Home' Trinidad and Tobago Guardian : February 27th 2014 Contents FEBRUARY 2014 • WEEK FOUR www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG11
Arecent newspaper article
quoted a Clico source as say-
ing that growth has been
above projections in the last
two years. Even so, judging
from the recently released
financial results for 2012, we note that pre-
miums continue to decline. Perhaps, the 2013
results, which are not yet publicly available,
would show a different picture?
The following table gives us premium income
and underwriting profit or loss for the period
2006 to 2012.
With the possible exception of 2010, Clico s
ability to generate a profit from its core under-
writing activities seems, at the very least, to
The earlier comment was made in response
to a report that the government is having sec-
ond thoughts about transferring Clico s "good
business" to a new company called Atrius.
One consequence of this proposed transfer is
that an additional $1.5 billion would have to
be pumped into the new company. Given the
huge sums of taxpayers money that have
already been consumed to fix the CL Finan-
cial/Clico and BAICO problems, the Govern-
ment now seems reluctant to make any further
advances to bring this matter to a close.
The latest possible solution seems to be to
sell the insurance business and let the buyer
pump in fresh funds and perform the necessary
acts to help the business achieve its full poten-
One of my avid readers has provided me
with an interesting list of possible suitors and
suggested reasons for their interest. The next
table summaries this information. (See table).
This list is not exhaustive and it is still possible
for a foreign "dark horse" to emerge.
Financial position: assets
Clico s asset base advanced from $19.69
billion as at December 2011 to $22.46 billion
as at December 2012. The movements in four
main line items accounted for the bulk of this
Investments in associates declined from
$5.8 billion in the earlier period to $1.29 billion
in 2013. This major change was caused by the
sale of 40,072,299 shares in Republic Bank
Ltd. This sale resulted in the company s
remaining holdings of 11,876,000 RBL shares
to be re-classified as an investment. Somewhat
counteracting this decline was increases in the
value of the company s holdings in Angostura,
One Caribbean Media and CL World Brands.
Investments in subsidiaries also declined
over the one-year period. In this case, the
major change occurred in the lower values of
the two methanol companies. For example,
the MHTL s value fell to $4.88 billion from
$5.43 billion a year earlier.
The biggest advance was in the value of
investment securities, which increased to $10
billion from $3.74 billion as at year-end 2011.
Approximately $1.16 billion related to the
reclassification of the remaining RBL shares.
In addition, the company s holdings of gov-
ernment securities rose from $2.96 billion to
$7.97 billion as at year-end 2012.
Finally, Clico s holding of cash and short-
term deposits increased to $2.48 billion from
$449 million as at December 2011.
Liabilities and equity changes
The value of insurance contracts advanced
from $6.1 billion at the end of 2011 to $8.17
billion as at year-end 2012. Here, the largest
movement was recorded by the increase in
actuarial reserves for long-term insurance
contracts, which rose from $316 million in
2011 to $1.82 billion in 2012.
Another significant change was noted in
the value of investment contracts, which fell
to $11.98 billion from the 2011 balance of $12.18
billion. This reduction of almost $200 million
was concentrated in the lower value of EFPA
contracts; this item declined from $11.08 billion
in 2011 to $10.80 billion as at December 2012.
Modest increases in both deposit administra-
tion contracts and managed fund balances
helped mitigate the overall decline.
The company s negative equity position
improved from $7.27 billion in 2011 to $6.58
billion as at the end of 2012. On the one hand,
the valuation reserves fell to $5.31 billion from
$8.42 billion in the prior year while, on the
other hand, the accumulated deficit improved
from negative $15.7 billion as at December
2011 to $11.91 billion as at year-end 2012.
Both line items were significantly impacted
by a single transaction, which was the sale of
40-plus million shares of Republic Bank Ltd
in late 2012. Back in 2011, the company record-
ed $1.8 billion as being the unrealised reval-
uation of available for sale financial assets.
Then, in 2012, this balance declined to $530
million. Compensating for this reduction was
the realised gain on available for sale financial
assets of $3.66 billion.
Income and profit
Net insurance premiums declined to $268.3
million from the 2011 result of $277.3 million.
In 2012 underwriting expenses more than dou-
bled to $2.54 billion from $1.11 billion in 2011.
This change resulted in Clico reporting an
underwriting loss of $2.27 billion for the 2012
period; this compares with a loss of $837.4
million in the 2011 session.
Investing activities produced an overall profit
of $6.22 billion, which was a huge improvement
over the $1.73 billion reported for 2011. The
largest contributor was a profit of $3.83 billion
on the sale of investments, principally shares
Notably, investment income almost doubled
to $2.33 billion from $1.21 billion in the 2011
period. Interest income on companies secu-
rities increased to $259.3 million from $1.2
million in 2011. In addition, dividend income
rose to $1.81 billion from the 2011 result of
The overall result from operating activities
in 2012 climbed to $4.03 billion from the 2011
result of $1.07 billion. After allowing for finance
costs, the operating profit before tax registered
at $3.8 billion for 2012; this represented a huge
increase over the 2011 result of $720 million.
With very little taxes being applicable, the
after-tax result for 2012 came in at $3.8 billion
versus $702 million for 2011.
Outlook for 2013 and beyond
The 2013 investment results have been pos-
itively impacted by the sale of additional assets.
These companies included CL World Brands
subsidiaries Burns Stewart (whiskey) and
Thomas Hine (cognac). Hopefully, the core
insurance business delivered a better result.
A huge variable is the pending settlement
of the MHTL shares; this matter is now at a
stage that some action can be taken. If no
extension of time was requested by the Gov-
ernment, it appears that Clico will be forced
to sell this valuable asset at a price determined
by the ICC Tribunal.
Other significant blocks of publicly-listed
shares include Angostura, One Caribbean
Media and LJ Williams. Ownership of such
huge chunks of shares in these companies
seems inconsistent with the normal activities
of an insurance company; but then, neither
Clico nor CL Financial were "normal" com-
Will some of these shares be "sold" either
to the parent CL Financial or the Government
as part of a cleaning up exercise to prepare
Clico for an eventual sale to a third party?
Will the Government have another change of
mind and decide to push through with the
Atrius plan, despite the additional costs? What
is the plan for the "not so good" portion of
the insurance business? Let us see how 2014
Clico's 2012 results
and its future
A huge variable is the pending
settlement of the MHTL shares;
this matter is now at a stage that
some action can be taken. If no
extension of time was requested
by the Government, it appears
that Clico will be forced to sell
this valuable asset at a price
determined by the ICC Tribunal.
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