ncb financial group limited...2017/12/02 · ncb financial group limited, 32 trafalgar road,...

Reliance Restricted

Valuation of Guardian Holdings Limited

NCB Financial Group Limited

20 November 2017 | Version 1.0

NCB Financial Group Limited: Valuation of Guardian Holdings Limited | of 80


Reliance Restricted

Valuation of Guardian Holdings Limited 20 November 2017Ernst & Young Services Limited 8 Oliver RoadKingston 8Jamaica W.I.ey.com

Mr. Dennis CohenNCB Financial Group Limited,32 Trafalgar Road, Kingston 10,Jamaica

Dear Mr. Cohen

We are pleased to present the following report covering the valuation of Guardian Holdings Limited (“GHL”).

The objective of the valuation was to determine the fair market value of GHL as NCB Financial Group (“NCBFG”) seeks to make an offer to shareholders of GHL to acquire shares.

Our Report was prepared in accordance with your instructions as set out in our Engagement Agreement dated 23 October 2017.

The scope and nature of our work, including the basis and limitations, are outlined in Appendix C of this Report and detailed in the Engagement Agreement. We strongly recommend you carefully read Appendix C along with our Engagement Agreement in connection with our Report and determine whether the scope and nature of our work are sufficient for your Purpose.

Our Report was prepared on your instruction solely for the Purpose outlined and should not be used or relied upon for any other purpose. This Report (or any portion or summary of it) may not be quoted, referred to or shown to any other parties except as otherwise provided in the Engagement Agreement. We accept no responsibility or liability to any person other than to our client, or to such party that we have agreed in writing to accept a duty of care in respect of this report, and accordingly if such other persons choose to rely upon any of the contents of this report they do so at their own risk.

If you have any questions on this Report please contact the undersigned at 876-815-3159 or [email protected]. Thank you for the opportunity to serve NCBFG.

Yours faithfully,

Anura Jayatillake

Ernst & Young Services Limited

Anura Jayatillake Partner - Jamaica

Transaction Advisory Services T +1 876 925 2501 M +1 876 815 3159 F +1 876 755 0413E [email protected]



DashboardTable of contents

Executive Summary1

Page 4

Transaction Background2

Page 6

Economic overview3

Page 11

Industry analysis4

Page 21

Financial performance ...5

Page 45

Valuation

6

Page 58

Appendices

7

Page 68

1 Executive Summary 7 Appendices2 Transaction Background3 Economic overview4 Industry analysis5 Financial performance and ...6 Valuation



1Executive Summary



1 Executive SummarySummary of valuation results

GHL Range of Equity Value per share TT$

$13.95Asset Approach: Using the adjusted net asset method, the value of equity was estimated to be $13.95 per share.

$16.99 $19.51Income Approach: Using the discounted cash flow method the equity value was estimated at a low of $16.99 and

…, a high of $19.51

$15.19 $25.21Market Approach: Using P/E and P/B transaction multiples the value of equity was estimated to range between a low of $15.19 and

…, a high of $25.21.

Valuation Conclusion

Based on our review, it is our opinion that the Income Approach is the most appropriate to determine the FMV of GHL. Therefore, we estimate the FMV per share of GHL to range between $17 and $19.50. Our estimated fair value range reflects a range of premiums between 13.3% and 30.0% on the share price quoted on TTSE on 31 October 2017. These premiums are reflective of potential synergies to be realised by a controlling shareholder.




Transaction Background

2

In this section Page

Transaction overview 7

Acquirer overview 8

Target overview 9



► NCB Financial Group Limited (“NCBFG”) acquired a 29.99% stake in Guardian Holdings Limited (“GHL”) through a private sale of shares owned by the Lok Jack and Ahamad families, and the International Finance Corporation. The transaction was successfully completed at a total price of approximately J$28b, with the granting of all necessary regulatory approvals in Jamaica, Trinidad and Tobago, and other relevant jurisdictions.

► The effective date of the valuation is 31 October 2017.

► Subsequent to this transaction, NCBFG is now seeking to make an offer to other shareholders to acquire additional shares in GHL and as such, requires a valuation of the shares as mandated by the Trinidad and Tobago Securities and Exchange Commission to ascertain the fair market value of GHL’s shares.

2 Transaction BackgroundTransaction overview

NCBFG’s Current Shareholding in GHL

Details Value

GHL total issued shares 231,899,986

NCBFG Shareholding 29.99%

# of Shares owned by NCBFG69,546,806




Business overview

The footprint of NCBFG has been rooted in Jamaica since 1837, which began as the Colonial Bank of London, and through a series of mergers and acquisitions, emerged as NCBFG in 1977.

The Bank is headquartered in Kingston, Jamaica and is a 51.82% subsidiary of AIC (Barbados) Limited. Its ultimate parent company is Portland Holdings Inc., which was incorporated in Canada.

NCBFG is listed on the Jamaica Stock Exchange (since 1986) and the Trinidad and Tobago Stock Exchange (since 2003).

As part of a reorganization exercise of NCBFG’s (the company and its subsidiaries) structure, N.C.B. Group Limited (“NCB Group”) was incorporated in 1985 as a holding company. The holding company then acquired the entire share capital of NCBFG and its subsidiaries.

In 1993 NCB Group acquired all the assets of Mutual Security Bank Jamaica Limited (MSBL) and, in 1996, merged its operations with that of MSBL. Since then the company has expanded its operations through other acquisitions. These include the following which NCBFG acquired through its subsidiary, NCB Capital Markets Limited:

► Acquisition of 100% stake in AIC Finance Limited in December 2013.

► Acquisition of 96.24% of the issued share capital of Advantage General Insurance Company Limited in February 2013.

► Acquisition of a 29% stake in Jamaica Money Market Brokers Limited.

In May 2016, the company acquired 29.99% shareholding in Guardian Holdings Limited.

NCBFG currently serves markets in 21 countries across the English and Dutch Caribbean, including Trinidad & Tobago, Barbados, Jamaica, Curacao, Aruba, St. Maarten, Bonaire and Cayman, and serves the financial services industry.

Segments

NCBFG’s operations are conducted through the following segments:

2 Transaction BackgroundAcquirer overview

NCBFG's operating segment

1. Incorporates the Bank’s liquidity and investment management function, management of correspondent bank relationships, and relationships with other financial institutions as well as foreign currency dealing activities

2. Incorporates stock brokerage; securities trading; investment management; other financial services provided by overseas subsidiaries

3. The Group’s insurance brokerage services, trustee services and registrar and transfer agent services

Source: NCBFG 2015 Annual Report




Business overview

Guardian Holding Limited (“GHL”), a public limited liability holding company, was incorporated in the Republic of Trinidad and Tobago on 8 November 1982.

Its registered office is located at 1 Guardian Drive, Westmoorings S.E., Trinidad and Tobago. GHL and its subsidiaries (“the Group”), depicted in the chart on the left, are engaged in:

► underwriting all classes of property and casualty insurance, ► the provision of life and health insurance, ► pension products, and ► asset management services to individual and corporate customers.

The group operates across the Caribbean region in the following countries

2 Transaction BackgroundTarget overview

Guardian Holdings Limited Group

Source: GHL 2015 Annual report

Aruba Curacao Netherlands

Bahamas Grenada St. Lucia

Barbados Jamaica Trinidad & Tobago

Bermuda Malta




History and nature

GHL’s history dates back to 1847 when Standard Life of Edinburgh opened a branch office in Trinidad. Since then the company has evolved as depicted in the table on the left.

Segments

The Target conducts its operations through the following segments:

► Life, health and pension business

► Property and casualty business

► Asset management

Shareholders metrics

► The Group’s comprehensive income increased by 182% between 2014 and 2016, due to increases in reported profits and favourable exchange differences.

