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Guardian Life preps for Island Village exit, profit surges

Published:Wednesday | April 13, 2016 | 4:00 AMCamilo Thame
Eric Hosin, president of Guardian Life Limited.

Guardian Life Limited posted an 87 per cent jump in earnings in 2015.

The $4.8 billion net profit last year largely reflected a one-off $3.5 billion gain from a change in the tax regime, which was offset by a $2.5 billion increase in the reserves for future policy benefits due to the normal passage of time.

Last September, the amendments to legislation required that life insurance companies pay income tax at a rate of 25 per cent rather than a three per cent levy on gross premium income and a 15 per cent tax on investment income.

The change also lowered the asset tax from one per cent to 0.25 per cent.

Consequently, Guardian Life's net results from insurance activities increased from $1.1 billion in 2014 to $3.7 billion last year.

The insurer, which operates from New Kingston, also benefited from a bumper year on the Jamaica Stock Exchange in 2015, posting $4.4 billion in net income from investing activities, up from

$3.9 billion the year before.

"The consolidated net profit was driven by the strategic management of the company's relationships with its stakeholders, the focus on new business growth, service excellence, liquidity and risk management and operational efficiency," according to Eric Hosin, president of Guardian Life.

Last year also marked the company's exit from Belize.

It offloaded the branch, which it inherited through the acquisition of Finsac-controlled insurance companies in 1999, to RF&G Life Insurance Company through a transfer agreement that was effected January 1, 2015.

The operations in the Belize made a

$15 million profit in 2014 following a

$24 million loss the year before. But the limited growth prospects for the branch, which took in $265 million in revenue in 2014, compared with $255 million the year before, factored more in the decision to sell.

The gain on sale of the life insurance policies added $240 million to Guardian's bottom line in 2015.

This year should finally mark Guardian's exit from its investment in Ocho Rios Beach Limited, the owner of Island Village shopping centre and entertainment facility located in the St Ann town.

Having paid US$2 million for a quarter stake in the entity in 2000, the insurer had hoped to finalise a sale of its shares (now 24 per cent, or 24,000 units following a sale of a one per cent stake in 2007) for US$60 a share last year.

However, the valuation of the asset fell as occupancy level at the property in St Ann declined, and the majority shareholder revised his offer to US$37.40 a share last June.

The minority shareholders agreed to the new price, and Guardian made a $63 million impairment provision in2015 on the investment following a $38 million impairment in 2012, when the first offer was made.

"The sale agreement is expected to be executed by the end of 2016," said the insurer's financial statements.

Put another way, Guardian will exit the 15-year-old investment at 47 per cent of US$79-a-share price that it entered the deal at in 2000.

camilo.thame@gleanerjm.com