The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Family Guardian’s president says he has seen “nothing to warrant any concern” from Value-Added Tax’s (VAT) imposition on insurance, despite the levy adding $326,000 to third quarter expenses.

Lyrone Burrows told Tribune Business there had been no reduction in the BISX-listed insurer’s numbers during VAT’s first full quarter on insurance premiums, even though it was likely to force further client adjustments.

Speaking after Family Guardian’s profits for 2015’s first nine months increased by 20.6 per cent year-over-year, Mr Burrows disclosed that its non-performing mortgage ratio had dropped by three-four percentage points to 8 per cent.

He attributed this to the insurer being able to “realise” on seven distressed properties that had been non-performing for one year or more, dropping Family Guardian’s delinquent mortgage book well below commercial banking sector averages.

Mr Burrows also revealed that Family Guardian was seeking to exploit its home service branches and personnel to penetrate the Family Islands with its ordinary life and financial services products.

He added that the company had begun to “engage” its staff on the plan, believing they had the ability to cross-sell and deal with clients “at a higher level”.

“VAT came into effect on July 1 for property and casualty and health insurance, so it’s still fairly early in the game,” Mr Burrows told Tribune Business.

“We’ve not seen any reduction in our numbers as a result, as it relates to VAT applied to health and property and casualty policies.

“I expect there’s been some fall-off, as it’s maming people more judicious in how they spend their money, but we’ve not seen any significant numbers to warrant any level of concern.”

Praising Family Guardian’s multiple business lines for their resilience in being able to withstand VAT to-date, Mr Burrows added: “Business wise, given that we operate in multiple insurance markets, we have had to bear $300,000 in VAT expenses that were not there in 2014.

“We’ve been able to; I wouldn’t say absorb it, but even with the additional payments our profitability has remained fairly static with the prior year.”

For the three months to end-September 2015, Family Guardian’s operating expenses fell by 4.9 per cent year-over-year to $5.577 million. And net profit rose by 60.3 per cent to $1.329 million, compared to $828,935 the year before.

Mr Burrows said VAT’s impact on property and casualty premiums had effectively been offset by reduced global reinsurance rates, describing the impact as “a zero sum game”.

Given that Bahamian property and casualty underwriters purchase huge amounts of reinsurance annually, the reduced costs have helped to minimise the 7.5 per cent VAT levy now added to consumer premiums.

“For our property and casualty agency, it’s pretty favourable that market rates for reinsurance have softened,” Mr Burrows told Tribune Business. “People have not felt the impact of VAT on their insurance premiums.

“Even with VAT in effect, it has almost resulted in the same premium. It’s almost a zero sum game. The issue will be next year if market rates start to harden.”

Family Guardian’s net income for the nine months to end-September jumped from $4.318 million to $5.208 million year-over-year, driven by a $2.9 million rise in total revenues that resulted from increased premium income and investment income.

“We’re pretty much right on par with our expectations, so we’re comfortable,” Mr Burrows said of the company’s financial performance. “We anticipated expanding faster, but given the economic situation in the country, we’re pleased with how things are panning out.”

When asked to explain Family Guardian’s ‘expansion’ plans, he added: “We are looking at developing our footprint within the Family Islands.

“We have branches in Exuma, Eleuthera and Abaco, but they mostly deal with one segment - the home service line. We are looking to maximise our personnel in those locations to expand financial services products into those islands.

“We believe our agents in those locations have the ability to serve customers at a higher level as well. There are people there seeking ordinary life products, but we don’t have the personnel in place to serve those needs,” Mr Burrows continued.

“I think we can do so with the home service personnel, and are trying to engage them at that level.”

The Family Guardian chief added that its mortgage portfolio was now “trending very strongly”, following progress in tackling existing loan delinquencies.

“We’ve been able to realise on seven of the non-performing properties,” Mr Burrows told Tribune Business, “which have been in a delinquent state for in excess of a year; in some cases, more than that.

“We’re now down to 8 per cent, from 11-12 per cent, in non-performing mortgage loans. It’s allowed us to focus a lot more heavily on new business as opposed to dealing with hard core delinquencies.

“It takes up quite a lot of time, and you don’t get the returns for the amount of time mortgage officers spend chasing those delinquent accounts.”