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Financial News

Jan 2009 Financial News

Guardian Life suffers loss from sugar job cuts

Jan 30, 2009

Guardian Life, the second-largest life insurance outfit in Jamaica, has lost out on a scheme that covered thousands of sugar workers and is bracing for a dramatic fall-off in group life business.

At the same time, president Earl Moore says the unending job cuts throughout the economy will likely erode more group life business, forcing Guardian to look to product innovation and marketing aimed at individual policyholders, to take up the slack.

"We have the entire sugar workers scheme so that alone is a good example of how it will affect our employee benefits side," Moore said in a Financial Gleaner interview.

Looming sugar redundancies

More than 7,000 sugar jobs were cut last year, and another 5,000 to 6,000 looming sugar redundancies may likely force the winding up of the fund, when the Government is finally able to clinch a deal to sell the Sugar Company of Jamaica.

A total of 13,000 sugar workers are expected to be made redundant under that deal being negotiated with Brazil's Infinity BioEnergy.

The Financial Gleaner, up to press time, was unable to obtain from the Sugar Federation the size of the insurance scheme, as the lone officer with the information was said to be out of office until next week.

"Normally, on the individual side, you might have a little movement, but we are more concerned with the other side of the business, employee benefits, which is a group life," Moore said, but offered no specifics on the actual impact on the company's performance.

The labour ministry has reported that some 9,331 jobs were lost in 2008, nine times the number of workers who joined the unemployment line in 2007. Since January, various companies have announced they are slashing more than 1,000 jobs with more planned cuts on the way.

Union bosses are saying publicly that job cuts could rise to 15,000 this year.

Moore said his company, a provider of life and health insurance services since 1999, has no control over the loss of business resulting from job cuts, but suggested that Guardian would become more aggressive in seeking to claim a large share of the shrinking industry business.

Through a re-energised marketing thrust, he is banking on wooing group life business away from competitors.

Moore's aggressive tone mirrors his bosses in Trinidad who are intent on reclaiming value for shareholders in an increasingly difficult market.

Guardian Holdings this week announced a share buy-back (see story on Page 7).

Guardian Life has not disclosed the value of its total employee benefits business line, but its 2007 published financial obtained by the Financial Gleaner point to the company collecting $316 million in group life insurance premium at the end of 2007, or just over eight per cent of the $3.8 billion in total premium for the year.

Group life revenues in danger

While group life revenues are poised to be punished in the current economic climate, Guardian is not forecasting any sizeable long term effect on individual life income.

"In a recession, we normally find that the individual life is not affected in the long run," he said. Rather than persons abandoning personal insurance payments in the face of job losses and generally tough times, Moore suggests:

"History shows that people protect their family when in crisis and stick more to their insurance."

In 2007, Guardian earned $2.5 billion from its individual/ordinary life business, which was 64 per cent of the group's total insurance premium income. Renewals contributed $1.98 billion, while new business brought in $479 million.

In the meantime, no planned increase in premium rates is on the cards for the insurance company, neither is there likely to be any more staff cuts, with the company already having shaved a few positions last year.

More aggressive marketing

Even as Guardian Life embarks on a more aggressive marketing campaign, the CEO has cautioned that the focus will be on applying the brakes to spending.

"The idea is frugality, so cost rationalisation and increased productivity, with the main objective to contain cost," Moore emphasised, adding that operating costs for 2009 will be kept below 2008 levels.

In 2007, the group incurred operating expenses of $1.21 billion, an increase of approximately 15 per cent over the previous year.

Nevertheless, some small investment will be made in rolling out new insurance products. Last year the company spent $2 million to introduce two new products to the market, the latest being in October, when a term life insurance plan, called Five for Life, was rolled out with the expectation of it contributing no less than 20 per cent to premium income this year.

Emma Thomas, the company's head of marketing and communication said last year that new product development was targeted as one area of focus to drive revenues. It is expected that by the end of 2009, new product development will add about 33 per cent to premium income.

Sabrina Gordon, Business Reporter
Jamaica Gleaner
Friday January 30, 2009