By Dennise Williams, Staff reporter
Lee Chin
DYOLL HAS been in talks with a number of partners, including GraceKennedy and AIC Funds (Canada) for capital
injection.
Financial experts told Wednesday Business that due to the recent hurricane, Dyoll has no equity left. And the numbers support this position.
As at September 2004, total assets stood at $1.9 billion, while total liabilities were $1.3 billion and so total equity stood at $600 million. However, losses arising from the hurricane-related devastation in the Cayman Islands is reported to be $850 million.
EMINENT RESCUE
Nonetheless, media reports have indicated an eminent rescue from GraceKennedy and Michael Lee Chin's Canadian mutual fund, AIC. National Commercial Bank, chaired by Mr. Lee Chin, last year February invested over $562
million in Dyoll, representing a 46 per cent stake.
Yet, what has not been indicated is the form of the rescue.
Seeking answers, Wednesday Business spoke to Don Wehby, chief financial officer of GraceKennedy.
Mr. Wehby stated, "I can tell you that myself and my team at Jamaica International Insurance Company (JIIC), a GraceKennedy subsidiary, spent the entire weekend working on the due diligence. And we have sent down a team to Cayman looking at losses there. We have to get a complete understanding of what has happened down there. After that, we will decide whether we will go further."
However, anonymous sources say that Grace-Kennedy had been sniffing around Dyoll, even before its troubles. And Keith Collister, financial analyst and director at the Jamaica Chamber of Commerce believes that the current situation at Dyoll
has presented Grace-Kennedy a golden opportunity.
"Grace would like to expand its general insurance business regionally and, in my opinion, they have strong management in this area. Dyoll would be a good fit for them, due to its strong brand, and would also give them critical mass.
Yet, the question remains, how is it that a hurricane that hit an island with a population of only 45,000 people could topple a
stalwart company like Dyoll?
Mr. Wehby explained it this way, "The landscape in Cayman is flat. They have no hills to protect them. And it is my understanding that this situation is affecting most of general insurance companies in Cayman.
Compounding the situation is the fact that prudent business planning in the Caribbean means that 80 per cent of claims booked are then re-insured. That is, when a company like Dyoll sells insurance it keeps exposure of 20 per cent, then re-insures the balance with international insurance companies such as Lloyd's of London. However because of the flatness of Cayman, companies there have to take 30-35 per cent of the business on their books directly thus giving them a greater level of exposure.
Additionally, the property values in Cayman are very high; there are a lot of US million dollar houses over there.
Plus, there was a lot of damage to the motorcars. And there is no reinsurance for that. Insurance companies have to pick that up on their balance sheet."
And so, Mr. Wehby believes the aim of any rescue effort would be to, " to form a stronger insurance company."
However, what that means exactly is being kept close to the chest and Mr. Wehby would only say that, "A very delicate stage, anything can happen in 24 to 48 hours."
