Mar 2015 Financial News

Clico pays government $7 billion

Mar 27, 2015

Central Bank Governor Jwala Rambarran has announced a five-point plan to settle outstanding debts owed by the Colonial Life Insurance Company (CLICO) to policyholders and the government.

Speaking at a press conference yesterday, Rambarran said the resolution plan "will bring closure to this deep financial wound inflicted on thousands of CLICO policy holders and Central Bank is doing all in its power and more to ensure that such a financial trauma will never again be inflicted on you."

He said the company is now in a position to make its first payment of just over $7 billion to the T&T Government. This amounts to more than 40 per cent of CLICO’s debt to government.

This development comes almost six years after the collapse of the insurance empire in 2009 which prompted government to embark on a rescue plan involving billions of dollars.

Rambarran said government, which is CLICO's biggest creditor, received $4 billion in cash today, with settlement of the remaining $3 billion in lieu of cash through the transfer of three CLICO assets—Angostura Holdings Limited, CL World Brands Limited and Home Construction Limited.

In addition, CLICO's 1,500 short-term institutional products (STIP) policyholders will receive 85 per cent of their claims totaling $950 million in three months and will receive the remainider after the sale of Methanol Holdings International Limited (MHTL).

“These two payments are being made according to the terms of the CLICO Resolution Plan developed by Central Bank and finalised last week Monday after consultation with the Minister of Finance and the Economy, as required under Section 44F of the Central Bank Act. 

“Central Bank’s CLICO Resolution Plan was developed to repay all creditors and policyholders and to ultimately facilitate the transfer of CLICO’s traditional insurance portfolio to a suitable buyer by ensuring that enough appropriate assets are put aside,” Rambarran said.

He said CLICO’s December 2014 management accounts show that there are now sufficient assets to pay the company’s liabilities in its statutory fund. This is mainly due to the sale of its shareholding in MHTL last October ,which added just over $7 billion in cash to the statutory fund.

Rambarran said in the first phase of the payment plan, Government has been paid $4 billion in cash. STIP policy holders, who did not take up Government’s offer to be paid through bonds and shares in the CLICO Investment Fund, will be paid $950 million of the just over $1 billion owed to them.

“Government and these 1,500 policyholders will receive first priority for payment as their policy obligations are accorded legal protection through assets held in CLICO’s Statutory Fund. Of course, CLICO’s 100,000 odd traditional policyholders have equal protection through the Statutory Fund and our process has ensured that sufficient assets are available to meet their obligations,” he said.

The second phase will cover the remaining 15 per cent of claims from Government and the balance of non-assenting STIPs policyholders and will be funded from the proceeds of the sale of CLICO’s 57 per cent shareholding in Methanol Holdings (International) Limited (MHIL) for an estimated $2 billion.

In the third phase, will cover the company’s liabilities to non-Government mutual fund holders and non-residential STIPs policyholders. 

Rambarran said CLICO’s obligations to the group that did not accept the Government’s voluntary offer amount to about $410 million. This payout will be funded by the sale of CLICO’s 7 per cent shareholding in Republic Bank Limited and the sale of other assets. 

The Central Bank Governor assured that CLICO’s 18,000 assenting policyholders “will not be made worse off” for accepting Government’s offer and Finance and the Economy Minister Larry Howai will announcement arrangements for that group shortly.

He said in the case of British American Insurance Company Trinidad Limited (BAT), there is a broadly similar payment plan but because of financial constraints within the company, some assistance is required.

“As a result, Government will provide funding assistance to BAT to meet statutory fund and other creditor liabilities and to provide the necessary assets to enable the potential transfer of BAT’s traditional insurance portfolio to a suitable buyer,” Rambarran said.

 

Source:
Suzanne Sheppard
Trinidad Guardian
Friday March 27, 2015

http://www.guardian.co.tt/business/2015-03-27/clico-pays-government-7-billion