With a new mandate set by its parent company NCB Financial Group Limited (NCBFG), Guardian Holdings Limited (GHL) has embarked on fresh initiatives to not only expenses, but also cut its leverage and reallocate capital across the group.

The insurance conglomerate has already cut TT$26 million (J$597.73 million) in non-core expenses in the first half of the year which has not come from just streamlining operations through technology, but also selling some non-core assets. An example provided by GHL Chief Executive Officer (CEO) Ian Chinapoo is the sale of one jet in the second quarter and move to sell the second one in short order. This move alongside redeveloping and introducing new products will be part of a broader goal to improve the cost-to-income ratio.

“Even if expenses are growing, once it’s driving revenue growth that is greater than the expense, you would have an improvement in your contribution margin and profit lines. The main focus right now is removing any non-core expenses, but even so, it doesn’t mean expenses won’t grow. It means that we’re growing core revenue-generating type of expenses that reduce cost in other areas,” Chinapoo said at an August 14 investor briefing.

The sale of non-core assets will also be part of the greater group objective of deleveraging the business from a leverage ratio of 86 per cent to about 50 per cent by 2028. This will result in lower interest expense costs, greater returns on reallocated capital and make more capital available to pay as dividends to shareholders. GHL’s total borrowings and repurchase agreements stood at TT$3.26 billion at the end of 2023 with J$1.99 billion (TT$86.60 million) coming due in September 2025 and TT$1.02 billion maturing in December 2025.

“We intend to have a mix of refi as well as pay down. So, non-core assets would be anything that’s not part of our core strategy and revenue generation. We do have real estate assets that are not held as part of our investment portfolios in the life, health and pension companies. We are targeting some of those for sale and they will be in the market as appropriate,” Chinapoo explained on the move to cut its debt balance.

The group is currently working quite extensively through its product factory under its seven-point framework to introduce new products such as cyber risk. This innovation will be led by data scientists using machine learning to further segment clients in the property and casualty (P&C) business. However, the group will also be discontinuing some insurance products in the future, but the aim will be to ensure that customers are made whole or better off as they focus on maintaining contractual obligations.

GHL has already paid out TT$1.8 billion in claims in the first half of 2024 which is split TT$0.3 billion to P&C and $1.5 billion to life, health and pension (LH&P). This is not far from the TT$3.8 billion paid in 2023 where TT$0.6 billion was paid to P&C clients with GHL likely to see increased claims for those customers following Hurricane Beryl.

GHL’s second quarter (April to June) saw its insurance revenue rise eight per cent to TT$1.45 billion with the insurance service result/net insurance revenue up 47 per cent to TT$219.99 million. Although investment activities brought in lower income for the period, the reduction in finance expenses related to insurance contracts and higher insurance brokerage fees resulted in total income of TT$453.69 million. After accounting for a lower tax bill, GHL’s consolidated net profit increased 36 per cent to TT$168.28 million.

For the overall six months, GHL’s insurance revenue moved up ten per cent to TT$2.86 billion with the net insurance revenue 27 per cent higher at TT$401.87 million. While total income was flat, reduced operating expenses and a lower tax bill pushed consolidated net profit up six per cent to TT$404.95 million, with TT$401.05 million attributable to shareholders. The trailing 12-month earnings per share is TT$3.10.

Total assets are four per cent over the six months to TT$36.14 billion with TT$25.20 billion in investment securities and TT$3.60 billion in cash. Total liabilities and equity attributable to shareholders were TT$31.94 billion and TT$4.19 billion, respectively.

GHL is likely to bring in further gains later this year as it completes sales related to its Cambridge property development in New Kingston, Jamaica. There are 47 units remaining from the 150-unit property with GHL to launch another sales campaign after some additional upgrades to the property.

Despite boasting a book value of TT$18.04, GHL’s stock price on the JSE is down 18 per cent year-to-date (YTD) to J$290.07 (TT$12.36) while the TTSE price is down 34 per cent to TT$12.50 (J$289.78) as of August 22. This also puts the company’s price to earnings (PE) ratio at 4.03 times and its price to book (PB) ratio at 0.69 times.

“So, we’re already have less than 25 per cent of our float that is actually available for trading. So, if we were to go and do a share buyback, we’d actually be reducing that [float], and we actually do want to increase the breadth of our shareholding and certainly encourage more shareholders to come in. It’s a low priority because we want to encourage people to own shares,” Chinapoo explained on a share buyback query.

GHL’s top ten largest shareholders own 77.53 per cent of the company’s issued shares which leaves a very small free float of shares owned by the public. GHL did have a share buyback in the past but ended it after six months in August 2009 due to regulatory constrictions.

GHL will pay a TT$0.23 dividend totalling TT$53.37 million to be paid on August 29 to shareholders on record as of August 16. This brings GHL’s 12-month dividend to TT$0.76 for a dividend yield of 6.08 per cent.

Its parent company NCBFG will pay a J$0.50 dividend totalling J$1.29 billion to be paid on September 16 to shareholders on record as of September 2.

Although NCBFG is already a licensed financial holding company (FHC) in Jamaica, Chinapoo noted that GHL would also be undertaking a similar restructuring that would see GHL create a FHC subsidiary to hold its different regulated subsidiaries in the group and another holding company for the non-regulated entities. However, with more than 60 subsidiaries across more than 20 jurisdictions, he noted that this would be a massive endeavour and will involve discussions with regulators in those different jurisdictions to ensure everyone is satisfied.

“We’re working collaboratively towards complying with all the FHC regulations. So, it’s simple in the sense that the concept is simple, but of course Guardian Group being over 60 companies, we have some work to do in terms of segregating [companies]. We’re not just looking to comply with the legislation, but we’re actually looking to become more efficient in the process. We’re working to do it as quickly as possible. We are a large group and therefore, there’s much to be done, but we have specific milestones and we’re working towards achieving each of those milestones,” Chinapoo added on the FHC developments.

First Citizens Bank Limited (FCB) is set to complete phase two of its vesting structure which will see three of its subsidiaries transferred to First Citizens Group Financial Holdings Limited (FCGFH) on October 1. FCGFH was listed in FCB’s place in October 2021 on the Trinidad & Tobago Stock Exchange (TTSE). While the transfer was expected to have been completed in October 2022, it took two years longer than expected.

FCB noted in July 2021 that the reorganization would free up the bank’s capital and that FCGFH could better deploy capital to the different subsidiaries.

Other regulated FHC’s include Jamaica Money Market Brokers (Trinidad and Tobago) Limited, RBC Financial (Caribbean) Limited and Republic Financial Holdings Limited (RFHL). RFHL completed its restructuring in December 2015 which saw Republic Bank Limited become a subsidiary of the holding company.