► The table below highlights some of the Group’s key shareholder metrics.

2 Transaction BackgroundTarget overview

GHL's history

1847 Commenced when Standard Life of Edinburgh (SLE), Scotland, opened a branch office in Trinidad

1972 SLE ceased operation and merged its Trinidad and Tobago portfolio with that of Jamaica Mutual Life Assurance Society effective 15 November 1972.

1979 Localization of the operations of all insurance companies became mandatory towards the end of the 1970s

1980On 30 December 1980 Guardian Life of the Caribbean was incorporated for the purpose of accepting the Trinidad and Tobago portfolio of Jamaica Mutual, as a result of the mandatory requirement above.

1982 Guardian Holdings became a publically listed company in Trinidad and Tobago

1986 Guardian Holdings became a publically listed company in Jamaica

1990 Acquired majority shareholding in Crown Life (Caribbean) Limited

1993>Merged the operations of Crown Life (Caribbean) Limited with those of Guardian Life

of the Caribbean Limited in January 1993.>GHL entered into the Dutch Caribbean (Curacao and Aruba).

1999Established Guardian Life Limited in Jamaica in July 1999 following acquisition of the individual life and pension portfolios of Jamaica Mutual, Crown Eagle, Dyoll Life and Horizon Life.

2000 Acquired West Indies Alliance Insurance Company Limited in Jamaica

2001The operations of the Trinidad & Tobago and Jamaican operations of West Indies Alliance Insurance Company Limited were merged and re-branded the business as “Guardian General Insurance Limited.”

2003 > GHL added Guardian Asset Management> Acquired Fatum Holding N.V.

2007 Legal amalgamation of NEMWIL with Guardian General Limited in December 2007

2012>Acquired 100% sharing in Globe Insurance Company of Jamaica Limited (Globe)>Globe was later merged with West Indies Alliance Insurance Company Limited to form Guardian General Insurance Jamaica Limited.

2013 Fatum General Insurance N.V., a subsidiary of Fatum Holding N.V., acquired the issued share capital of Royal & Sun Alliance Insurance (Antilles) N.V.

Source: GHL website and 2014 annual report

Shareholder metrics 2014 2015 2016

Profit for the year attributable to equity holders of GHL, TT$m 341 335 396

Comprehensive income attributable to equity holders of the parent, TT$m 167 279 470.1

Earnings per share 1.47 1.44 1.71

Dividends per share declared 0.57 0.61 0.66

Book value per share 11.16 11.77 13.11

Market value per share (year-end) 13.25 13.23 12.65

Source: GHL 2016 annual report




Economic overview

3


Global economy 12

Trinidad and Tobago economy 15

Other Caribbean economies 17



GDP growth rates► According to the IMF, the global economy was

estimated to have grown at a rate of 3.2% in 2016, approximately 20 bps below the 2015 growth rate, as illustrated in the chart on the left.

3 Economic overviewGlobal economy

World GDP growth rates – Actual (2012-2016); estimates (2017-2022)

3.5% 3.5% 3.6% 3.4% 3.2%

3.6% 3.7% 3.7% 3.7% 3.8% 3.8%

1.9%2.8% 2.7%

-5.4%

1.4%

5.2%6.4%

5.3% 5.2% 5.1% 5.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Gross domestic product, constant prices Gross domestic product, current prices

Source: IMF - World Economic Outlook Database, October 2017




GDP growth rates► Presented in the tables are the GDP growth

rate for selected countries.


GDP growth rates in selected countries/region – constant prices2012 2013 2014 2015 2016 2017e 2018e 2019e 2020e 2021e 2022e

Euro area -0.9% -0.2% 1.3% 2.0% 1.8% 2.1% 1.9% 1.7% 1.6% 1.5% 1.5%

Canada 1.7% 2.5% 2.6% 0.9% 1.5% 3.0% 2.1% 1.7% 1.7% 1.8% 1.8%

China 7.9% 7.8% 7.3% 6.9% 6.7% 6.8% 6.5% 6.3% 6.2% 6.0% 5.8%

Hong Kong SAR 1.7% 3.1% 2.8% 2.4% 2.0% 3.5% 2.7% 2.9% 3.0% 3.1% 3.3%

Japan 1.5% 2.0% 0.3% 1.1% 1.0% 1.5% 0.7% 0.8% 0.2% 0.7% 0.6%

United Kingdom 1.3% 1.9% 3.1% 2.2% 1.8% 1.7% 1.5% 1.6% 1.7% 1.7% 1.7%

United States 2.2% 1.7% 2.6% 2.9% 1.5% 2.2% 2.3% 1.9% 1.8% 1.7% 1.7%


GDP growth rates in selected countries/region – current prices2012 2013 2014 2015 2016 2017e 2018e 2019e 2020e 2021e 2022e

Euro area -7.3% 4.3% 2.3% -13.7% 2.3% 5.1% 7.8% 3.7% 3.5% 2.9% 3.3%

Canada 2.0% 1.0% -2.7% -13.4% -1.5% 7.2% 7.5% 4.3% 3.7% 3.8% 3.7%

China 13.9% 12.4% 9.3% 6.6% 0.1% 6.3% 9.9% 8.6% 9.2% 8.8% 8.6%

Hong Kong SAR 5.7% 5.0% 5.7% 6.2% 3.7% 4.1% 3.2% 3.9% 3.5% 3.7% 4.2%

Japan 0.7% -16.9% -6.0% -9.7% 12.7% -1.1% 3.7% 2.8% 1.4% 1.8% 2.0%

United Kingdom 1.7% 2.5% 10.3% -4.6% -8.2% -2.4% 3.7% 2.6% 2.7% 2.7% 2.8%

United States 4.1% 3.3% 4.4% 4.0% 2.8% 4.0% 4.3% 4.1% 3.9% 3.8% 3.6%





Inflation rate► The table on the left depicts global inflation

rates from 2012-2022. In 2016 world inflation remained stable at 2.8%.

► Inflation rates for selected countries are shown in the table on the left.


World inflation rates, rates – Actual (2012-2016); estimates (2017-2022)

4.1%

3.7%

3.2%

2.8% 2.8%3.1%

3.3% 3.3% 3.3% 3.2% 3.2%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

2012 2013 2014 2015 2016 2017e 2018e 2019e 2020e 2021e 2022e


Inflation rates in selected countries/region– Actual (2012-2016); estimates (2017-2022)Inflation, average consumer prices 2012 2013 2014 2015 2016 2017e 2018e 2019e 2020e 2021e 2022e

Euro area 2.5% 1.3% 0.4% 0.0% 0.2% 1.5% 1.4% 1.7% 1.8% 1.9% 2.0%

Canada 1.5% 0.9% 1.9% 1.1% 1.4% 1.6% 1.8% 2.1% 1.9% 2.0% 1.9%

China 2.6% 2.6% 2.0% 1.4% 2.0% 1.8% 2.4% 2.5% 2.6% 2.6% 2.6%

Hong Kong SAR 4.1% 4.3% 4.4% 3.0% 2.6% 2.0% 2.2% 2.4% 2.6% 2.8% 3.0%

Japan -0.1% 0.3% 2.8% 0.8% -0.1% 0.4% 0.5% 1.1% 1.6% 1.3% 1.6%

United Kingdom 2.8% 2.6% 1.5% 0.0% 0.7% 2.6% 2.6% 2.2% 2.1% 2.0% 2.0%

United States 2.1% 1.5% 1.6% 0.1% 1.3% 2.1% 2.1% 2.6% 2.4% 2.2% 2.3%





Overview ► According the Central Bank of Trinidad and

Tobago (CBTT1), T&T continues to experience economic challenges. However, there are signs of improvement in the energy sector as exploration activity increased in the third quarter and the upcoming Juniper project has led to an anticipation in the increase of the output of natural gas.

