COLONIAL Life Insurance Company (Trinidad) Ltd (CLICO) is solvent, yet it still owes the Government $2.09 billion as part of its 2009 bailout arrangement.
In addition, approximately $1.66 billion provided with respect to British American Insurance Company (Trinidad) Limited (BAT) remains unpaid.
This according to 38th quarterly report of the Central Bank, which was filed in the High Court pursuant to section 44E (7) of the Act, which reported on the period which ended March 31, 2021.
The report provides a snapshot of the progress of proposals to restructure CLICO, BAT and Clico Investment Bank (CIB)
“In summary, of the approximately $18 billion (inclusive of preference interest due) provided by the Government in respect of CLICO, approximately $16.6 billion has been repaid by CLICO, leaving a balance of approximately $2.09 billion as at February 28, 2021,” the report noted.
“Payments for interest on the preference shares due to the Government have commenced. As at February 28, 2021, the remaining interest due to the Government on these preference shares amounted to approximately $32.8 million,” it noted.
The report noted that by January 24, 2019 approximately $5 billion in cash payments were made to the Government “in consideration for an appropriate reduction in CLICO’s liabilities to GORTT”.
“A further cash payment of approximately $300 million (paid in tranches) was made to GORTT by CLICO between March 20 and 27, 2020. An additional $125 million was paid to GORTT on July 8, 2020. On September 17,2020, pursuant to another Ministerial direction, CLICO was directed to pay GORTT $600 million, in cash, in two tranches in exchange for an appropriate reduction in liabilities owed to GORTT.
The first tranche of approximately $300 million was paid to GORTT on September 30, 2020 and the second tranche of approximately $300.1 million was paid in two parts on October 24,2020 and October 30,2020, respectively,” it said.
CLICO’s most recent audited financial statement, for the 12 months ending December 31, 2020, indicate the company had positive net worth of $3.23 billion at the end of 2020.
That means the insurance company is in a position to pay off all of its liabilities, including the $2.09 billion it owes the Government.
The 2020 audit showed that CLICO’s after tax profits plunged by 95 per cent for the year ending December 31, 2019.
CLICO recorded $119.23 million in after-tax profit in 2020, compared with $123.69 in 2019
Its total assets amounted to $13.55 billion in 2020, down from $14.90 billion at the end of 2019, while its total liabilities for 2020 were $10.31 billion.
CLICO has been under the control of the Central Bank since 2009, in accordance with Section 44D of the Central Bank Act.
In an interview earlier this year, Central Bank Governor Dr Alvin Hilaire said he is anxious for T&T’s regulator of financial institutions to close the book on this country’s largest bailout.
“As I told you before, we want to get out of this thing yesterday. Right? We are not in the business of running insurance companies. Most of the conditions are no longer there in terms of the systemic issue. And in terms of the health of the financial system, so we don’t have a systemic problem,” he had said.
Despite CLICO being under the management of the Central Bank, the report noted that a number of transfers were made pursuant to ministerial directives over the course of the Central Bank’s management of CLICO.
Directives by the Minister of Finance to CLICO are allowed under section 44 F(5) of the Central Bank Act, which states: “In the performance of its functions and in the exercise of its powers under section 44D the Bank shall comply with any general or special directions of the Minister and shall act only after due consultation with the Minister.”
Among the ministerial directives recorded in the Central Bank document are:
1. In January 2017, in light of the unanticipated delay in the sale of MHIL shares and pursuant to directions from the Minister of Finance to the Central Bank, CLICO obtained an independent valuation of CLICO’s 100 per cent shareholding in Occidental Investment Limited (OIL) and Oceanic Properties Limited (OPL) in preparation for the transfer of these shareholdings to the Government, thereby appropriately reducing CLICO’s liabilities to the Government.
The valuation report was completed and the share sale and purchase agreement executed by the parties on March 28,2017. On May 8, 2017, the parties signed the necessary share transfer forms to facilitate the transfer of CLICO’s 100 per cent shareholding in OIL and OPL to the State Enterprise, Golden Grove-Buccoo Limited.
2. In November 2017, pursuant to directions from the Minister of Finance to the Central Bank, arrangements were commenced to facilitate the purchase and cancellation of certain Government bonds held by CLICO in consideration for an appropriate reduction in liabilities owed by CLICO to the Government in order of priority. The relevant Sale and Purchase Agreement was executed on July 26, 2018 and a Variation Agreement which amended the value of binds to be transferred was executed on August 30,2019.
3. On April 11, 2018, approximately $107 million of a WASA loan facility together with a cash payment of $21 million were effectively transferred to the Government for an appropriate reduction in liabilities owed by CLICO to the Government in order of priority.
4. Pursuant to directions from the Minister of Finance, agreements were executed on March 29, 2018 for the transfer of CLICO’s approximately 21 per cent shareholding in One Caribbean Media Limited (OCM) and approximately five per cent shareholding in West Indian Tobacco Company Limited to the Government based on an independent valuation, in consideration for an appropriate reduction in liabilities owed by CLICO to the Government in order of priority. These shares were transferred on April 25, 2018.
5. On April 30, 2018, CLICO received from the liquidator of CIB, the Deposit Insurance Corporation, an interim distribution of 27,619,219 Republic Bank Limited (RBL) shares and 848,564 OCM shares.
Pursuant to directions from the Minister of Finance, the Central Bank directed CLICO to transfer to the Government the RBL shares and the OCM shares based on the price determined by an independent valuation in consideration for an appropriate reduction in liabilities owned to the Government in order of priority. These shares were transferred to the Government on July 4, 2018.
6. On September 7, 2018 and April 4, 2019, bonds totally approximately $502 million (now valued at approximately $500 million pursuant to a Variation Agreement dated August 30, 2019) were transferred to the Government (for cancellation) in exchange for an appropriate reduction in liabilities owed by CLICO to the Government.
7. Further to directions to the Central Bank from the Minister of Finance, CLICO was directed to transfer one of its properties located in Chaguanas and one another located in Port of Spain to the Government, based on an up-to-date independent valuation, in consideration for an appropriate reduction in liabilities owed by CLICO to the Government.
For the property located on Chaguanas, the relevant sale and purchase agreement was executed on April 9, 2019 and the deed of assignment was registered on February 6, 2020.
The purchase agreement and the deed of lease for the property located in Port of Spain were executed on August 5,2020 in exchange for an appropriate reduction in liabilities.
The report noted that progress on the sale of traditional insurance portfolios of CLICO and BAT has “been impacted by ongoing court proceedings in the context of a challenge by one of the bidders of the portfolio.” An injunction was granted to Maritime Life (Caribbean) Ltd in July 2020.
In the 2019 financial statement, it reclassified assets in preparation for sale to Sagicor.
CLICO’s balance sheet showed the reclassification of over $7 billion in assets, in the form of Government bonds, from investment securities to assets held for sale.
In addition, it shifted all of its $6.43 billion in insurance contracts—and all but $145.48 million of the $1.66 billion classified as investment contracts—to $7.72 billion of liabilities directly associated with assets held for sale.
Note 18 of CLICO’s financial statement indicates: “The sales and purchase agreement allows for the parties to exit the contract by mutual agreement as well as by either party, if the other party fails to fulfil stipulated terms as outlined in the agreement.”
But Note 18 adds: “CLICO remains fully committed to the sale of the portfolio and the execution of the signed agreement.
Directives to sell the asset from the Central Bank as controller of CLICO under section 44D of the Central Bank Act have not changed.”