Apr 2006 Financial News

GHL Reports a Loss for the First Quarter

Apr 27, 2006

Guardian Holdings Limited (GHL) reported Earnings Per Share (diluted) of ($1.92) for the first quarter ended March 31, 2006 down 163.01 per cent from 73 cents in 2004. This significant reduction was largely as a result of the net adverse valuation adjustment of the Company’s investment portfolio for the period under review namely the fall in RBTT Financial Holdings share price from $40.50 at the beginning of January 2006 to $31.30 at March 31, 2006. In addition, the Group also had to withstand the effects of two one-off events, one occurring in the UK and the other in the Netherland Antilles. In the UK, unbudgeted expenses were due to the early acquisition of assets and personnel of its third party policy administration and claims service provider while Fatum, of the Netherland Antilles, was required to make a significant reserve increase in the quarter.

Net Insurance premium revenue grew 7.61 per cent as both Trinidad and Jamaica saw growth in these areas. The UK General Insurance Companies however continue to be challenged by soft market conditions. The Group’s Operating Profit however was turned into a loss of $354.418 million ultimately leading to a Loss After Tax of $393.488 million.

Given that this first quarter loss has eroded the entire earnings of the Company for 2005, the outlook for GHL is quite unfavorable over the 2006 financial year. The Mark to Market losses recorded in the Other Income category of the Company's Financial Statements may well continue to plague GHL's bottom line given the outlook for the local equities market. It is questionable whether GHL's Operational Performance, combined with whatever recovery in the regional equities markets is anticipated in the second half of the year, would be sufficient to keep GHL out of the "red" by the year end. We expect that this turn of events would place further pressure on the share price of GHL, despite the fact that the share price is already trading at a discount to its Net Asset Value, and the long term prospects of the Company is still strong.

Jason Gokool
Sreshtha Tewari
WISE Research Team