Insurance juggernaut on market again

The Bermuda-based parent company BF&M Limited is selling its shares in the Insurance Corporation of Barbados Limited (ICBL).

And the company has hinted that Barbados’ challenging economic circumstances is one reason behind the proposed sale.

This was outlined in the group’s annual report for the year ending December 31, 2019, in which Group Executive Chairman and Chief Executive Officer John Wight reported strong returns for the year despite having to weather “tumultuous” events, including the impacts of two hurricanes and tackling “major regulatory, legislative and operational reform imposed on the industry”.

Shareholders’ net earnings were BMD$11.9 million resulting in a return on shareholders’ equity of 4.3 per cent, compared to earnings of BMD$20.2 million and a return of 7.5 per cent in 2018.

Shareholders’ equity as at December 2019 was BMD$280.9 million.

Wight said: “While the core business operations performed well, the company did, however, set up further impairment provisions of BMD$5 million relating to its commercial and residential properties that reduced in value in 2019.

“In addition, following a strategic decision by the company to focus on its core territories, an impairment in the amount of BMD$6.6 million was recorded in 2019 to reflect the decision to sell its 51.2 per cent interest in the Insurance Corporation of Barbados Limited,” he said.

He said while the company provided stable and acceptable returns to BF&M over many years the Barbados economy has been very “challenged” in recent years, highlighted by the International Monetary Fund’s intervention and financial support of Barbados in 2018.

ICBL was established in 1978 as a statutory corporation and subsequently privatized in December 2000.

BF&M, which acquired the 51.2 per cent interest in ICBL in 2006, was incorporated in Bermuda on August 5, 1991 as a holding company, and is a public limited company listed on the Bermuda Stock Exchange.

Back in 2018, ICBL was named in a scandal involving former government minister Donville Inniss, who was tried and found guilty of all three criminal counts he faced in the United States federal district court.

In that case, the court found that Inniss had taken bribes from the insurance company in 2015 and 2016 while he was the Minister of Industry, International Business, Commerce and Small Business Development.

The court heard that ICBL paid him US$36,000 to use his authority to ensure that the firm’s million-dollar contract with the state-owned Barbados Investment and Development Corporation was renewed.

The group’s principal business is insurance in the areas of property, casualty, motor, marine, life, health and long-term disability insurance, annuities, the management and investment of pension plans, as well as the rental of office space in buildings it owns.

The ICBL operation, which is identified by its geographical location, is now classified as “held for sale and discontinued operations”.

ICBL, which has both public and private sector business, provides insurance coverage in the areas of motor, property, marine, miscellaneous accident, group and individual health, group and individual life, and pension business.

According to the annual report, the expected consideration for the sale, less selling costs, is BMD$17.9 million as at 31 December 2019.

The net book value of the Barbados operation as at December 31, 2019 is BMD$24.535 million. As such the non-current assets of the disposal group have been written down by BMD$6.635 million to fair value as at December 31, 2019.

In October 2019 management of BF&M committed to a plan to dispose of its Barbados operation following its strategic decision to place greater focus on the group’s core territories. An initial non-binding term sheet of the sale was signed in November 2019.

While acknowledging that the transaction is subject to regulatory approval and other closing conditions, Wight said subsequent to year-end, due diligence is ongoing.

According to the annual report, the assets and liabilities of ICBL are comprised almost entirely of financial assets and liabilities that are not within the scope of the measurement requirements of IFRS 5 -Non-current Assets Held for Sale and Discontinued Operations.

In his report to shareholders, Wight said throughout the year management went to significant lengths to engage with all stakeholders and in particular customers, keeping them abreast of the latest changes and of their implications, and fostering open dialogue.

“We frequently hear about change being ‘the new normal’. While the phrase is somewhat of a cliché, the full meaning of what it entails was brought sharply into focus, at time of writing, by the global disruption caused by Covid-19,” he said.

“At BF&M, we believe that nimbleness and readiness for change are essential qualities of being a leading insurer – always with our customers at the centre of all that we undertake. With ever-increasing compliance and regulatory demands dominating the landscape, from privacy laws to the new and substantial IFRS 17 accounting standard change scheduled for implementation in 2023, we invested significant effort during 2019 to be ready for change,” he said.

Reporting on the group’s overall 2019 performance, Wight said when it came to pensions and investments the Cayman market continues to be a strong source of growth opportunity.

The health and life insurance divisions performed well for the year with strong earnings, due significantly to a strategy of diversification of business lines within the division, the company said.

As a result of Hurricanes Dorian and Humberto the company’s 2019 net earnings for the property and casualty division were down from those recorded in 2018. However, despite significant claims, a profit was recorded for the period under review.
marlonmadden@barbadostoday.bb