AIG Jamaica moves its business offshore: To finalise exit by 2016
Three years after a major restructuring of the business, general insurer AIG Jamaica is moving its operations offshore but will continue to write business for clients here.
AIG Jamaica Insurance Company Limited was formerly Chartis Jamaica Insurance Company Limited, which was created in 2012 when sister company American Home Assurance Company (AHAC)-Jamaica transferred its business to that operating vehicle. The company continued to be headed by Earl Codling, but he was eventually replaced by new country manager Rarane Langley around the second half of 2014.
Chartis Jamaica is a subsidiary of Chartis Latin America Investments LLC of Delaware in the United States. American International Group is the ultimate parent of both Chartis and AHAC.
AIG Jamaica stopped writing business at the end of January, with two exceptions, and ceased renewing policies at the end of March.
It is still writing business for government tenders and international clients, which will also come to an end on September 1, but simultaneously, that business will be taken over by American Home Assurance Company, which essentially amounts to the reversal of the restructuring that happened in 2012.
This time, however, AHAC will enter into a management contract with an AIG affiliate domiciled elsewhere in the Caribbean to handle the business from government and multinational clients. Neither the name of the affiliate nor its country location was disclosed.
"This is something that since the beginning of the year we have been working with the regulator, broker, and our clients to guarantee that what we are doing in Jamaica has no [impacts]," said a spokeswoman for AIG, speaking with Wednesday Business from Miami on Tuesday.
She said that the move was related to the best use of resources. "As the notes said, we have ceased operations there. As a global company ... our responsibility is to continue to use our resources on the most robust opportunities we have in the market. Because of that, in assessing our future growth and potential growth there, this is a decision - as any global company does - which we made."
All the insurance business, assets, and liabilities of the Jamaican branch have been transferred to AHAC.
Jamaica is rewriting its transfer tax policy rules and has just introduced legislation to close loopholes for companies with foreign branches, but the AIG spokeswoman declined to address the issue of whether the move was related to tax considerations. It will take more than a year to complete the run-off of operations. AIG Jamaica is working with a timeline of August 31, 2016, to substantially complete the transfer of business subject to approval by the Financial Services Commission.
It is expected to result in the liquidation and transfer of net assets to the company's parent in the form of dividends and or the return of contributed capital.
AIG Miami confirmed that the company will still do business here.
"Our company, which is American Home - AHAC - will remain in the market," the spokeswoman said, but she declined to address what the outcome would be for staff.
"What we are trying to do is to guarantee a smooth transition. Staffing and personnel, that's something we don't discuss, but the most important thing is that we follow the proper procedures, and we have been working with the regulators and our employees and clients to make sure that there is a smooth transition for everyone."
The company, in its published financials, said that employee severance and contract termination awards will cost US$766,060 ($89 million) it disclosed on Monday in published financials.
AHAC will bill AIG Jamaica for the amount.
The Caribbean-based affiliate that will manage AHAC's business will provide the staffing to undertake AHAC's underwriting, claims, and investment functions.
AIG Jamaica operates in the property and casualty markets.
Last year, the company grossed premiums of $1.93 billion, up from $1.84 billion in 2013.
Its assets of $2.54 billion were almost twice its liabilities of $1.51 billion at year end December 2014. Its book value of $1 billion includes $702 .45 million of share capital.
AIG Jamaica made underwriting profit of $110 million last year, down from $171 million in 2013, while net profit fell from $191 million to $151 million.