Friday, April 24 2009

A $5 billion injection over the next two years is what Colonial Life Insurance Company (Clico) needs to return to normalcy, Central Bank Governor Ewart Williams said yesterday.

Speaking at the launch of the Monetary Policy Report (MPR) at the Central Bank auditorium, Port-of-Spain, Williams said the cash inflow was needed to bring stability to Clico’s core operations including the rollover of maturing policies and recovery of new business.

Asked to clarify whether the assets of Clico were being sought by other entities, Clico chairman and former Central Bank Governor Euric Bobb said this was not the case and noted the company was being rebuilt. He said the company has had no suitors. Williams said some assets of CL Financial, Clico’s former parent company, were more encumbered than initially thought and there was need for an asset evaluation to determine to what extent this was so.

“We did not go into detail into each asset,” he said when asked about the Memorandum of Understanding (MOU) signed between Government and CL Financial on January 30. On the payment of dividends before the MOU was signed with the Government, “It is not exemplary, it is not,” Williams said.

Whether he felt CL Financial was conducting negotiations in bad faith prior to the signing of the MOU, as it did not declare how its assets were pledged, Williams said in the MOU, CL Financial committed itself to divesting its assets.

He said having the assets encumbered does not mean Government can’t get net value for the assets and consequently be reimbursed. Pointing to the injunction against CL Financial to stop the sale of Clico Energy, Williams said this matter was still in court.

“We acted to stop that,” he said.

Asked about the US$50 million being used from the Petroleum Fund to provide funding to failed insurance subsidiaries of Clico across the region, Williams said this was justified. He said the argument of regional leaders was that assets of CL Financial were committed to Trinidad and Tobago and they felt they had a just claim on the group’s resources. “I think the money is well-justified,” he said.