GUARDIAN Holdings Limited (GHL) and Clarien Group Limited (CGL) continue to see improvement in earnings as the Bermudan and Caribbean economies experience a rebound in tourism and other economic activities.

Both companies are subsidiaries of NCB Financial Group Limited (NCBFG) with a 61.77 per cent stake in Trinidad-based GHL and 50.10 per cent in CGL. Guardian is a Caribbean insurance conglomerate operating in 21 countries while Clarien is the owner of Clarien Bank Limited (CBL) which has banking, brokerage and corporate administration services in Bermuda.

At the NCBFG investor briefing held last week, chief executive officer of CBL Ian Truran said that the Bermudan economy was on a positive trend as more tourists roam the streets and greater business in the financial services space. He also pointed out how S&P Global Ratings had reaffirmed it’s A+ credit rating while Moody’s affirmed the A2 rating with a stable outlook. He also pointed to the fact that the Government has a 31-point economic recovery plan.

Truran pointed out that by the end of the financial year (September 30), its loan book would have experienced north of five per cent growth and the non-performing loan (NPL) book improving by more than 30 per cent. He explained that this growth was driven by infrastructure and sovereign related financing as well as high end residential real estate financing. CBL’s consolidated loan book was BM$712.19 million ($103.94 billion) at the end of 2021 with Truran stating at the May briefing they intended to grow the loan book by BM$150 million in the 2023 period.

He also pointed to how the bank’s capital ratio was at 21 per cent which not only exceeded the regulatory minimums, but also allows them to grow as well. However, the growth in the loan book was abated by the decline in global asset prices which impacted the fee income the subsidiaries generated.

“We have unfortunately experienced some reductions in our fee income associated with the global markets and our asset management business as everyone is probably aware of, the global markets are down north of 20 per cent and therefore, our fee-based income has been impacted accordingly. We are looking at our transaction banking as well as our asset management business to make sure first of all that we retain, penetrate and are successful in our acquisition opportunities,” Truran added.

GHL’s second quarter saw its gross written premiums record a marginal reduction to TT$1.68 billion, but a four per cent improvement in net written premiums. The net result for investment activities was down by 39 per cent to TT$264.91 million for the quarter and experienced a drop of 26 per cent to $570.44 million for the six months. The notes attributed this decline to the fall in asset prices in the first half of 2022.

“The world has experienced a perfect storm of macroeconomic and geopolitical events, which has led to very high levels of volatility across financial markets, and which has also impacted our portfolios. The unfavourable fair value movement of the group’s local and global investments was offset by an increase of investment income of TT$77 million, arising out of increased investment portfolio and income earned,” stated the shareholder report signed by GHL chairman and NCBFG president and CEO Patrick Hylton.

Net results from insurance activities doubled to TT$413.15 million for the second quarter and by 63 per cent to TT$680.76 million for the first six months of the year. While the GHL notes said that this was attributable largely to favourable reserve movements on capitalising on investment and expense management opportunities, NCBFG’s consolidated financials for insurance activities revealed that the group experienced a 549 per cent rise in reinsurance on benefits and claims of $12.99 billion for the second quarter and $36.23 billion for the first half of the year. This occurred at the same time as insurance benefits claims expenses moved up 59 per cent to $88.59 billion for the six months. GHL had exited the reinsurance business at the end of 2021 after experiencing a US$10-million loss in 2021 after floods in Germany.

According to Investopedia, reinsurance is also known as insurance for insurers or stop-loss insurance. Reinsurance is the practice whereby insurers transfer portions of their risk portfolios to other parties by some form of agreement to reduce the likelihood of paying a large obligation resulting from an insurance claim.

According to a Fitch report, mergers and acquisitions in the global reinsurance sector are expected to be limited in 2023 amid investor concerns over macroeconomic risks and climate change risks. It also stated that even though reinsurance firms may raise premiums which will generate greater profitability, Fitch doesn’t expect a wave of interest in acquiring reinsurers for the near term.

GHL’s net profit attributable to shareholders tripled to TT$256.34 million in the second quarter and up by 70 per cent to TT$435.71 million ($10.02 billion) for the six month period. This represents half of the total TT$782.33 million earned in 2021.

GHL’s total assets were up two per cent to TT$34.90 billion while equity attributable to shareholders was up six per cent to TT$4.93 billion. GHL’s share price on the Trinidad and Tobago Stock Exchange (TTSE) is down 11 per cent year to date to TT$26.74 while the Jamaica Stock Exchange (JSE) share price is down three per cent to $505.44.

“The downturn in the economy will affect that area as well, but we have developed some hedges and there’s also some natural hedges. We perceive it may have a significant impact on the revenue side. However, it’s a proven fact that any life, health and pension company that has a good distribution system will prove resilient to an economic downturn on the revenue side. A well-trained distribution channel has the ability to change the focus of sales from wealth accumulation to wealth protection when there’s an economic downturn,” said outgoing GHL CEO Ravi Tewari on the group’s ability to withstand an economic downturn.