A question of commitment

IT'S A simple equation for the principal players at Barbados Mutual Life Assurance Society (The Mutual). While Jamaica may be experiencing a recession and the harsh socio-economic consequences as a result, making a major investment here was still worthwhile, as the existing opportunities outweigh the negatives.

Policyholders and shareholders of Island Life Insurance Company are expected to meet in Kingston some time this month to give the seal of approval to a letter of intent signed by The Mutual to take controlling interest in the Jamaican company and actively participate in the management of its future operations.

It was the need to further expand its policy base, and the relative size of the Jamaican population which saw The Mutual begin its renewed thrust to enter the Jamaican market three years ago, according to its chairman, J. Arthur Bethell.

In discussions with the company's management at its Bridge-town, Barbados and Port-of- Spain, Trinidad offices recently, Mr. Bethell told a group of Jamaican journalists invited to have a look at its operations, that they would of course like to see a more favourable investment climate in Jamaica and stable exchange rate. Buy they also feel "this could be the opportunity we've been looking for."

The usually conservative Barbados Mutual has been on an expansion binge especially within the last 20 years and actually started discussions to re-enter Jamaica - where it operated between 1896 and 1970 - before the Financial Sector Adjustment Company (FINSAC) put to tender the portfolios of Crown Eagle, Dyoll Life and Mutual Life, which went to Trinidad giant Guardian Holdings and local player, First Life.

The Mutual already operates 21 offices in 19 countries, from the Cayman Islands in the north to Curacao in the south and offers a wide range of financial products and services including individual life, annuities, general insurance and retirement products, group life, health and pensions, mutual fund products, asset management services, banking and credit card services.

Despite its substantial investments, one of the strengths of The Mutual lies in its guidelines to invest no more than 20 per cent of its portfolio in real estate development, unlike some Jamaican companies which have invested between 60 and 80 per cent in that area, Mr. Bethell said.

General manager in charge of operations, Dodridge Miller, said that in addition, the company generally ensured that "we have long-term tenants before we build. We are not in the business of speculation."

Deputy general manager at The Mutual in Trinidad, David O'Brien, noted that the same principle has been applied to the operations there. "We went into real estate, but we build specific buildings for clients, just the same as in Barbados. We will not start a project unless we have at least 40 per cent of it already tenanted," he said.

However, Mr. Bethell pointed out that "The Mutual's core business is insurance and I see that continuing."

He said they would bring the prudence and confidence of The Mutual to their management of the business in Jamaica, using an industry approach to rebuild confidence in the sector.

The Mutual has seen its assets grow to about US$500 million at the end of 1998, and together with segregated pension funds, total assets under management are more than US$700 million. Net income for the year was US$11.5 million.

Mr. Bethell said that as they prepare to move into Jamaica, The Mutual wanted to ensure they provide good value for their policyholders, good training and accommodation for staff and continued to be good corporate citizens.

He said that although the Island Life deal has not yet been finalised, the Jamaican company would continue to be operated as a stock entity. "There is no consideration to changing that," said Mr. Bethell, adding that the only changes would be in the management of the insurance company.

Mr. Bethell, asked how the deal would be financed, said they would not have to borrow to finance the acquisition, and they had a yet undisclosed plan to ensure Island Life is adequately capitalised and that assets are appropriate to match the liabilities.

He said Island Life, which has some 30,000 policies and assets of about US$50 million, would represent about 10 per cent of The Mutual's holding if it is acquired. A combined total of more than 75,000 individual life policies are currently being administered by The Mutual.

Mr. Bethell said the growth of The Mutual has primarily taken place within the last 20 years, partly through an expansion in its agency force, leading to growth in business in Barbados and elsewhere, thereby boosting the company's asset base.

He surmised that the problem at Island Life might have been because there was a "little too heavy" concentration in real estate investments, and although the Jamaican economy is facing trying times at the moment, "I feel it will grow, but I just can't say when."

Asked whether the staff at Island Life would be retained if The Mutual is successful in its bid, general manager Mr. Miller said that was a judgement they could not make "at this stage".

Mr. Miller believed the problems in the insurance sector in Jamaica resulted from a mismatch of assets "and we will be trying to correct that."

Asked why they believe they will be able to out-compete other companies in the insurance sector in Jamaica, Mr. Miller said that once they have completed the transaction, Island Life would become the strongest such company in Jamaica as they bring their management capability and expertise to bear on its operations.

It is more than likely that Trinidad's guardian Life, which bagged the majority of the now defunct Jamaica Mutual Assurance Society, would also make the same claim.

Company officials, noting that Jamaica's new Insurance Act makes provision for 100 per cent solvency, pointed out that they have adopted international standards for testing continuing solvency and to monitor surplus levels.

Mr. Bethell said The Mutual's solvency requirement ratio was already at 197 per cent, and that the company's strategic goal is 200 per cent.

*For more information on Barbados Mutual read The Rise of the Phoenix, published by Ian Randle Publishers. The book looks at the rise of the Society between 1840 and 1990 and is written by Cecilia Karch and Henderson Carter.

 November 7, 1999