LoJ sale completion expected next month
THE SALE completion of Life of Jamaica (LoJ) to Barbados Mutual Life Assurance Company is expected by mid September.
So said Financial Sector Adjustment Company (FINSAC) corporate operations executive, Patrick McDonald, yesterday.
FINSAC acquired a 76 per cent majority stake in the beleaguered company last year when it found itself run aground by liquidity problems.
In order to rehabilitate the company and prepare it for a viable sale FINSAC injected over J$2 billion into the country's leading life insurance company
"We have reached an agreement on a price satisfactory to both of us, the basic terms are agreed," Mr. McDonald told Wednesday Business.
Only last week there was speculation that the sale was stalled because FINSAC was attempting to extract more funds from Barbados Mutual who in turned believed that at US$45 million it had overpaid for Jamaica's largest life insurance outfit which was over $14 billion in pension funds under management.
Barbados Mutual had made an "indicative offer" when it originally bid for LoJ in May of this year, Mr. McDonald said. After completing its 'due diligence' the Barbados insurance powerhouse went about acquiring a more accurate picture of the company's operations and financial status. As a result, further negotiations ensued.
The Barbadian company has got a "marginal discount" on its original offer, explained Mr. McDonald . He did not disclose the discounted offer, saying there were still details to be finalised.
Earlier this year, Barbados Mutual's chief operating officer Dodridge Miller told Wednesday Business: "We think we can do a good job of turning around LoJ and so we placed a competitive bid of US$45 million for the company. We expect to capitalise LoJ beyond the figure injected into it by FINSAC. We will look to place capital funds of between US$25 to US$35 million into LoJ."
Observers of the life insurance industry suggested that the negotiations with Barbados Mutual had stalled, with the Barbadians seeking better terms for their purchase.
"Rubbish," Mr. Mc-Donald said in response to this. "The negotiations are going full speed ahead."
The successful completion of these negotiations would leave Barbados Mutual with control of two major Jamaican life insurance companies. It already has a controlling interest in Island Life.
Now with control of LoJ, it is expected that Barbados Mutual will merge LoJ and Island Life, LoJ's vice president for customer care, support and marketing, Paul Taylor speculated.
Such a merger would allow for a rationalisation of the administrative systems as well as the computer systems operated by the two Jamaican companies. "This would create some scope for cost cutting," said Mr. Lalor.
The two local life insurance entities are listed on the Jamaica Stock Exchange (JSE) and have minority shareholders, said JSE public relations manager, Yvonne Nicholson. Any merger would have to incorporate the interests of the minority shareholders.
"I don't see any major changes at LoJ in the near future," Mr. Lalor said.
The "legislative issues" involved in merging two insurance companies are likely to take some time to sort out.
Island Life posted a net profit of J$166.2 million during its last financial year and is projecting $100 million in profit for the current year. The company has already earned some $60 million in profits for the year to the end of June 2001, following its first quarter audited income of $22 million.
LoJ's after-tax profit for the year 2000 compared favourably with a consolidated loss of $2.8 billion in 1999. Consolidated profit from operations for the quarter to March 31,2001 totalled $125.5 million, compared with an operating loss of $59.7 million for the same period in 2000. The 2000 results reflect the fact that LoJ's local operations received a $2 billion capital injection.
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