Home' Trinidad and Tobago Guardian : May 18th 2014 Contents SBG8 | VERBATIM
SUNDAY BUSINESS GUARDIAN www.guardian.co.tt MAY 18 • 2014
Cabinet has reportedly
decided to sell Clico s
insurance portfolio in
parts to other local insur-
ers and has instructed the
Central Bank and Clico
management of same.
This possibility was first
brought to light by an article published in the
Trinidad Guardian on July 30, 2013 entitled
"Proposal to Cabinet on way forward: Sell
Clico, BA to recover debt."
The current timing of this decision comes
as a disturbing development for several reasons.
The paramount one being that the pending
sale of Methanol Holdings Ltd (MHTL), if
done at fair market value of $12-$15 billion,
would effectively put Clico back in the black
with surplus assets of about $1-$3 billion.
Why is the minister of finance rushing to in
essence liquidate Clico before this sale is con-
cluded and the true picture of Clico s balance
sheet is established?
Secondly, discussions are widely rumoured
to be taking place between CBTT and prospec-
tive buyers of Clico s insurance portfolio before
an independent valuation has been done to
establish the value of the portfolio. CBTT also
allegedly wants to sell the portfolio in pieces
to multiple local insurers which will most likely
lead to lower bids than if it was sold in whole.
Does cabinet understand that if they sell a $9
billion insurance portfolio they do not receive
$9 billion in cash?
Clico would have to transfer close to that
amount of assets to the company(ies) who
buys the portfolio as an insurance portfolio is
a block of liabilities. In fact, in cases where
an insurance company has statutory deficits,
as Clico presently does, the seller may have
to pay the buyer to assume the liabilities, ie
the Government may have to pay another
insurer/insurers upwards of $2 billion (the
amount of the statutory fund deficit) to acquire
Clico s traditional insurance portfolio. As an
example the recent sale of some of British
American s Caribbean operations was con-
cluded without British American or CL Finan-
cial receiving so much as $1 in proceeds.
The new buyer(s) of Clico s portfolio may
then alter the insurance contracts resulting in
less favourable terms to the policyholders
(increased premium and expense charges for
example). This is typical of a sale due to insol-
Also, several hundred staff and agents who
out of loyalty remained in service to Clico s
policyholders under the most trying circum-
stances would now be on the breadline. If
these things were to happen this would be
detrimental to the economy as this process
may decrease market confidence and increase
systemic risk of an already insurance weary
public that has been fed conflicting statements,
including government refusing to honour its
guarantees, during the past five years since
the Central Bank s intervention.
What happened to
the Atrius plan?
As first reported in a daily newspaper article
on February 7, 2013 entitled "Clico gets a new
name", Atrius was the name the Government
selected for the company which would assume
the traditional insurance portfolio of Clico.
This was in fulfilment of the "Resolution of
the Clico situation line item in the 2013 budget
statement which stated:
"As part of the overall solution we shall
incorporate a new insurance company into
which those traditional policies and other
assets will be transferred from Clico. That
new company will continue to manage the
In another article on August 1, 2013 entitled
"Govt snaps up Clico" it was reported that:
"Contacted yesterday, Finance Minister
Larry Howai confirmed the Clico-Atrius trans-
fer and e-mailed the following response: "Cab-
inet has approved the establishment of the
company and a portfolio of assets sufficient
to meet its commitments as well as approved
third-party obligations will be transferred to
it."He added: "The process will involve the
execution of an agreement with Clico which
will ensure that there will be an orderly transfer
of the assets and liabilities. There has been a
delay with this process, but over the past week
I have taken specific action to get the estab-
lishment of the company back on track.
"While the intention of the Ministry of
Finance is to have the company listed on the
Stock Exchange, we have not yet approached
Cabinet for approval and we have not yet
established a timetable for such a listing."
Clico s management and external consultants
have continued to recommend the roll out of
Atrius as the best possible option for ensuring
that the State is repaid all funds advanced to
Clico post CBTT intervention. Atrius business
plans show that government, the sole owner,
would be able to receive dividends within two
years, and can shortly thereafter divest some
or all of Atrius shares via an IPO similar to
the FCB model which was a huge success (save
for the 659,588 shares bought by their former
chief risk officer).
The Government is seemingly hesitant to
put the $1.5 billion needed to capitalise Atrius,
which will give it 100 per cent ownership of
a competitive, and profitable insurance com-
pany, where returns average around 9.5 to 12
per cent, but it may end up paying other insur-
ers to acquire Clico s portfolio instead. Is this
in the national interest?
It is also noteworthy that during the last
two years millions of dollars have already been
expended by Clico, under direction of the
Ministry of Finance and the Central Bank, in
preparation of the operationalisation of Atrius,
which would be forfeit if the Atrius plan is
Also, what if any monies have been expend-
ed by Atrius which has had a board of directors
since May 2013?
Could a restructured
Clico be a viable entity?
The primary reasons for the Clico failure
(not CLF Group), include asset impairments
of the parent CLF and sister company CIB
and worsening economic conditions causing
an increase in the company s insurance lia-
bilities. This effect was compounded by CBTT
changing the admissibility of certain assets
(Republic Bank Ltd, and MHTL primarily) into
the statutory fund in 2008. Undoubtedly, there
were also a host of corporate governance issues
which the Coleman Commission of enquiry
Where is Clico going?
Continued on Page 9
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