Xavier University- Ateneo de Cagayan

School of Business and Management

Business Administration Department

BA13: A Case Study on

College Assurance Plan (CAP)

Submitted by:

Jaminal, Rogerlyn
Ondong, Michelle Florence
Tan, Katrina
Ugsod, Nikka
Viernes, Jude Cyril

Submitted to:
Mr. Antonio C. Emata

February 23, 2015

1. Societal Environment
A. Sociocultural Forces

Connecting with CustomersOne of the most important social factors in the insurance business is
insurance agents' ability to establish a rapport with customers. Insurance
buyers aren't going to choose agents who lack industry knowledge, come
across as uncaring salespeople or can't provide legal contracts to back
their products and services.
Competition with BusinessInsurance companies and their agents must have a dynamic, competitive
and visible online presence. Insurance buyers want websites that are easy
to maneuver, links that provide all the necessary details and message
centers that make correspondence quick and simple.
Social MediaSocial media has changed the way insurance companies market their
policies and coverage options and strive to maintain strong reputations with
consumers. Many insurance agents use Facebook, Twitter and LinkedIn to
appeal to customers and spread the word about their products and
services.

B. Political Legal Forces

Regulatory and political dispensations of any given national or state

government are determined by the orientations of its ideology. These
political and legal forces shape the profile of your business environment.
Members of CAP can sue the company because of its inability to pay them
back.

C. Economic Forces

Premiums paid to insurers are invested, poor economic output can offer
less return for insurers, hence higher premiums. Insurers have to take
more of a hit in terms of risk themselves.
More fraudulent claims occur during times of economic downturn, due to
lack of money.
Companies failing economically will relocate to other countries and pull out
or markets. This causes less revenue for insurers.
Insurance is management of risk; in a down turning economy less
businesses are willing or able to take risks.
The economic concerns are significant in contributing to the outcome of
gross state product revenues. The insurance industry pays high tax rates
and invests in various bonds for the state. The percentage rates make up a
great portion to gross state product.

D. Technological Forces

Insurers should embrace new technologies to differentiate themselves in

the insurance arena.

Technology Investment: When it comes to technology insurers have

underinvested historically. Insurers expect to see a continuing increase in
technology investment across a large portion of client base. There's a trend
in using technology to sell insurance, and insurers thinking like a consumer
service business in how they interact with customers. There's a great deal
of momentum in using technology to augment or disrupt existing business
models. That will require CAP to be much more strategic and collaborative
with marketing, sales and other aspects of the business.

2.) Task Environment

A. Government
The Makati Regional Trial Court has given embattled pre-need company
College Assurance Plan Philippines (CAP) a second lease on life. In a
resolution dated Nov. 8, the Makati RTC granted CAP's petition for
rehabilitation and ordered the implementation of the firms revised recovery
plan.
Makati RTC Judge Cesar Untalan also requested the Securities and
Exchange Commission to give CAP a second chance at reviving its business.
He emphasized the need to give CAP another chance to re-establish itself for
the good of its planholders. "It is really very difficult to develop and construct,
but it is very easy to destroy. Let us go rehabilitate CAP rather than liquidate,"
Untalan wrote.
B. Special Interest Group (Board of Directors)
Alejandro R.
Roces
Chairman
Emeritus
Ambassador
Raul I. Goco
Chairman
Atty. Enrique A.
Sobrepea, Jr.
President & CEO
Col. Coronado P.
Muasque (Ret.)
Corporate
Secretary

Mr. James Marsh

Thomson
Corporate
Treasurer
Mr. Ernesto V.
Espaldon, Jr.
Director
Mr. Quintin S.
Doromal
Director
Mr. Robert John L.
Sobrepea
Director

Mr. William Russell

L. Sobrepea
Director
Ms. Gillian Akiko N.
Thomson
Director
Mr. Arleigh Joseph
A. Espaldon
Director
Mr. Silvestre H.
Bello III
Director

C. Customers
Sobrepeas invention of the traditional educational plan, where the pre-need
company guarantees full payment of tuition at the time of maturity has been
copied by many pre-need companies. Filipino parents quickly snapped up the
educational plans and money rolled in for CAP, which became the number
one educational plan provider in the country.
D. Creditors
The seven trustee banks are led by the Bank of Commerce (BOC), which
manages more than 60 percent of the trust fund; the rest are Allied Banking
Corp., Bank of the Philippine Islands, Union Bank of the Philippines,
Metropolitan Bank and Trust Co., Equitable PCI Bank, and Philippine
Veterans Bank.

E. Communities
CAP was banking on the countrys economic growth, as well as former
President Marcoss tight regulation of fees of colleges and universities. Every
year, college fees would go up by only 10 to 15 percent. However, the preneed industry did not foresee the deregulation of fees in 1992. Just before
the Asian financial crisis, from 1990 to 1995, tuition jumped a whopping 275
percent. And for 1996 to 2000, the price of education went up by another 26
percent. CAPs revenues generated from collections of planholders were no
longer enough to meet the increasing costs of tuition and the higher number
of maturing plans. For instance, CAP said that fees at the Ateneo de Manila
stood at P9, 200 in 1990, but swelled to P37, 000 per semester in 2000.

