Burst your Babble

Survival daw: Yosi Tanco’s STI-PhilPlans fund in P3B deficit hole since 2018…or 2 years before COVID

It’s a bad omen when an insurance company on the brink of bankruptcy begins its excuse letter to its planholders with a statement claiming that its fund trustees were “carefully chosen.”

It’s a bad omen when an insurance company on the brink of bankruptcy begins its excuse letter to its planholders with a statement claiming that its fund trustees were “carefully chosen.”

Worse, when that company blames an external factor like COVID-19 for dealing it with a mortal blow when its financial problems were already stinking as far as back as two years ago.

This is what Philplans’ owner bilyonaryo Eusebio “Yosi” Tanco, and his partner former Securities and Exchange Commission commissioner Monico Jacob, did in an April 22 letter to planholders as he swiftly denied any responsibility in mishandling the insurance giant’s assets while blaming COVID-19 for the erosion of its assets and not having enough cash to meet obligations to planholders.

Based on its annual filing with the SEC, Philplans was already P3.186 billion in deficit as early as 2018 – its internal actuary stated it should have P32.37 billion in total trust funds to meet its maturing obligations but only had P29.183 billion.

This deficit is 1,700 times more than its P177 million fund deficit in 2017 when PhilPlans reported a P1.814 billion loss.

PhilPlans itself admitted that it sought relief from the Insurance Commission (IC) which allowed Tanco’s firm to relax the watchdog’s rules in determining the value of its assets due to the high volatility of the local stock market.

In a circular issued November 2018, IC said an insurance firm could choose to value its stock holdings at the prevailing market rate or acquisition cost.

PhilPlans said that “had the relief not been applied” it would have had a deficit of P1.875 billion for pension holders, P1.299 billion for education holders, and P11.82 million for life holders. This means that even when the stock market was doing relatively well (versus 2020), PhilPlans reserves were already in the red. (Philplans has yet to submit its 2019 annual report. Its website has a financial report as of 2016).

Tanco claimed that its trustees “carefully chose” PhilPlans’ assets but a cursory look at its holdings should have sent IC’s alarm bells clanging two years before the coronavirus crash.

Tanco, a Philippine Stock Exchange director and owner of controversial Venture Securities involved in the multi-billion peso R&L stock scam in November 2019, invested P8.5 billion or roughly 25 percent of PhilPlans total asset portfolio in equities in 2018, which is by no means a prudent investment strategy for any insurance company.

Worse than having a quarter your funds in volatile stocks, Tanco bought 5,286 memorial lots at Heritage Park for a total of P1.291 billion in 2015 “intended for bundling with the life and pension plans” of PhilPlans.

The 76-hectare Heritage Park is owned by Rosehills Memorial Management Inc. which was bought by PhilPlans for P100 million in 2013.

PhilPlans made use of these Taguig investments to windowdress its books by raising the cost of these memorial lots by 180 percent to P3.6 billion in 2018.

Overall, including the properties bought by Tanco for the fund, PhilPlans has almost 40 percent of its P33 billion funds in risky assets.

In 2009, Tanco, through STI Group, took over the pre-need and health maintenance organization (HMO) of Philippine American Life and General Insurance Co. (Philamlife), the local subsidiary of American insurance giant AIG which was then reeling from the global financial crisis, and from which it built PhilPlans.

Eleven years later, Tanco has shut down PhilPlans’ provincial branches and is asking planholders to support a “survival” strategy which it was forced to take rather than liquidating its assets at a massive loss.

Related story: Dinahilan pa COVID! Yosi Tangco shuts down STI-PhilPlans’ provincial branches in desperate move to avert fire sale of assets

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