Caribbean360: St Kitts and Nevis deciding whether to free up CLICO assets to permit sale

St Kitts and Nevis deciding whether to free up CLICO assets to permit sale
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Chris Hoyos on 30/07/2012 11:04:00
 
BASSETERRE, St Kitts and Nevis, Monday July 30, 2012 – St Kitts and Nevis is
being asked to permit the US$6.6 million worth of assets held in CLICO
International Life (CIL) to be disposed of as part of a transaction that could
see the insurance company’s traditional business sold to one of two regional
insurance entities.
According to a recent cabinet briefing, Prime Minister and Minister of Finance,
Dr Denzil Douglas, put this to his cabinet colleagues for their consideration as
agreement from St Kitts and Nevis is needed in order to pave the way for
judicial managers Deloitte to go ahead with the sale of CIL.
The prime minister reported that representative for the appointed judicial
manager Deloitte Consulting Ltd, Oliver Jordan, had stated that after conducting
an extensive search process regionally and internationally, had received
non-binding offers from two regionally-based insurance companies for the
purchase of CLICO's traditional business.
The traditional business consists of Individual and Group Life insurance,
pensions and annuities. The condition of the sale is that sufficient assets of
an acceptable nature must be transferred from CIL to the purchaser and that
there would be no cash sale of the assets but rather a discounting of the
portfolio liability. The Minister of Finance was careful to highlight that no
investor had expressed an interest in the purchase of CIL's Executive Flexible
Premium Annuities (EFPA) product as presently structured but that some were
interested in considering its purchase under some restructured arrangement.
A recent valuation indicated that the asset position of CIL is in the vicinity
of US$220 million region-wide whereas the policy holder liability position is
approximately US$425 million. For St Kitts and Nevis, the policy holder
liability of CIL is about BD$4.5 million with US$2.73 million of that amount
allocated to the EFPA portfolio and the balance of US$1.77 million assigned to
the traditional insurance business portfolio.
According to Dr Douglas, given the nature of the non-binding offer agreements
which have been made, the assets of CIL will have to be converted into an
acceptable format to facilitate the sale of CIL's insurance business to the new
investors. A model for achieving this conversion was discussed and may require
some limited level of guarantee by regional governments.
Therefore, Dr Douglas told his colleagues, the cabinet was being asked to
specifically consider whether it would support the release of CIL's assets in St
Kitts and Nevis to facilitate the proposals.
Douglas explained that the impact of the model is that all traditional
policyholders (that is, individual and group life, pension and annuity
policyholders) would become new policyholders of a new insurance company. For
the EFPA policyholders, based on the level of success of the asset conversion,
there is likely to be a payout of a fixed sum on their outstanding principal,
with the balance on the principal discounted and converted into annuities. Click
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