Ashford W. Meikle, Staff Reporter
LAST MONTH the Supreme Court of Jamaica approved the application by the Financial Services Commission (FSC) to liquidate Dyoll Insurance Company. However, while the court's decision came as no surprise and long before the FSC's application, almost all of the major investors in the Dyoll Group have been quietly making impairment provisions in their financial reports.
Dyoll's Insurance's capital base was eroded as a result of the plethora of claims submitted to the company in the aftermath of Hurricane Ivan and its inability to honour those claims. Amid rumours about the financial health of the company and its inability to attract capital, the Jamaica Stock Exchange (JSE) suspended trading in Dyoll Group's shares on February 14 with the share trading at $14.50.
TEMPORARY MANAGER
In March, following the JSE's sanction against Dyoll, the Financial Services Commission (FSC), sent in a temporary manager to conduct an audit of the insurance company and sold - within days of assuming control - Dyoll's Jamaican portfolio to Jamaica General Insurance Company, a GraceKennedy subsidiary.
The Supreme Court's decision - the final nail in the coffin of the insurance company - essentially points to the inevitability of a major wipe-out of investors' shareholding since, according to an analyst, "If you take the insurance business from the group, what will the group be worth? Even the coffee farm was hit by Hurricane Ivan, so without Dyoll Insurance company there is nothing."
So, faced with this sobering reality, it is not without some amount of irony that the largest shareholder in the Dyoll Group, the National Commercial Bank (NCB), moved quickly to remove the future inclusion of the item on its books when it indicated that it would write off its investments a few months ago. In fact, NCB was the first company to publicly indicate that it would write off its investment in Dyoll when it did so in its interim six months results (to March 31 this year).
STAKE HOLDING
With the impairment provision of $536 million for its 27 million shares, this translates into $19.11 per share, representing the price NCB paid for its 46 per cent stake holding in Dyoll last February.
It is expected that the NCB Group subsidiary, West Indies Trust Company, will also write off its 360,000 stockholding investment in the Dyoll Group. Taking the last sale price of $14.50, that totals about $5.2 million.
The second largest shareholder, Guardian Investments Limited, a subsidiary of the Trinidadian conglomerate, Guardian Holdings, with its 9.2 million shareholding Guardian Life, conservatively lost $133.4 million (calculated at $14.50). "As any prudent investor ... as any prudent company, given the fact that Dyoll has been taken off the market, we've written it off," the group chief financial officer for Guardian Holdings, Howard Dottin, told Wednesday Business yesterday from Port of Spain in Trinidad.
Another Guardian Holdings subsidiary, Guardian Life Limited, wrote off almost $10 million from its books. "What we did [is] we wrote down those shares to zero," vice president for investments at Guardian Life, Megan Miller-Brown, told Wednesday Business. She continued, "We took the loss straight up because technically your shareholding has no value. It was at $9.7 million write-down." This amounts to roughly $16.50 for the almost 600,000 shares Guardian Life Limited held.
PROPRIETARY ACCOUNT
Mayberry Investments Limited wrote off its Dyoll investments to the tune of $20 million, or roughly $15.26 per share for its 1.3 million stockholding held under its proprietary account. Commenting on the impairment provision earlier this year, Mayberry's chairman, Christopher Berry said the decision was taken "out of an abundance of caution."
At the same time, if one were to use that price - of just over $15 - then it is estimated that a number of Mayberry's clients were out of pocket by about $13 million based on the investments in the Mayberry Managed Clients Account.
The National Insurance Scheme, with its 1.1 million shares, will find the National Insurance Fund out of pocket by some $16 million.