► Activities in the non-energy sector are also expected to rise as a result of the growth in the energy and energy related sectors.

Unemployment rate2

► The average unemployment rate in 2016 increased by 60 bps when compared to 2015.

► The table on the left shows the average unemployment rate for the period 2012-2016.

Real GDP

The chart on the left shows the GDP growth for Trinidad and Tobago.

3 Economic overviewTrinidad and Tobago economy

GDP growth rate 2012-2022 (actual and estimated)

2012 2013 2014 2015 2016 2017e 2018e 2019e 2020e 2021e 2022eConstant prices 1.3% 2.7% -0.6% -0.6% -5.4% -3.2% 1.9% 2.2% 1.6% 1.4% 1.4%Current prices 1.0% 2.9% -1.0% -10.0% -10.3% -3.9% 2.5% 3.7% 4.4% 4.4% 4.4%

-12.0%-10.0%-8.0%-6.0%-4.0%-2.0%0.0%2.0%4.0%6.0%

Constant prices Current prices


1 Central Bank of Trinidad & Tobago Monetary Policy Announcement, September 29, 2017 2 Central Bank of Trinidad & Tobago Economic Bulletin, Volume XIX No. 2, September 2017

Unemployment rate, % averageYear 2012 2013 2014 2015 2016

Rate 5.0 3.7 3.3 3.4 4.0

Source: Central Bank of Trinidad & Tobago Economic Bulletin, Volume XIX No. 2, September 2017




Inflation

► In June 2017 headline inflation stood at 1.5%, compared with 3.6% in January 2017.

Exchange rates

► In the fist six months of 2017, T&T’s international price competitiveness as measured by the trade weighted real effective exchange rate (TWREER1) improved by 1.9% yoy.

► The T&T dollar depreciated by 4.6% in 2016 when compared to 2015.

► The T&T dollar continued to depreciate against the US dollar, reaching an average rate of $6.7421 as at September 29, 2017

► The chart on the left illustrates the movement of the T&T currency relative to the USD (base currency).

3 Economic overviewTrinidad and Tobago economy

Inflation, average consumer prices– Actual (2012-2016); estimates (2017-2022)9.3%

5.2%5.7%

4.7%

3.1% 3.2% 3.2%3.7%

3.3% 3.3% 3.2%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

2012 2013 2014 2015 2016 2017e 2018e 2019e 2020e 2021e 2022e


1 The TWREER reflects the weighted average of a country’s currency relative to a basket of other major currencies, also known as the trade weighted-nominal effective exchange rate (TWNEER), and adjusted for the effects of inflation. Central Bank of Trinidad & Tobago Economic Bulletin, Volume XIX No. 2, September 2017

Average annual exchange rate (USD:TTD)

6.3009 6.2564

6.2998 6.3480

6.3996 6.4033 6.4156 6.3850

6.3537

6.6434

6.7421

6.0

6.1

6.2

6.3

6.4

6.5

6.6

6.7

6.8

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 29-Sep-17

Avera

ge ra

te

1. Rates represents an average of the annual buying and selling rates.2. 2017 rate is as at September 29, 2017Source: Central Bank of Trinidad and Tobago




GDP growth

The table on the left shows the GDP growth for each economy the target operates in1.

3 Economic overviewOther Caribbean economies

1 except Trinidad and Tobago

GDP growth rates (constant and current))Country 2012 2013 2014 2015 2016 2017e 2018e 2019e 2020e 2021e 2022e

Gross domestic product, constant prices

Aruba -1.40% 4.20% 0.80% -0.50% -0.20% 3.40%

Bahamas 3.09% 0.01% -0.52% -1.66% -0.25%* 1.80% 2.50% 2.20% 1.60% 1.50% 1.50%

Barbados 0.30% -0.07% 0.06% 0.90% 1.60%* 0.88% 0.53% 0.80% 1.28% 1.55% 1.60%

Curacao -0.14% -0.79% -1.14% 0.28% -0.97%

Grenada -1.16% 2.35% 7.34% 6.44% 3.68%* 2.55% 2.32% 2.20% 2.50% 2.74% 2.74%

Jamaica -0.51% 0.21% 0.53% 0.94% 1.33%* 1.66% 2.33% 2.65% 2.78% 2.80% 2.80%

Malta 2.61% 4.59% 8.17% 7.06% 5.52% 5.14% 4.39% 3.80% 3.52% 3.29% 3.24%

Netherlands -1.06% -0.19% 1.42% 2.26% 2.21% 3.06% 2.59% 1.86% 1.87% 1.80% 1.78%

St. Lucia -0.66% 0.17% -0.90% 1.96% 1.00% 1.60% 2.77% 2.11% 1.46% 1.46% 1.46%

Gross domestic product, current prices, Percent change

Aruba -0.60% 1.80% 2.60% 1.60% -0.90% 2.10%

Curacao 3.04% 0.53% 0.34% -0.21% -0.97%

Bahamas 6.45% 1.46% 1.13% 2.74% -1.55%* 4.70% 4.25% 4.20% 3.55% 3.37% 3.03%

Barbados -0.62% 0.90% -0.41% 1.63% 2.89%* 5.91% 6.33% 3.34% 3.81% 4.29% 4.34%

Grenada 2.70% 5.38% 8.07% 9.44% 5.92%* 5.21% 4.59% 4.39% 4.62% 4.96% 4.88%

Jamaica 2.44% -3.78% -2.39% 2.56% -1.82%* 2.37% 4.67% 5.09% 5.59% 5.89% 5.84%

Malta -3.21% 10.22% 10.69% -8.40% 6.92% 9.16% 10.97% 6.27% 5.68% 4.94% 4.84%

Netherlands -7.29% 4.53% 1.62% -13.92% 2.53% 6.04% 8.07% 3.47% 3.25% 2.66% 2.58%

St. Lucia -0.07% 3.69% 4.16% 6.25% 1.58% 2.51% 3.61% 3.71% 2.98% 2.89% 3.02%

1. * - estimatedSource: : IMF - World Economic Outlook Database, October 2017; Central Bureau of Statistic, Curacao; Cemtrale Bank Van Aruba, Economic Outlook May 2017




Inflation

The inflation rates for each economy in which the target operates is highlighted in the table on the left.

3 Economic overviewOther Caribbean economies

Inflation, average consumer prices2012 2013 2014 2015 2016 2017e 2018e 2019e 2020e 2021e 2022e

Aruba 0.60% -2.40% 0.40% 0.50% -0.90%

Curacao 3.20% 1.30% 1.50% -0.50% -0.40%* 0.20%

Bahamas 1.91% 0.44% 1.18% 1.88% 0.76% 2.43% 2.16% 2.64% 2.31% 2.16% 2.20%

Barbados 4.53% 1.81% 1.77% -1.11% 1.28% 4.99% 5.77% 2.50% 2.50% 2.70% 2.70%

Grenada 2.41% -0.04% -0.98% -0.58% 1.72% 2.64% 2.03% 1.83% 1.89% 1.89% 1.89%

Jamaica 6.90% 9.36% 8.28% 3.68% 2.35%* 3.36% 5.25% 5.50% 5.50% 5.50% 5.40%

Malta 3.23% 0.98% 0.77% 1.18% 0.90% 1.29% 1.65% 1.78% 1.80% 1.80% 1.80%

Netherlands 2.82% 2.56% 0.32% 0.22% 0.11% 1.27% 1.43% 1.50% 1.60% 1.60% 1.60%

St. Lucia 4.18% 1.47% 3.52% -0.99% -3.09% 0.16% 0.94% 1.55% 1.48% 1.45% 1.53%

1. * - estimateSource: IMF - World Economic Outlook Database, October 2017; Central Bureau of Statistic, ECONOMIC DEVELOPMENTS IN 2016 AND OUTLOOK FOR 2017, Curacao




Other Caribbean economies3 Economic overview

Aruba

► According to the Cenral Bank of Aruba, the economy is expected to expand by 3.4% in real terms in 2017, compared to the 2016 estimated contraction of 0.2%.

