MANILA, Philippines - Pre-need companies want the Securities and Exchange Commission (SEC) to relax industry rules to cut losses from old plans sold at high interest rates and avert what they claim as their impending demise.

The sector sent a call for help as early as Aug. 28, but up to now, corporate regulators have yet to act on the request.

"The proposals of the pre-need industry are still being studied by the commission’s nontraditional securities department," SEC Chairman Fe B. Barin said in a telephone interview Tuesday.

She declined to comment on the merits of the industry request and on the possible regulatory action.

"The letter acknowledges the fact that investment assumptions made when we priced our products and which have always been hit ever since the inception of the industry may no longer be hit in the future. That is a problem we want addressed and solved," Philippine Federation of Pre-Need Plan Companies President Juan Miguel M. Vazquez said in a text message.

He and other officials of the group, which wanted the regulator to keep their letter confidential, declined to be interviewed.

In separate letters sent to the commission on Aug. 28 and Sept. 24, the federation sought the relaxation of industry rules so they can cope better with the US-led economic slowdown.

The group said pre-need firms had sold a number of plans promising up to 18% yield. "Given the current economic environment, generating the high return promised by these old plans is close to impossible," executives from 13 pre-need companies told the SEC in their Aug. 28 letter.

"[In] the last few months, the trust funds of our plans registered huge unrealized erosion in value because of the economic slowdown," the group wrote the regulator in a second letter dated Sept. 24.

They said their trust funds had been reduced due to accounting standards tying assets to market prices. Unless and until the onerous yields on the old plans are addressed, "there could be no certain future for our industry," it said.

Pre-need sales in the 11 months of 2008 declined by over a fifth from year ago, as pension plans faced stiff competition from other investment products.

The sector has been selling fewer education plans since it was hit by a scandal a few years ago, when several pre-need firms failed to pay clients after tuition shot up.

The industry posted P13.97 billion in sales compared with P17.51 billion a year earlier, data from the SEC showed.

The group said hiking capital as a condition to sell would be the industry’s death knell.

The federation proposed removing unrealized losses from the computation of the trust fund deficit as a short-term solution.

It also sought five years within which to put up the additional capital for loss provisioning, pay trust fund deficits with noncash assets such as real estate and unlisted shares with good track record.

The group also said the capital required to cover paper losses should be built over five years.

For long term solutions, the group proposed the following:

* Determine which plans are commercially viable and have these managed separately from those that are not;
* Have individual pre-need companies submit their own proposals on how to they seek to manage their plans in the next 10 to 15 years;
* Allow companies to continue selling new plans, profits from which will make up for losses from old ones bearing high interest; and
* Create new ways to determine asset prices aside from tying these to market rates.

In November, the SEC allowed companies, including pre-need firms, to reclassify assets based on future prices, giving them relief from plunging market prices of their holdings due to the uncertainty unleashed by the economic turmoil in the US. — Don Gil K. Carreon