The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

FamGuard (Bahamas) is closing on the acquisition of a new headquarters for its Freeport operations, while also gearing up for the “imminent” launch of its ‘simplified issue’ life product.

Patricia Hermanns, FamGuard’s president and chief executive, told Tribune Business that the new life insurance tool would “strike a chord” and fill an “underinsured” gap in the market.

Speaking after the BISX-listed parent for Family Guardian unveiled a 31 per cent year-over-year increase in net profits for the 2013 first quarter, Ms Hermanns said its expanded Freeport operations would move into their new base by early 2014 at latest.

Confirming that the necessary Insurance Commission approvals for the new life insurance instrument had been received, Ms Hermanns told Tribune Business: “It’s a simplified issue product, which means that the lengthy application forms have been reduced quite considerably.

“It’s a product that will essentially be sold through our group arm, and be a life product added to a health product. Persons currently in our group portfolio will be offered the opportunity to buy additional coverage through a simplified application form.”

Asked about the likely level of market demand, Ms Hermanns said that while no numbers had been generated yet: “We are very optimistic about the ability of that product to grow into an important line for us.

“We think it will strike a chord in the market. Many people are underinsured, and the time taken to go through the process of completing the application form, people do not make that time readily available. We believe the simplified application process will increase the likelihood of persons taking the time to insure.”

FamGuard (Bahamas) and its subsidiary are also busy on the real estate front. “We are in the process of acquiring an additional building in Freeport for our expansion of the business there,” Ms Hermanns told Tribune Business.

While declining to identify the property or purchase price, as all legal work on the deal has yet to complete, she added: “It is a building in the main area of Freeport.

“We are currently renting some additional space, and this will allow us the opportunity to move into a building we own. There are costs to owning a building, but this gives us the best advantage of the two options.

“It gives us the opportunity to put our own stamp on it from a branding perspective. It is definite that we are moving in that direction. We will probably do some improvements to the building once all the work is completed from a legal perspective, so I’m pretty confident the acquisition will be finalised this year.”

Given the required enhancements, Ms Hermanns said it may not be until early 2014 that Family Guardian moves into its new Freeport home.

Elsewhere, the FamGuard president told Tribune Business that assets under management by its FG FInancial and FG Capital Markets units were now “certainly north of $40 million”

“It’s doing well and we’re continuing to grow our deposit base, while yields are very strong in the funds we offer, so that is getting the attention of the investing public,” Ms Hermanns said.

“On the equities side, we are seeing the yields growing strongly in our growth fund, which is heavily invested in equities. The current yields we’re seeing are quire a few points above bank rates.”

FamGuard’s net income increase for the three months to end-March 20103, which rose to $1.668 million from $1.274 million the year before, was aided by a “strong” 35 per cent decline in death claims year-over-year. They fell by $763,000.

Describing the 2013 first quarter performance as “very close to expectations”, Ms Hermanns said it was also boosted by the continued efficiencies being extracted from the BahamaHealth portfolio.

“We have entered into an alliance with Aetna, which has one of the largest health provider networks in the US, and that affords us a level of efficiency that translates into a better medical claims ratio,” Ms Hermanns told Tribune Business.

“We certainly are profitable. We are earning a profit on our medical portfolio, and the efficiencies that we are getting in terms of management of the portfolio are also helping.”

Gross premium revenue fell 7.8 per cent year-over-year to $22.82 million, down from $24.739 million, which Ms Hermanns attributed to “a lot of ebb and flow on the group health business” as clients dropped coverage in response to premium rate increases that reflected past claims experience.

Annuity deposits, on the other hand, rose by 46 per cent year-over-year to $2.868 million from $1.964 million. This was due to their rates being higher than those paid on bank deposits.

While net premium revenue and annuity deposits combined were down 2.5 per cent at $23.398 million, FamGuard’s 2013 first quarter results were also driven by a 9.3 per cent reduction in total expenses.

These fell from $8.498 million in the 2012 first quarter to $7.705 million, with operating expenses reduced by 3.6 per cent at $3.866 million.