NIS investments unbalanced – actuary

-says gov’t must give clear timeline for recovery of CLICO investment

The National Insurance Scheme’s asset allocation is well outside its Prudential Investment Framework (PIF) which had been approved in 2005 and a major rebalancing is needed, the draft report of the eighth actuarial review of the scheme has said.

Looking at the position at the end of 2011, the report said that 27% of the portfolio is short-term Government of Guyana treasury bills, 91% of the portfolio is held in short-term securities with most having maturities of one year and 99.8% of the investments are located in Guyana.

The report said that with such a heavy concentration in local, short-term assets the investment is not well diversified. The report pointed out that the PIF was approved in 2005 and updated in 2006 and set out the following asset allocation:

*short-term – no more than 30%

*medium-term – no more than 20%

*long-term – no less than 30% and no more than 80%.

“The current asset allocation is well outside the targets set in the PIF and thus major rebalancing of assets, or changes to the target asset mix are required. Given the state of NIS finances most assets should be held in relatively liquid and marketable instruments”, the report said.

Also addressed in the report was the Scheme’s investment in the collapsed CLICO (Guyana) Inc. The report noted that when CLICO was placed under judicial management in February 2009, the NIS held $5.8B or 18% of its investments in CLICO’s Corporate Flexible Premium Annuity plans. The report said that the investments had maturities of up to five years but that since 2009 no interest has accrued on the deposits. It was pointed out that in 2011, title for a CLICO property, the Camp Street building which now serves as the headquarters of the Guyana Revenue Authority and is valued at $600M was transferred to the NIS.

“To date, no provisions or asset write-downs for sums invested in CLICO have been made given that a unanimous Parliamentary Resolution was passed in 2009 guaranteeing State support for the recovery of the NIS investment in CLICO. It is necessary that the Government of Guyana  clearly indicate the timeline and nature of the guarantee and whether it will be met with cash, bonds, real estate (or) another financial instrument”.

At the end of 2011, the NIS’s investment stood at $28.95B, up from $25.13B at the end of 2006. During the review period, the report said that the average yield on investments was 5% and the average yield on reserves was 4.7%. Pointing out that inflation was averaging 6.3% per annum, the report said that the real rate of return on reserves over the 5-year period was -1.8%.

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