurance Code,” he said.

Eternal Plans in its statement said it made a cash deposit of P200 million to its trust fund, telling the commission that it wanted a supervised rehabilitation.

“The company desires to address the remaining deposit balance and address in particular the issue of the asset-liability mismatch for the ‘old basket’ of plans.” it said.

“The company assures the planholders that we will come out stronger from these financial difficulties within a short period of time.”

According to the Pre-Need Code of the Philippines, a trust fund ensures guaranteed benefits and services under a pre-need plan contract. The code requires that certain percentages of insurance plans be deposited into the trust fund.

Conservators may be appointed to manage a pre-need company’s assets and liabilities, collect debts due, and make decisions that would preserve its assets and restore its viability. — Jenina P. Ibañez

RELATED ARTICLESMORE FROM AUTHOR