An­tho­ny Wil­son

Cli­co, the in­sur­ance com­pa­ny that col­lapsed on Jan­u­ary 30, 2009, con­tin­ues to sell mil­lions of dol­lars in new, tra­di­tion­al prod­ucts to thou­sands of new cus­tomers, Car­olyn John, its man­ag­ing di­rec­tor (Ag.), told the Busi­ness Guardian in re­cent in­ter­views. In one of the biggest events in the post-In­de­pen­dence his­to­ry of T&T, the Gov­ern­ment and the Cen­tral Bank in­ter­vened to save Cli­co, which at the time had li­a­bil­i­ties to its short-term pol­i­cy­hold­ers and mu­tu­al fund in­vestors that far ex­ceed­ed its as­sets. In the in­ter­views, John dis­closed that the in­sur­ance com­pa­ny, which cel­e­brat­ed its 75th an­niver­sary last De­cem­ber, is work­ing to­wards an Oc­to­ber dead­line for the es­tab­lish­ment of a new com­pa­ny. The plan is that the new com­pa­ny that emerges from Cli­co would have $6.5 bil­lion of tra­di­tion­al in­sur­ance li­a­bil­i­ties and $7 bil­lion in as­sets. Un­til the change is made, Cli­co con­tin­ues to sell tra­di­tion­al prod­ucts to new clients and cus­tomers con­tin­ue to pay their pre­mi­ums. In 2010, Cli­co did $45 mil­lion in new busi­ness, at­tract­ing more than 1,500 new clients. Last year, the in­sur­ance com­pa­ny did $23 mil­lion in new busi­ness with more than 1,000 new clients agree­ing to sign up. Cli­co's new busi­ness con­tin­ues in­to 2012 and the com­pa­ny projects that it will ex­ceed last year.

"In terms of its prod­ucts, Cli­co still has the best in­di­vid­ual an­nu­ity and life in­sur­ance prod­ucts on the mar­ket," says top Cli­co of­fi­cial, Sylvester Samuel. Cli­co's tra­di­tion­al port­fo­lio com­pris­es in­di­vid­ual an­nu­ities, crit­i­cal ill­ness, whole, term or en­dow­ment life in­sur­ance poli­cies as well as group health, group life and group pen­sions. While Cli­co con­tin­ues to sell tra­di­tion­al life in­sur­ance and group poli­cies, more than 90 per cent of its new busi­ness comes from in­di­vid­ual an­nu­ities-which in­volves the client mak­ing a reg­u­lar month­ly pay­ment to their fund un­til their des­ig­nat­ed re­tire­ment age when they re­ceive a lump sum of 25 per cent of their con­tri­bu­tions with 75 per cent go­ing to pur­chase a month­ly pen­sion. Both Samuel and John agree that for many peo­ple in T&T, Cli­co re­mains a vi­able op­tion in terms of the pro­vi­sion of in­di­vid­ual an­nu­ities. "One of the things that Cli­co can boast about is that from Jan­u­ary 2009 to now, there is not a pen­sion­er who is en­ti­tled to a month­ly pen­sion or a health claim who has not re­ceived that pen­sion or pay­ment on time­ly ba­sis," says Samuel. John adds that if any­body says that they have not been paid rel­a­tive to a pen­sion, it is be­cause they have not sub­mit­ted their life cer­tifi­cates on time.

The mon­ey to make the pay­ments to its pen­sion­ers and oth­er claims comes from div­i­dend in­come-most­ly from the in­sur­ance com­pa­ny's own­er­ship of 32.3 per cent of Re­pub­lic Bank and 56.4 per cent of Methanol Hold­ings-as well as the in­ter­est on the $2 bil­lion in Gov­ern­ment bonds that re­mains on the com­pa­ny's bal­ance sheet from the $3.1 bil­lion that was pumped in to Cli­co's bal­ance sheet in the first quar­ter of 2010. The com­pa­ny to­day is small­er than at its peak in 2008, when for­mer chair­man Lawrence Duprey, ever fo­cused on ex­pan­sion, was dri­ving the sales force to sell new Ex­ec­u­tive Flex­i­ble Pre­mi­um An­nu­ities (EF­PAs) to fi­nance ac­qui­si­tions lo­cal­ly, re­gion­al­ly and in­ter­na­tion­al­ly. The com­pa­ny's sales­force to­day is 150, down from 600 at its peak in 2008. For a long time af­ter the Gov­ern­ment's in­ter­ven­tion, the com­pa­ny's fo­cus was on the con­ser­va­tion of its busi­ness, which meant that many peo­ple who held in­di­vid­ual an­nu­ities were per­suad­ed to keep them. Asked to de­scribe Cli­co's fi­nan­cial po­si­tion in May 2012, John says: "Es­sen­tial­ly, we are man­ag­ing the busi­ness. We are bring­ing our fi­nan­cial state­ments up to date. We post­ed the 2009 with the com­par­a­tive 2008 on our web site.

