Prudentialife bankrupt, seeks corporate rehabilitation

The Insurance Commission on February 3, 2012 issued a “Stay Order” on the request of troubled pre-need firm Prudentialife Plans Inc. for corporate rehabilitation.

With the “Stay Order” decision, all payment of claims by planholders effective February 6, 2012 are suspended. That means starting February 6, all Prudentialife planholders cannot file for any claims against the company until its corporate rehabilitation plan is approved.  All claims being processed, however, as of February 6 will still be honored and funds will be released to planholders.

Notice to Prudentialife planholders and other stakeholders

The Insurance Commission directs all Prudentialife planholders, stockholders, creditors, and other interested parties to view and comment on the verified proposal for corporate rehabilitation submitted by the company. Details of the proposal are available at Prudentialife’s website. Deadline of  comments on the said rehabilitation plan is on February 25, 2012.

Planholders and other interested parties are also encouraged to attend the consultation hearings scheduled on March 2 and 13, 2012, 9 am, at the IC Board Room, 2nd Floor of the Insurance Commission building at United Nations Avenue in Manila. The sessions will discuss the process of corporate rehabilitation for Prudentialife.

History of trouble

Prudentialife has been experiencing financial difficulties for the past several years. In September 2008, the company’s trust and investment assets were valued at P14.16 billion — P5 billion short of the P19.5 billion reserved fund required by the Securities and Exchange Commission (SEC).

In an attempt to reduce this deficiency, the company unilaterally lowered the interest rate of its pension plan products from 12% per annum to 6% per annum.

Prudentialife received another blow in 2009 when the SEC canceled the company’s dealers’ license which terminated their ability to sell new pre-need plans to customers. Still, the company promised to continue honoring their obligations to existing planholders. Investments-wise, however, it was downhill from there for Prudentialife.

In its 2010 financial statements, the company reported total assets amounting to P10.97 billion. But the company’s liabilities that year reached P20.21 billion, translating to a deficiency of P9.23 billion.

By September 2011, this deficit has ballooned to P10.53 billion — with Prudentialife booking assets worth only P9.15 billion versus incurred liabilities amounting to P19.67 billion.

Reasons for failure

Prudentialife blamed several factors for their eventual downfall. Among the reasons cited by the company for their failure to meet their obligations to planholders include:

1. Old plans that guaranteed high benefits — the company claims the benefits on the plans were based on actuarial assumptions that drastically changed due to “subsequent events beyond the pre-need companies’ control.” They cited an assumption in the case of educational plans wherein tuition rates were expected to increase only by the government-mandated cap of 10% per year but rose more than expected after the government adopted a policy of deregulation with regard to tuition fees.

2. Global economic crisis — Prudentialife said they were not able to generate the projected returns on their investments due to the global financial meltdown in 2007 and 2008 led by the collapse of Lehman Brothers,  Merill Lynch, and other big financial institutions.

3. SEC rules on investment — the company also blamed the SEC for its rules disallowing pre-need firms to invest in unlisted companies and properties that were not income-generating. Prudentialife claims the SEC forced them to divest investments in those types of assets regardless of the loss they would have to absorb due to such divestment.

4. Revocation of Dealers’ License and Permit to Sell — the SEC and the Insurance Commission were tagged as culprits for their failure to act on Prudentialife’s request to reinstate the company’s dealers’ license which, according to them, would have enabled them to sell new plans and ultimately restore financial viability.

5. Unscheduled termination of plans — Prudentialife argues that more than 50,000 plans, amounting to P3.8 billion, were terminated by planholders as of September 2011 due to fear supposedly brought about by the revocation of their dealers’ license and the downfall of other pre-need firms such as College Assurance Plan (CAP) and the Legacy Group. The termination of plans resulted to non-payment of premiums which purportedly impaired the liquidity of Prudentialife’s trust funds.

