Jun 2012 Financial News

Clico’s fall might be Sagicor’s gain

Jun 07, 2012

Although the circumstances surrounding Government’s bailout of CL Financial subsidiary, Clico, are still to be totally resolved, the Sagicor Financial Group is ready to play a role in bringing a resolution, says its chief operating officer Richard Kellman. One year ago Dodridge Miller, group president and chief executive officer, at a video conference at Sagicor’s Building, Queen’s Park West, Port-of-Spain, said Sagicor would consider buying Clico if it was available. Asked on Tuesday if Sagicor still maintained its interest in acquiring Clico, Kellman said some matters still must be “finalised.”

“The Clico situation has been ongoing for more than three years now and resolution is becoming clearer now, but still not finalised. As Finance Minister Winston Dookeran announced in Parliament on Monday, there has been much progress dealing with the executive flexible premium annuity (EFPA) as a whole,” Kellman said. “I think significant funds have been paid to a large portion of that sub-group of the policyholders.” Speaking in the House of Representatives on Monday, Dookeran said the Government has processed 83 per cent of payments to Clico policyholders. However, Kellman said there are still matters outstanding. “Like what happens to the traditional policyholders, even as the EFPA policyholders received two tranches of bonds, one for ten years and one for 20 years. The second duration is the term under which they will be issued and the introduction of a supporting fund as an alternative is still unclear,” he said.

Kellman was speaking on Tuesday at Sagicor’s presentation of its financial results for 2011. Given these circumstances, he said, Sagicor will play any role that is in the interest of its stakeholders and the insurance industry. “With this background, Sagicor has expressed an interest, which it made public and to the Government, that if there is any way if a company of our size in the marketplace could be able to assist in the resolution of this issue, then subject to the protection of all our shareholders, stakeholders and policyholders, we would play our role,” Kellman said. “We did express in playing our role to acquire the policyholders’ interest for stability and would be happy to play that role.” Kellman said legal and other issues must be cleared before any decision is made. “At this stage, it is still a work in progress. It is unclear what role, if any, we would be able to play in that resolution. So, yes, it has been a year since we discussed this and there is the whole resolution of this that will take a while. There are also the legal issues that are surrounding it. Sagicor remains interested in playing any role that might support the industry as a whole subject to the interest of our stakeholders.”

Corporate governance
Kellman boasted that Sagicor’s governance structure kept it from taking the same path as other financial institutions, like CL Financial. “One of the key aspects of Sagicor and its modus operandi is its very strong governance structure. It is something that we bring to the market.” Robert Trestrail, executive vice-president and general manager, Sagicor Financial Group, said the ongoing Commission of Enquiry into the CL Financial Group and the Hindu Credit Union (HCU) has negatively impacted the insurance industry. “I would say the insurance industry as a whole has suffered from the negative views being ventilated in the marketplace with regard to what has happened with the CL Financial Group. It has painted the whole industry in a bad light. Governance is a core issue as one of the issues that has come out of the commission so far and a lack of it,” Kellman said. Trestrail said Clico’s collapse has created an opening for Sagicor. “Sagicor has benefited from the departure of Colonial Life and British American Insurance. We have been able to benefit from being able to acquire and attract some of their experienced advisors who now sell for Sagicor and we have benefitted from an increase in business that may have gone else where in the past. “There has also been a greater appreciation of what Sagicor’s brand represents and our stability. While the industry as a whole has to manage that image, Sagicor, as a leader, has benefitted from the trials and tribulations of the industry.”

Financial results
In reviewing the group’s 2011 financials, Kellman called Sagicor a “US$5 billion company.” “Our assets have crossed the US$5 billion barrier. So that despite the challenges that we faced in 2011, we made our way through it and there was good news. Our growth is there and our solvency is intact,” he said. “To say the environment in which we operated in 2011 was challenging would be an understatement. Most of the developed world suffered from fiscal deficits and, in particular, the Eurozone had challenges of its own. The United States was downgraded in mid-2011,” Kellman said. Natural disasters in the first quarter of 2011 were also troubling. “This had a serious impact on our European operations, Sagicor at Lloyd’s. The environment was more than just challenging.” According to the chairman’s report, there was a strong performance from Sagicor Life Jamaica, and a solid performance from Sagicor USA, which countered the losses at Lloyd’s to post-group net income of US$31.8 million for the financial year 2011, while in 2010, group net income was US$41.6 million.
The report said Sagicor at Lloyd’s incurred significant underwriting losses on its international property reinsurance assumed business during the year. The segment also incurred losses in the United Kingdom motor business. Together, these produced losses at Sagicor at Lloyd’s of US$33.4 million for 2011. The group exited the international reinsurance market and the UK direct motor market. Despite this, the report stated the rest of the group performed solidly. Revenue for 2011 totalled US$1,350.6 million, an increase by US $94.5 million over that for 2010.

Q1 2012 report
The report referred to the group’s first quarter of 2012 as being a “welcomed return to profits attributable to shareholders.”
For the first quarter of 2012, Sagicor recorded net income of US$16.6 million compared to a loss of US$11.1 million for the same period last year. Sagicor’s report called this “satisfactory.” The report said this represents a significant improvement over the equivalent period last year when Sagicor at Lloyd’s operating segment (SAL) incurred a large incidence of insurance claims arising from extraordinary catastrophies. “The group’s performance is often impacted by the prevailing economic environment, which continues to show only modest signs of improvement in North America, Europe and the Caribbean,” the report stated. Earnings per common share for the quarter were US$2.8 cents and the annualised return on shareholders’ equity was 6.4 per cent.


Source:
Raphael John-Lall
Trinidad Guardian
Thursday June 7, 2012

http://www.guardian.co.tt/business-guardian/2012-06-06/clico%E2%80%99s-fall-might-be-sagicor%E2%80%99s-gain