F. Trade Association
CAP introduced the traditional educational plan in 1980, appealing to every
parents dream of being able to send their children to college. It was founded
by Enrique A. Sobrepea Jr. together with James Marsh Thomson, Rafael E.
Evangelista, Ernesto M. Espaldon, and Romulo M. Espaldon.
G. Competitors
Other firms offering educational plans adjusted their products and offered
fixed value plans, or those that have a pre-determined value come maturity
time. Yet, CAP continued to offer traditional educational plans for 10 more
years, or up to 2002. Industry players say the Sobrepeas, well-regarded as
consummate marketing people, saw the 10 years as an opportunity to sell
more plans, and thus positioned themselves as the best alternative among all

other educational plans. They strengthened their position as the market

leader in the educational plan business.
H. Employees/ Labor Unions
Plan holders are up in arms over the failure of a pre-need company to give
them their hard-earned money. Surprisingly, the companys employees are
now behind them in their struggle. Employees of College Assurance Plan
(CAP) are preparing for protests over a series of retrenchments, violation of
their collective bargaining
I. Suppliers
The College Assurance Plan (CAP) is the second largest pre-need company
in the country. From 1980 to 2003, CAP had a total of 780,603 apart from
37,421 planholders fully served by CAP. About 81,029 are currently being
served. More importantly, 382,483 planholders are fully paid but had not yet
availed themselves of their benefits as of end-2003. These plans will mature
in the next few years. However, there are still 164,000 planholders who are
actively paying their plans. Ninety-one percent of these existing planholders
are holding on to traditional plans.

J. Shareholders
Apart from the Sobrepea family, other major shareholders of CAP include
the Thomson family, Jose A.R. Bengzon III, Rockshed Management, Romulo
Espadon, Rafael Evangelista, Coronado Munasque, Euron Realty, Ernesto
Espaldon, and Melchor Morales.

3. Porters Five Forces Model of Competition

The intensity of rivalry
among the competing
players in the industry
Bargaining Power of
Consumers
Bargaining Power of
Suppliers
Threats from new
entrants and entry
barriers

Opportunities
Most Outstanding pre-need
company
Model Taxpayer
Incoming college student,
working individuals, senior
citizens and physical
handicapped person
-

Threats
Many strategies of other
company through
advertising establishments.
-

Many pre-need companies

existing have their own
variety or strategies in
terms of social


Threats from product
substitute

responsibility
Low initial capital
investment
-

4. Industry Analysis

External Factors

Weight

Rating

Weighted
score

Comments

Opportunities
o Manpower

1.0

5.0

6.0

This is the most important

because they will be the one
to innovate or improve of
their product and services.

o Money

1.0

5.0

5.0

Opportunity to put their

trust funds in safe and
profitable investments.
And it is also important.

o Environment

1.0

4.0

4.0

You should know your

place if it is safe to
calamities.

This is not as important as

others and I rate them not
as high.
You should know your
competitors in your areas.

Threats

Method

0.0

3.0

Environment

1.0

4.0

4.0

Total

1.0

19.0

5. Internal Forces
a)

Core Values

Educational equity
High achievement for all
Ensuring every child succeeds
Constant learning
Mutual responsibility

6. SWOT Matrix
Strengths
o Manpower
The company being the first to offer the preneed educational plans in the Philippines has
the capacity and experience required to be
engaged in this business.
o Money
CAP Inc. as of 2002 has trust fund assets in
the amount of P8.49 billion.
o Method
The company followed a business model
which capitalized on the need of Filipino
parents to provide their children with tertiary
or college education.

Weaknesses
Manpower
Diversification and expansion.
o Money
Investment of its funds to unrelated
business
o Method
Capitalized on its track record and
continued to offer pre-need educational
plans and other insurance products.
o Environment
With the passage of the Educational Act of
1992 deregulating tuition fees, the
company faces skyrocketing college
costs.
o

Opportunities
o Manpower
With a pool of talented and experienced
employees the company has the capacity
and chance to improve and expand their
products and services.
o Money
Opportunity to put their trust funds in safe
and profitable investments.
o Manpower
Capacity to invest in new formation
technology.
o Environment
Recent
calamities
and
greater
uncertainties.

Threats
o Manpower
Trained and competent employees of the
company could be subject to pirating
from rival firms offering better
compensation and benefits.
o Money
Financial crisis and economic downturns.
o Method
New and stricter regulations from the SEC
and Insurance Commission.
o Environment
Competing or rival firms

7. Strategic Problem
College Assurance Plan, Inc. is currently facing Liquidity problems resulting to
their inability to cover its liabilities and obligations to their plan holders.

8. Strategic Alternatives with 3 Criteria

Alternative Course of
Action
1.) To increase
liquidity by
selling company
assets

2.) To increase
companys
capital through
the issuance of
shares and new
investors

Materials

Money

Methods

Environment

Assets will
be sold for
cash

Billions in
pesos.

Cash will
be use to
settle
obligation
s

Decrease in
stockholders
or owners
equity

Stock
certificates

Cost for
issuing
new shares

Proceeds
will be
use for
company
operation

Decrease in
shares of
company
profits as
there are
more
stockholders

Cost
savings in
laying off of
employees

Laying
off of
nonessential
personne
l

Smaller work
force to
manage

Increase of
cash on
hand

Business
closure

Stockholders
will divide
remaining
cash after
settling
obligations

3.) To reorganize
the business
through
retrenchment

4.) To close down

the business

All assets will

be sold

A.) To increase liquidity by selling company assets

B.) To increase companys capital through the issuance of shares and new
investors
C.) To reorganize the business through retrenchment
D.) To close down the business

9. Decision Matrix
In making decisions, the group considers the following criteria:

Competitive advantage of CAP

Financial Condition of the Company
Market demand of the Companys products and services

10. Recommendations
The group recommends alternative number 1 which is for the company to sell
some of its assets to have the needed liquidity to settle its current liabilities and
obligations. The group also recommends that the company should recognize its
business operations to cut cost and improve profitability and efficiency.