► The 12-month moving average inflation rate for Aruba remained unchanged at -0.4% in June 2017 compared to May 2017. In June 2016 Aruba recorded a moving average of -0.6%.

► Housing is the primary contributor to the decline in inflation.

Bahamas

► Despite the passage of hurricane Matthew in the final quarter of 2016, preliminary indications are that the Bahamian economy remained relatively stable to mildly increasing compared to an estimated contraction of 1.7% and 0.5% in 2015 and 2014, respectively.

► Average consumer prices fell by 0.35% in 2016, compared to an increase of 1.88% previousyear.

► Average unemployment rate decreased to 11.6% in November 2015 from 14.8% a year earlier.

Barbados

► The Barbadian economy grew at a rate of 1.6%in 2016 compared to 0.5% in 2015, driven by the growth in toruism activities.

► For 2016, inflation was 1.5% as compared to -1.1% in 2015.

► Average unemployment rate for 2016 was 10.0%, compared to 11.3% in 2015

Grenada

► Real GDP grew by 1.7% in 2016, compared to 5.2% in 2015.

► Consumer price inflation fell from 1.1% in 2015 to 0.9% in 2016. Most sub-indices recorded an increase, except for hotels and restaurants; and food and non-alcoholic beverages which declined by 7.4% and 1.4%, respectively

► The rate of unemployment was estimated at 28.6% in 2016, compared to 29.0% in 2015

Curacao

► Real GDP contracted by 1.0% in 2016 and grew by 0.3% in 2015.

► The fall in energy prices offset the rise in food prices and as a result, Curacao recorded inflation of 0.0% in 2016.

► Over the period 2003-2015 labour productivity, on average has contributed negatively to output growth. In 2016, labour productivity fell by 5.3% compared to -3.8% in 2015

Bermuda

► Real GDP decreased by 0.1% in 2016, compared to a 0.6% growth in 2015. The financial intermediation and international business industries recorded the highest decline in real terms.

► The average price levels (CPI) increased by 1.4% in 2016.




Other Caribbean economies3 Economic overview

Jamaica

► For the July 2017 quarter, real GDP was estimated to have grown within the range of 0.0% and 1.0%, representing the tenth consecutive quarter of expansion

► Headline inflation increased to 4.4% at end of June 2017, compared to 4.1% at the end of the last quarter. The BOJ expects inflation at the end of the fiscal year to range between 4.0% and 6.0%

► The Weighted Average Selling Rate (WASR) of the Jamaican versus the US dollar was J$128.62 at the end of the June 2017 quarter reflecting annual depreciation of 1.8% relative to annual depreciation of 5.7% at the end of the previous quarter.

► The 2016 unemployment rate declined by 0.3 percentage points to 13.2%, relative to previous year.

St. Lucia

► Real GDP is estimated to have declined by 0.7% in 2016, compared to a 1.3% growth in 2015.

► The consumer price index fell by 3.0% at the end of the 2016 period.

► The rate of unemployment was estimated at 21.3% in 2016, compared to 24.1% in 2015




Industry analysis

4


Global industry 22

Trinidad and Tobago 25

Jamaica 29

Aruba 33

Curacao and St. Maarten 37

Barbados 38

Bahamas 40

Bermuda 42

St. Lucia 44



To develop an appropriate value for a business or its assets, it is important to understand the economics of the underlying business and its industry. Accordingly, we have analyzed the insurance industry.

Global insurance market

► The global insurance market (GIM), which is valued in terms of gross written premiums (GWP), grew at a CAGR of 4.4% over the four year period, reaching a value of $4,549 billion in 2015.

► The market is expected to reach a value of $5,836 billion in 2020, representing a 29% increase when compared to 2015.

► The actual and project market value is shown in the chart on the left.

► There are two sectors in the GIM: the life insurance sector and the non-life insurance sector:

► The chart on the left shows the composition of the GIM.

4 Industry analysisGlobal industry

Global insurance market value: actual (2010-2015), estimated (2016-2020)

3,828 3,988 4,071 4,325 4,539 4,723 4,947 5,213 5,508 5,836

4.2%

2.1%

6.2%

5.0%

4.1%

4.7%5.4%

5.7%6.0%

0%

1%

2%

3%

4%

5%

6%

7%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

grow

th ra

te

$ billi

on

Market value Growth rateSource: MarketLine Industry Profile – Global insurance, January 2017

Global insurance market sector, 2015

Life insurance55%

Non-life insurance45%

Source: MarketLine Industry Profile – Global insurance, January 2017




Global life insurance

► The life insurance sector value of the GIM represents gross premium incomes from mortality protection and retirement savings plans.

► This sector grew at a CAGR of 3.5% between 2011 and 2015 and generated total GWP of $2,504.5b in 2015.

► The global life insurance sector (GLI) is expected to grow at CAGR of 4.5% for the five-year period 2015-2020 to reach a value of $3,12.7b by the end of 2020.

► The actual and project market value for the sector is shown in the chart on the left.

Category segmentation

► In 2015, the life insurance segment of the GLI market accounted for 68% of the market's total value and as illustrated in the chart on the left.


Global life insurance market value: actual (2010-2015), estimated (2016-2020)

2,179 2,251 2,254 2,408 2,505 2,584 2,680 2,810 2,957 3,126

3.3%

6.9%

4.0%

3.2%3.7%

4.8%5.2%

5.7%

0%

1%

2%

3%

4%

5%

6%

7%

8%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

grow

th ra

te

$ billi

on

Market value Growth rateSource: MarketLine Industry Profile – Global Life insurance, December 2016

Global life insurance segment, 2015

Life insurance68%

Pension/annuity32%

Source: MarketLine Industry Profile – Global Life insurance, December 2016




Global non-life insurance

► The non-life insurance sector value of the GIM consists of:

► This sector grew at a CAGR of 5.4% between 2011 and 2015 and generated total GWP of $2,034.4b in 2015, as illustrated in the graph on the left.

► MarketLine forecasts that the industry would value $2,710.1b by the end of 2020, corresponding to a CAGR of 5.9% over the period 2015-2020.

► The actual and project market value for the sector is shown in the chart on the left.

Category segmentation

► The motor segment contributed the majority of the GWP to the non-life insurance sector in 2015, as shown in the chart on the left.


► Motor segment► Property segment► Liability segment► Other insurance segment

► Non-insurance products such as Health, Travel, Accident cover and other products

General insurance market

Global non-life insurance market value: actual (2010-2015), estimated (2016-2020)

1,649 1,737 1,817 1,917 2,034 2,140 2,267 2,403 2,550 2,710

5.3% 5.5%

6.1%

5.2%

5.9% 6.0% 6.1% 6.3%

0%

1%

2%

3%

4%

5%

6%

7%

0

500

1,000

1,500

2,000

2,500

3,000

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

grow

th ra

te

$ billi

on

Market value Growth rateSource: MarketLine Industry Profile – Global Non-life insurance, December 2016

Global non-life insurance segment, 2015

Motor38%

Property21%

Liability12%

Other29%

Source: MarketLine Industry Profile – Global Non-life insurance, December 2016




Overview

The T&T insurance sector comprises of:

► insurance companies (providers of life and/or general insurance products and services), and

► insurance intermediaries (i.e., registered insurance adjusters, brokers, salesmen and agents).

Active life, general and composite insurance companies, are depicted in the table on the left.

