The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Family Guardian’s parent yesterday reported a 103 per cent year-over-year increase in 2017 first quarter net income, after an 11.5 per cent drop in total benefit payouts offset a $1.7 million revenue contraction.

L. Edgar Moxey, FamGuard Corporation’s chairman and chief executive, told shareholders that the decline in annuity deposits for the three months to end-March 31 was a ‘double edged sword’ that worked in the company’s favour.

Although the fall in annuity deposits drove the revenue decline, its also lessened the amount of reserves that had to be set aside to pay future policyholder benefits, positively impacting expenses.

“Total revenues decreased by $1.7 million over the same period in 2016,” Mr Moxey wrote. “However, this was primarily due to a reduction in annuity deposits during the quarter.

“As is the custom for annuities, deposits fluctuate from period to period and, despite the decline in the total dollar amount for the quarter, the company continued to experience a strong demand by policyholders as the number of deposits remained in line with deposits during the three months ended March 2016.

“The decline in deposits was also offset by a corresponding reduction in benefits on annuity deposits, as reserves for future policyholder benefits for these products decreased in direct correlation.”

Annuity deposits were down by 51.8 per cent year-over-year for the 2017 first quarter, dropping from $4.075 million last year to $1.966 million this time around.

However, this also resulted in FamGuard’s increase in reserves declining by 61.3 per cent year-over-year, falling from $4.618 million to $1.788 million. And a drop in group health claims resulted in total benefit payments dropping by almost $2.4 million - from $20.767 million in 2016 to $18.381 million.

“The decrease is attributed to lower medical claims from our group health business and a reduction in the reserves for future policyholder benefits on annuity deposits,” Mr Moxey confirmed. “Total expenses are in line with that of the prior period and show a positive variance of 1.7 per cent year-to-date.”

As for the revenue side, he added: “Gross premium income increased by 3.1 per cent, and ended the three month period at $25.6 million, with all three divisions of the company reporting positive variances.

“Investment income contributed $3.1 million to total revenues, a decline over the prior year due to the continued fluctuation in equities and the impact of the 50 basis point reductions on variable rate investment assets which are tied to Prime.”

FamGuard’s net equity rose to over $116 million, while net income for the three months to end-March more than doubled, rising from $775,379 to $1.574 million.

Its main competitor, Colina Holdings, also reported relatively strong 2017 first quarter results, with net income relatively flat year-over-year at $5.6 million. Profits attributable to ordinary shareholders were down slightly, at $4.6 million compared to $4.8 million.

The BISX-listed insurance holding company paid out $4.6 million in dividends to its ordinary and preference shareholders during the first quarter, with the majority - some $4 million - going to the former category.

“Total gross premium revenues totalled $32.5 million compared to $33 million for the three months ended March 31, 2016,” Terry Hilts, Colina Holdings’ chairman, told shareholders.

“Gross policyholder benefits were higher than prior year experience, totalling $23.7 million for the three months ended March 31, 2017. Fluctuations in mark to market adjustments have resulted in a decrease to $5.4 million in net investment income for the first quarter of 2017, compared to $6.9 million for the same period in the prior year.”

Mr Hilts added: “Total assets stand at $744.6 million, compared to $726.6 million as at December 31, 2016...... We will continue our long-term strategy to direct new investments in high quality, fixed-income securities to ensure that invested assets remain the largest proportion of our total assets which, at March 31, 2017, comprised 75.8 per cent of total assets.”