"You would re­call that when we came in it was Feb­ru­ary 2009 and we had to get every­thing in or­der and we had to make sig­nif­i­cant im­pair­ments to our bal­ance sheet par­tic­u­lar­ly with re­gard to in­vest­ments that we held in re­lat­ed com­pa­nies.

• We had sig­nif­i­cant in­vest­ments in ex­cess of $5 bil­lion in Cli­co In­vest­ment Bank;

• We had re­ceiv­ables in ex­cess of $3 bil­lion from CL Fi­nan­cial and a num­ber of its sub­sidiaries;

• We have a sig­nif­i­cant share­hold­ing in An­gos­tu­ra, which thank­ful­ly has turned around but which was delist­ed in 2009 for 18 months;

• We al­so have a sig­nif­i­cant share­hold­ing in HCL, which is fac­ing sig­nif­i­cant chal­lenges par­tic­u­lar­ly with re­gard to the debt in­curred to fi­nance One Wood­brook Place.

We had a num­ber of de­ci­sions to take with re­gard to our fi­nan­cials and we took all the hard de­ci­sions. That's 2008 and 2009."

In the three years since the in­ter­ven­tion, the com­pa­ny has worked hard to clean up its bal­ance sheet.

It has made a claim to De­posit In­sur­ance Cor­po­ra­tion, the liq­uida­tor of its sis­ter com­pa­ny, Cli­co In­vest­ment Bank, for in­vest­ments val­ued about $5 bil­lion, most of which were held as fixed de­posits.

Try­ing times

From the rel­a­tive com­fort of the cur­rent po­si­tion that Cli­co is in, the in­sur­ance com­pa­ny ex­ec­u­tives are able to re­flect on the pe­ri­od be­tween Feb­ru­ary 2009-when the Cen­tral Bank and the Gov­ern­ment in­ter­vened to save the pol­i­cy­hold­ers and in­vestors-and Sep­tem­ber 2010, when Fi­nance Min­is­ter Win­ston Dook­er­an an­nounced the de­ci­sion to stop all pay­ments on the EF­PAs. Start­ing at the com­pa­ny right out of school at 18, she had pre­vi­ous­ly worked at Cli­co be­tween 1973 and 1977 and again be­tween 1979 and 2005. John, a char­tered ac­coun­tant who trained in T&T and in Eng­land, says she was in se­mi re­tire­ment when she was called to re­turn to the in­sur­ance com­pa­ny on Feb­ru­ary 4, 2009 as the sec­ond-in-com­mand to Claude Mu­saib-Ali, the for­mer Cli­co man­ag­ing di­rec­tor. Cli­co, she says, re­ceived the first tranche of $500 mil­lion in State funds on Feb­ru­ary 16 but that mon­ey was paid out with­in two weeks as a re­sult of the back­log of ma­tured EF­PAs, sur­ren­der re­quests and the month­ly pay­ments that the com­pa­ny makes to its pen­sion re­cip­i­ents and to its staff. "The ma­tur­ing oblig­a­tions were run­ning at be­tween $200 mil­lion and $400 mil­lion a month," says John. Be­tween March 2009 and Feb­ru­ary 2010-when Cli­co got ac­cess to the $3.1 bil­lion in bonds is­sued by the Cen­tral Bank-the in­sur­ance com­pa­ny was able to keep up with its com­mit­ments as a re­sult of an­oth­er $1.4 bil­lion that the State pumped in­to the com­pa­ny, div­i­dend pay­ments from Re­pub­lic Bank and Methanol Hold­ings and an arrange­ment by the Cen­tral Bank, which re­leased "a cou­ple of the bonds that we had in the Statu­to­ry Fund...be­cause the cash sup­port from the Gov­ern­ment was not com­ing in as quick­ly as we would have liked." Cli­co was able to raise $500 mil­lion by en­ter­ing in­to re­pur­chase agree­ments with Re­pub­lic Bank and First Cit­i­zens for the bonds from its statu­to­ry fund, which were then re­paid by a third tranche of $800 mil­lion that Cli­co re­ceived in Sep­tem­ber 2009. The bonds were then re­turned to the Statu­to­ry Fund.

