(Trinidad Guardian) Clico, the insurance company that the Government saved from collapse four years ago, recorded a 2012 after-tax profit of close to $3.8 billion, which was more than five times greater than the $702 million it declared in 2011. Clico declared profits of $6.2 billion from its investing activities for the financial year, which eclipsed the $2.2 billion loss from insurance activities.
The most significant contributor to Clico’s investment profits was the $3.8 billion gain the company booked on the disposal of some 40 million Republic Bank shares in November 2012. Those bank shares, which were then worth about $4.3 billion, constituted 84 per cent of the underlying investment in the Clico Investment Fund—which converted the 11 to 20-year zero-coupon bonds into units in the CIF.
But while the insurance company, which was once T&T’s largest and most powerful, is generating profits, the KPMG-conducted audit indicates that Clico had a negative net worth of $6.5 billion. This means that the company’s liabilities, which were recorded at $29 billion, dwarfed its assets, which were valued at $22.4 billion at the end of 2012.
The financial statement reveals that “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.”
Clico’s liabilities of $29 billion include about $16 billion in taxpayers’ money, comprising $4.9 billion in preference shares and close to $11 billion in Executive Flexible Premium Annuities (EFPA’s) that Clico policyholders have ceded to the State in exchange for cash, zero-coupon bonds and units in the Clico Investment Fund.
Following the insurance company’s dramatic collapse, which was announced at a news conference at the Central Bank on January 30, 2009, the Government pumped $5 billion into Clico by acquiring $4.99 billion in preference shares and $7.24 million in ordinary shares. That transaction resulted in Government owning 49 per cent of the share capital of the company, leaving Clico’s parent, the Lawrence Duprey-founded CL Financial, with 51 per cent.
In 2009, Government was advised not to acquire more than 49 per cent of Clico, because to have done so would have triggered the pre-emption rights clauses in the Methanol Holdings (Trinidad) Ltd (MHTL) shareholders’ agreement. In an interesting turn of events, Clico’s 2012 financial statement reveals officially, for the first time, the outcome of the arbitration matter brought by the minority MHTL shareholders, Consolidated Energy Ltd, who are the claimants.
According to the financials: “The tribunal issued a partial award on March 28, 2013, dismissing all the claimants’ claims with the exception of certain of its oppression claims.
“On November 18, 2013, the tribunal concluded that the relief and remedy for this oppression is the sale of the 56.53 per cent shareholding held by the company in MHTL to the claimants within a reasonable time.
“As such, the claimants and respondents (Clico, CL Financial and MHTL) were instructed to negotiate and agree terms of sale by January 31, 2014.
“If no agreement is reached and no extension is requested, the tribunal reserved the right (at that time) to set the price for the sale (following submissions by the various parties) based on updated market valuations as at January 31, 2014.”
The Guardian was told yesterday that the two parties to the arbitration have not reached agreement on the price of MHTL and the tribunal is now in the process of hiring an independent firm of petrochemical valuators.
Clico’s 56.53 per cent stake in MHTL and its Oman-based sister company are together valued at $5.57 billion in the 2012 accounts, about ten per cent less than the $6.1 billion the insurer’s stake in the companies was valued at in 2011.
Clico’s audited financial results for 2012 were published on its Web site yesterday, after the company’s board, which is chaired by former Minister of Finance Gerald Yetming, approved the financials for issue on January 29.