The Central Bank of Trinidad and Tobago (CBTT) says it has put up for sale, the cash-strapped Colonial Life Insurance Company Limited (CLICO) whose near total collapse five years ago led to a government takeover and multibillion-dollar injection to keep the regional operation 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," he said.
Rambarran said an independent actuarial firm has been hired and is in the process of valuing CLICO's traditional business.
"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," he said.
Collapsed in 2009
CLICO and its sister operation British American Insurance Company collapsed in 2009. Under a rescue plan agreed with parent company CL Financial, the Trinidad government signed a shareholder agreement with then chairman Lawrence Duprey, which gave the government control of 49 per cent of CLICO's shares, among other assets.
Trinidad injected an initial TT$7 billion (US$1.01 billion) into CLICO in 2009 to keep the collapsed insurance firm running and protect policyholders. Another TT$13 billion (US$2.01 billion) was committed by the current Kamla Persad-Bissessar administration.
The Trinidad government, meantime, has been selling off assets of CL Financial, including the Lascelles deMercado conglomerate in Jamaica, which was taken over by CL Financial in 2008.
Rambarran says CLICO was placed under the control of CBTT on February 13, 2009, in accordance with Section 44D of the Central Bank Act, 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," the central banker said.
Earlier this year, CLICO announced it had made after-tax profit of TT$3.8 billion in 2012, a fivefold growth relative to the TT$702m made in 2011.
Its 2012 gains were due to its investment activity, which garnered profit of TT$6.2 billion and offset a TT$2.2 billion loss on its core insurance business.
The most significant contributor to CLICO's investment profits was a TT$3.8 billion gain 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.
A KPMG audit indicates that CLICO has a negative net worth of TT$6.5 billion, due to the insurance company's liabilities of TT$29 billion. Assets totalled 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," said the financial statement.
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