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Stabroek News

BCIC back on the market for partners - Says real growth won't happen without market consolidation
published: Friday | March 9, 2007


Leslie Chung, managing director of BCIC.

Lavern Clarke, Business Editor

A year after it broke off merger talks with NEM, the Matalon-owned British Caribbean Insurance Company (BCIC) has signalled it is back on the market, looking for 'worthwhile' partners.

"We're looking to acquire or to merge," managing director Leslie Chung told the Financial Gleaner on Friday.

The general insurance company, one of 11, suggests that the market has peaked making consolidation inevitable, saying otherwise its players will end up cannibalising each other's markets.

"We can only achieve inflationary growth," said Chung, referring to the sector. Those individual companies that continue to grow, he said, have done so not by building out new markets, but by capturing a share from competitors.

Sector declined

In fact, in 2006, the general insurance sector had 5.2 per cent growth in gross written premiums - from $17.7 billion to $18.6 billion - according to figures compiled by regulator the Financial Services Commission, but in real terms, the sector would have declined, marginally, given inflation of 5.8 per cent recorded by Statin.

Compared, the sector had 13.9 per cent growth of gross premiums in 2005, in a year when inflation was 12.9 per cent, indicating marginal real growth.

Net premium income grew by seven per cent annually in those two years.

A week ago, BCIC launched a new product, LadyMax - motor coverage with a security component in partnership with Hawkeye Security, meant to assist in the recovery of stolen vehicles by means of electronic tracking devices - from which it anticipates 'new' income of up to $300 million from the new product. The company plans to follow with ExecutiveMax.

But new products do not equate to new market share. Rather Chung expects that clients for LadyMax will either upgrade policies or switch from other insurance companies.

These conditions, said Chung, continue to illustrate that the market remains ripe for alliances that will marry processes while cutting overhead expenses and other costs to more efficiently service the market.

It's a position that is consistent with regulators' reading of the sector, sources say.

It's the FSC's thinking, the Financial Gleaner was advised by persons in the know, that the competition will only get more fierce under the Caricom single market and that it was in the interest of existing companies "to find synergies that will allow them to meet the competition."

It's for those reasons that BCIC had made an overture to NEM.

It's not clear why the talks folded.

Regulatory concerns

"The merger did not take place possibly due to regulatory concerns," said Chung, but did not elaborate.

But the pull back also came at a time when BCIC had hit a slump, depleting its shareholder value. NEM, on the other hand, reported a rise in profits that year, to $385 million, and added muscle.

BCIC is a $3 billion company, measured by its asset base, and has revenues of $1.5 billion, said Chung. The company claims the No. 5 spot in the general insurance market.

BCIC has made no new overtures, says Chung, but the company, which is chaired by Joseph M. Matalon, continues to speak openly of its desire for a partner.

General Insurance Sector 2006

lavern.clarke@gleanerjm.com

Total Assets $35.7b
Capital & Surplus $8.8b
Gross Premium Written $18.6b
New Premium Written $8.6b
Underwriting Profit/(Loss) ($1.2b)
Net Income $927.1m
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