|
OVERVIEW
Fiscal 2002 has been a year in which FINSAC continued its thrust to
rapidly wind down its activities in the financial sector, by
successfully divesting itself of its major holdings in Jamaica’s banking
and insurance sectors. FINSAC’s divestment efforts were also directed
towards its real estate and other physical assets. As a result, FINSAC
no longer holds a majority stake in any financial institution, and the
resolution of Jamaica’s financial sector crisis is now largely
accomplished. FINSAC is thus well on target to comply with its five to
seven year timetable originally set in 1997.
DIVESTMENT ACTIVITIES
Interests in Financial Institutions
FINSAC started off the year with its focus on accomplishing the sale of
its majority stake in National Commercial Bank Jamaica Limited, the
largest bank in the country, and the stake held by the Government of
Jamaica in Life of Jamaica Limited (LOJ), the largest life insurer in
the country. Both sales were accomplished successfully during fiscal
2002.
(a) Insurance
The process of divesting the Government of Jamaica’s stake in LOJ
started during the previous financial year, and was successfully
concluded this year, after a competitive bidding process.
Below is a summary of the bids received on April 2, 2001:
| |
|
|
| 1 |
Barbados Mutual Life Assurance Society
/ Life of Barbados Limited / Colina Insurance Company Limited
(Bahamas) consortium |
J$2,047.5M |
| |
|
|
| 2 |
Colonial Life Insurance Company
(Trinidad) Limited (CLICO) / CL Financial Limited |
J$2,216.0M |
| |
|
|
| 3 |
First Life Insurance Company Limited |
J$1,229.0M |
FINSAC’s technical team reviewed the three bids received and
evaluated them against the following criteria, which were designed to
measure the suitability of each bidder as the successful purchaser of
the majority ownership in Life of Jamaica Limited. A summary of the
criteria used was distributed to the bidders prior to receipt of the
bids. Non-compliance with any of the requirements below resulted in an
automatic disqualification of the bid.
a) The operating plan, business plan, annual reports, and other
requested information were to be submitted.
b) The data should be reliable, accurate and up to date.
c) The potential owner should not be in receipt of or associated
with an entity in receipt of FINSAC’s assistance.
d) The bidder’s directors or owners should not be a director with a
controlling interest in a company in which FINSAC has intervened at
the time of such intervention.
e) The directors/owners should not be under indictment in
proceedings of bankruptcy, or fraud, or customs/tax/securities
violations.
f ) There should be no reason to doubt that the affairs of the
bidding entity are exercised with good corporate governance, due
diligence and in accordance with properly formulated plans and
strategies.
g) The company's Minimum Continuing Capital and Surplus
Requirements (MCCSR) (before acquisition) should exceed 100%.
h) There should be no reason to doubt that the company will comply
with all Jamaican regulations.
Once a bidder had passed all the automatic disqualifiers, then the
following criteria were assessed:
a) the financial capacity of the potential owner(s) of the shares
as evidenced by a review of the financial statements of the
acquirer(s);
b) the managerial capability specific to the life insurance or
health insurance industry as evidenced by historical performance and
the operating and business plans submitted by the bidder(s).
The bid price was then ranked against the other qualified bidders.
Based on these criteria, FINSAC’s review team disqualified the bid
from Colonial Life Insurance Company/CL Financial Limited, primarily
because it failed to meet the targeted level of capital surplus measured
before the acquisition, which was stated as one of the automatic
disqualifiers, of which all bidders were aware.
The two remaining eligible bids for comparison were, therefore, the
bids from First Life Insurance Company, and the consortium consisting of
Barbados Mutual Life Assurance Society (BMLAS), Life of Barbados Limited
(LOB) and Colina Insurance Company Limited (Bahamas) (Colina).
Based on the following key factors, the FINSAC team recommended the
acceptance of the BMLAS/LOB/Colina consortium’s bid. This was within the
range of offers expected by FINSAC, based on an actuarial valuation
carried out by consulting actuary Desmond Sutherland and a 2001 review
of the franchise value of LOJ carried out by PricewaterhouseCoopers of
Canada:
- the strong financial capacity of the partnership and particularly
the lead bidder, BMLAS (rated “A” by A.M. Best);
- BMLAS’s experience in the Jamaican insurance sector through its
recent and successful acquisition of Island Life Insurance Company
Limited (Island Life);
- its plan to fund LOJ to a 150% level of MCCSR immediately; and
- its strong management team.
Pages 1
2 3
4 5
|
