PHILAMLIFE TO RAISE CAPITALIZATION OF PHILAM PLANS

MAKATI CITY, October 18, 2005 – As a show of commitment to its pre-need business and to the mission it pursues in securing the future of the Filipino family, Philamlife, the leading life insurance company in the country, recently announced its decision to raise the authorized capitalization of its pre-need subsidiary, Philam Plans, from the current level to P1.5 billion. Its application for the increase in authorized capital and the infusion of an additional P500 million to raise the paid-up capital of the company to P700 million was approved by the Securities and Exchange Commission (SEC) late last week.

Philam Plans’ paid up capital to date stands at P300 million or three times the minimum requirement set by the Security and Exchange Commission (SEC) for pre-need companies carrying the full line of pre-need products (pension, life/memorial and education plans). Because of the P500 million cash infusion, Philam Plans will become the highest capitalized pre-need company in the country.

“We are taking this momentous step precisely at this time because it is both the responsive and the responsible thing to do. Our response to the pre-need crisis is precisely to express our unwavering belief in the viability of the pre-need profession by increasing our stake in the business,” says Philam Plans President Jesus G. Hofilena.

The additional capital infusion will enable the company to further pursue its business expansion and market leadership while sustaining its competitiveness via technology-backed service support.

Record of Performance and Promises

Philam Plans, the pre-need subsidiary of Philamlife and a member company of international financial giant American International Group, Inc. (AIG), has a long history of excellent sales performance and on-time benefit payments. Its close to 500,000 strong planholder base can count on the company to fulfill its commitment to provide the financial resources promised to them via the P16.9 billion trust funds currently set aside for this purpose. To date, the company’s trust funds are the biggest and most liquid in the industry.

Philam Plan’s business performance is a difficult record to match. Standing at the no. 1 slot for overall pre-need sales performance in July 2005, the company took 22% of the total pre-need market. It is the dominant provider of education plans with a 39% market share of year-to-date education plan sales. Its latest education product, Pangako Education Plan, is gaining wider acceptance from the market.

“The additional capitalization only means that our planholders are more assured that their pre-need company of choice, Philam Plans, will never let them down,” said Philamlife President & CEO and Philam Plans Chairman Jose L. Cuisia, Jr.

Product Innovation, Technology-backed Services and Good Governance Practices

Through the years, the company has been known to be a product trailblazer, continually engaged in market research and product innovation. It wisely limited its product offerings to fixed value plans, going against the business norm of the times way back in 1989. Today, the fixed value product model has proven to be the only sustainable pre-need plan in the market.

In 1994, the company introduced the lapse free plan with the launch of the Gintong Yaman pre-need certificate, ensuring Filipinos with limited income of a secure and systematic way to save for the future.

First to be awarded the much-coveted ISO 9000 quality seal, Philam Plans trailblazed the industry’s quality service standards. This resulted in full support capacity for Philam Plan’s close to 70 branches and regional offices nationwide.

Philam Plans is the first pre-need member company of the Life Office Management Association (LOMA), an internationally recognized learning arm of the insurance industry. Philam Plans’ employees are thus among the best trained in the industry. This translates to an assurance of sound business practices and standards worthy of planholder trust.

Its affiliation with AIG has made Philam Plans one pre-need company that is subjected to the stricter compliance standards of the US Sarbanes-Oxley Act. This law was enacted to govern more seriously all US companies and protects the public against fraudulent acts borne out of questionable business practices. By strict adherance to its control and audit prescriptions, planholders are assured that the company practices utmost good governance.

Philam Plans aspires to give more to the Filipino people. Through technology-backed service, it commits to put into place advanced systems to enable real-time operation support in its branch network nationwide. The migration to a new operating system is part of a continuing plan to keep the company abreast of the servicing standards of today.

A Dedicated Partner

For 16 years, Philam Plans has lived up to its commitment to its customers. Continually upholding prudent financial management practices and innovative marketing practices, the company has proven itself capable of withstanding the challenges in a less than ideal business environment.

Optimistic about the future, Philam Plans looks forward to longer years of service to the Filipino people through the support of its mother company Philamlife and its principal, American International Group, Inc. (AIG).

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Philam Plans Secures Continued Education of 5,400 College Students

The country’s leading pre-need company Philam Plans Inc. is set to release education plan benefits reaching over P46 million this September 2005 close to 5,400 college beneficiaries have secured for themselves continued college education in the second semester of the year.

“Philam Plans has paid all maturing and availing plans either ahead of or on time and shall continue to do so.” Philam Plans President and CEO Jesus Hofileña stated. This affirms Philam Plans unwavering commitment to its thousand of planholders whish has kept through 16 years.

Philam Plans gives these benefits directly to the planholders in the form of manager’s check, this provides them the flexibility to use their funds for a variety of education expenses such as tuition fees, books, school items, etc. Because it is given out in manager’s checks, the planholder is fully assured of education benefits proceeds.

As the leading education plan provider, Philam Plans boast of a wide range of products making the company the pre-need firm of choice amongst many Filipinos. As of August 2005, the company controls close to 50% of education plan sales since January this year.

