Guardian Life exploring more real estate opportunities
Insurance company Guardian Life Limited is cautiously looking to real estate for a continued boost in profits as interest rates continue to trend south.
The outlook comes after a 7.3 per cent annual increase in profit - from $4.08 billion to $4.38 billion at year ending December 2017.
CEO Eric Hosin says the company is examining all options, including whether to go deeper into the property market.
"We are reviewing as we speak. We're looking at other opportunities, because we do have a land bank. It will entail how we roll out the development so that it is beneficial to all," Hosin said.
"We're looking at not only Kingston, but we're looking outside as well; we're not sure what we will do or how it will end up," he told the Financial Gleaner.
Guardian is currently executing a two-phase real estate project in New Kingston valued at $6 billion. The project has reached the second floor of a seven-storey residential complex at the corner of Comlin Bank Road and Musgrave Avenue. But all the 66 units have already been sold out. The other phase of the development at 2-4 Musgrave Avenue will comprise two high rises of about 170 units.
DIVERSIFYING FOR EARNINGS
Hosin says the diversification into real estate is a risk-mitigation strategy to shore up earnings in an atmosphere of declining interest rates.
"Real estate is an investment that helps us as we try to diversify. When we consider that interest rates are declining, we have to look at real estate to mitigate the effect of that," Hosin said, while cautiously forecasting that Guardian's present path will be maintained.
"You will see us continually building at this time because we feel we can use this to play our part in national development as well as having a good alternative regarding investment. At the same time, we are doing it in a sensible fashion - we're not rushing, as we don't want to make mistakes," he said.
Guardian got a boost from its investing activities in 2017. Net investment Income moved from $4.6 billion to $5.76 billion, a near 25 per cent increase. That resulted from a nine per cent increase in Net investment income and a 153 per cent increase in fair value gains on financial assets and investment properties, the bulk of which came from equity securities, according to notes accompanying the company's audited financial report.
Hosin says the company has taken note of the benefits of a long-term horizon in its investment activities.
"It is true that we are looking for some (asset investments) that are short, some that are medium, and in a large way we are looking for long, because our liabilities are long in nature in many cases," he said.
Guardian Life's core business of selling insurance also saw "a real uptick" last year, when premium income rose by a billion dollars to $11.42 billion. The CEO reported that the greater volumes of premiums came from individual life policies and group health programmes.
But he also signalled concern regarding the increasing rate of claims against health policies. Guardian managed a respectable retention rate for premium income of just over 90 per cent, he said, even while noting "an acceptable nine per cent increase in death claims" and a "33 per cent increase in health claims".
Guardian is giving its endorsement of the 'Jamaica Moves' campaign of the Ministry of Health, saying the problem of chronic non-communicable diseases among the Jamaican population needs attention.
"This is a problem across age groups because what you are finding is that even younger persons are presenting with prostate cancer and breast cancer," he said.