Howard Dottin, group chief financial officer of Guardian Holdings Limited, at a September 2005 investors' briefing in Kingston. - File

Ashford W. Meikle, Business Reporter

For the first time in its history, the Trinidad and Tobago conglomerate, Guardian Holdings Limited (GHL), has posted a loss of almost a quarter billion dollars, which the group's top executives have attributed to the negative performance of regional capital markets and the insurance subsidiary's decision to restructure its United Kingdom business.

For its audited financial year to December 31, 2006, Guardian recorded a loss of TT$236 million (J$2.5 billion) according to its audited statement posted on the weekend.

"The main contributors to this unsatisfactory performance were the costs associated with the restructuring of our U.K. P&C business and the fair-value losses associated with the poor performance of our local stock markets," noted Guardian's chairman, Arthur Lok Jack, in his statement accompanying the results.

No FINAL dividend

As a result of the loss, the group will not pay a final dividend, Lok Jack said.

The GHL stock traded up three cents to TT$20 Tuesday on the Trinidad exchange - its first trading day of the week - but has not traded in Jamaica since March 16, when its price slipped 90 cents to J$220.10.

The company's Jamaican holdings include Guardian Asset Management and Guardian Life whose revenues topped $7 billion in 2005 and had assets under management totalling $18 billion.

The group's core insurance business, insurance premium revenue, increased marginally by four per cent, from TT$4.2 billion to TT$4.6 billion.

But Guardian's executives point out that this growth was achieved despite a significant reduction in lump-sum deposits in the 'life' companies and the withdrawal of the Caribbean's P&C operations from 'fronting' business.

"The lump-sum deposits and single- premiums business are sensitive to investment performance. Therefore, if the equity markets are underperforming, this business reduces," Guardian's chief financial officer (CFO), Howard Dottin, explained to Wednesday Business in an email which discussed the conglomerate's year-end results.

"The core life insurance business in Trinidad and Jamaica exceeded last year's new business in terms of annualised premium income," said the CFO.

Impact of fronting

Explaining why Guardian opted to stop fronting business - taking larger risks, on behalf of another insurance company from which the company, acting more like a broker, earns a commission - Dottin said: "Fronting has an impact on the gross premium line but no impact on the net premium line since the entire premium received flows out as reinsurance [and] the true economic value to the company was small in relation to the potentially large risks that were involved."

In fact, largely as result of its decision to reduce its reinsurance coverage in certain areas, Guardian's net premium climbed by 13 per cent, to TT$3.7 billion.

With the negative returns of the stock exchanges - the JSE was down four per cent last year while the T&T Exchange lost nine points - Guardian had a fair value loss of TT$103 million.

Yet, inspite of the improving market conditions, Dottin acknowledged that the group's current investment mix makes it vulnerable to market fluctuations.

"Given our current investment mix, and as long as we hold that mix, any deterioration in the capital market will negatively impact the group's reported profits.

Unfortunately this is an inevitable part of operating under International Accounting Standards in a market that has little liquidity and huge volatility."

The CFO said that Guardian would concentrate on improving its core operational performance.

"Restoration of confidence will come with an improvement in our overall operating performance," he said.

"We have a clearly defined strategy and despite the challenges that we faced in 2006, we now operate companies that are leaner, stronger and better positioned to generate higher sustainable profits."

ashford.meikle@gleanerjm.com.