(Trinidad Guardian) Monday night’s publication of Clico’s 2023 audited consolidated financial statements has raised questions about the lack of transparency in the insurance company’s handling of transactions and information about its former major subsidiary, Methanol Holdings Internation Ltd (MHIL). And the company’s 2023 financials have led to calls by Clico stakeholders for the Government to exit the insurance company that collapsed in 2009.
The questions surrounding MHIL arose because the insurance company’s auditors, KPMG, refused to express an opinion on Clico’s 2023 audited, consolidated financials.
KPMG’s disclaimer of opinion, in which it declined to express an opinion on Clico’s accounts, was because the auditor was “unable to obtain sufficient, appropriate audit evidence over the transactions of the material subsidiary (MHIL) that are included in these consolidated financial statements as at and for the year ended December 31, 2023.”
KPMG added, “We were denied access to the necessary audit working papers and group reporting from the subsidiary in order to allow us to complete the required audit procedures.”
KPMG issued a disclaimer of opinions for Clico’s consolidated financials for the years 2021 and 2022, based on issues with audit information from MHIL.
In Clico’s 2023 financials, KPMG also issued a disclaimer of opinion based on its inability “to obtain sufficient appropriate audit evidence on the financial information provided (by CL World Brands) because we were denied access to the management and the auditors of CL World Brands,” an associate company of Clico. The audit firm refused to provide an opinion on CL World Brands in 2022.
Financial sources told Guardian Media on Tuesday that the responsibility to provide the auditor with MHIL’s audit working papers was Clico’s, as it was the parent company of the methanol producer with a 56.53 per cent shareholding in it.
Clico sold its entire 56.53 per cent stake in MHIL, which is located in Oman, to the Switzerland-based Proman Group on December 22, 2023 for the sum of US$347 million ($2.35 billion), in a transaction that was first reported in the T&T Guardian on December 27, 2024.
The sale of the MHIL shares to Proman, through a company called Consolidated Energy Ltd, was a reversal of the Government’s policy. Almost eight months before the sale, on April 25, 2023, Minister in the Ministry of Finance, Brian Manning, outlined a plan in which Corporation Sole would acquire 19.63 per cent of Clico’s shareholding in MHIL, the National Investment Fund (NIF) would acquire 17 per cent of the insurance company’s shareholding in MHIL and Clico would retain 19.9 per cent. Manning’s explanation was in response to a motion on the adjournment by Opposition Senator, Wade Mark.
NIF is 100 per cent owned by Corporation Sole, which is the entity that holds assets on behalf of the people of T&T. Corporation Sole is Minister of Finance, Colm Imbert.
Neither Imbert nor Manning has fully explained why the Government deviated from the April 2023 plan.
Clico, auditor respond
Questioned on Monday about why Clico denied its auditors access to the necessary audit working papers, the insurance company’s chair, Jennifer Frederick, explained that the same disclaimer of opinion, based on MHIL, was issued in 2022.
“The closing balances were not available for 2022 and hence the 2023 opening balances could not be verified and would result in a disclaimer for 2023,” said Frederick.
“Additionally, the company was sold before year end 2023 and this current board of directors sought and obtained the audited financials for 2023 from the company to facilitate a disclosure note on the sale in Clico’s consolidated financials upon the disposal of MHIL.
“However, the auditors also required detailed audit work on the operations of MHIL for 2023 for the same disposal disclosure note and the time frame for requesting complete access to the working papers of MHIL’s auditors had already past post its sale in December 2023. Even if that additional work had been done the disclaimer would have continued based on the inability of the auditors to confirm the 2023 opening balances,” the Clico chair said.
Contacted for comment on Wednesday morning, KPMG’s managing partner in T&T, Dushyant Sookram, said: “Going forward, the significant issue that gave rise to the disclaimers, as noted in the audit report, would no longer arise because of the disposal of the MHIL shares.”
Policyholders concerned
Having perused the insurance company’s 2023 financials, Clico Policyholders Group (CPG) head, Peter Permell, expressed disappointment and deep concern that KPMG issued yet another “disclaimer of opinion” to Clico for its financial year ended December 31, 2023.
Permell said: “Clearly, this cannot reflect well on the new board of directors appointed in October last year nor does it augur well for a company which has high hopes of turning the page so that someday in the not-too-distant future it can resume writing new insurance business.
“However, on a more positive note, the audited accounts also reveal an after-tax profit of $2.30 billion for 2023 and the repayment of the Government in the sum of S500 million and a subsequent or post-balance sheet event disclosure that ‘Clico reduced its debt to Government by an additional $605 million’.”
That $500 million payment by Clico reduced its outstanding preference share liability to $529.35 million as at December 31, 2023.
The payment by Clico to the Government of $1.105 billion—$500 million in 2023 and $605.60 million in 2024—suggests the insurance company’s debt to the Government has been fully repaid.
“Unfortunately, it is not clear whether this means that Government has now been repaid in full the $1.07 billion balance owed as at November 30, 2022, referenced in the Central Bank in its final report to Parliament,” Permell observed.
He said, therefore, the group is calling on the Clico board to state whether the insurance company has fully repaid the Government, and by extension the taxpayers of T&T, the outstanding balance owed to them in full and whether the Government has acknowledged receipt of same.
In his affidavit for the Trinidad and Tobago Revenue Authority appeal to the Privy Council, Finance Minister Colm Imbert said: “The fall in oil and gas prices and lower than expected production of oil and gas has had a profound impact on the country’s petroleum revenues, leading to a projected shortfall in revenue for 2024 of TT$5 billion. When this significant shortfall is added to the initially estimated budget deficit of TT$5 billion for 2024, even with additional one-off revenues from asset sales, the country’s deficit for 2024 is now expected to be as high as TT$9 billion.”
Some analysts have interpreted Imbert’s comment about “additional one-off revenue” of about $1 billion to be a reference to payments to the Government from Clico that originated with the payment for the MHIL shares.
Permell said the disclosure of the repayment of Clico’s debt would mean that the Government is now legally required to release the Executive Flexible Premium Annuity policies currently assigned to it by the assenting policyholders so that this group can finally be paid the residual balance owed to them by Clico as trustee.
End liquidation, says CLF shareholder
CL Financial shareholder and former Clico agency manager, Carlton Reis, said he thinks it is time the Government, the liquidators of CL Financial, and the company’s shareholders begin discussions to take the group out of liquidation.
“The Government has no place staying in private business because it is affecting the entrepreneurial benefits of CL Financial. Taking the group out of liquidation can only benefit the country and create more opportunities,” said Reis, adding that he has the voting rights for about 58 per cent of the group because he acquired the shares in CL Financial that were owned by Dalco and he is a beneficiary of the CL Duprey Trust.