Nov 2010 Financial News

Guardian reduces losses...to cease London motor business

Nov 19, 2010

GUARDIAN Holdings Limited (GHL) reduced third-quarter losses by 99 per cent or by TT$700 million for the three months ended September 30, 2010 when compared to the corresponding period of 2009 and suggestions are that these losses will slow further by the end of the year when the loss-making Lloyd's of London motor business is discontinued.

Loss for the September 2009 quarter was TT$707 million, but that slowed significantly to TT$6.4 million at end September 2010 following strong sales in the quarter. GHL's gross premiums written, at TT$1 billion for 2010, was 26 per cent over 2009, while net premiums increased 35 per cent over prior year's quarter.

"The third quarter of the year has traditionally been the slowest quarter for sales as evidenced by our relatively flat top line in the quarter versus the previous quarter. However, this should not be taken as a trend as we continue to experience strong sales despite the continued difficult economic climate," Arthur Lok Jack, chairman, said in a statement.

However, operating profit declined 24 per cent following a TT$75.3-million reduction in fair value gains from the 2009 quarter and the effect of the Chilean earthquake on claims. Lok Jack also noted the need, strengthened GHL's reserves in the Lloyds of London motor business.

"The Board of Directors have taken the decision to cease writing this line of business. We fully expect the losses in this business segment to be greatly reduced by year-end," Lok Jack disclosed.

The foray into the London market was done in an effort to expand GHL's reach in insurance as the markets within the Caribbean had matured. However, this has not proved to be a good experience with Guardian losing a lot of money with its motor business there.

The deal with the International Finance Corporation (IFC), which closed during the September quarter, resulted in an additional US$25 million in common equity and US$50 million subordinated debt which was converted into common equity being invested in the group.

"The issuance of new common shares at a premium boosted our profits as we booked a net realised gain of TT$28 million," Lok Jack noted.

"All of the new equity was issued at a substantial premium above GHL's market price and reflects the confidence IFC has in the future growth of our Group," Lok Jack said. IFC bought the shares at TT$16, when the share price stood at TT$13 per share.

As a result, GHL's debt to total capital ratio improved from 43 per cent to 34 per cent, while debt to equity improved from 75 per cent to 51 per cent. "These improved leverage ratios give the Group better financial flexibility to carry out our strategic expansion plans," Lok Jack stated.


Source:
BY ALICIA ROACHE
Jamaica Observer
Friday November 19, 2010

http://www.jamaicaobserver.com/business/Guardian-reduces-losses_8167576