4 Industry analysisTrinidad and Tobago

Active insurance companiesActive general insurance companies Active life insurance companies

Bankers Insurance Company of Trinidad and Tobago Limited Bancassurance Caribbean Limited

Capital Insurance Limited Cuna Caribbean Insurance Society Limited

Colonial Fire & General Insurance Company Limited Maritime Life (Caribbean) Limited

Colonial Fire & General Insurance Company Limited Sagicor Life Inc.

Export-Import Bank of Trinidad and Tobago (Eximbank)Limited ScotiaLife Trinidad and Tobago Limited

Furness Anchorage General Insurance Limited Tatil Life Assurance Limited

Nagico Insurance (Trinidad and Tobago) Limited* The Demerara Life Assurance Company of Trinidad and Tobago Limited

Guardian General Insurance Limited

Gulf Insurance Limited Active composite (life and general) insurance companies

Maritime General Insurance Company Limited Pan-American Life Insurance Company of Trinidad and Tobago

Motor One Insurance Company Limited British American Insurance Company (Trinidad) Limited

Sagicor General Insurance Inc. Colonial Life Insurance Company (Trinidad) Limited

The Insurance Company of the West Indies Limited Guardian Life of the Caribbean Limited

The Great Northern Insurance Company Limited Mega Insurance Company Limited**

The New India Assurance Company (Trinidad and Tobago) Limited Trinre Insurance Company Limited

The Presidential Insurance Company Limited The Beacon Insurance Company Limited

Trinidad and Tobago Insurance Limited

1. *formerly GTM Insurance Company Limited2. **changed its name to Assuria Life (T&T) Ltd, effective 19 March 2015Source: Central Bank of Trinidad and Tobago




Life insurance

► CBTT indicated in their 2015 annual report that the life insurance sector is highly concentrated with two regional market players accounting for 58.9% of the sector’s assets and 66.3% of premium income.

► Ratios for the life insurance sector are shown in the table on the left

Forecast

► According to BMI, life insurance premiums in T&T are sensitive to fluctuations in economic activity and consumer demand, given the small scope of the market. As such, they anticipate growth in the life insurance segment as interest rates remain low and economic conditions become more favourable.


Headline life insurance forecast

2.19 3.35 3.44 3.85 4.25 4.47 4.64 4.86

-20%

53%

3%

12% 10%5% 4% 5%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

0

1

2

3

4

5

6

2014 2015 2016e 2017e 2018f 2019F 2020f 2021f

% yo

y gro

wth

TTD,

billio

n

Gross life premiums written, TTD, $b Gross life premiums written, %yoy1. e - estimate2. f- forecastSource: BMI Industry View - Trinidad & Tobago - Q4 2017

Life insurance ratios2009 2010 2011 2012 2013 2014 2015

Capital Adequacy

Capital to total assets 25.4 23.8 22.1 22 21.2 21.3 20.7

Asset Quality

(Real estate +unquoted equities + debtors ) / total assets 15.7 15.1 13.5 9.3 10.5 7.4 7.8

Earnings and Profitability

Expense ratio = expense (incl commissions) /net premium 40.6 37.8 38.6 37.8 35.1 33.6 33.1

Investment yield = Investment income / investment assets 7.2 6.2 5.7 5.4 5.1 4.8 4.5

Liquidity

Liquid assets / current liabilities 38.9 28.8 33.5 33.6 32.6 34.2 37.7

Source: CBTT 2014&2015 Annual Report




Non-life insurance

► According to the CBTT, similar to the life insurance sector, the non-life insurance sector is also concentrated, with 54.8% of the market share based on premium income controlled by three institutions.

► BMI indicated that Guardian is the largest player in this sector, accounting for 44.5% of non-life premiums written in 2014, followed by Sagicor with 9.1% of the market share.

► Ratios for the life insurance sector are shown in the table on the left

Composition

► The non-life insurance sector is dominated by property and motor vehicle insurance, which are expected to account for 70% of total non-life insurance written in 2017, as illustrated in the chart on left.


1 BMI-Industry Forecast - Non-Life Sub-Sector - Trinidad & Tobago - Q4 2017

Non-insurance ratios2009 2010 2011 2012 2013 2014 2015

Asset Quality

(Real estate +unquoted equities + accounts receivables)/ total assets 17.2 16.9 16.2 14 13.5 13.8 16.5

Actuarial Issues

Net technical reserves/average of net claims paid in the last 3 years 122 130.2 154.8 164.1 168.4 171.1 176.3

Earnings and Profitability

Return on Equity (ROE) = Pre-tax profits / shareholders funds 17 12.3 15.5 17.5 20 14.2 10

Return on assets (ROA) 7.2 4.8 6.4 7.6 8.9 6.4 4.7

Liquidity

Liquid assets / current liabilities 59.3 48.4 42.9 56.5 60.5 61.2 58.8

Source: CBTT 2014&2015 annual report

Property40%

Motor vehicle30%

Health19%

Personal, accident insurance3%

Other insurance8%

2017 non-life insurance composition

Source: BMI-Industry Forecast - Non-Life Sub-Sector - Trinidad & Tobago - Q4 2017




Non-life insurance con’t

Forecast

► BMI expects positive growth in the non-life insurance sector as shown in the table on the left.

Mutual funds

► Growth in the T&T mutual funds industry declined in the first half of 2017, as illustrated in the table on the left.

► Income funds represents the largest share on the mutual fund’s market.


Headline non-life insurance forecast

4.34 4.44 4.61 5.03 5.43 5.69 5.92 6.18

13%

2%

4%

9%8%

5%4% 4%

0%

2%

4%

6%

8%

10%

12%

14%

0

1

2

3

4

5

6

7

2014 2015 2016e 2017e 2018f 2019F 2020f 2021f

% yo

y gro

wth

TTD,

billio

n

Gross non-life premiums written, TTD Gross non-life premiums written, %yoy

1. e - estimate2. f- forecastSource: BMI Industry View - Trinidad & Tobago - Q4 2017

1st half 2017, mutual fundAggregate mutual funds under management

► change (%), yoy -0.5

► Approx. value TT$b 42.7

Income funds under management

► change (%), yoy -0.2


Equity funds under management

► change by (%), yoy -1.2


Source: CBTT Economic Bulletin, September 2017




Insurance industryAs at 30 June 2016:

► 11 general insurance companies were registered with ten being operational;

► 7 registered life insurance companies were registered with six in operation

Life Insurance

► The life insurance industry recorded total assets of $287.1 billion as at June 30, 2016, which represents an increase of 2% over the balance as at December 31, 2015.

► The tables at left present statistics on the life insurance industry for June 2015 to June 2016.

4 Industry analysisJamaica

Source: FSC Compass. December 2016

As at June 15 $b

Sep 15 $b

Dec 15 $b

Mar 16 $b

June 16 $b

% ∆between Dec'15 & June' 16

Balance Sheet

Total Investment Assets 253.8 255.3 263.5 267.4 266.4 1.6

Total Assets 271.7 273.9 281.7 287.6 287.1 2.0

Insurance Liabilities 82.6 81.1 81.1 83.2 85.5 5.2

Other Liabilities 127.5 128.7 131.9 133.7 132.6 1.1

Total Liabilities 210.1 209.8 213.0 216.9 218.1 2.6

Capital & Surplus 61.5 64.1 68.6 70.6 69.0 0.0

Profit and loss (YTD)

Net premium Earned 21.4 32.1 45.9 11.2 22.5 5.1

Net Investment Income 10.1 15.6 23.0 5.6 11.8 16.8

Other Income 2.0 3.0 4.0 1.2 2.5 25.0

Total Expenses before tax 28.1 38.0 52.1 14.1 28.6 1.8

Net Income before tax 5.4 12.9 21.0 4.0 8.2 51.9

Net Income 5.0 10.4 17.3 3.1 6.3 26.0

Selected prudential ratios for the life insurance industryRatios 15-Jun 15-Sep 15-Dec 16-Mar 16-Jun FSC Benchmark

Life Companies

Solvency Ratio 29.3 30.5 32.5 32.5 31.6 ≥ 10%

Return on Equity (YTD) 8.6 20.0 30.1 5.6 11.9 ≥ 20%Source: FSC Compass December 2016

Statistical information and financial position of the life insurance industry




General Insurance

► As at June 30, 2016 aggregate total assets of the general insurance industry amounted to $76.5b representing an increase of 17.9% over the amount reported in December 31, 2015.

