Guardian Holding Limited (GHL) exited its reinsurance business at the end of 2021 following the US$10-million (TT$67.94-million) loss it incurred in the third quarter due to the floods in Germany.

According to Investopedia, reinsurance is also known as insurance for insurers or stop-loss insurance. Reinsurance is the practice whereby insurers transfer portions of their risk portfolios to other parties by some form of agreement to reduce the likelihood of paying a large obligation resulting from an insurance claim

Guardian Re (SAC) Limited is a reinsurance business which pools GHL’s hurricane and earthquake risk and reinsures the bulk of the risk of the aggregate to external, professional reinsurance companies. Guardian Re accepts inward reinsurance from external reinsurance companies from a diversified pool of global risks as a corollary to the reinsurance of GHL’s reinsurance programme. Guardian Re had a net profit of US$9.72 million in 2020 which was a turnaround from the US$54,000 loss in 2019 due to the share of claims incurred with clients. It also had total assets of US$102.39 million and shareholders equity of US$54.87 million in 2020.

“It should be noted that over many years, even including this US$10-million loss, our Bermudan reinsurance company is and has been a profitable venture. However, we have concluded that volatility in its profits is inconsistent with our strategy of producing stable operating profits. We have therefore taken a decision to exit this portfolio fully,” stated GHL Chief Executive Officer (CEO) Ravi Tewari at the company’s recently held hybrid annual general meeting (AGM) at the company’s headquarters in Westmoorings, Trinidad and Tobago (T&T).

This comes at a time when its competitor Sagicor Financial Company Limited launched its own reinsurance subsidiary in 2020 to optimise group-wide capital by reinsuring business from Sagicor Group companies. Even global asset manager Brookfield Asset Management Inc spun off Brookfield Reinsurance in June 2021 after earning US$128 million in its first quarter. Both subsidiaries are based in Bermuda.

GHL’s net profit only expanded by one per cent to TT$782.33 million in 2021 largely due to the TT$136.02 million net impairment losses on its financial assets. GHL’s property book was also impacted by La Soufrière volcano eruption in St Vincent and the Grenadines during the year.

“We have divested our loss-making UK operations fully and we have made our Pointe Simon project in Martinique economically viable. We have modified our reinsurance programme to dampen the effect of catastrophic hurricanes on our profits. We have upgraded our capabilities to match our assets with our liabilities, thereby making much more efficient use of our capital,” Tewari explained on the company’s risk management during the year.

The company’s first-quarter earnings, which released the day after the AGM, showed a modest five per cent rise in its gross written premiums to TT$2.14 billion with the net amount rising seven per cent to TT$1.33 billion. GHL’s operating profit marginally declined to TT$209.99 million as operating expenses rose seven per cent to TT$332.21 million. The company attributed this to the implementation costs related to International Financial Reporting Standards (IFRS) 17 relating to insurance contracts which goes into effect on January 1, 2023. The group is also spending heavily on artificial intelligence, machine learning and automation to improve greater efficiencies across the group.

Group Chairman Patrick Hylton revealed at a NCB Financial Group briefing that Guardian Life of the Caribbean (GLC) will be partnering with an e-pharmacy company in T&T to allow patients and doctors to have access to this facility. The partnership complements the group’s fintech product, Almi, which was launched in the prior year.

In Jamaica, GLC and Guardian Life Limited (GLL) will be consolidating their back offices during the year in order to become more customer focused. GLL contributes more than half of GHL’s operating profit despite the three Jamaican subsidiaries contributing less than a quarter of revenue. To facilitate this shift, Eric Hosin will be appointed the group head of life, health and pensions, while Meghon Miller-Brown will ascend to the role of president for GLL effective June 1. GLL’s net profit rose by 11 per cent to $10.3 billion while Guardian General Insurance Jamaica Limited’s net profit increased by 184 per cent to $618.40 million in 2021.

“I believe as insurance companies and pension funds, as long-term institutional stores of capital, it is critical to our region for the most efficient mechanism to be found so that the savings can be deployed in ventures to truly transform our region. Guardian is very conscious of this as it factors it into our investment profile and we are fairly proactive in lobbying for changes in restrictions that would allow investment in these areas,” Tewari explained surrounding the ability of entities such as GHL to invest in infrastructure projects in the Caribbean.

GHL is currently looking for a new group CEO when Tewari demits the role at the end of the year. While this was planned ahead of time, the group is searching for a new chief financial officer (CFO) after David Maraj resigned on May 5 due to personal reasons. Samanta Saugh has been appointed acting CFO effective May 15. Anthony Lancaster and Phillip Hamel-Smith retired from the board of GHL at the end of the AGM while Michael Gerrard was elected to the board.

GHL’s total assets closed March at TT$35.12 billion ($803.30 billion) with cash and cash equivalents at TT$3.44 billion. Total liabilities were TT$30.28 billion while equity attributable to shareholders was TT$4.84 billion. GHL’s stock price in Jamaica remains flat at $514.99 while the Trinidadian price is down seven per cent year to date to TT$28 ($649.60).

Tewari explained that the board was not considering a stock split or share buyback at this time. However, he was confident that the company’s continued investment in infrastructure will yield significant returns in the future, especially as the Caribbean economies continue to open up.

“At GHL, we’re of the firm belief that there is nothing preventing a Caribbean-based financial services entity from having a global footprint. We have been very circumspect in how we design our infrastructure, processes and technology to be able to compete at that level. As Guardian goes into the future, we will be accretive. Naturally, the immediate environment is where we’ll focus in the short term, but we see the world as our oyster. Guardian will expand outside of the region,” Tewari closed.