The FamGuard Corporation would be unable to pay its shareholders dividends, as a result of a net loss of $2.9 million in 2002, the company announced over the weekend.
A statement on FamGuard’s unaudited year-end results said that the year 2002 has been one of “challenge and change”.
Last year represents the first year the company has had a loss, according to Norbet Boissiere, chairman of FamGuard Corporation.
And, with the possibility of a Middle East War on the loom, FamGuard is taking a hard look at its cost base, though having already made some adjustments in its operations.
“We would be taking a look at the entire company. There are some things that we need to do, some reconstruction that needs to take place. Some amalgamations of offices throughout the country.” Vice President of Operations Ms Cecile Greene told The Guardian.
“We are cautiously optimistic. It is going to be a challenge going ahead but we are certainly intent on doing it,” she said.
Mr. Bossier has confirmed that the unaudited results for 2002 reflect “a year of challenge and change.”
FamGuard, the parent holding company of Family Guardian Insurance Company, BahamaHealth Insurance Brokers & Benefit Consultants, and FG General Insurance Agency has reported a net loss of $2.9 million of which $2.2 million was the net investment in BahamaHealth from Doctors Hospital PHO making BahamaHealth a 100 per cent wholly-owned subsidiary of FamGuard.
The key factor affecting the operational results was the merger of Star Insurance Company (Bahamas) with Family Guardian. Home Service revenue from the merged operation was less than projected, and a longer than anticipated amalgamation process has delayed economies of scale. The results for the year reflected approximately $1 million in non-recurring expense items related to the merger.
The Financial Services (Ordinary Life) division of the insurance company underwent a major restructuring.
“The impact has been positive with sales revenue 50 per cent ahead of budget,” Mr. Boissiere said, “the negative impact has been the expenses related to the restructuring.”
Another factor, reflecting the weak economy, he said was the loss in value of investment equities in publicly traded companies amounting to $900,000, which has been charged to the income statement.
He stated that the company had a successful private placement of $10 million of preference shares, which resulted in a strengthened capital base, and the company’s Balance Sheet now stands at over the $100 million mark.
“As a result of the 2002 performance, the Board of Directors has announced that there will be no fourth quarter dividend paid to shareholders,” Mr. Boissiere said, confirming that the 2002 represents the first year the company has had a loss.
He said though, that 2003 would continue to be a challenging year, which could be exacerbated by global and domestic events.
“The Board and management group of the company are diligently addressing operational areas and will implement all measures necessary to contain costs and improve sales performance,” Mr. Boissiere said.
Commenting on the loss, Vice President of Operations Ms. Greene said: “We should be getting it back as the business progresses.”
On the question of not being able to pay dividends to shareholders for the fourth quarter, she told The Guardian that the company hopes they take the news well.
“The shareholders, I am sure, would not be very happy and we hope that they appreciated that these are very difficult times that we are operating in,” she said. “But we can’t make any promises as to what would happen in 2003 other than to say that we are working very diligently to turn this situation around in fairly short order.”
Turning to the rising costs in health care in the country, Ms Greene noted that such is also happening in the United States.
As The Bahamas is very closely linked to the U.S., many FamGuard’s clients seek medical care abroad, thus impacting the local insurance industry product.
“On an annual basis, we go through a real long analysis of continuing increases in healthcare, we review our premiums on a regular basis and we hope that our premiums are sufficient to cover the cost of our claims,” Ms. Greene said.
Asked whether a significant increase in health care costs is imminent, Ms. Greene said some of FamGuard’s member groups have received fairly substantial increase in premiums over the last 12 months.
Even as a company itself, FamGuard’s premium increased 20 per cent to 30 per cent. Though this is not expected to continue in 2003, certainly there would be no decrease in premium costs, she said.
Another issue discussed was the non-disclosure of financial reporting by a number of international insurance companies in The Bahamas.
“We can’t see how they are doing, to compare ourselves against,” Ms. Greene said. “This is very unfair. The Bahamian-owned insurance companies are required to give full disclosure to the Government.”
By Lindsay Thompson, The Nassau Guardian
