Aug 2010 Financial News

IFC deal, GAM Jamaica sale top GHL’s agenda

Aug 11, 2010

Guardian Holdings Ltd (GHL) has described its equity transaction with the International Financial. Corporation (IFC) as a “very meaningful milestone” in the Group’s history. GHL and IF a member of the World Bank Group, in May reached an agreement to invest $473 million in the common equity of the Group at a price of $16 per share. “The agreement, which has now passed all of the IFC’s internal approval processes, awaits only our shareholders’ approval before closing,” chairman Arthur Lok Jack stated yesterday in published second quarter results to June 30, 2010. “This investment by the IFC, which was made at a significant premium above our share price, was achieved only after they performed an extremely thorough due diligence on the company.

“The IFC makes equity investments only in companies that demonstrate the best in class for corporate governance, risk management and corporate social responsibility. GHL has demonstrated all of these qualities,” Lok Jack stated. Lok Jack acknowledged that GHL has entered into an agreement to sell its asset management business of GAM Jamaica. “With the local government and regulators in Jamaica de-emphasising the main business of GAM Jamaica, which is their repurchase trading business, we felt this was an opportune time to exit the business,” the chairman said.

GAM Jamaica to be downscaled

In an earlier report last month, Jeffrey Mack, chief executive officer of the GHL Group, said GAM Jamaica will be downscaled to a department and merged with the operations of Guardian Life Ltd, once it finalises the deal to sell a portion of the investment house’s portfolio to Proven Investment Ltd. Mack said the changes will not disturb Guardian Asset’s Trinidad operations, where it will continue as a stand-alone company. “Guardian Asset Management grew out of the investment department of Guardian Life, so we are actually going back to that old model where we have an investment department,” Mack said. The deal with Proven will see GAM disposing of 25 per cent of its business, comprising non-proprietary or third-party funds under management. The other 75 per cent, which Mack said were funds managed on behalf of two other Jamaican subsidiaries —Guardian Life and West Indies Alliance—will still be managed by the retrenched asset management division. Mack said the deal with Proven—a Jamaican operation in the business of asset acquisitions—was an opportunistic one for his company.

The sale is expected to be wrapped up by this month. “One of our three core businesses is asset management and our asset management business in T&T and here in Jamaica are two different business models,” Mack said. “The asset management business in T&T is the classic asset management business where we advise high net-worth individuals, we sell products to retail customers like mutual fund to help them accumulate and manage their wealth. It’s a trading business, where they trade in repurchase agreements; and the repurchase agreements centre on Government of Jamaica bonds,” Mack said of the Jamaica operation. Likening the situation to lending out the company’s balance sheet for a trade margin, Mack said the insurance-sector regulator, the Financial Services Commission, has been discouraging reliance on this type of business activity. “We were able to negotiate what we thought was a fair price for the business and so we decided to sell,” Mack said.

GHL’s Q2 results

For the first half of 2010, GHL’s profit after tax was $217.2 million, compared to $62.8 million over the comparable period last year. “This represents a 245 per cent increase in profit. Excluding the effects of Zenith from the six-month 2009 results shows an impressive increase in after-tax profits of 25 per cent. “Profit before tax from continuing operations amounted to $322 million compared to the six month 2009 result of $254 million, a 26 per cent improvement.

“Both of our regional insurance segment’s operating performance beat last year’s similar period results, with Guardian General in particular achieving an extremely good combined loss ratio of 75.1 per cent. “Unfortunately, our international property and casualty business, which now comprises our Lloyds business and our reinsurance business, Guardian Re, suffered net losses after tax of $26 million due primarily to the Chilean earthquake losses and the European windstorm losses, which we reported in the first quarter,” Lok Jack stated.


Source:
Trinidad Guardian
Wednesday August 11, 2010

http://guardian.co.tt/business/business/2010/08/11/ifc-deal-gam-jamaica-sale-top-ghl-s-agenda