May 2011 Financial News

Guardian bounces back into good health - Part II

May 06, 2011

Trinidadian-based Guardian Holdings is unarguably one of the Caribbean's leading insurance players, and for the financial year ended December 31, 2010 staged a remarkable performance that sees it returning to good fortunes after a turbulent two-year period.

According to its consolidated published financial highlights for the year under review, Guardian Holdings Limited (GHL) posted revenues of TT$5.52 billion (2009: TT$4.60 billion) which generated a profit of TT$425 million compared to a loss of TT$824 million in the prior year. Revenues from its insurance operations jumped to TT$4.26 billion for the period under review, TT$806 million more than 2009's TT$3.457 billion. GHL wrote TT$1.566 billion in life business net premiums, TT$122 million more than the preceding year. Also, its revenues from investment activities increased to TT$1.259 billion, a marginal gain on the TT$1.152 billion posted for 2009.

Total capital and reserves moved to TT$3.130 billion, TT$788 million more than the TT$2.342 billion registered for the financial year 2009. Shareholders' equity also got a boost coming in at TT$3.039 billion compared to TT$2.264 billion for 2009. Shareholders had something to smile about with the total dividend for the year per ordinary share on continuing operations at 50 cents, 6 cents more than the 44 cents posted for the prior year.

The year 2010 was a successful one for the Life, Health & Pensions Group, comprised of three insurers that continue to dominate the Life, Health and Pensions (LHP) landscape in the Caribbean. These are Guardian Life of the Caribbean Limited (GLOC) domiciled in Trinidad & Tobago, Guardian Life Limited (GLL) domiciled in Jamaica, and the life arm of Fatum domiciled in Curacao and Aruba.

The Group achieved net profits of TT$313 million, which is a 54 per cent improvement year over year. The primary drivers of this performance according to GHL were the success of its sales team in Individual Life and Employee Benefits in settling new business and efficiencies arising from technological improvements and cost management.

Looking more specifically at Jamaica, Guardian Life Limited posted total revenues of J$11 billion, driven largely by net insurance premium of J$7.27 billion. For the financial year ended 31st December 2009, total revenues came to J$10.76 billion. Net profit attributable to equity holders of the parent rose to J$785.23 million, J$162.733 more than the J$622.5 posted for the prior year. Total Assets also increased to a healthy J$40.5 billion. This compares to J$36.9 billion for 2009. Rather instructive is that cash flows from operating activities came to J$3.62 billion, J$75 million more than the J$2.87 billion registered for the preceding year.

Speaking with Caribbean Business Report from Guardian Life's headquarters on Trafalgar Road, Kingston, president of Guardian Life, Eric Hosin said: "We have posted record profits of 26 per cent and Health helped to play a big part in that. We have concentrated on customer service and it has paid off for us and we continue to do more in that area. We have put in place the only online, real time pension system which allows individuals to track their pension contributions. This is in line with our online, real time, health access we give to clients. The use of technology has allowed us to attract business by being able to disclose valuable claims information. It therefore comes as no surprise when we are able to present one's claims ratio with all the salient information. We also have a 24/7 health desk which certainly has been a winner for us. We have been able to grow our revenue which has helped our bottom line."

That growth of 26 per cent comes against the background of a contracting economy and the constraints imposed by the JDX. Hosin attributes this to cost containment and, as he puts it, "sweating the small stuff". Guardian Life has gone on a concerted effort to improve productivity and performance. "What we have done is adopted a team approach and we have tried to filter that down throughout the company. It is vitally important that we get more income from our core businesses because as you well know the JDX saw to it that interest income has fallen off significantly. We are not waiting for the turnaround of the economy. We believe that it will come sooner rather than later and we want to be part of the uptick. We don't want it to happen and then we are trying to catch up, hence we are doing all we can right now," said Hosin.

So will Guardian Holdings be looking to make any more Jamaican acquisitions? According to Group CEO Jeffrey Mack, the plan is to take a two-pronged approach — grow the Group organically and secondly look for growth opportunities from the consolidation of the market. "Our first goal is to grow the Group organically and this is less risky. We feel that although we have good market share in all our markets there is still good top line growth there. The English-speaking Caribbean, which is our main market, is somewhat limited with between just five and six million consumers. That means we have to some extent look inorganically for growth opportunities.

"That means that in the short to mid term we have to continue growing through acquisitions in the English-speaking Caribbean. We know this market and its players extremely well, better than we do other territories. Furthermore, given the regulatory changes in terms of corporate governance and capital requirements there are some opportunities that will come from market consolidation. Guardian is well positioned to be one of the consolidators of the market.

"Now, that includes Jamaica .We like the market here, and our two companies in Jamaica — Guardian Life Limited and West Indies Alliance — have done very well for us. Jamaica is ripe for consolidation and as opportunities present themselves we will certainly look at them," said the Guardian Holdings Group's CEO.

Longer term, he is of the view that Guardian must look to the emerging markets of Latin America. Some of the insurance markets there are beginning to deregulate and the penetration levels are relatively small at this point. Given the growth of these economies and their proximity to the English-speaking Caribbean, opportunities can be evaluated. Guardian has learnt some invaluable lessons when it goes outside its core market, more particularly with Zenith of the UK. In future, it may be more prudent to go into new markets with a partner that is familiar with that particular country.

"We have to enter those markets smartly and not make a mistake. We have to find a partner to help make any future acquisitions relatively digestible so that it is not too big a risk relative to the size of our balance sheet. That would be our main criteria as we look to expand mid to longer term into those markets," said Mack.


Source:
Al Edwards
Jamaica Observer
Friday May 6, 2011

http://www.jamaicaobserver.com/business/Guardian-bounces-back-into-good-health---Part-II_8756422#ixzz1LabFUMt8