Thursday, April 18, 2024

IT’S MY BUSINESS: Manager’s CIL solution still the best one


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It’s time for the CLICO International Life Insurance Co. Ltd’s (CIL) policyholders, especially those holding Executive Flexible Premium Annuities (EFPAs), to face up to the fact that getting “100 per cent” of their money back is probably not going to happen.
And the longer it takes to sell the tangible assets that CIL does own, the more their claims will be eroded by inflation.
I say this knowing it is a hard thing to accept, but how much longer are you willing to wait on a Government facing so many financial problems quite outside of those posed by CIL that your hardships were not even mentioned in the last Budget speech?
All CIL policyholders have is a promise Government made to the High Court that it would be going ahead with its own bailout solution, which came a month after judicial manager Deloitte Consulting had filed its final recommendations to said court last June. (For more analysis on this, read my column in this week’s BARBADOS BUSINESS AUTHORITY. Sorry for the plug but we don’t have space here to repeat it.)
Suffice it to say in this space then that the judicial manager had essentially dismissed the Government proposal due to lack of activity on the latter’s part in moving it forward. Then Government sent a letter, which it released to the media and was duly reported on the front page of THE NATION in July, saying it would go ahead with the plan.
Since then, have you heard anything more? Let me know.
We have a Government which is so broke that it is seriously contemplating – since it has no choice – raising bus fares in order to reduce its transfers to the Transport Board. Which is what it said the Barbados Labour Party was going to do and that was why it didn’t deserve your vote.
In last Friday’s WEEKEND NATION, Editor-in-Chief Roy Morris quoted a reliable source as saying that “in addition to asking senior managers to give up some of their pay, the board [of the Transport Board] took the position that they had to get approval from Cabinet for an increase in bus fares, or the removal of the provision that allows schoolchildren in uniform to travel free on buses, or the placing of all workers on a three-day work week”.
Well, at least they aren’t planning to throw that little old lady off the bus.
At the end of its August Budget debate, in which it got two of its tax increases wrong (the consolidation tax and garbage tax), the Freundel Stuart Government announced it was going on the hunt for foreign exchange loans to the tune of US$1/2 billion.
It is also looking for Chinese money to finance the rebuilding of Almond Beach Village into a Beaches Resort (apparently), another BDS$1/2 billion for that Bulkeley Factory reincarnation, long mooted but wisely shelved by the former administration on the grounds of financial waste – yet we were told that foreign exchange was still falling fast.
In any of this high financial planning (borrowing), a bond issuance of $117 million to bail out the policyholders of CIL seemed not to figure. On top of that, two new property trusts would have to be set up to hold the CIL real estate assets here and in the eastern Caribbean, respectively.
This would need a whole lot of work thrown to get it up and running, not to mention the buy-in of the countries involved. How long would all that take?
So I think the policyholders need to realize that their best, most realistic option is the one recommended by Deloitte. In its June report to the High Court, Deloitte summarised it, and due to lack of space, I am going to boil it down even more (so any errors are mine) as follows:
• Traditional policies and EFPAs would be written down to current asset values, with CIL’s total liability of $837 million written down to $441 million, representing a loss of around $400 million;
• The write-down would be borne equally by all policyholders; • The EFPAs would be converted into long-term annuities;
• These “restructured” policyholder liabilities along with all CIL assets would be transferred to a new company (“NEWCO”);
• Clico Holdings Barbados Ltd’s assets would also be transferred into NEWCO; and
• NEWCO would then be offered for sale to third-party insurance entities subject to regulatory and court approval.
That plan seems to be the most realistic, given the state of the Government’s finances and its general inertia.
As the report says on Page 15, “The write-down of policyholder liabilities represents a going concern solution which will minimize the social and economic impact on the region and maximize the returns to policyholders, given the current state of the property market in the region. The same does not hold true for liquidation.”
CIL policyholders should stop grasping at fiscal straws. The judicial manager’s solution is still the best one.
• Pat Hoyos is a publisher and business writer.


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