Pre-need sales surpassing P20 B

MANILA, Philippines - The sale of pre-need products is forecast to surpass the P20-billion mark this year, from P17.78 billion in 2011, based on contract price (CP).

In the first nine months of 2012 alone, the contract price sale already amounted to P16.6 billion.

However, PhilPlan First Inc. (PhilPlans) president and chief executive officer Monico Jacob said the better gauge would be first year payments (FYPs) or first payments (FPs) rather than contract price.

“There are three types of valuation in the pre-need industry, that is, contract price, first payments and first year payments,” Jacob pointed out.

Contract price refers to the full amount of the product acquired or sold. FPs is the initial payment or downpayment made by the buyer of a pre-need product, which is not necessarily the CP. FYPs is the total amount of payments made by the buyers of pre-need product in a given year, much like the first year premiums (FYPs) in the life insurance industry.

And just like the life insurance industry, the FYPs are the true gauge of sales and income, as well as recurring business from succeeding payments from earlier business.

 “Poor sales is due to poor annual sales, plus weak or lack of recurring or renewal business,” the chief executive added.

It would likewise be prudent for the regulators and the buying public to look at the trust funds of each company, the capital base and the net income.

Nevertheless, Jacob said that an increase in total contract price was a good sign.

PhilPlans reported that its trust fund has already surpassed P41 billion to back up the full line of pre-need products it was marketing, which includes life or memorial plans, education plans and pension plans. It was a little over P38 billion at the end of 2011.

However, Jacob acknowledged the strong sales of life plans of St. Peters Life Plan Inc.

“They are the recognized leader in this category, and the reason for that is the strong fusion or merger of a strong sales and a strong link-up to service providers,” he said.

St. Peters Life Plan has an extensive sales outlets and sales force complimented by a number of service producers for memorial services, such as St. Peter Memorial Chapels, St. Peter Memorial Gardens, St. Peter Memorial Homes, St. Peter Finance Corp., and St. Peter Community.

PhilPlans likewise believes in the same formula of strong sales of pre-need products and strong ties with service providers.

Complimenting its education plans is its “fusion” with educational institutions, such as the Systems Technological Institute (STI) Group, Philippine Women’s University (PWU), and Jose Abad Santos Memorial School (Jasms).

In fact, majority of the education plans sold in 2012 are said to be dominated by PhilPlans.

A look at the first nine month figures show that the sale of life or memorial plans reached P5.7 billion representing 185,703 plans. In each quarter, sales registered positive growth in both value and number of contracts sold.

The same cannot be said of the education and pension plans.

In the July to August period this year, pension and education plans recorded lower sales that the previous two quarters or the first semester of 2012.

The PhilPlans chief executive said that the general feedback from the industry is that the stigma of failed pre-need companies strong in education plans was the biggest factor.

For the pension plan category, life insurance and other savings and investment instruments were the principal culprits.

The stock market has been performing beyond expectations, the mutual funds and the unit investment trust funds (UITF) were all expanding, and the life insurance industry were selling variable or investment linked products through its sales force or through bank partners.

Meanwhile, other industry players have decided this year to stop selling pre-need products, which include Coco Plans and Sun Life Financial Plans. Manulife Plans decided to just stick to selling pension plans.

“We are not selling new plans but we continue to service the one in force. We have not exited the business, but should conditions be more favorable in the future, we could consider starting to sell products again,” Riza Mantaring, president of Sun Life Financial Plans, said.

Curiously, all three are strong players in the life insurance industry.

At the start of the year, 20 pre-need companies received their license to operate. But industry players are saying that it has actually gone down to a dozen players actively marketing their products. “The rest are in the service-mode only,” they said.

A quick glance at the 2011 statistics shows disturbing signs. Of the four quarters, the last quarter recorded the lowest output.

From P4.9 billion in contract price in the first quarter in 2011, it steadily fell to the P3.6 billion in the October to December period.