Corporate Rehabilitation Plan

As opposed to pursuing liquidation where the company’s assets will be sold in order to pay creditors and planholders, Prudentialife is seeking corporate rehabilitation where it will restructure itself and attempt to bring the company back to profitability. Among its proposed strategies are:

Continue the life plan business. The company claims the trust funds for its life plan business is more than enough to cover all life plan obligations. Thus Prudentialife implores the SEC and the Insurance Commission to reinstate its dealers’ license to allow the company to sell new life plans and continue the life plan business.

Spin off the education and pension plans business to Manila Bankers Life Insurance Corp. Since the trust funds for the education and pension plans cannot meet all obligations, Prudentialife is proposing a haircut to the benefits promised to planholders. Alternatively, the company is proposing to transfer these two business units to another pre-need firm Manila Bankers Life Insurance (MB Life) that will assume all obligations to Prudentialife’s education and pension planholders.

It is sad that the Filipino planholder is again meant to suffer with the demise of Prudentialife Plans. We thus call on the SEC and the Insurance Commission to implement stringent, appropriate, and urgent reforms to prevent another pre-need firm from experiencing the same fate; otherwise, the pre-need industry will accelerate its fade into oblivion due to major loss of consumer trust.

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28 thoughts on “Prudentialife bankrupt, seeks corporate rehabilitation”

  1. I have fully paid my Pension Plan last Nov. 2011 for 15 years maturization…what will happen next if the company is liquidated-do we get at least the full contract price? Truly as I am reading this parang maiiyak ako at sobrang kaba dahil tested na -other companies who experienced such financial troubles was not considered to be rehabilitated-the planholders situation were not considered that important to the company as well as those who have the power to save it. I pray that God will give them the heart to really think of the Planholders situation in this. 

    • In a rehabilitation, planholders should expect a “haircut”. That’s another way of saying you could end up with much less than what your plan was worth. I suggest you study the financial statements of your pension plan provider to understand if they are at risk of bankruptcy.

  2. Since the trust funds for the education and pension plans cannot meet
    all obligations, Prudentialife is proposing a haircut to the benefits
    promised to plan holders.

  3. whew! naalala ko na muntik na akong kumuha ng plan nila noong 2008. buti na lang nagbago ang isip ko at di natuloy… 

  4. The rich gets richer and the poor gets poorer. The corporate bosses and owners are laughing all the way to the bank. The poor plan holders are left in the dust. The SEC and the Insurance Commission should have made extreme measures to prevent this from happening. The people in the SEC and in the Insurance Commission should think about the poor plan holders and not just implementing their friggin rules. They should at least think about what will happen to the plan holders who have work hard for their money to invest in this company. I’m pretty sure they already have forseen the future of Prudentialife way back in 2008.

  5. Identifying a
    pre-need company to be the same as an insurance company, would be like
    saying that an orange is the same as an apple. YES! They are both
    fruits, but they are not of the same kind… The same goes with the
    pre-need industry and the insurance industry.

  6. praying to god to help us on this matter i have 8 plan all fully paid for my chilldren hoping for there future …..gone     i hope they have heart


  8. Prudentialife admitted that it been in financial trouble since 2001. It
    sought to increase its capital base to meet maturing claims, but in
    2009, the Securities and Exchange Commission, which was the previous
    regulator of pre-need firms, disallowed it to sell new plans, cutting
    off sources of new cash flow to pay for old claims.

  9. I came across a
    video clip of a news several days ago reporting that Prudentialife Plan
    is bankrupt. My first reaction was, “Oh!”. Another pre-need company went
    down. Fortunately for me, I knew it was a pre-need company, but for the
    majority who would mix and match pre-need companies with insurance
    companies, I don’t think so.

