Guardian Jamaica energised by NCB - Pursuing real estate, individual health as new frontiers

Guardian Life Limited, the second-largest insurance outfit in Jamaica, reckons it is doing well in a competitive market despite a reversal last year of a rapid profit climb in recent years.

Bolstered by a significant take-up of shares in its Trinidad-based parent company Guardian Holdings Limited by NCB Financial Group, the Jamaican operation is banking on a marketing and business bounce from that partnership.

At the same time, the company, which made $4 billion in profit last year and closed the period with $66 billion in assets, is pursuing a $5-billion residential and corporate property build-out around its New Kingston head office over the next three years, determined to chart a new investment strategy to boost profits as corporate paper fails to bring the returns its investors have mandated.

Squeezing even small returns from an admittedly unprofitable new individual health product line and going aggressively after new business in what is regarded as a still underinsured Jamaican market round out the company's arsenal laid out by Guardian President Eric Hosin in an interview with the Financial Gleaner.

In October, Guardian got the go-ahead from insurance regulator, the Financial Services Commission, to enter the individual health insurance market, and the No. 2 company is going after a line of the insurance business previously monopolised in the Jamaican market by No. 1 player, Sagicor Life.

Minority Guardian owner, NCB Financial Group, has not said much publicly about its design, being whispered in business circles, to deepen its ownership and control of Guardian Holdings, but already, Guardian company executives are relishing what is to come.

Anticipating future

"We are very upbeat about the fact that the largest financial institution, NCB, has bought into Guardian. They have already stated that they are interested in investing even more. With that, we look forward to a very positive future with growth and development, being a part of the NCB network," Hosin said.

"We think that we stand to benefit ... . To join up with and be associated with NCB is also a great thing for us and for NCB. We are a good place to invest in," he said, while invoking a local saying in affirmation of his take - "Man don't stone fluxy mango tree".

Late in 2015, NCB acquired 29.99 per cent stake in Guardian Holdings Limited through a private purchase of shares previously owned by the Lok Jack and Ahamad families and International Finance Corporation. Arthur Lok Jack is the chairman of Guardian Holdings, which is 100 per cent owner of Guardian Life.

Reached for an update on NCB's future plans, NCB Group President and CEO Patrick Hylton would neither deny nor confirm information that NCB is either interested in, or is actively pursuing further Guardian share acquisition.

"As you will readily appreciate, NCB Financial Group Limited is a public company with its shares listed on the stock exchanges in both Jamaica and Trinidad & Tobago. Guardian Holdings is also a public company with its shares listed on the Trinidad & Tobago Stock Exchange. This has the consequence that we are obliged to disclose material information to all investors simultaneously in a timely manner. This constrains us from answering some of the questions you have asked, beyond referring to and commenting on disclosures we have already made to the stock exchanges," Hylton said.

Guardian Life, meantime, is pushing ahead with new revenue streams.

"We are looking for alternative investments because government securities are just not going to work," he said of Guardian's decision earlier this year to pump billions of its own cash into property development.

New investments

New investments include the upscale Hampshire residential complex, a stone's throw from its Jamaica headquarters on Musgrave Avenue, along which where Guardian owns some nine acres of land. The Hampshire's 66 units sitting on 1.4 acres, Hosin said, were sold out in two weeks.

It is one of two phases of development in which $5 billion was invested in June.

Phase two will see more homes with entrances on Musgrave Avenue as well as lady Musgrave Road, across the street from the proposed site of a new Marriott hotel. Other phases down the line will see more residential and commercial buildings going up on another six acres.

The recent addition of individual health insurances policies has been driven in part by company's decision to target small business owners, including a new breed of young financially educated entrepreneurs.

Hosin explained Guardian's late entry into the individual market, saying: "Strategically, we didn't want to do it before. Individual health is a very difficult business. The profitability is such that you have to make sure all your ducks are lined up. We wanted a get a certain number of years of experience dealing with group health."

Individual health rounds out the range of products and services that also include group health, individual life, group life, pensions, and property development.

With new jobs being added, especially in tourism and business process outsourcing sectors, Guardian is eyeing an incrementally growing market even as it seeks to get more Jamaicans than its current 220,000 policyholders buying insurance products.

"People usually focus on the premiums that they pay but not on the billions of dollars the insurance industry pays out in claims every year," noted Hosin.

The Guardian head is upbeat about the company's current performance saying its third quarter results, now being approved by shareholders, show the company on track to post improved full year results over 2016.

Guardian Life made net profit of $4.08 billion last year, but that was down from $4.78 billion the previous year. The dip in 2016 is being attributed to extraordinary results in 2015 which Hosin said were bumped up by a one-off windfall from changed tax rules that saw the company keeping more cash than would previously have gone to the government treasury. The 2016 results have been described as normal and organic.

In five years, the company's bottom line has nearly quadrupled from the $1.23 billion reported in 2012. And, Hosin is also trotting out five-year average return on capital employed at 27 per cent as being among the best indicators of Guardian's strong financial position.

The insurance company's cost to income or efficiency ratio averages 23 per cent.

Guardian has a robust cash position with all its investment coming from profits. Its cash holdings would have been positively impacted by the sale of its Belize portfolio of 3,086 individual life policies with annualised premium income of approximately BZ$2.8 million as well as a small pension portfolio of BZ$1.7 million.

Hosin did not disclose how much was paid by the Belizean company that acquired the portfolio.

In August 2016, Guardian also sold its 24 per cent stake in Chris Blackwell's Island Village in Ocho Rios, but Hosin said the terms of the transaction were confidential.

Guardian Life's 2016 annual report recorded $239.5 million in proceeds from discontinued operations and $2 billion from the sale of financial assets.

huntley.medley@gleanerjm.com