By Ewart S. Williams, Governor, Central Bank of Trinidad and Tobago, Feb. 13, 2009

Ladies and Gentlemen,
This is the first in a series of media conferences that the Central Bank intends to schedule to update the national community about progress with respect to resolving the financial difficulties in CLICO, CIB and CMMB. The Chairman of the Board will also be communicating with the media from time to time.
Since the Media Conference of Friday 30, January 2009, much has been achieved in the implementation of the MOU signed between CL Financial and the Government and in the clarification of the financial situation of the three institutions – CIB, CLICO and CMMB.

As you are no doubt aware, in accordance with the MOU, a new Board was appointed to run the affairs of Clico, in addition to a Manager/CEO (Mr. Andrew Claudius Musaib-Ali) and a Chief Financial Controller (Ms Carolyn John). CL Financial, the signatory to the MOU has appointed a team to work with the Government on the implementation of the MOU. This team and the Government representatives have had one meeting but have otherwise been in constant communication with each other. Meanwhile, with the assistance of the Manager appointed to Clico by the Central Bank, we have made much progress in clarifying the present financial position of CLICO, which unfortunately, appears to be much worse than we had envisaged. Let me give you some
examples:

• Based on the audited accounts, Clico had surpluses in the Statutory Fund in 2004, 2005 and 2006; these surpluses shifted to a deficit of about $600 million in 2007.

• Based on the un-audited accounts for 2008 the Statutory Fund deficit (measured on the same basis as in the period 2004 - 2007) has ballooned to $5.1 billion. If
this is correct, one interpretation would be that the premium income collected in 2008, and which should have been directed to the Statutory Fund, was otherwise utilized.

• Over the last few years Clico’s statutory fund assets have included several inter-group assets, including deposits in CIB and securities issued by the parent CL Financial. Certainly at the present time, these instruments appear to be of little value. If we exclude these from the Statutory Fund calculation of 2008, the notional deficit rises to $10 billion, on a policyholder liability base of $16.7 billion.

• In the CL Financial business model, Clico was a major source of cash much of which was used to finance investments held in the name of other entities in the Group. In this model, Clico has ended up as guarantor for many of the Group’s assets most of which are heavily pledged. Of course, pledging limits the potential proceeds from asset sales. A Canadian firm has been contracted to disentangle, inter alia, a whole range of complicated financial
transactions, to review Clico’s non-policyholders’ liabilities and the extent to which Clico’s assets are pledged.

Turning to the immediate situation:

• As at end-January 2009, Clico had policy surrender requests on maturing obligations of $650 million; the monthly payment for pensions and annuities is $40 million. Clico currently has a bank balance of $15 million, in addition to a sizable bank overdraft. In accordance with the MOU the Cabinet has approved a first tranche of a funding package to begin to ease the liquidity pressures on Clico and British American. In line with the spirit of the MOU, the focus
in the first round will be on meeting policyholders’ liabilities and payments to pensioners.

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Source: http://www.central-bank.org.tt/