Regional economic decline blamed for reduced GTM profit

Jun 01, 2017 News

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The Guyana and Trinidad Mutual Fire and Life Insurance Company Inc. (GTM) has mainly attributed its reduction in profit for 2016 to economic challenges which led to a decline in the demand for life insurance.
Chairman of the GTM Board, Mr. R. L. Singh in his ‘Review of the Report and Accounts for the Year ended December 31, 2016’ said that these challenges are not specific to Guyana, but are also being faced by branches in other Caribbean jurisdictions.
Singh made these statements at the company’s Annual General Meeting on Tuesday at the Georgetown Club, Camp Street. He said that in Guyana’s case, the company made a profit of $83M for the year 2016, compared to $329M in 2015, a reduction of $246M. However, Singh said that the disparity between 2016 and 2015 was due to the sale of equity investments in 2015, thus increasing income by $249.54M in that year.
Giving more figures, the Chairman said that GTM made a surplus of revenue over expenditure of $352M before the adjustment for the movement in actuarial liabilities, compared to $587M in 2015.
In his analysis of the company’s performance, Singh said that as with most life insurance companies across the Region, last year proved to be quite challenging for GTM, even though the individual life market remains largely untapped.
He said that work done by the International Monetary Fund (IMF) show that there is low penetration for individual life insurance across the Organisation of Eastern Caribbean States (OECS) and Guyana, with just under five per cent and three per cent respectively.
According to Singh, due to the economic position of Caribbean countries, insurance companies are finding it difficult to achieve levels of premium growth enjoyed previously or increased market penetration.
Despite this, the Board Chairman said that he is pleased that GTM has recorded a growth in gross premiums of $97.27M or six per cent over the previous year.
“Of this sum, $43.24M or 44.45 per cent emanated from Guyana and St. Lucia, $40.31M or 41.44 per cent. Though the majority of these premiums were generated from sale of individual life products, health insurance has far greater potential and your company has taken steps to further expand its health portfolios.”
Further, the Chairman reported that total claims for the year reached $626.6M of which $476M was due to health claims. He said that the St. Lucian branch alone incurred 48.5 per cent of the overall health claims for the year.
He reported that investments by the company are limited to fixed deposits, government-backed bonds, treasury bills and mortgages to sales and administrative staff. Singh added that the company will continue to scan the environment for new secured long-term investment opportunities that will not place GTM’s financial security at risk.
Focusing on Guyana’s performance, Singh said that over ten years ago, the Caribbean branches were outperforming local operations one year over the next. “This is no longer the case. GTM Guyana has recorded an average annual growth of approximately 13.22 per cent in gross premiums over a period of five years.”
He reported that for the financial year 2016, GTM Guyana recorded a surplus of $227.84M and net profit of $26.18M following deduction for movement in actuarial liabilities. Singh expressed his confidence that despite external challenges, the company will continue to improve its production, loss and expenditure ratios and profitability.
Singh said that there was an increase in investment income in 2016 of $9.2M or 4.9 per cent when compared to the previous year. Performance was also hindered due to Britain’s first steps towards leaving the European Union, the Chairman said.
According to him, this move resulted in temporary turmoil in stock markets around the world, most of which eventually rallied to trade higher than before. On the other hand, the Pound Sterling was not so fortunate, since it would have suffered its worst devaluation in recent history.
He said that companies which held Pounds Sterling experienced this effect immediately, including GTM.
“The effect of the devaluation is reflected in the Statement of Profit or Loss and Other Comprehensive income under the line item, ‘Currency exchange loss.’”
Addressing the performance of the Eastern Caribbean entities, Singh said that these jurisdictions are not without challenges. “Though your Company’s Eastern Caribbean Branches continue to achieve growth in premiums, persistently high health claims and management expenses, particularly in St. Lucia have overshadowed their efforts.”
Again, the Board Chairman is enthusiastic that with the improvement of economic conditions, production will improve at those branches which will be reflected in their performance ratios.

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