Oct 2008 Financial News

Guardian Holdings Limited - Impact of the Global Financial Crisis on GHL and its Group of Companies

Oct 13, 2008

The purpose of this letter is to provide our Shareholders with an assessment of the impact of the global financial crisis on the GHL Group of Companies.

As I am sure everyone is aware, recent weeks have seen unprecedented turmoil in the financial markets around the world. While Trinidad has appeared to remain relatively unaffected, and we all hope that this will continue to be the case, GHL is an international company that has investments in a number of overseas markets. We have been vigilant in examining our investments for exposure to the various distressed and failed institutions and we have been able to assert to the regulatory bodies in Trinidad and Tobago and to the Trinidad and Tobago and Jamaica Stock Exchanges that GHL and its Group of Companies have had no material exposure to any of the overseas institutions that have run into difficulties. This list included AIG, Merrill Lynch, Lehman Brothers, Freddie Mac, Fannie Mae and Bear Stearns and has subsequently grown to include a number of European financial institutions. We have no material exposure to any of the financial institutions that have recently become insolvent.

You will be well aware of one international financial institution in which we held a major interest. This is, of course, the Royal Bank of Canada, the shares of which we received in partial exchange for our holding in RBTT just days before the end of the second quarter. I can inform you that during the third quarter we disposed of all our holding in RBC at prices which are markedly higher than applied at the end of the second quarter and therefore this investment no longer represents a source of risk to the group. I can further assure you that the proceeds from the sale have been returned to Trinidad and Tobago and are currently invested in low risk domestic assets.

Notwithstanding the above, in the normal course of our business, the Group maintains portfolios of international quoted equities in a number of our entities. These portfolios are managed by international investment professionals, are spread across numerous markets and are well diversified. These foreign instruments are not immune to the volatility in world markets caused by the global credit collapse but, in aggregate they represent less than 2% of the Group’s investments. In addition we hold these investments for the long term to match our life and pension policyowners’ liabilities. International Bonds are also being marked down in value but there is limited exposure as we predominately invest in sovereign bonds and interest rates have started to fall recently which should support bond prices. Overall, after the disposal of our holding in RBTT/RBC, the prudence and conservatism of our investment policy has served us well and we are seeing the benefit of that in present turbulent market conditions.

Finally, the Group has long applied the principle of reinsuring with A-rated re-insurers. It is true that in an environment where Merrill Lynch and AIG failed overnight, one may validly question the “Ratings” provided by independent agencies. However, to the extent possible, we have secured the backing of blue chip global re-insurers and are of the view that risk emanating from this exposure is minimal.

The Board, Management and Staff of GHL and its member companies, wherever in the world we operate, are confident that the GHL Group of Companies is in sound condition to prosper.

We will continue our prudent management of your investment and stay true to our watchwords of “Strength, Endurance, Leadership.”


Source:
The Trinidad and Tobago Stock Exchange
Monday October 13, 2008