Of the $300 mil­lion left from the re­po arrange­ment, Cli­co re­ceived $250 mil­lion and British Amer­i­can (Trinidad) got $50 mil­lion.

"The next time we got any fund­ing was on re­ceipt of the $3.1 bil­lion in bonds in Feb­ru­ary 2010. So you can imag­ine be­tween Sep­tem­ber 2009 and Feb­ru­ary 2010 how dif­fi­cult it was to face the clients," she says. Asked whether Cli­co gave pref­er­en­tial pay­ments to any EF­PA clients whose in­vest­ments had not ma­tured, John said: "We dealt with some life and death sit­u­a­tions. Peo­ple came in here with oxy­gen tanks and wheel­chairs. There was no pref­er­ence. We made pay­ments on com­pas­sion­ate grounds." Cli­co al­so had to rene­go­ti­ate and re­struc­ture some of its TT-dol­lar and US-dol­lar loans from lo­cal fi­nan­cial in­sti­tu­tions to the tune of about $600 mil­lion by ex­tend­ing the term of the loans and seek­ing low­er the in­ter­est rates. "Every­body was fac­ing the prospect of their au­di­tors im­pair­ing the loans to Cli­co, so we had to con­tin­ue ser­vic­ing the loans, while rene­go­ti­at­ing the terms. That was the some of the sys­temic risk that the Gov­er­nor spoke about," says John.

Bil­lion-dol­lar pay­out

Ex­plain­ing the EF­PA pay­out by the Gov­ern­ment-with each pol­i­cy or in­vest­ment re­ceiv­ing $75,000 in cash with the bal­ance be­ing paid in 20, one-year, ze­ro-coupon bonds-John says the State is tak­ing the place of the pol­i­cy­hold­ers in terms of the claims on Cli­co's Statu­to­ry Fund. "The Statu­to­ry Fund is still in deficit. There has been some im­prove­ment be­cause there has been some up­ward move­ment in the val­ue of Re­pub­lic Bank, Methanol Hold­ings and some of the oth­er share­hold­ings," such as An­gos­tu­ra and Wit­co, says John. "Apart from ma­tu­ri­ties, sur­ren­ders and death claims which will cause a re­duc­tion in Cli­co's li­a­bil­i­ty, with this Gov­ern­ment's of­fer, the State is just stand­ing in the shoes of those per­sons who ac­cept. So the li­a­bil­i­ty with re­gard to the Statu­to­ry Fund is not go­ing down be­cause of the pay­out." So far, the Gov­ern­ment has made pay­ments to 22,990 poli­cies out of a to­tal of 27,737. Up to Tues­day, some $8.6 bil­lion had been paid to hold­ers of short-term in­vest­ments-com­pris­ing Cli­co and British Amer­i­can (Trinidad) EF­PAs as well as the CORE Se­ries mu­tu­al fund and pay­ments to cred­it unions and trade unions. Giv­ing the ex­am­ple of a $1 mil­lion EF­PA, she said the hold­er of the pol­i­cy would re­ceive $75,000 in cash and ze­ro-coupon bonds worth $925,000 but the pol­i­cy is as­signed to the Gov­ern­ment.

John 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 mil­lion 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 be­cause the tax­pay­er has to get his mon­ey back. So the Gov­ern­ment can­not walk away." The pay­out en­vis­aged by the Gov­ern­ment to­tals $12.7 bil­lion. Of that amount, about $10 bil­lion com­pris­ing res­i­dent EF­PA pol­i­cy­hold­ers would be a Cli­co Statu­to­ry Fund li­a­bil­i­ty to the Gov­ern­ment. The bal­ance-com­pris­ing about $1.7 bil­lion held by non-res­i­dent EF­PA pol­i­cy­hold­ers and mu­tu­al fund in­vestors-does not con­sti­tute a di­rect claim by the Gov­ern­ment on the Cli­co Statu­to­ry Fund, but a claim on Cli­co as­sets out­side the Fund. Asked what lessons the coun­try should take from the Cli­co ex­pe­ri­ence, she said the need for good cor­po­rate gov­er­nance prac­tices and sec­ond­ly, the im­por­tance of risk man­age­ment in the world of busines.