The Tribune

By NEIL HARTNELL

Tribune Business Editor

FAMGUARD Corporation's 54.4 per cent net income increase for the 2012 first quarter "came close to expectations", its chief executive yesterday expressing optimism that its alliance with a major international 'third party' healthcare provider would further help reduce claims.

Patricia Hermanns, who is also FamGuard's president, said the $1.274 million bottom line for the three months to end-March 2012, compared to $825,215 the previous year, was aided chiefly by a 7.9 per cent drop in total policyholder benefits paid out.

These fell year-over-year from $18.628 million to $17.162 million, with gross policyholder benefits dropping by an even larger amount - from 18.6 per cent, to $15.508 million from $19.057 million the previous year.

Ms Hermanns attributed the improved benefits/claims experience to the work FamGuard, and its Family Guardian insurance subsidiary, have done in working through their health portfolio, repricing and increasing premiums where necessary to better reflect past claims experience and risk.

"We came close to our expectations," she told Tribune Business of the 2012 first quarter. "We certainly have been working through the health portfolio issues by rate increases, so we were anticipating we would be in sync with the financial position at the end of the first quarter."

Total benefits and expenses fell from $26.751 million to $25.661 million year-over-year, a reduction of 4.1 per cent or just over $1 million.

This made all the difference to FamGuard's net income, as total income dropped from $27.576 million in the 2011 first quarter to $26.936 million, a 2.3 per cent fall.

Much of the total income reduction was due to a 46.6 per cent decline in annuity products, which dropped year-over-year to $1.964 million compared to $3.679 million in 2011.

Ms Hermanns attributed the fall to the Bahamian Prime rate cut in May/June 2011, which lowered the "rate yield" on annuities year-over-year, making them less attractive as savings and investments instruments.

She added, though, that Family Guardian was continuing to see growth across all product lines, and in premium income. "We are continuing to work through and refine our products to ensure we have strong bottom line impact, and are refining the efficiency in how we work," Ms Hermanns told Tribune Business.

"That's one of the most important ways to ensure we have a strong bottom line impact for the business. We are working to deliver continued improvement in our bottom line for 2012, and we intend to do that by refining the efficiency in our pricing and benefit experience, as well as continued growth in premium income across all product lines."

Ms Hermanns added that Family Guardian was "in the final stages" of completing the software conversion for its health portfolio, acknowledging that it had been "very challenging" but was "close to completion".

With this conversion close to completion, premiums receivable had returned to a more normal level, and had further reduced year-over-year to $5.453 million at end-March 2012, compared to $6.421 million.

Meanwhile, Ms Hermanns said the "full effect" of Family Guardian's alliance with Aetna, a major third party healthcare provider and one of the largest networks in the US, was set to "be played out" through the remainder of 2012 and 2013.

Explaining that the agreement would provide "value added" services to Family Guardian policyholders, especially when it came to overseas care, Ms Hermanns said: "We believe the strength of Aetna will accrue some benefits to us in terms of the claims experience."