► Aggregate net premiums earned were approximately $8.3b slightly higher than the $8.1b in June 30,2015.

► The tables on the left presents statistics on the general insurance industry for June 2015 to June 2016.


Statistical information and financial position of the general insurance industry

As at June 15 $b

Sep 15 $b

Dec 15 $b

Mar 16 $b

June 16 $b

% ∆between Dec'15 & June' 16

Balance Sheet

Total Investment Assets 43.4 44.5 45.2 46.7 47.7 5.5

Total Assets 66.3 64.9 64.9 67.9 76.5 17.9

Insurance Liabilities 36.9 37.0 35.3 36.4 42.3 19.8

Other Liabilities 7.5 5.5 6.1 6.9 9.0 47.5

Total Liabilities 44.4 42.5 41.4 43.3 51.3 23.9

Capital & Surplus 21.8 22.4 23.6 24.5 25.2 6.8

Profit and loss (YTD)

Net premium Earned 8.1 12.3 16.3 4.1 8.3 2.5

Net Investment Income 1.4 2.0 2.8 0.7 1.6 14.3

Other Income 0.3 0.5 0.7 0.2 0.6 100.0

Total Expenses before tax 8.0 12.0 15.3 4.3 8.7 8.7

Net Income before tax 1.8 12.9 4.5 0.7 1.8 0.0

Net Income 1.3 2.0 3.3 0.7 1.5 15.4Source: FSC Compass, December 2016

Selected prudential ratios for the general insurance industrySolvency Ratio 45.3 48.8 53.2 53.0 46.4 ≥ 25%

Return on Equity(YTD) 8.8 13.9 18.9 2.9 7.6 ≥ 20%

Underwriting Ratio (YTD) 99.2 97.3 96.8 105.2 104.8 ≥ 100%

Source: FSC Compass, December 2016




Forecast for life and non-life insurance

► Growth in Jamaica’s insurance market has been relatively stagnant over the past few years.

► This has been primarily due to low incomes and limited household spending capacity.

► Long term forecasts however foresee market growth in line with the country’s wider economic growth.


Insurance forecastInsurance forecast 2014e 2015e 2016f 2017f 2018f 2019f 2020f 2021f

Gross life premiums written, J$b 42.60 46.80 50.57 54.28 60.75 67.51 76.05 86.40

Gross life premiums written, J$, % y-o-y 0.7 9.9 8.0 7.3 11.9 11.1 12.7 13.6

Gross non-life premiums written, J$b 34.77 38.19 39.01 41.55 44.87 48.19 51.94 56.19

Gross non-life premiums written, J$, % y-o-y 4.8 4.2 -4.6 1.2 4.1 2.2 2.0 3.3Source: BMI Research (e-estimate, f-forecast)




Forecast for non-life insurance

► The motor and property insurance segment of the non-life insurance market accounted for approximately 90% of Jamaica’s non-life insurance market.

► Motor premiums are expected to grow over the forecast period at strong rates in both United States dollars and Jamaican dollars.


Non-life insurance premium by product line2014e 2015e 2016f 2017f 2018f 2019f 2020f 2021f

Motor vehicle insurance, J$m 16,001.0 16,793.9 17,713.5 18,651.2 20,083.6 21,554.1 23,327.6 25,405.5

Motor vehicle insurance, J$, % y-o-y 7.3 5.0 5.5 5.3 7.7 7.3 8.2 8.9

Motor vehicle insurance, % of non-life ins. 46.0 44.0 44.0 45.4 44.9 44.8 44.7 44.9

Property insurance, J$m 16,111.5 17,012.2 17,200.2 18,099.8 18,928.5 19,673.4 20,323.6 20,946.2

Property insurance, J$, % y-o-y 37.8 5.6 1.1 5.2 4.6 3.9 3.3 3.1

Property insurance, % of non-life insurance 46.3 44.5 44.1 43.6 42.2 40.8 39.1 37.3

General liability insurance, J$m 1,573.1 1,740.4 1,815.6 1,968.6 2,202.3 2,442.2 2,731.5 3,070.6

General liabilityinsurance, J$, % y-o-y 39.0 10.6 4.3 8.4 11.9 10.9 11.8 12.4

General liability insurance, % of non-life ins. 4.5 4.6 4.7 4.7 4.9 5.1 5.3 5.5

Other insurance, J$m 458.5 2144.8 2068.6 2598.4 3407.6 4238.3 5240.2 6414.1

Other insurance, J$, % y-o-y -78.4 367.8 -3.6 25.6 31.1 24.4 23.6 22.4

Other insurance, % of non-life insurance 1.3 5.6 5.3 6.3 7.6 8.8 10.1 11.4

Source: BMI Research (e-estimate, f-forecast)




4 Industry analysisAruba

Life insurance companiesNagico Life Insurance (Aruba) N.V. (Trade Name: Nagico Life Insurance)

Ennia Caribe Leven (Aruba) N.V.

Fatum Life Aruba N.V. (Trade name: Guardian Group Fatum Life Aruba en Guardian Group Life Aruba)

Sagicor Life Aruba N.V.

American Bankers Life Assurance Company of Florida Limited, Agency

Pan-American Life Insurance Company of Aruba V.B.A.Source: Central Bank of Aruba

The following tables present the insurance companies in Aruba

Captive insurance companiesBancarib Real Insurance Aruba N.V.

Fides Rae Insurance Company N.V.

MCB Risk Insurance N.V.

Mondis Manufacturers Insurance Company N.V.Source: Central Bank of Aruba

General insurance companiesAruba AIG Insurance Company N.V.

Elvira Verzekeringen N.V.

Ennia Caribe Schade (Aruba) N.V.

Fatum General Insurance Aruba N.V. (Trade name: Guardian Group Fatum General Insurance Aruba en Guardian Group General Insurance)

NAGICO Aruba N.V.

Netherlands Antilles & Aruba Assurance Company (NA&A) N.V.

TRESTON Insurance Company (Aruba) N.V.

Massy United Insurance Aruba N.V.

Bupa Insurance Company; Agency

The New India Assurance Co. Ltd., Aruba branch

Stichting Fondo Nacional di Garantia pa Vivienda

Best Doctors Insurance V.B.ASource: Central Bank of Aruba

No. of supervised institutions in Aruba's insurance sector2012 2013 2014 2015 2016

Nonlife insurance companies 12 13 12 12 12

Life insurance companies 7 7 7 6 6

Captive insurance companies 4 4 4 4 4

Company pension funds 11 11 10 10 10Source: CBA Annual statistical Digest 2016;p.71




The tables on the left present and statistics for Aruba’s non-life insurance sector.


