Saturday, February 24, 2018

Howai: Funding Atrius will cost Govt at least $1.5b

Plans to sell CLICO portfolios on open market...

Government is now actively considering putting collapsed insurance giant Clico’s $8 billion worth of profitable business on the open market rather than transferring it into Atrius, the company established last year specifically to acquire these assets.

Finance Minister Larry Howai confirmed yesterday in an e-mailed response to the Express that the Government was considering the option to sell Clico’s portfolios, but has not made a final decision.

“We are considering the option of moving forward with a sale of the portfolios but Cabinet has not made a final decision,” he stated. “The reason the matter is now under consideration is simply because of the cost involved. The Government will have to inject substantial funding to capitalise the company. This will be in addition to the $20 billion already put into the Group.”

Howai said: “Government is close to making a final decision in the matter but will do so after appropriate consultation with the major stakeholders. More details will be provided once a decision is made.”

Senior Clico sources have told the Express there is not likely to be an Atrius.

“What will happen with that portfolio is that it will be put on the market for somebody else to bid for it. That auction process will not take place until the Cabinet makes its final decision not to proceed,” sources familiar with the plan said yesterday.

Last February, Cabinet approved the new name for CLICO’s replacement, and last June, it approved the transfer of CLICO’s “good business” (like insurance policies) to Atrius, which would be 100 per cent owned by the Government.

This planned about-face now, is because of cost: the Government will not only have to buy CLICO’s business, but also capitalise the new company, which will be at least $1.5 billion, sources said.

The Express was told the matter was discussed in Cabinet, and the recommendation was that the issue be referred to a committee for further evaluation, where it currently is.

Conservative projections done by CLICO on the good business portfolio, sources said, suggest this new company would be profitable, and therefore it could be a mistake by the Government to not proceed with Atrius.

“If they did what they originally contemplated and moved this book of business into Atrius and they run this business properly (like they did with State bank First Citizens) they could come back five years and launch it on the stock exchange and make good money on the investment,” the source said.

For the past two years, sources said, CLICO has been selling more business than it anticipated to sell in spite of the problems.

“Agents continue to perform and people are still buying and the growth in business over the past two years in this tarnished CLICO has been above projections for two years and that is why we believe Atrius would have been profitable,” a source said.

Ministry of Finance sources, however, told the Express that despite the talk of CLICO doing a substantial amount of new business, it was not the magnitude suggested.

In a subsequent phone interview, Howai said whatever decision is taken will be in the best interest of the country, based on investment, risk, returns, and profitability. He also allayed any concerns policyholders may have, should policies be sold to another entity and not transferred to Atrius.

“Whomever buys these assets will be looking to make the portfolio grow. If it’s managed well, people (should not be worried),” he said.