  10. ano ang dapat gawin ng mga plan holder tulad ko… para makalmante kahit pano ang isip at kalooban namin. alam kong matatagalan to pero pano naman kmi…
    pano kami makakasiguro na makakakuha kami ng claims if ever maayos nyo to… 

  11. Libragirl from pangasinan! I’m one of the pension Plan holder, paano ko na makukuha ang pension ko kung magdedeclare ng bankruptcy ang prudentailife. Pinaghirapan ko pa naman yan ng ilang taon sa abroad as a OFW  tapos mawawala nalang na parang bola. Please have a big heart naman to return our money kasi pinaghirapan namin niyan.

  12. mahiya naman kayo sarili namin pera kami pa nagmamakaawa ibalik sa amin mga pera namin ang kakapal naman ng mga mukha niyo. kahit ibalik niyo nalang sa amin mga pera namin pinaghirapan namin yon. kami dito naghihirap samantalang ibang tao dyan nagpapasarap sa mga perang nakuha sa amin. inaasahan pa naman namin makaktulong sa pag aaral sa mga anak namin tas ganito lang mangyayari pagkatapos mong maghintay ng napakatagal na panahon, diyos na bahala sa inyo mga kapal muks. sigurado ko mga boss dyan sa prudential meron pa silang makukuhang pera para sa kanila at galing sa mga pera ng mga planholders. kapal niyo siguro nga sa inyo mapunpunta mga pera namin at sa inyo din mapupunta ang karma.

  13. Eto po ba yung may mga sales agent sa SM malls? Hindi kasi clear sa akin bakit may mga Prudential agents pa rin na nag aalok nito sa SM, paki clarify sana…

  14. planholder to us working as ofw n save this khit hrap puyat dinaranas nmin nawa d maglaho na parang bula nlang pinaghirapan nmin.thanks pra that u can pay as back.tnx

    • Are the yahoogroups still active? I tried sending an email pero nag-bounce back, the groups don’t exist daw. Please help check kung tama address above….i would really like to be a part of this group. Thanks.

  15. Plan holder din ako ng prudential. Matatapos na sana ako sa pagbabayad ngayon taon na ito pero di na nila tinangap at sinabihan ako ng Area manager mismo dito sa amin sa dahilan. Ang tanong ngayon, bakit idinamay sa legacy ang prudential? Gayong maayos naman ang serbisyo nung mamatay ang tatay ko. Prudential ang nag-ayos lahat hanggang libingan.

    Pangalawa tanong, bakit patuloy pa rin nagbebenta ang St Peter’s Plans ng policy at parang untouchable ito at ayaw pakialaman ng SEC at Insurance Commision. Ano kaya ang meron sa St Peter’s Plans na ito? Money under under the table to IC?

    At ang pinakamalaking tanong? WHY IS IT THAT PRUDENTIAL LIFE IS BEING SINGLED OUT BY THE SEC AND INSURANCE COMMISION????? Wala naman sila kinalaman sa LEGACY.

    Saka bakit idinamay ng IC ang pension plan kahit di naman ito lugi? Nakapagtataka?

  16. hellow po anu na po balita sa prudential life 2012 pa po nag matured yung plan ko.. pero till now wala parin po akong benefits na narereceive sa educational plan ko kelan po ba pwedeng ma withdraw yung perang pinaghirapan ng nanay at tatay ko kailangan na po namin ng pera ngayun please naman po maawa naman kayu sa amin….

  17. nagpakamatay kamakailan lamang ang isang estudyante ng UP-MANILA dahil walang ma-ipambayad ng Tuition Fee ang BATA (March 2013)… Kelangan pa bang DANASIN ng PLANHOLDER yang ganyang SENARYO????.. I keep sending e-mail to helpdesk of Prudential to know what is happening bilang Planholder.. Akala ko pinto lang at bintana ang isinasara.. Pati pala e-mail add ng helpdesk ng Prudential..

  18. My certificate of full payment no. 02588 dated may 16, 1999 for my E-PLUS PLAN with Contract No. 020596442. I was not aware that the company has gone bankcrupt. !!!!
    Could please advise me what will happen to my plan & what shall i do.
    Thank you so much.



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