Balance sheet and income statement statistics-non-life insurance (Afl.m)

2012 2013 2014 2015

Total assets 291.4 309.3 331.4 349.1

Total income 81.2 81.3 85.6 93.2

Total expenses 75.3 65.9 66.4 82.4

Net income 5.9 15.4 19.2 10.8

Source: CBA Annual Statistical Digest 2016: p72-73

Financial ratios- non-life insurance2012 2013 2014 2015

Liquidity ratio

Current assets to total assets(%) 24.0% 26.4% 26.9% 24.7%

Return on investments ratio

Investment income to average invested assets(%) 4.0% 4.4% 4.5% 4.0%

Coverage ratio

Weighted assets less borrowings to technical provisions (%) 404.0% 433.3% 491.6% 402.0%

Source: CBA Annual Statistical Digest 2016: p. 74

Non-Life Insurance

The tables below present selected statistics for the non-life insurance sector in Aruba

Life Insurance

Statistics for Aruba’s life insurance sector is presented in the table below:

Balance sheet and income statement statistics-life insurance (Afl.m)

2012 2013 2014 2015

Total assets 978.1 1024.1 1105 1166.1

Total income 161 155.3 168.1 162.1

Total expenses 139.3 125 145.4 157.7

Net income 19.8 30.1 18.4 2.6Source: CBA Annual Statistical Digest 2016; p. 84-85

Financial ratios-life insurance (Afl. m)2012 2013 2014 2015

Liquidity ratio




Coverage ratio


Source: CBA Annual Statistical Digest 2016; p. 86




Pension

The tables below present selective statistics for the pension sector in Aruba

Captive insurance

Statistics for Aruba’s captive insurance sector is presented in the table below.


Balance sheet and income statement statistics-captive insurance (Afl. m)

2012 2013 2014 2015

Total assets 74.3 89.4 101.3 112.3

Total income 26.0 27.6 25.4 24.9

Total expenses 8.7 8.9 8.6 7.5

Net income 15.0 16.7 15.3 16.4

Source: CBA Annual Statistical Digest 2016; p.87-88

Balance sheet and income statement statistics-pension (Afl. m)2012 2013 2014 2015

Total assets 301.9 332.0 321.4 341.5

Total income 40.3 43.8 38.6 33.0

Total expenses 33.9 41.6 37.8 33.0

Net income/loss 6.4 2.2 0.8 -0.2Source: CBA Annual statistical Digest 2016; p: 89-90

Financial ratios-pension (Afl. m)2012 2013 2014 2015

Liquidity ratio




Coverage ratio


Source: CBA Annual Statistical Digest 2016; p.91




Forecast

BMI forecasts that Aruba’s non-life market will be undermined by heavy competition and that it expects premium prices to be low for consumer over its forecast period.

► Motor and property insurance will continue to dominate the non-life sector and will account for approximately 80% of premiums throughout the forecast period (2017-2021).

► Property insurance is expected to grow at a rate of 6.3% in 2017.

► Motor insurance is expected grow annually at 2% over the forecast period. Premiums should grow from US$22.45.2m in 2014 to US $24.8m in 2021.

► Health & Accident insurance is expected to grow at steady single digit rates from 2017 to 2021 with gross premiums moving from US$5.5m in 2017 to US$6.2m in 2021





Source: Central Bank of Curacao and St. Maarten

The tables on the left present selected data on Curacao and St. Maarten’s insurance industry1.

4 Industry analysisCuracao and St. Maarten

1 The tables represent the most recent information available on the Central Bank of Curacao and St. Maarten’s website

Insurance companies and pension funds under supervision2009 2010 2011 2012 2013

Life insurance companies

► branches 5 4 4 5 5

► incorporated in Neth. Ant./Cur & SXM* 5 5 5 5 5

Non-life insurance companies

► branches 8 8 6 6 6

► incorporated in Neth. Ant./Cur & SXM* 13 14 15 15 15

Pension funds 20 16 15 15 15

Sub-total 51 47 45 46 46

Captive life insurance companies 1 1 1 1 1

Captive non-life insurance companies 11 10 11 10 10

Professional reinsurance companies 4 5 5 4 4

Sub-total 16 16 17 15 15

Total 67 63 62 61 61Source: Central Bank of Curacao and St. Maarten

Selected financial inforamtion - local market insurance companies(NAf m) 2009 2010 2011 2012 2013

Life

Total admissible assets 2,081.30 2,228.90 2,347.50 2,494.90 2,613.10

Gross premium 68.6 75.1 111 89.2 -

Net operational result 30.3 38.4 29 66.8 52.7

Non-life

Total admissible assets 432.8 490.1 567.9 597.5 557.9

Gross written premium 331.6 337.5 339.3 337.3 -

Underwriting result 15.2 -13.9 16.3 7.6 -0.7




Major insurance companies within Barbados operate both regionally and internationally, and have mutual funds and pension investment businesses.

Life sector1

► Accounted for two-thirds of the insurance market.

► Consists of six operating insurers

► Top three insurers accounted for 95% of total industry assets.

► Leading players are Sagicor Life, Guardian Group and the Insurance Corporation of Barbados2

General sector1

► Consist of 15 companies

► Top three companies accounted for 63% of general insurer’s assets.

Performance indicators

► At the end of 2015, the domestic insurance sector’s assets grew by 7.2% yoy, reaching a value of $3.24b.

► The life sector’s GPW grew by 98% yoy in 2015, and was driven by a significant transaction by one of the larger insurers. Without this major transaction the sector would have grown by 32%.

► The table at left highlights selective performance indicators for the Barbados insurance industry.

4 Industry analysisBarbados

1 The Central Bank of Curacao and St. Maarten –Financial Stability Report 2016; Information is as at December 2015 2 BMI - Barbados Insurance Report Q4 2017

Performace indicators2012 2013 2014 2015

Life Insurance

Gross premium written, $m 170.5 198.1 232 458.6

Net operating income, $m 97.7 47.4 88.7 94.1

Total assets, $m 2,056.9 1,946 1,948.4 2,195.1

Capital to asset ratio (%) 30 26.3 30.1 29.9

ROA (%) n/a 2.3 4.8 4.7

Total assets to GDP (%) 23.7 22.3 22.4 24.8

General Insurance

Gross premium written, $m 475.2 470.3 492.2 457.8

Net operating income, $m 41.7 39.8 28.3 11.4

Total assets, $m 1,085.8 1,064.9 1,076.1 1,048.3

Capital to asset ratio (%) 30.2 31.7 31.4 28.5

ROA (%) n/a 4.4 2.6 1.2

Total assets to GDP (%) 12.5 12.2 12.4 11.9

1. Numbers presented inclusive of 15 general insurers and the general insurance business of 3 life insurersSource: Financial Services Commission and Central Bank of Barbados cited in CBB 2016 Stability Report




Forecast

► BMI anticipates restricted growth in the more established markets such as motor vehicle and property insurance over the next few years, given the high level of maturity and the highly competitive landscape of local and regional providers.

► The table on the left presents BMI’s forecast for Barbados insurance industry.

4 Industry analysisBarbados

Insurance forecast2014 2015 2016 2017f 2018f 2019f 2020f 2021f

Gross life premiums written, BBD mil 232 232.7 244.3 252.1 266 279.8 295.2 312.1

Gross life premiums written, %yoy 17.1% 0.3% 5.0% 3.2% 5.5% 5.2% 5.5% 5.7%

Gross non-life premiums written, BBD mil 490 457.8 480.5 503.5 525.7 550.6 578.2 608.5

Gross non-life premiums written, %yoy 4.2% -6.6% 5.0% 4.8% 4.4% 4.7% 5.0% 5.2%

Source: BMI - Barbados Insurance Report Q4 2017




Overview

► The Bahamas insurance industry consisted of 11 life and health (long-term) insurers and 17 general insurers at the end of 2016, as shown in the table on the left.

► The domestic sector’s total assets grew by 30% over the period 2015/16. This growth was driven by a 106% increase in general insurer’s total assets, which accounted for 41% of the market’s assets.

► The table on the left illustrates selective statistics for the domestic insurers market.

