Tuesday, Dec 11, 2018

Trinidad Central Bank says “preferred” buyer found for CLICO

Trinidad Central Bank says “preferred” buyer found for CLICO
16 Nov
2018

The Governor of the Central Bank of Trinidad and Tobago (CBTT), Dr. Alvin Hilaire says a preferred bidder has been found regarding the financially troubled Colonial Life Insurance Company (CLICO) and the British American Co (Trinidad) Ltd’s (BAT) traditional portfolio.

“As part of the resolution strategy, CLICO/BAT with Central Bank oversight, conducted a wide reaching, professionally managed and transparent process to identify a suitable company to acquire and manage the business.

“After the rigorous process that spanned several years, a preferred bidder was identified to purchase both portfolios,” Hilaire said.

He told reporters at the launch of the CBTT’s monetary policy report for November 2018 that the sale and purchase agreements are expected to be signed shortly and the un-named signatories will work closely to get the necessary regulatory approvals in the shortest possible time to complete the transition.

Hilaire did not disclose the name of the “preferred bidder’ even as he acknowledged that it i’s a private transaction and because of confidentiality he could not give more details.

“This would pave the way for an exit by the Central Bank from control over CLICO and BAT once conditions are appropriate. The circumstances that emerged in 2008/09 warranted the Central Bank’s control of the companies in the interest of policy holders and financial system stability.

“The Bank however does not perceive its role as running an insurance company or indeed any commercial enterprise. Now that a buyer has been identified for the traditional portfolio, following the signature of the sale and purchase agreements, the next steps will be for the company involved to prepare ‘schemes of transfer’ to seek regulatory approval for the transfer of the policies from CLICO/BAT to the buyer.”

Hillaire said that upon satisfaction of all the requirements of the regulator/s for the approval of the schemes of transfer, steps would be taken to cancel the registration of CLICO and BAT and the Central Bank would be in a position to relinquish control.

The Trinidad and Tobago has pumped an estimated TT$24 billion (One TT dollar=US$0.16 cents) into the companies after it experienced financial difficulties in 2009.

Hillaire said that as of mid- November 2018, CLICO has returned almost TT$14 billion to the government in cash and transfer of other assets, noting that the majority of the repayment, estimated at TT$8.3 billion, was in cash.

He said the transfer of Republic Financial Holdings Limited (RFHL) and other shares received by CLICO from the liquidators of CLICO Investment Bank (CIB) in April 2018 formed the second largest block of the repayment.

“The balance has been effected by the transfer of a number of assets from CLICO to the government in exchange for the reduction of debt owed by CLICO. Some of these assets, along with the RFHL shares, were used by the government to create the National Investment Fund, which proved to be very successful on its recent bond issuance.

“In addition, as at the last audited financials, CLICO has returned to solvent status with an asset value which exceeds its liabilities even after allowing for the outstanding preference share liabilities that remain owing to the government,” Hillaire said in a statement posted on the bank’s website.

He said that as the situation has continued to improve during the current financial year, CLICO is expected to be in a position to repay all of the government support that was provided.

“Ultimately, the remaining shareholder value of CLICO will be for the government directly, since it owns 49 per cent of CLICO, and for CL Financial (in liquidation) who will in turn be able to use the resources to settle the obligations of CLF to the government and other creditors.

“BAT however has not been able to return to solvency and will not directly be able to repay the government from its own resources; consequently any shortfall will need be treated with as part of the wider CLF obligations to the government,” he added.

The Central Bank governor said that the traditional insurance portfolios of CLICO and BAT consist largely of universal life and term policies, deferred and immediate annuities and some group pension schemes. He said these portfolios continue to attract premiums and, as is the norm for this type of insurance, the policies will continue for many years into the future, requiring a sound, competent insurance company to deal with the ongoing administration of the policies and provide the necessary capital to ensure that claims will be paid in the future.

Hillaire said that stronger legislative apparatus and integration of the lessons learnt would help to further reinforce supervision.

“With the implementation of the new Insurance Act, the local insurance industry will be subject for the first time to a modern risk-based approach to capital, actuarial valuation and other aspects of insurance supervision.

“The Central Bank has worked with the industry over many years on designing, agreeing and testing the implementation of this new Act and believes that the industry is ready and able to respond to the challenges of this new approach,” he said, adding that the CBTT also recognizes that it will need to “up its own game” to contribute meaningfully to the effective implementation of the new Act.

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