The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The National Insurance Board (NIB) suffered a two-thirds cut in total comprehensive income for 2014, due almost entirely to its share of Bank of the Bahamas’ near $69 million net loss.

The social security system’s annual report, seen by Tribune Business, reveals that its ‘bottom line’ was slashed by 65.9 per cent year-over-year, falling from $33.7 million in 2013 to just $11.5 million for the 12 months to end-December last year.

An analysis of its financials shows that the drop was largely related to a $17.37 million loss on NIB’s ‘investment in associates’, which are Bank of the Bahamas and Cable Bahamas.

It holds 28.21 per cent and 22.32 per cent equity stakes in the bank and Cable, respectively, thus ensuring that it had to take a hit on Bank of the Bahamas’ extensive losses for the year to end-October 31, 2014.

NIB’s ‘loss on associate’ investments was entirely attributable to Bank of the Bahamas, given that Cable Bahamas is profitable, and represented a near-$17 million increase on the ‘red ink’ incurred in 2013.

NIB’s financials thus show the wide-ranging impact that Bank of the Bahamas’ difficulties, which required a subsequent taxpayer ‘bail out’, have had on other key elements of the Bahamian economy - not just the bank’s shareholders and customers.

Elsewhere, there was a 44.5 per cent year-over-year increase in the number of businesses and self-employed persons that NIB prosecuted for non-payment of contributions.

The number of cases approved for prosecution rose from 474 in 2013 to 685 last year, and NIB said in its annual report that it “continued to face challenges in the area of compliance and enforcement.

“To address the issue, the organisation enhanced its complement of inspectors by 28 persons during the year. In addition, sustained focus was placed on prosecutions as part of the compliance effort; 685 new cases were filed in court and 621 cases were completed.”

While NIB touted that contribution income exceeded benefits expenditure for the fourth consecutive year, it did so barely. Income rose by 6.6 per cent year-over-year to $244.5 million, while benefits spending grew at a faster rate of 9.6 per cent to $244.1 million - a mere $400,000 difference.

The contribution income increase was attributed to the rise in the insurable wage ceiling from $600 to $610 in July and NIB’s compliance drive. Wage ceiling adjustments are set to take effect every second July going forward.

The 6.6 per cent jump in contribution income also helped to reduce NIB’s administrative expenses as a percentage of this indicator from 19.6 per cent in 2013 to 18.9 per cent. However, in absolute terms administrative spending rose by 2.7 per cent from $45.1 million to $46.3 million.

The rise in benefits expenditure, meanwhile, was attributed to an increase in both pensioner numbers and the 2.3 per cent increase in pension payments now they are adjusted every two years for cost of living rises.

The Fund’s investment income ensured that NIB’s income exceeded its outgoings in 2014, but this indicator also fell - by 22.8 per cent year-over-year to $66.6 million from $86.3 million.

“The average rate of return on investments during 2014 was 3.7 per cent, down from 5 per cent in 2013,” NIB said.

“The equity portfolio continued to outperform expectations, returning 10.1 per cent on the combined local and US portfolios. However, there was a decline in investment income as NIB recorded its portion of Bank of the Bahamas loss as an investment in associate under the equity method of accounting.”

Addressing its investment composition mix, NIB added: “The Fund remains heavily invested in public sector investments – Government of the Bahamas debt, real estate finance leases, quasi-government debt.

“During 2014, real estate finance leases continued to grow with the addition of the JL Centre of $35.6 million. Holdings of certificate of deposits declined from $193.6 million to $168.7 million. Investments held inter- nationally remained at 10 per cent of the portfolio for 2014. The amount of US$ investments increased by 9 per cent to a total of $172 million.”