straight to the point – from different points of view

CLICO – a true story

CLICO – a true story

This is a tale that is so far fetched that you would not believe it if you had not lived through it. It has the makings of a block buster television series with a seriously devious cast of characters that would do a mobster movie proud. Because the tale spans more than a decade, very few people have fllowed it all the way through. The result is that the dots are incredibly hard to connect. This brief summary is written to help you do just that.

As with all the best stories, the opening scene is compelling. Here we have an insurance company (INS) that was once the third largest in the country that had risen to be the largest and most powerful. It had expanded to every nook and cranny in the Caribbean and was among the most powerful and revered financial institutions in the region.

It didn’t stop there. The success of this insurance company was used as a springboard to invest in many other businesses in territories across the world in a wide spectrum of sectors including drinks, energy, finance, real estate and much more. The holding cmpany (HOLD) in turn became the largest and most powerful conglomerate in the region, generating significant profits and foreign exchange and reputedly paying more taxes than any other companies other than the energy majors.

What a happy scene. Shareholders in INS and HOLD getting generous dividends every year. Policyholders in INS getting rates of return on their savings higher than at most other financial institutins. And the government getting hefty tax payments and the cuntry benefiting from large amounts of net foreign exchange through subsidiaries of HOLD like Methanol Holdings, Angostura and a raft of overseas assets. Whats more HOLD was well shielded against risk as it was diversified both by sector and region. The whole world and virtually all business sectors would have to collapse at the same time for it to face any serious problems. All was well in the garden.

Then out of the blue, a disaster. In 2008/9 the unthinkable happened. Huge American financial institutions had invested heavily in unsustainable markets called sub prime. We do not need to knw the details except that those companies then sold on these worthless sub prime assets to other financial institutions around the world. When the market recognised the worthlessness of these investments, they were held in large quantities by almost every major international finance house.

Conventional investment logic had been turned on its head. HOLD and others like it had diversified their investments to guard against risk. That very diversification meant that they were exposed to more collapsing markets than any other local enterprise and found themselves in need of assistance. In particular, their subsidiary INS was unable to pay its policyholders. It needed help and had to turn to someone who had the resources and an interest in keeping this tax and foreign generator alive and saving policyholders from the lss of their savings if INS were allowed to collapse. That someone was the government (GOV).

Fortunately for GOV and everyone else both INS and HOLD owned assets of tremendous value. The difficulty was that those values had been decimated by the global crisis but we all knew that the corporate assets of INS and HOLD would eventually return to their former levels. What was needed was a temporary bailout until those values rebounded as we all expected them to. The comparison with America for example was stark. Whereas American institutions held loans to sub prime borrowers that would never be repaid, INS and HOLD possessed assets of value that were expected to rebound on the markets within three years or so.

I invite you to take a leap forward to today, remembering as I said, that the asset base at INS and HOLD was of an altogether higher quality than at the institutions in America. In America the government loaned money to their institutions to help them through the crisis on terms and with conditions favourable to the government so that they were handsomely repaid for their support. Virtually every such institutin managed to repay the government and resume profitable tax paying trading within five years.

Here GOV decided t take over the running of not just INS but its parent company HOLD. Before delving into some of the more gruesome details of the takeover (that is what it is), just bear in mind that both INS and HOLD are still being run by GOV with no end in sight to their control. Having agreed to rescue INS and taking control supposedly to protect the investment in INS, GOV still runs them both twelve years later. This was not a challenging rescue by any standards, and definitely not by comparison with the American rescues. Can a rescue still be called by that name twelve years after it started, and with no end in sight?

In the meantime, the assets of INS and HOLD have increased with the recovery of the global economy. Fr the past seven years there has been enough value to pay back GOV yet GOV keeps control of both HOLD and INS, selling off assets to themselves at prices that they determine. Whats more, when HOLD sharehlders attempted to regain control of the conglomerate, GOV persuaded a judge to put it into liquidation withut even an audited statement to prove that it was insolvent.

Could this really have happened? If this were a novel the publishers would reject it out of hand. What financial rescuse lasts twelve years with no end in sight? Even worse is the fact that the figures make no sense. A script writer would at least ensure that the numbers are credible. Here is one example. The main aspect of the rescue was the buyout of all rights attributable to policyholder policies. GOV claimed to be assisting policyholders and INS. What they did was to pay policyholders 10.8 billion dollars and then force INS to pay them back 14.8 billion dollars in compensation. INS clearly culd afford to pay the full 14.8 policyholder claims so GOV took it all for itself and shortchanged policyholders by 4 billion dollars. I guess these stories need both a good guy and a villain.

But dont forget HOLD. GOV asserted to the court that HOLD was insolvent nine years after they took control. That is a crazy story line. Either GOV is saying that they took security from a company that was insolvent at the time (in 2009) or they turned a solvent cmpany into an insolvent one during their tenure. What a story line.

  1. However you look at this “rescue”, it is a story that defies logic. There are many aspects that need explanation and for sure the policyhlders and shareholders have powerful ground for legal redress. And this is only scratching the surcafe of the many illogical aspects of this saga.

The story is unfortunately true. You probably know that INS is CLICO and BA, HOLD is CL Financial and GOV is the government of Trinidad and Tobago. Who culd have made up a story so far fetched? They do say that truth is sometimes stranger than fiction.

Late addition – GOV is claiming that INS still owes it over one billion dollars. That is pure fictin, but what else shuld we expect?

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