Oct 2006 Financial News

NCB denies Blue Cross acquisition stalled

Oct 18, 2006

National Commercial Bank (NCB) officials yesterday denied that the bank's planned acquisition of Blue Cross has stalled because the health insurance firm does not have the asset base that was first suggested when negotiations began late 2005.

Insurance industry sources had told the Business Observer yesterday that the information was uncovered by a due diligence report. However, NCB executives said they had no knowledge of any such problem.

"We are not aware of any lack of asset problems," said Sheree Martin, NCB's head of corporate communications. "As far as we are concerned, any suggestions regarding the lack of assets is not true."
Martin said that the deal was "still at the regulatory stage" as the regulators were still looking at the shareholder agreement.

Ingrid Chambers, managing director of NCB Insurance, explained that the deal was being examined by the Financial Services Commission and the Blue Cross Blue Shield Association that regulates the international Blue Cross franchise.

Blue Cross, with over 400,000 customers, is arguably the largest health insurance company in the country. Financial experts say that this customer base was what attracted NCB Insurance, which is seeking to widen its market reach beyond its OMNI insurance brand.

"We have done our due diligence and we are satisfied," said Chambers. In fact, one of the assets that NCB is satisfied with is the brand. "For the immediate future, we won't be subordinating the NCB Insurance and the Blue Cross brands. The Blue Cross brand will be maintained," said Chambers.

Additionally, said Chambers, Blue Cross will remain in its own corporate headquarters as "the Atrium on Trafalgar Road is solidly NCB, and so Blue Cross will have its own corporate headquarters".

Besides its Hope Road headquarters, Blue Cross has locations in Mandeville, Ocho Rios and Montego Bay. NCB, on the other hand, has approximately 50 branches which would immediately widen Blue Cross' reach.
Yesterday, Chambers said that at this point, NCB had no comments on how it will market Blue Cross to NCB customers.

The most recent Blue Cross financials released by NCB show that in 2004, Blue Cross earned $1.9 billion in gross insurance premiums and another $262 million in gross income from health fund management.

The insurance provider generated a net surplus of $228 million, which pushed the company's accumulated surplus to just under $1 billion at the end of 2004. The NCB Group earned a net profit of $1.55 billion for the quarter ended June 30, 2006 with NCB Insurance contributing approximately 11 per cent of that amount.

Source:
Dennise Williams
The Jamaica Business Observer
Wednesday 18th October, 2006


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