Judicial Manager looking at four restructuring options

Deloitte Consulting Ltd., the Judicial Manager appointed for seven of the nine countries where CLICO International Life Insurance Limited (CIL) has been doing business, has developed four restructuring options for the company.{{more}}

The options, which were developed in consultation with a CIL Advisory Committee, are primarily based on the possibilities of capital injections ranging from Bds$152 million to Bds$56 million from the governments of Barbados and the East Caribbean Currency Union (ECCU).

The options were presented to CIL’s policy holders in St. Vincent and the Grenadines at a meeting held at Frenches House on Tuesday, September 27, by Oliver Jordan, Chief Executive Officer of Deloitte Consulting Limited.

The options, which were filed in the High Court of Barbados on September 14, 2011, take into consideration a number of factors, including the transfer of the traditional business portfolio (life, health, pension plans and flexible premium annuity policies) at its full value into the new company; the transfer of the policies held by all individual Executive Flexible Premium Annuity (EFPA) (fixed deposits) policyholders into annuities; the transfer of all EC Government and Quasi-Government EFPA policies into either annuities or equity; and the transfer of all EFPA policies held by private corporations into equity.

Under Option one, the traditional business of the company will be transferred at full value into the new company; individual EFPAs and Quasi-Government EFPAs will also be transferred at full value into annuities in the new company. However, under this plan, corporate EFPAs principal and interest will be converted to shares in the new company. The required investment under this approach is Bds$152 million.

The second option will also see the transfer of the traditional business at full value into the new company, and the transfer of individual EFPAs at full value into annuities in the new company. Corporate and Quasi-Government EFPAs will be converted to shares. The required investment under this approach is Bds$103 million.

Under option three, traditional business will be transferred at full value into the new company. The principal balance of the individual EFPAs and Quasi Government EFPAs will be transferred into annuities, while the interest on these EFPA policies will be converted to shares. Corporate EFPAs will be converted to shares in the new company. The required investment for this approach is Bds$94 million.

The final option, which requires an investment from the governments of Bds$56 million, will also see a transfer of the traditional business at full value into the new company. The principal on individual EFPAs will be transferred into annuities, while the interest on these will be transferred to shares in the new company. Corporate and Quasi-Government EFPAs will be converted to shares in the new company.

The four options are in addition to a recommendation made on July 28, 2011, that the traditional business and Executive Flexible Premium Annuity (EFPA) portfolio be restructured by transferring 60 per cent of the current policy value to a new company, with the remaining 40 per cent of the policy values converted to shares. This July 28 option assumes no capital injection from the governments.

“The final approach will be based on the availability of funding from Barbados and the Eastern Caribbean Governments to support the establishment of the new company.

“The Judicial Manager will, therefore, continue dialogue with the governments of Barbados and the Eastern Caribbean governments to confirm available funding in support of the reconstructing of CIL,” Jordan said.

“It is, however, important to note that there are a number of key contributing factors to the success of these proposed approaches,” he added.

These included the support from the Courts in all Countries for the restructuring plan; special dispensation from the insurance regulators to allow CIL to pledge certain real estate assets to meet its Statutory Insurance Fund obligations; regulatory approval to write new business in the jurisdictions in which the CIL currently operates and confirmation from regional Governments on the level of funding available to execute the restructuring plans as recommended by the Judicial Managers.

On June 2, 2011, the Eastern Caribbean Supreme Court in the High Court of Justice, St. Vincent and the Grenadines appointed Oliver Jordan and Patrick Toppin of Deloitte Consulting Limited in Barbados as the Judicial Managers of CLICO’s International Life Insurance Limited’s Branch Operations here.