May 2013 Financial News

CLICO bringing new business for stock exchange

May 29, 2013

It has been almost six months since the CLICO Investment Fund (CIF) was launched on the Trinidad and Tobago Stock Exchange Mutual Fund Market.
Since then, TTSE chief executive Wain Iton says, the fund’s presence has contributed to very strong “and welcome” activity on the Exchange.
“It’s been a really useful addition to the offerings we have. In the five months to date there have been 1,200 transactions amounting to 12.6 million units traded with a value of $279 million. That is real business for the stock exchange so we are excited,” Iton told the Business Express last week.
The Fund was launched on November 1 as part of the settlement to CLICO policyholders by the government as part of the $21 billion bailout of the country’s largest insurance company.
Policyholders of Short-Term Investment Products (STIPS) sold by Colonial Life Insurance Company (Trinidad) Ltd and British American Insurance Company (Trinidad) Ltd, valued at more than $75,000, received cash payments up to $75,000 and zero-coupon one to 20-year bonds for the difference.
From November 1 to December 14, 2012, STIP holders who accepted the settlement were able to redeem the 11-20-year bonds for shares in the CIF.
The CIF debuted on January 7 with 204 million units listed at a price of $25 per unit, and closed the day with 300 units being sold at a market price of $24.90.
Last Friday, it closed the trading day at $21.05.
“I think people have to understand the underlying value of the fund. A significant contributor to the fund is the Republic Bank stock. (The CIF) is trading at $21, and Republic Bank is trading at $100 so you can see there is a five times multiple right there in favour of the investor. The dividend yields are good from the investment so if you want to sustain yourself with a monthly or quarterly cash flow and hold on to the capital appreciation it’s there,” chairman of the CLICO Trust Corporation K Michael Daniell said.
Eighty-six per cent of the CIF comprises 40,072,299 Republic Bank shares with a nominal value of nearly $4 billion.
That has not stopped several unit holders from just cashing in their settlement.
“What the trust has done is compensate policy holders who have lost money to the extent that out of the almost $300 million that has traded, about a third of that is at the retail level (policyholders who have sold their units),” Iton said.
The issue, chairman of the CLICO Policy Holders Group Peter Permell believes, is the fact that out of the 15,000 policy-now-unit holders, many of them may have never invested in the stock exchange and are therefore unfamiliar with its technicalities.
“What has to be explained to unit holders is how a market works. What is important is that the unit you are holding generates cash flow. The first dividend paid 56 cents per unit, and the second, I have averaged, should be 30 cents per unit. That is a total yield of 86 cents yield per $25 unit or 3.5 per cent on the overall investment. That is better than any fixed deposit return anywhere now in these current economic conditions,” he said.
Daniell, for his part, thinks that there will be capital appreciation of the units over the next three to five years.
“There was no pricing model, but we determined a price that would have a psychological impact of affordability for people. That philosophy seems to have been missed by the people who did not understand the underpinning value of the Republic Bank shares. This is a product to hold on to, because even over the medium term, it will increase in value... Those who hold and buy will reap the benefits,” he said.
He noted that there may have obviously been people with their own personal financial situations to be concerned about, but hopefully they would come to realise the long term benefits.


Source:
By Carla Bridglal
Trinidad Express
Wednesday May 29, 2013

http://www.trinidadexpress.com/business-magazine/CLICO-bringing-new-business-for-stock-exchange-209284711.html