One of the most well known pre-need companies in the Philippines has been placed under conservatorship, a form of control by the government to protect the company’s clients, following its failure to meet the minimum capital and other requirements mandated by law.
In a decision, the Insurance Commission said Loyola Plans can no longer sell new education, life and pension plans but must continue servicing its existing clients.
Dennis B. Funa, insurance commissioner, said in a statement that Loyola failed to bring in P126 million needed to meet its lack of capital and P149 million in “trust fund deficiency.”
The deficiencies were found in Loyola’s 2016 audited financial statement and, according to Funa, was “one of the grounds for placing the company under conservatorship.”
Funa said Loyola now has a negative net worth while the money it has for trust fund was only P932 million against liability of P1.48 billion.
The commission said pre-need firms were required by law to set up trust funds from their premium collections which are supposed to “answer for future delivery or services” provided for by pre-need contracts with its clients. This funds should be separate from the company’s paid-up capital.
The commission in 2018 asked Loyola to build up its capital and trust fund and fill the gaps. The company submitted an action plan to address the problems.
The commission, in show-cause orders, also questioned Loyola for failing to submit financial statements in 2017 and 2018.
“At that time, the deficiencies were still considered provisional,” the commission said. It said Loyola also failed to meet the deadline for submission of audited financial statement in 2016 “despite repeated orders and issuance of show cause orders.”
The commission said submission of financial statements was crucial because it would show the “current financial situation of a pre-need company.”
“However, these reportorial requirements are yet to be submitted to us,” said the commission. Funa, in the statement, said this was one of the reasons the commission’s evaluation of Loyola’s plan to address its fund deficit had not been completed.
“Without these documents, we cannot verify the sufficiency and adequacy of the company’s action plan to generate cash flow to address deficiencies,” Funa said.
The commission appointed lawyer Dionne Marie M. Sanchez as conservator who would oversee assets, liabilities and management of Loyola. Sanchez, the commission said, would also “exercise all powers necessary to preserve the assets of the company.” Sanchez would also be in charge of reorganizing Loyola “with the goal of restoring the company’s viability.”
Sanchez, the commission said, was ordered to immediately coordinate with Loyola “for the immediate execution of the conservatorship program.”
Funa said the process would include evaluation of how the company planned to revive itself.
All plans issued before the conservatorship order would remain valid “and the obligation of the company” to its plan holders isn’t erased. “This means the company is still required to pay all existing and matured claims,” Funa said.
The Insurance Commission urged Loyola clients to file claims supported by documents at Loyola.
In 2016, the commission received 95 complaints about Loyola’s failure to pay matured plans.
The pre-need firm had avoided conservatorship after its then owner, the late Jesusa Puyat-Concepcion—daughter of the company founder Sen. Gil J. Puyat Sr.—offered to sell real estate assets worth P1.8 billion to cover a P238.3-million deficiency./TSB