Sep 2012 Financial News

Globe and West Indies to merge

Sep 12, 2012

GLOBE Insurance and West Indies Alliance (WIA) will merge after Guardian Holdings complete its acquisition of the former in November.

The merged entity will likely become the single largest general insurer in Jamaica, in terms of premiums earned, and perhaps, profitability.

Based on last year's performance, the combined operations would have earned premiums in excess of $5.5 billion in 2011, compared to the $4.8 billion Advantage General Insurance (AGI) took in.

AGI, which currently holds the number one spot, posted higher net profit in 2011 ($868 million) than Globe and WIA combined ($652 million), but its bottom line has fluctuated over the past four years.

AGI's bottom line ranged from a loss of $56 million to a profit $868 million between 2008 and 2011, while Globe and WIA combined ranged from $479 million to $652 million.

In other words, Globe and WIA — already owned by Guardian — together made $2.3 billion net profit over the four-year period, compared to AGI's $1.6 billion.

When improved operational efficiencies expected from the merger are taken into account, the new entity will likely be even more profitable.

Guardian's group chairman, Arthur Lok Jack, who told the Jamaica Observer that the two companies will eventually be brought together yesterday, said that Globe was a good fit for its strong core performance.

"We (Guardian) are very serious about underwriting insurance," he said. "We are careful about the risks we take."

Independently, Globe and WIA have been consistent in their underwriting performance — the earnings from the insurance business alone — and posted strong results over the past four years.

Globe did report $83 million in underwriting loss in 2009, but it was the smallest loss reported in that year, when only WIA and General Accident managed to make profit from their core business.

Globe and WIA have been the market leaders (numbers one and two) in fire consequential loss insurance but neither had a strong presence in motor insurance. Even when combined, their nine per cent market share of premiums earned from insuring automobiles still placed them at sixth.

AGI alone underwrites a third of the car insurance in Jamaica.

Lok Jack said that the companies would look at all insurance categories to identify "any new lines of business".

Together, their premiums earned from liability insurance are level with General Accident at the number one spot. The merged entity would also be second to American Home Assurance in insuring homes.

The Guardian chairman continues to see growth potential in Jamaica.

"We continue to grow because when we make profit we reinvest," he said. "When opportunities come, like Globe, we make a bid. We feel very good about Globe."

After more than six months of negotiations, Lascelles deMercado announced that it had agreed to sell Guardian all the shares in Globe for US$38 million ($3.4 billion).

Lascelles's board said that it hopes to complete the transaction before the end of November.

The sale is part of plans to divest certain assets of Lascelles in order to make a final dividend payment to existing shareholders, after the company is sold to Italian liquor company, Campari.


Source:
BY CAMILO THAME Business Co-ordinator thamec@jamaicaobserver.com
Jamaica Observer
Wednesday September 12, 2012

http://www.jamaicaobserver.com/business/Globe-and-West-Indies-to-merge_12492909#ixzz26G8nLqc8