The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Family Guardian’s holding company met “strong budgetary expectations” for 2013 with a 26.3 per cent comprehensive income rise, with net assets boosted by over $20 million via the consolidation of its mutual fund family.

Patricia Hermanns, speaking to Tribune Business just prior to the official announcement of her resignation, explained that the life and health insurer decided to consolidate FG Financial Fund Ltd with its own results because it held ‘decision-making’ power over the various funds’ activities.

With the BISX-listed parent, FamGuard Corporation, holding equity interests ranging from 13 per cent to 100 per cent in the four mutual funds administered under FG Financial Fund post-October 2013, the insurer recorded a $4.449 million net cash balance and just under $22.2 million in net assets at consolidation.

Speaking after FamGuard’s total comprehensive income jumped from $5.4 million to $6.822 million in 2013, Ms Hermanns said the funds business had “grown steadily” to its current $26 million in assets under administration despite having been founded just as the recession struck.

“That is a function of persons seeking better yields than in the banking system, and our capacity to manage the size of the risk we’re taking on,” Ms Hermanns told Tribune Business. “We’re reasonably satisfied with the growth. We continue to see it grow very strongly, and we are encouraged by the level of interest in the product. We expect that to continue in 2014.

“The interesting part is that when we launched the brokerage and advisory services and mutual funds in 2008, that was just at the start of the economic downturn. Despite that, business on the wealth management side has grown steadily.”

Ms Hermanns indicated her belief that Family Guardian was in a better place than when she joined it more than a decade ago in 2003, adding that she expected the business to “continue to perform well in 2014”.

This was despite the insurance industry being “difficult to pin down”, given that sudden surges in life and health claims could skew results just for a year. Family Guardian saw annuity deposits grow by 58.6 per cent year-over-year to $12.106 million, due to investors perceiving them as a relatively risk-free way to earn better investment returns than on bank deposits in the low interest rate environment.

“We would expect to see growth in annuities [in 2014],” Ms Hermanns added. “The extent of it is something we don’t control, but given the low interest rate environment we expect to see deposits continue to increase.”

The departing president added that Family Guardian was also looking to launch new product to the Bahamian market in 2014, and better exploit cross-selling opportunities between its life/health and general insurance agency business.

“We continue to grow our premium volumes, and are working to exploit cross-selling opportunities between the life company and the property and casualty brokerage business,’ Ms Hermanns told Tribune Business.

With the macroeconomic environment continuing to restrict new business and sales opportunities, Ms Hermanns said Family Guardian had placed a “heightened level of focus in terms of how our agents engage the market.

“As a company, we focus on risk management, so the way we engage the market without increasing risk is an important part of the process,” she added.

Cost management and an improved claims experience had also boosted the results delivered by Family Guardian’s healthcare business, with prior business model adjustments and the insurer’s relationship with US healthcare network provider, Aetna, increasing efficiency and ensuring the target investment returns were met.

Meanwhile, the total value of Family Guardian’s non-performing mortgages rose by 13 per cent or close to $1 million year-over-year to hit $7.227 million, a figure equivalent to 11.7 per cent of the total portfolio.

“Like all of the financial sector, the mortgage portfolio continues to move along at a slower rate of growth than in the past. We continue to work through delinquent accounts,” Ms Hermanns told Tribune Business. “The growth has slowed down quite a bit. We want to ensure the risks we are taking on are very strong. We are moving forward very conservatively with regard to new mortgage risks.”

Ms Hermanns reiterated that mortgages, as a percentage of Family Guardian’s total investment portfolio, had been reduced from over 40 per cent five years ago to around one-third now.

“We’ve steadily reduced it, and it’s been a decided strategy to do that even before the economic challenges,” Ms Hermanns said.