Last weekend the Clico Policyholders Group (CPG) received what we prefer to call an advance copy of the Clico's Audited Financial Statements for the year ended December 31, 2013, (final draft) in our mailbox. According to note 17, "For 2013, the EFPA Investment Contracts (classified under the Insurance Act as insurance contracts) have been valued (at circa $10 billion) taking into consideration the total acceptances the GORTT's payout offer as at December 31, 2013.
For the period under consideration, more than 90 per cent of all EFPA policyholders had accepted the Government's offer.
"This offer involved policyholders accepting a payout value equivalent to the policy value as at the last renewal date before September 10, 2010, less principal withdrawals, and policyholders assigning their policies to the Government. The payout commenced in 2011 and all of the policies, now assigned to GORTT, are valued at the payout value."
Hence the Government's claim of circa $10.6 billion for the consideration paid to EFPA policyholders as evidenced by Appendix 1 of the July 4, 2013, letter of intent, which sets forth the terms and conditions of proposed new shareholders agreement with CL Financial.Gerard Yetming, chairman of both CLF and Clico is reported to have said "a team of government officials and (CLF) shareholders are working on this and they are expecting to have a final agreement by March."
As we reflect on the above, we are reminded of the words of Clico's managing director, Carolyn John, in an interview with the Business Guardian in 2012. She explained that in the EFPA payout by the Government...the State is taking the place of the policyholders in terms of the claims on Clico's Statutory Fund. Giving the example of a $1 million EFPA, she said the holder of the policy would receive $75,000 in cash and (20) zero-coupon bonds worth $925,000 but the policy is assigned to the Government.
John further explained, "If you were entitled to the protection of the Statutory Fund, the Government now stands in your shoes as the assignee. So the liability for the millions of dollars has not gone away. It remains with Clico, but the Government is now effectively the policyholder because it is standing in the shoes of the policyholder. The liability has not come off our balance sheet ..."
Additionally, former finance minister Winston Dookeran, in a speech to the House of Representatives on September 14, 2011, explained, "It is expected that the discounting rate (for bonds of maturity up to ten years) would be in the order of 80 cents (on the dollar) resulting in a haircut for the first ten years of 20 per cent.
Bonds with a maturity of 11 to 20 years may be exchanged for units in NEL 2 (now called the Clico Investment Fund (CIF)) at a rate of dollar for dollar which means that the total return for the investor would comprise 80 cents on bonds with maturity from one to ten years and 100 cents on the dollar for the longer term bonds through the NEL 2 (CIF) mechanism. On this basis the average return would be in the order of (approx.) 92 cents on the dollar (leaving an outstanding balance) ..."
Simply put, this means that by making it mandatory for each EFPA policyholder to execute a Deed of Assignment and Declaration of Trust in favour of the Government, as a condition precedent to the acceptance of the offer, the Government ensured that it was placed in the position of assignee and/or trustee of the insurance contracts of all these policyholders and is therefore now legally empowered to claim from Clico not just 90 perc ent but 100 per cent of the value on the basis of the contractually agreed terms and conditions.
In light of the above and Finance Minister Larry Howai's recent statement on state-owned media CTV that Clico is now "solvent," the only unanswered question for policyholders is, will the Kamla Persad-Bissessar-led Peoples Partnership Government seize the opportunity to finally do right by the thousands and thousands of policyholders and ensure that they get that which is morally and legally due to them; or will the Government seek to 'pocket' policyholders' money?
Either way, we are calling on the Government to issue a clear and unequivocal statement so that policyholders may be guided accordingly.
Peter Permell
Chairman