-$205m in policy loans written off
The Demerara Mutual Life Assurance Ltd has recorded an after tax surplus of $338.7 million for the year ended December 31, 2008, $78.3 million less than it achieved in 2007.
This announcement was made on Tuesday when the insurance company held its 117th Annual General Meeting, at its Robb Street Head Office, where the company’s Directors’ Report and its audited Accounts were adopted. The surplus was boosted by a big increase in investment income – 30% – from $386m to $504m. Premiums on the other hand were up by only 1.8% from $828m to $842m.
Chairman of the Board of Directors, Richard Fields’ report said that the company had “achieved positive results in the financial year in the midst of global economic challenges”. He noted that while in 2007 the company recorded an after tax surplus of $417 million, this figure was bolstered by the profitable sale of land in Grenada.
Fields said that in 2008, overall sales were better than in 2007 even in the face of the social and economic downturn experienced internationally. He said that the total number of individual life policies sold in 2008 increased by 3 percent over 2007.
He noted that the company’s subsidiary, the Demerara Fire and General Insurance Company, made a small profit of $379,332 in 2008 but said that he expected the fortunes of the subsidiary to improve significantly by the end of this year.
According to the report, Net Premiums written for the company amounted to $842.9 million when compared to $828.7 million in 2007 and $819.1 million in 2006. Net Premiums written refers to the amount received from policyholders less the amounts payable to the company’s reinsurers in respect of policies in force.
For Annualized Premium Income (API), the company recorded a figure of $73,955,002 compared to figures of $75,588,067 and $71,561,928 recorded in 2007 and 2006 respectively. The API “relates to the anticipated premiums for actual new business sold during the policy year”, the report said.
“The total of claims paid was $ 192.3 million, which was less than $214 million paid in 2007.”
The Auditors’ Report by Deloitte and Touche homed in how loans on policies should be categorized. The auditors said that in accordance with accounting policy, policy loans should include loans on policies which are in force and within the cash surrender value assigned to the policy. “However, it was discovered that policies that were lapsed, matured and terminated which should have charged out to the income statement was also included. “ The auditors said that the company was analyzing this in detail to separate the in-force policies from the others. In the relevant note to the accounts, the company said that as an interim measure a provision of $100m has been created and loans on policies of $205M prior to 1985 which are no longer in force were written off during the year.
Total revenue for 2008 declined by 8 percent from $1.49b to $1.37b in 2008 and total expenditure also dropped by 4%.
The corporate performance review in the report also noted that the “investment market climate was showing definite signs of instability by mid year 2008. This encouraged us to institute a menu of measures aimed at ensuring that our substantial local and foreign investments, financial assets and interest rates remained safe and stable in all territories”. Fields in his report had stated that Demerara Mutual was not exposed to some well-known institutions that went under last year like CLICO and the Stanford Group. However, while noting that maximizing returns from investments is crucial, Fields said that the company had to adhere to new regulatory restrictions in all territories where it operated. Restrictions included a cap on investments. “The difficulty is that in Guyana, local investment opportunities are not widely available”, Fields said.
Net premiums from Guyana were down. In 2007, the net premium was $130m while in 2008 it was $118m. Over the same period, St Lucia’s premiums rose from $220m to $241m while Grenada’s own climbed from $381m to $385m.
The policyholder’s fund – the total value of all insurance policies held by Demerara Mutual in special fund totalled $4.6b as compared to $4.3b in 2007. The actuarial surplus – the difference between its liabilities and its assets was $1.08b in 2007 compared to $869m in 2006.
The notes to the accounts revealed that Demerara Mutual took a loan of $35.4m from the GT&T pension scheme which is held by Demerara Life to offset a major local claim. The repayment of the loan was expected to be completed by the end of 2009. There was also a $71.9m loan from Citizen’s Bank as at January 1, 2008 at a rate of 8%. There was a repayment of $16m on it during the year.
The company’s investments were mainly in Commonwealth Caribbean-Government bonds and Eastern Caribbean home mortgage and security exchange bonds.
At Tuesday’s meeting, the Reports from Directors and its audited Accounts were passed unanimously by the policyholders in spite of the fact that the policyholders did not have the opportunity to view these beforehand.
This was raised as a concern by one policyholder Wilfred Eleazar who said that this was the second time he was raising the matter at an AGM. Although initially being prevented from raising this concern because the time for questions had already passed, the boisterous support Eleazar received from the gathering forced the Chairman to temporarily abandon the agenda and to accommodate the question.
Eleazar requested that in the future provisions be put in place to ensure that policyholders be presented with the reports beforehand. In response, Fields said that normally the company would mail the reports beforehand but explained that this year there were some difficulties which prevented this from being done.
He, however, promised that next year, the reports would be mailed before the Annual General meeting. This announcement was greeted with a loud applause from the gathering.
The gathering also voted that three retiring Directors; Clifford Reis, Hugh George and Jean Renwick be re-elected as Directors of the Society. They also passed a provision to fix the remuneration of the Directors.
The retiring Auditors Deloitte and Touche were also re-elected as the Society’s Auditors for the year 2009, and a provision was passed which allows the Directors to determine the amount paid to the Auditors.
A provision to allocate$3,950,000 for donations to charity and educational purposes was also approved.
The glossy annual report carried conservation messages on several of its pages under the theme Forest = Water = Life.
Demerara Mutual Life Assurance Ltd was founded in 1891. It has since expanded and provides a range of insurance services in Guyana, Grenada, St Lucia and St. Vincent and the Grenadines.
