This expression is based on the facts and figures that the Bahama Journal uncovered in its investigation over the last several weeks.
Documents supplied by sources in the insurance industry show that Colina Insurance in the past few years raided at least two entities that it controlled to allow it to be in the financial position to make more acquisitions.
An actuary, who analysed the proposed acquisition of Imperial and who spoke with the Journal on the condition of anonymity, produced a report which indicates that the controlling shareholders of Colina bought the company from Cigna in April of 1997.
By May of that year, they got their money back as they received $10 million within 30 days. A total of $16 million was taken out of the company in dividends in three years.
The year before the current shareholders took control of Colina, the company had $17,353,314 in the bank. Within three years of taking over the company, the cash reduced to $2,521,555.
In 1997, the shareholders reportedly changed the method of calculating the reserves. In 1998, the company’s actuary changed and in1999 they changed the assumptions to calculate how much reserves the company should keep.
When Colina was bought in 1997, the company made $2 million in profits. Since then, the profits have declined every year.
According to reports, the shareholders of Colina invested millions of dollars in a bank which has the same directors and senior officers as Colina. They are now being accused of using the money of Colina Insurance to prop up Colina Financial which was not making a profit.
Additionally, the group used the money of Colina Insurance to recapitalize Colina General Insurance which itself lost substantial sums of money after aggressively trying to buy market share through what is being called reckless underwriting criteria and by cutting premium rates.
In 2002, Colina bought Global Insurance and went through the same process of releasing reserves as the shareholders did with Colina. This time they released approximately $8.5 million which was coincidentally the same amount they purchased the controlling interest in Global Life for.
The financial analysts now say that it is not in the national interest for Colina to acquire Imperial or any other company because Colina would end up having an unhealthy degree of control over the capital market of the Bahamas.
Colina, by owning Imperial, would control about 70 percent of the ordinary life market and a large percentage of the pension funds in the country.
This combination would allow no broker-dealer to be competitive with Colina Financial Services.
According to the analysts, this would have serious implications for anyone planning a public offering or a private placement. They say it would not be in the country’s interest because the management of Colina has demonstrated a propensity to raid the assets of companies controlled by them.
The Registrar of Insurance Companies is being roundly criticized over the transactions of Colina.
One of the analysts said the major questions is, “Where was the Registrar of Insurance Companies in all this? How come the Registrar even considered allowing Colina to buy Imperial Life with this type of tract record?”
Just last week, the government issued a warning to Colina Insurance Company against “premature action pending the lawful consideration of the regulators.”
The statement also said that government officials are especially concerned considering that in similar mergers in other parts of the world the actual results fell far short of projections to the detriment of policyholders and shareholders.
The statement added that regulators must be satisfied about Colina’s alternative plans in the event of downsizing, especially as it relates to Bahamian jobs.
But Colina responded in a brief statement saying, “Given any real or perceived misunderstandings that may exist, Colina is endeavouring to meet with the appropriate government representatives, at the earliest opportunity to resolve them.”
