Jamaica delivers Guardian Holdings record year
Guardian Holdings head office in Trinidad and Tobago. The insurer recorded TT$1b in profit for the first time in its history, in 2022.

Trinidad-based Guardian Holdings Limited's (GHL's) net profit surpassed TT$1 billion for the first time ever in 2022, even though its Jamaica operations contribution to the outcome slipped.

Jamaica made up 22.4 per cent of GHL's TT$7 billion (J$156.33 billion) revenue compared to the 24.4 per cent on TT$6.8 billion from the prior year. Trinidad and the other Caribbean segment made up 50.4 per cent of revenue with the remainder coming from the Dutch Caribbean and non-Caribbean markets.

Despite this relative market decline, Jamaica made up 57 per cent of GHL's consolidated net profit which went up 40 per cent to TT$1.10 billion, an improvement from the 52 per cent contribution the country made to the insurers profit in 2021 when it recorded a total profit of TT$785.80 million. This was largely driven by Guardian Life Limited and fellow subsidiaries Guardian General Insurance Jamaica Limited (GGIJ), Guardian Resorts (Jamaica) Limited and Guardian Property Services Limited.

"Despite continued volatility in the investment markets brought about by geopolitical events and economic challenges, the Group remained resilient and continue to focus on optimising performance, capitalising on emerging opportunities, while at the same time managing and mitigating known and emerging risks," said GHL chairman Patrick Hylton in the shareholder report.

This Jamaican contribution is expected to go up even further this year as Guardian Life completes the sale of The Cambridge and Camden, both apartment complexes, which has garnered interest from pension funds, unit trusts and other institutional investors. The last available value of the properties was J$5.03 billion (TT$225.36 million) in 2021.

The bulk of GHL's earnings came from the life, health, and pensions business (LHP) which TT$4.23 billion in insurance premiums and net profit of TT$1.16 billion. The year over year improvement was attributed by Hylton to significant investments in technology and processes which to leverage its scale across the region in its 23 territories and reduce operating costs, plus bring operational synergies.

"What we're doing by increasing capacity is that we're able to tackle the applications better and actually allow our underwriters to have the time to discuss with the agents around the risks. So, we're actually making our processes faster to be more efficient, but we're actually then able to manage the risk of the conversations around risk even better," said President of Guardian Shared Services Limited Alan Sadler last Thursday in an investor forum.

Its property and casualty business (P&C) grew premiums to a record TT$3.01 billion with net profit increasing a third to TT$211.60 million as it expanded its property line of business. Its combined ratio also moved down from 91.6 per cent to 81.7 per cent due to an improved claims ratio and commissions ratio. GGIJ saw premiums rise 10 per cent to TT$503 million with Trinidad-based Guardian General Insurance Limited (GGI) hitting TT$1.65 billion in premiums.

Although GHL's P&C business saw gains in 2022 from stronger business, 2023 is expected to have hurdles ahead as the insurance conglomerate finishes up its negotiations with its reinsurers who have reduced capacity in the region due to reduced capital and losses experienced last year. GHL's chief executive officer Ian Chinapoo mentioned at NCB Financial Group Limited's annual general meeting (AGM) last month that the reinsurance market is expected to harden especially ahead of their April deadline.

"The negotiations are ongoing, and feedback has been positive so far. What we bring to the table is very different from most companies as we've been told in terms of the strategic transformational changes we've made to better manage the portfolios. If demand remains the same, what you have is a pricing adjustment where the pricing goes up which we're seeing on the property and casualty side," stated president of GGI Dean Romany.

Romany was in London during the forum after making rounds to Hannover, Munich and Zurich to meet with various reinsurers. Guardian used to have a reinsurance business that it exited in 2021 following a US$10-million loss related to the floods in Germany that year.

Chinapoo highlighted that the group has been aggressively trying to acquire more reinsurance coverage to ensure they have enough capacity for their various markets. Some markets have seen reinsurance premiums spike by 40 per cent with its Jamaican general insurance arm sending out renewal quotes to customers at 50 per cent above last year's figures.

However, he remained confident that they would be able to leverage the regional reach to negotiate better terms with the reinsurance companies. This is also based on the focus that the Caribbean region is underinsured in terms of value and that they have to be reasonable with premium increases and managing client exposures.

"Knowing your customer and positioning yourself in the market to best manage risk is crucial. With these headwinds, we've not seen a reduction in our retention rates. That means our clients are renewing with us even at slightly higher rates," Chinapoo added as he continues to receive updates from different markets.

GHL's asset management business was the only segment to experience a decline as international fixed income and equity markets continued to decline from rising interest rates. As a result, the segment's revenue dropped 15 per cent to TT$126.2 million with net profit shrinking 42 per cent to TT$27.38 million.

Despite this decline, the segment has further built up deposits to position itself to capture opportunities from rising rates and longer tenors. Its assets under management stood at TT$2.1 billion with the segment launching two new TTD mutual funds focused on Caribbean equity and fixed income.

Total assets grew marginally to TT$34.81 billion (US$5.16 billion) its investment securities portfolio at TT$21.73 billion. Total liabilities decreased to TT$29.24 billion with the group paying off series A of its J$13.4 billion bond in September. Equity attributable to shareholders grew 12 per cent to TT$5.56 billion with its book value clocking in at TT$23.96.

With the shift from IFRS 4 (International Financial Reporting Standards) to IFRS 17 on January 1, GHL is planning to hold a forum as it relates to the change in how its financial statements are presented and restated from a comparative basis. While it doesn't change the fundamentals of the business, it impacts the presentation mainly for its LHP segment and moderately for its P&C segment.

"So, globally, for all insurers, we are going to all experience a bit of a downward move in our implementation period, but as that bank of profits which is held inside of the service margin starts to kick in and move over time, we are all going to experience that release coming from the in-force block as we continue to grow and strengthen that portfolio," said group chief financial officer Samantha Saugh on IFRS 17 queries.

GHL's stock price closed on Thursday at TT$25.06 and J$488.27 which left it with a market capitalization of TT$5.81 billion/J$$113.29 billion. Its AGM will be held on May 4 at its corporate centre in Westmoorings in Trinidad & Tobago.

Chinapoo at the end of his presentation highlighted the key group strategic initiatives as strengthening the group's capital structure, continued investments in digital offerings including omni-channel capabilities and increase investments in its capital markets origination and structuring business.

(FX rate – J$ 22.33272 – $TT 1)

BY DAVID ROSE Observer business writer davidr@jamaicaobserver.com

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