The firm’s education plans such as GOLD and GOLD Premiere not only ensure the education of the child but also provide 15-20% yearly increment to enable parents cope with inevitable tuition fee increases. These education plans likewise guarantee an additional cash benefit as a gift to the student immediately after graduation. The company also launched a more affordable education plan called Pangako, which provide the security of the child’s future schooling at a cost within the reach of many parents.

Philam Plans has boosted its trust fund level, which now amounts to P16.2 billion—the largest in the industry today. This move was taken to ensure the company’s capability to fulfill all its obligations. With 86.7% of this money invested in government securities and near cash equivalents, it is the most liquid trust fund in the industry. At this level, Philam Plans ha the means to readily pay all maturing and availing pre-need plans until the year 2013 and will be there to serve the general public for many more years.

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STATEMENT ON PHILAM PLANS 2004 FINANCIAL PERFORMANCE
(Ver 1 - Announcement of the capital infusion)

Philam Plans as well as its parent company, Philamlife recognize the long-term nature of the pre-need business. As the industry leader with the largest market share, Philam Plans looks confidently into the future even as it adapts to changing times and conditions.

As solid proof of its unwavering commitment to its pre-need arm, Philamlife has recently infused additional capital to Philam Plans amounting to P175 million. With a paid up capital of P300 million, this is already three times the minimum capital required by the SEC for pre-need companies.

As of June 2005, Philam Plans trust funds stood at P16.2 billion, the largest in the industry, and in full compliance with all investment mix standards of the SEC. Philam Plans’ trust funds’ have the highest liquidity position in the industry with more than 80% of its assets in cash and in highly liquid instruments, or P12 billion. For the period of 2006 – 2011 alone, Philam Plans has programmed maturing plan obligation of P9.8 billion; these maturing plan obligations are almost twice covered by money available in trust funds today. This does not consider the fact that the company’s trust fund level shall continue to grow as it sells new pre-need plans.

Philam Plans has always met its contractual commitments to all its planholders and will continue to do so. As it continues to meet the rising financial need of the Filipino families, Philam Plans shall give the highest priority to the protection of its planholders now and in the future.

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Philam Life Stands Ready to Support Philam Plans

August 1, 2005

Dear Valued Philam Plans Clients:

For some time now the Philippines Pre-Need industry has been experiencing a troubled business environment brought about by the failure of some well-known pre-need companies to fulfill their contractual obligations to their clients. This has resulted in a crisis of confidence that has tended to sow anxiety and doubt over the ability of the other companies to protect the interests of their plan holders. It is for this reason that I would like to personally assure you that Philam Plans will live up to all its contractual commitments, whether now or in the future.

There are some very facts about the way Philam Plans operates that sets it apart from those companies that have experienced financial difficulties or even failures, giving me the highest confidence to guarantee our company’s stability. First, Philam Plans has absolutely no open-ended liabilities. Unlike those companies that sold “ traditional education plans” that contractually guarantee the payment of tuition fees no matter what their future cost would be, thereby exposing them to undetermined financial obligations, all of Philam Plans’ products carry fixed-value benefits enabling us to accurately forecast how mush we need to pay when our plans mature. Thus we are able to set and manage our investment objectives properly. Second, Philam Plans has the largest and the most liquid government securities fully secured by the Republic of the Philippines. At this current level we have the means to readily pay all maturing and availing pre-need plans until the year 2013, and such expenditures will only represent approximately 5% of our total trust fund assets at any point in time. In 2004 alone Philam Plans put in an additional P3.6 billion to its trust funds to further secure our ability to pay all planholders benefits.

While the resources of the Philam Plans are more than sufficient, another categorical assurance I can give you is that the full financial might of Philamlife stands ready to support Philam Plans. As of this writing, Philamlife has capital and surplus funds of more that P30 billion and will not hesitate to back up its wholly owned subsidiary, Philam Plans, if ever the needs arises. As the undisputed life insurance industry leader for over 50 years now, Philamlife acknowledged the trust reposed on it by all its clients, and this extends to the customers of all subsidiaries that bear its name. Over a million clients have collectively placed their faith in Philamlife’s financial stability. We will not let you down.

I take great pride in the prudence and care that Philam Plans exercises in managing its operation, thus minimizing bisiness risks. We work with the conscious realization that so many families have entrusted their future financial welfare to our organizations, particularly in the pre-need business that brings hope and security to their most cherished dreams of securing their children’s education, providing for their retirement and enabling them to live a dignified life. Enshrined in our corporate vision in our commitment to contribute to the quality of life of every Filipino.All our expertise and professionalism are therefore dedicated to working for you peace of mind. We aim to always live up to our advocacy – Sa Philam Plans, panatag ka.

Now that you know Philamlife fully supports Philam Plans, let me tell you who, in turn, backs up Philamlife. We are a member company of the American International Group (AIG), the largest, most diversified insurance and financial services organization in the world with the highest market capitalization of over $150 billion and nearly $800 billion on in total assests. As Philamlife is to Philam Plans, AIG is behind Philamlife all the way.

In closing, let me thank you for your faith and continuing patronage. It is our principal source of strength that will enable us to persevere as we overcome all business challenges.

JOSE L. CUISIA, JR
Chairman of the Board, Philam Plans
President & Chief Executive Officer, Philamlife

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