CLICO for sale

Friday, May 23, 2014

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THE Central Bank of Trinidad and Tobago says it has put up for sale, the cash-strapped Colonial Life Insurance Company Ltd (CLICO) whose near total collapse four years ago, led to the Trinidad and Tobago Government pumping billions of dollars to keep it afloat.

Central Bank Governor Jwala Rambarran in a statement confirmed that the bank was in the market for a buyer.

"As part of the resolution strategy for CLICO, the Central Bank proposes to transfer CLICO's traditional insurance portfolio for value to an acquiring insurance company that is well capitalised, has a proven track record and the capacity to honour all obligations to policyholders" Rambarran said to achieve this objective, the insurance portfolio is being evaluated by an independent valuation company. "An independent actuarial firm has, therefore, been engaged to value CLICO's traditional business for this purpose and the exercise is still in progress.

"Subsequently, the Central Bank will conduct the process for the sale and transfer of CLICO's traditional insurance portfolio on a transparent, open market basis. The bank has neither engaged with any prospective buyers nor made any decision on the structure of the portfolio transfer."

CLICO and its sister company, the British American Insurance Company (BAICO) collapsed in 2009 and the Trinidad and Tobago Government signed a shareholdersâ agreement with then CLICO chairman Lawrence Duprey following the signing of a Memorandum of Understanding (MOU) between them on January 30, 2009. The MOU gave the Government control of 49 per cent of CLICO's shares.

The then Patrick Manning government injected seven billion Trinidad and Tobago dollars (US$1.01 billion) into CLICO in 2009 to keep the collapsed insurance firm running and to protect policy holders.

Through the passage of legislation in the Parliament, the Kamla Persad- Bissessar led coalition People's Partnership Government committed a further TT$13 billion (US$2.01 billion) to keep the floundering insurance company afloat.

Rambarran noted that pursuant to Section 44D of the Central Bank Act, the Central Bank was in control of CLICO which started on February 13, 2009, in order to safeguard the interests of policyholders and creditors and to prevent disruption, substantial damage or impairment of our financial system.

"The Central Bank is the only entity empowered to restructure the business or undertakings of CLICO, in accordance with the provisions of the Act," he said.

Earlier this year, CLICO, the regional insurance giant announced it had made an after tax profit of nearly TT$3.8 billion in 2012.

CLICO's audited financial results for 2012 were published on its Web site. According to the financial statements of the embattled company, the 2012 after tax figure was more than five times greater than the TT$702 million it declared in 2011.

CLICO declared profits of TT$6.2 billion from its investing activities for the financial year, which eclipsed the TT$2.2-billion loss from insurance activities.

The most significant contributor to CLICO's investment profits was the TT$3.8-billion gain the company booked on the disposal of some 40 million Republic Bank shares in November 2012. Those bank shares, which were then worth an estimated TT$4.3 billion, constituted 84 per cent of the underlying investment in the CLICO Investment Fund (CIF), which converted the 11 to 20-year zero-coupon bonds into units in the CIF.

But the KPMG-conducted audit indicates that CLICO had a negative net worth of TT$6.5 billion. This is due to the company's liabilities, recorded at TT$29 billion, while assets were valued at TT$22.4 billion at the end of 2012.

"The company's board, together with the Central Bank and the Government are working to eliminate the current capital efficiency where the company has excess liabilities to assets," the financial statement read.




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