Finance Minister Colm Imbert said yesterday that Clico still has a deficit of close to $1 billion and the insurer’s 2014 after-tax profit of $5.13 billion was just an “accounting transaction” resulting from bringing to book the proceeds of the sale its shares in Methanol Holdings (Trinidad) Ltd (MHTL).
“Clico’s not in the black—it’s still insolvent,” Imbert added at the weekly government media briefing, where he clarified Clico’s latest financial statements posted on the company’s website on Wednesday, showing a $5.13 billion profit.
Following the publication of its 2014 financial statements, CL Financial majority shareholder Lawrence Duprey on Wednesday had reinforced his recent calls on government to relinquish the companies in the group.
Imbert, however, said the “so-called” profit was simply an accounting “paper” transaction and had arisen due to the sale for US$1.175 billion ($7.44 billion) of the MHTL shares.
He added: “It’s (profit) really bringing to book the proceeds of the sale of the methanol company shares and it’s an accounting transaction.”
Stating that yesterday’s exclusive on Clico’s financials in the Guardian implied the company was “in the black,” Imbert said the accounting transaction did not really assist Clico’s position since its balance sheet deficit at the end of 2014 was $934 million in deficit.
“Although they had a profit, they also had a loss of income of $4.7 billion,” he said.
Imbert added: “So in 2013, the balance sheet (deficit) for Clico was $1.1 billion and in 2014, $934 million in deficit. So there was no significant change—it’s just an accounting transaction.”
“Based on all information available to me, Clico is still insolvent and its liabilities exceeds its assets,” Imbert said.
According to the insurer’s 2014 financial statement, Clico’s assets total $29.316 billion, while its liabilities amount to $30.250 billion. Clico’s three biggest liabilities are:
• Investment contracts of $12.379 billion, 88 per cent of which are the Executive Flexible Premium Annuities;
• Its traditional insurance portfolio valued at $8.305 billion; and
• Redeemable preference shares worth $4.992 billion, which carry an annual dividend rate of 4.75 per cent of $4.992 billion, or $237 million.
Imbert said the report of the commission of enquiry into Clico and the Hindu Credit Union—done by English Queen’s Counsel Sir Anthony Colman—is expected by month-end.
Purported insolvency a fabrication—Dacon
Duprey’s spokesman Claudius Dacon in an immediate response to Imbert, said, the actual content of the accounts is a “powerful admission that the assets left by the Lawrence Duprey team were worth a great deal more than successive administrations had led us to believe.”
“The latest Clico accounts are 16 months old, so it’s hard to get too excited about the results as spectacular as they may appear, because they give absolutely no assurance or comfort for the financial position of the company today. They are an eye opener, however, for several reasons. The most important is that they’ve actually arrived.
“Because the company is now run by the Central Bank, we’ve had nobody to complain to when Clico doesn't comply with the rules that prescribe June 2015 as the date when accounts should have been submitted. This total lack of control and oversight extends to all the reporting and operating activities at Clico.”
Dacon said: “Their appointed managers have been able to use (and abuse) the vast sums of taxpayer money (over $20 billion) and the hugely valuable Clico assets without oversight by anyone. Consequently the largest financial institution in the region with billions of taxpayers’ money at risk is currently unregulated.”
Dacon added: “No Ponzi scheme in the known universe has ever yielded assets worth $5 billion more than book value, as is shown in the accounts. Mr Duprey was right in his request for liquidity assistance, to give the assets time to recover value and the company to return to financial strength. Remember too, that there was a sale of assets two years ago that returned in excess of three billion dollars over book value.”
“It’s beginning to appear that the-then purported insolvency at Clico was a fabrication, created to enable ...government officials to seize Clico’s assets ($4.5 billion) at Clico Investment Bank to repay deposits to state enterprises and their friends at the suffering of Clico policyholders.”
“A review of the statements then made—in the light of this disclosure—shows the taxpayer could and should have been fully repaid at least three years ago. It also suggests policyholders and the public were deliberately misled in 2010 and subsequently by alarming and disparaging statements of propaganda against Lawrence Duprey from those in authority, and who had access to information about the true worth of the Clico assets. Why was this necessary and what were their motives?”
Dacon said: “Hidden from view by the amazing performance of the assets on Clico's books is another stark reality, that under Central Bank direction, Clico has now been transformed into a serial loss maker for policyholders. Relieved of the burden of annual interest payments of about $1 billion, it should be inconceivable that Clico now operates at a loss. “
“Yet that is precisely what these accounts tell us—the insurance operations returned a loss more than masked by the profit on sale of assets which we were told were worthless. The scale of incompetence is alarming and for the sake of taxpayers and everyone else associated with this company, it must be taken away from Central Bank and Government’s illegal control and directorship.”