REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE INSURANCE COMMISSION Insurance Commission Building Manila PROPOSAL FOR CORPORATE REHABILITATION

OF PRUDENTIALIFE PLANS, INC. CRL Ref. No. 2011-001 UNDER RA 9829 IN CONNECTION WITH THE CONSERVATORSHIP STATUS OF THE COMPANY x--------------------------------------------------------------------x

ADVISORY No. 02
During the consultation hearings held on March 2 and 13, 2012, an appeal was addressed to this Commission by the planholders of Prudentialife Plans, Inc. (PPI) to exclude the life plan from the coverage of the Stay Order dated 3 February 2012. In the same vein, a letter of PPI dated 8 February 2012 signed by its President, Jose Alberto T. Alba, was submitted to this Commission, through the Conservator, Atty. Rosario S. Bernaldo, requesting that the life plans be excluded from the coverage of the said Stay Order on the grounds that the trust fund for the life plans has no deficiency and therefore, can service all life planholders, and that, under these circumstances, it is difficult to explain to life planholders or their beneficiaries the failure of PPI to pay for memorial services and other benefits under the life plans, especially considering the emotional state of the bereaved at the loss of a loved one. Also filed with the Insurance Commission is an endorsement from the Conservator dated 5 March 2012, recommending the request of PPI that the life plans be excluded from the coverage of the Stay Order considering that the PreNeed Code requires the establishment of separate and independent trust fund per pre-need plan and that the trust fund for the life plan is sufficient to service the planholders or their beneficiaries at their time of need. ISSUE: Whether or not life plans can be excluded from the coverage of the Stay Order While the Commission is still in the process of evaluating the merits of the verified proposal for corporate rehabilitation of PPI, it cannot in the meantime ignore the immediate needs of the life planholders. The Insurance Commission notes that the trust fund for the life plans had no deficiency and in fact had an excess of almost Two Hundred Million Pesos as of December 31, 2010 and could service all life planholders at the time.

However, the Insurance Commission is also aware of the other life planholders with future availments who must also be protected. Hence, before deciding on the issue, the Insurance Commission waited for the latest actuarial valuation for the life plan to assure itself that the payments can be sustained. Based on the said latest valuation as of December 31, 2011, the life plan trust fund excess was reduced to just Fifty-Seven Million Four Hundred Eighty-Eight Thousand Pesos (P57,488,000.00) from almost Two Hundred Million Pesos (P 200,000,000). A study must be done to assure us that this trend will not continue. Even so, we cannot discount the fact that there are urgent life plan benefit availments as of this date which cannot realistically wait for the said study. Therefore, to balance the urgent interest of life planholders who have present availments with the interest of life planholders with future or forthcoming availments, the Commission hereby approves on a limited basis the exclusion of the life plan from the coverage of the Stay Order with the following conditions:
a) PPI shall be allowed to resume rendering memorial services and paying

b)

c)

d)

e)

other benefits under qualified life plans only up to the aggregate amount of Two Million Pesos (PhP2,000,000.00) per month in order to minimize the depletion of life plan trust funds; The said amount of Two Million Pesos shall be equitably apportioned to all planholders with availments during the applicable month. Each individuals entitlement shall not exceed two thirds (2/3) of the benefits due per individual plan. The balance shall be addressed by the final decision on the proposed rehabilitation plan; This exemption shall be effective up to June 30, 2012. Thereafter, a final decision on this aspect shall be issued simultaneously with the decision on the proposed rehabilitation plan; All payments to be made by PPI pursuant to this instruction must be made through crossed checks and subject to the review of the Conservator who shall be a co-signatory together with an authorized officer of PPI. The Insurance Commission examiners may also review the computations, vouchers, and checks to be issued; and All actions to be made concerning this instruction must all be reported in writing to the Insurance Commission by the Conservator.

As mentioned during the hearing, a copy of this order shall be posted in the respective websites of the Insurance Commission (www.insurance.gov.ph) and Prudentialife Plans, Inc. (www.prudentialife.com). The Insurance Commission shall release instructions from time to time to clarify or resolve other major issues submitted for consideration. Hence, all stakeholders are enjoined to regularly visit the said websites for major announcements.
City of Manila, 10 May 2012. EMMANUE L F. DOOC Insurance Commissioner
Cc: Prudentialife Plans, Inc. (for implementation) Atty. Rosario S. Bernaldo, Conservator (for monitoring) Mr. Jose Rizal Batiles, Planholders representative/convenor

Also, a request was made by PPI in the said consultation hearings on March 2 and 13, 2012 (a) to release to the beneficiaries insurance benefits that have been paid by third party insurance companies through PPI; and (b) the oral request of PPI to pay to the aforesaid third party insurance companies for the premium of the aforesaid insurance in order to protect the planholders of PPI by ensuring that the insurance coverage under the PPI plans will not lapse. Second Issue Whether or not PPI should be allowed to release to the beneficiaries insurance benefits that have been paid by third party insurance companies through PPI Third Issue Whether or not PPI should be allowed to pay to the third party insurance companies for the premium of the aforesaid insurance in order to protect the planholders of PPI by ensuring that the insurance coverage under the PPI plans will not lapse

Second and Third Issues Lastly, the Commission notes that there is no legal impediment for the release to the beneficiaries of insurance benefits that have been paid by third party insurance companies through PPI. After all, such money does not belong to PPI which is only prevented from releasing the same because of the Stay Order. Concomitantly, there is nothing under the law, other than the Stay Order, that prevents PPI from paying to the aforesaid third party insurance companies for the premium of the aforesaid insurance in order to protect the planholders of PPI by ensuring that the insurance coverage under the PPI plans will not lapse. a. There is no legal impediment for the release to the beneficiaries of insurance benefits that have been paid by third party insurance companies through PPI. Hence, PPI is hereby authorized to release to the concerned beneficiaries the insurance benefits that have been paid by third party insurance companies through PPI; b. There is nothing under the law, other than the Stay Order, that prevents PPI from paying to the aforesaid third party insurance companies for the premium of the aforesaid insurance in order to protect the planholders of PPI by ensuring that the insurance coverage under the PPI plans will not lapse. Thus, PPI is hereby authorized to make such payment to the aforesaid third party insurance companies for the premium of the aforesaid insurance; and . Indeed, under these circumstances, it is quite difficult to justify to life planholders or their beneficiaries why PPI is being prevented by the Stay Order of this Commission to pay for memorial services and other benefits under the life plans. In fact, to attempt to further justify the continued application of the Stay Order in the light of the requests of PPI and the life planholders and the recommendation of the Conservator would make the Commission irresponsive to the immediate needs of life planholders or their beneficiaries during highly emotional and difficult circumstances arising from the loss of a loved one.