4 Industry analysisBahamas

Bahamas insurance marketInsurance industry 2015 2016

Life and health ("long-term") insurers 12 11

General insurers 16 17

Registered intermediaries (agents and brokers) 56 58

Sub-agents 21 21

Salespersons 686 700

Source: ICB 2015 and 2016 Annual Report

Selected statistics on Bahamas insurance industry2015 2016

Long-term General Long-term General

Total gross premium, $ million 454 315 447 311

Net Income, $ million 45 18.6 43 -7.6

Total Assets, , $ million 1311 457 1365 940

Risk retention ratio 88.7% 31.8% 88.8% 32.2%

Net loss ratio 74.0% 30.3% 73.5% 55.7%

Expense ratio 20.4% 41.9% 19.8% 14.5%

Combined ratio 94.4% 72.2% 93.3% 70.2%

ROE 11.4% 8.9% 11.0% -3.8%

ROI 3.8% 9.3% 3.8% -80.0%

Source: ICB 2016 Annual Report




Forecast

► BMI has a positive long-term outlook for the Bahamas insurance industry, however the non-life market is subject to several challenges such as the country’s vulnerability to hurricanes given its location.

► The table on the left presents BMI’s forecast for Bahamas insurance industry.

4 Industry analysisBahamas

Insurance forecastHeadline insurance forecast 2014 2015 2016 2017f 2018f 2019f 2020f 2021f

Gross life premiums written, BSD mil 410 430.5 413.4 423.6 443 461.4 478.9 496.8

Gross life premiums written, % yoy 2.1% 5.0% -4.0% 2.5% 4.6% 4.2% 3.8% 3.7%

Gross non-life premiums written, BSD mil 347.4 351.5 301.8 321.9 334.5 347 359.1 371.4

Gross non-life premiums written, % yoy -2.0% 1.2% -14.1% 6.7% 3.9% 3.7% 3.5% 3.4%

1. f - forecastSource: BMI - Bahamas Insurance Report Q1 2018




4 Industry analysisBermuda

Registered insurersClass of Insurer 2015 % 2016 %

Class 1 243 19.3% 225 18.4%

Class 2 294 23.3% 280 22.9%

Class 3 255 20.2% 254 20.8%

Class 3A 129 10.2% 127 10.4%

Class 3B 22 1.7% 22 1.8%

Class 4 40 3.2% 41 3.3%

Long-Term Class A 7 0.6% 8 0.7%

Long-Term Class B 8 0.6% 8 0.7%

Long-Term Class C 113 9.0% 107 8.7%

Long-Term Class D 8 0.6% 8 0.7%

Long-Term Class E 27 2.1% 29 2.4%

Special Purpose Insurer 115 9.1% 115 9.4%

Total: 1,261 100% 1,224 100%

1. The statistics for all insurers registered are now presented based on the number of licences held, to more accurately reflect year-end results

Source: Bermuda Monetary Authority, 2016 Annual Report

Market statistics by class of insurers as at 31 Dec 2015 (USD mil)

Class of Insurer No. of Licences

Gross Premiums

Net Premiums

Total Assets

Capital & Surplus

Class 1 238 3,485 2,847 17,580 12,496

Class 2 284 7,983 6,213 49,856 24,733

Class 3 242 42,894 36,019 125,686 37,710

Class 3A 126 12,242 9,291 25,938 13,552

Class 3B 22 12,704 8,922 31,386 11,916

Class 4 39 36,626 30,497 149,492 63,364

Long-Term Class A 7 190 190 1,632 472

Long-Term Class B 8 127 127 223 81

Long-Term Class C 115 2,880 2,880 78,009 12,970

Long-Term Class D 7 195 195 4,568 636

Long-Term Class E 28 8,854 8,854 112,962 18,373

Special Purpose Insurer 115 2,657 2,444 34,375 4,541

Total 1,231 130,836 108,478 631,709 200,844

1. Underwriting statistics quoted are from insurance company Statutory Financial Returns (SFR) and modified filings for 2015. Companies submit filings on a phased basis throughout the year following the financial year-end. The initial submission deadline for 2015SFRs was April 2016. Due to this schedule the most recent complete year-end figures for this overview are from 2015

2. This information is based on annual filings and as such movements or transactions can occur which may significantly impact individual reporting periods.

Source: Bermuda Monetary Authority, 2016 Annual Report

Bermuda’s tax free status has contributed significantly to it being one of the leading offshore insurance and reinsurance centres in the world. However, the impact of Brexit on Bermuda's relations with the EU as well as US President Trump's move towards protectionism against offshore insurance products presents an element of risk to the industry’s growth.

The following tables highlight the number of registered insurers in the industry and selective industry statistics.




Forecast

► BMI anticipates a positive long-term single digit growth outlook for Bermuda’s insurance market.

► The larger segment of the insurance market is the non-life segment and is expected to grow by 2.8% in 2017, reaching a value of BMD121.4b.

4 Industry analysisBermuda

Insurance forecastHeadline insurance forecast 2014 2015 2016e 2017f 2018f 2019f 2020f 2021f

Gross life premiums written, BMD, $b 24.9 12.24 33.36 36.49 38.7 41.65 45.15 49.31

Gross life premiums written, %yoy 17.1% -50.8% 172.5% 9.4% 6.1% 7.6% 8.4% 9.2%

Gross non-life premiums written, BMD, $b 126.95 118.59 118.1 121.37 123.76 126.81 130.32 133.43

Gross non-life premiums written, %yoy 4.2% -6.6% -0.4% 2.8% 2.0% 2.5% 2.8% 2.4%

Source: BMI - Bermuda Insurance Report Q1 2018




The tables on the left present insurance companies operating in St. Lucia and selective insurance and pension statistics for the years ended 30 June 2009-2014.

4 Industry analysisSt. Lucia

St. Lucia’s insurance companiesA.F. Valmont & Co. Ltd. M&C General Insurance Co. Ltd

Agostini Insurance Brokers (St. Lucia) Ltd Massy United Insurance

Axcel Finance (St.Lucia) Ltd Nagico (St. Lucia) Limited

Caribbean Alliance Insurance Co. New India Assurance Co. (T&T) Ltd.

CGM Gallagher Insurance Brokers (St. Lucia) Ltd Pan American Life Insurance Co. Insurance of the Eastern Caribbean

CLICO International Life Insurance Ltd. Phoenix Auto & Property Insurance Services Ltd

Demerara Mutual Life Assurance Society Ltd Premium Finance Company (E.C.) Ltd

E. C. Global Insurance Co. Ltd Risk Consultant and Insurance Brokers Limited

Eastern Caribbean Insurance Ltd. (ECI). Sagicor General Insurance

First Caribbean International Finance Corporation (Leeward & Windward) Sagicor Life Inc

Francis Rosemin & Company Limited Scotiabank

Guardian General Insurance Limited St. Lucia Motor & General Insurance Co. Ltd.

Guardian Life of the Caribbean Limited: Agents Jeffrey & Jeffrey Limited Sterling Insurance Services

Guyana & Trinidad Mutual Fire & Life Ins. Co. Ltd Sun General Insurance

J.E. Maxwell & Co. Ltd. The Beacon Insurance Company Limited

Jeffrey & Jeffrey Limited West Indies General Insurance Co. LtdSource: The Insurance Council of St. Lucia

Insurance and pension statisticsEC$’000 2008-09 2009-10 2012-11 2011-12 2012-13 2013-14

Contribution income 87,175 91,820 92,025 102,889 102,604 107,951

Short-Term Benefits Expenditure 9,731 10,116 10,471 11,476 11,973 14,403

Long-Term Benefits Expenditure 37,244 40,264 46,267 50,421 54,031 57,727

Pensions Expenditure 35,621 38,490 43,890 47,613 50,941 54,334

Active insured persons (#) 49,005 49,516 51,227 51,697 52,298 51,726

National Insurance Corporation 2014 Annual Report




Financial performance and analysis

5


Guardian Holdings Limited (GHL) 46

Guardian Life of the Caribbean Limited (GLOC) 48

Guardian Life Limited (GLL) 50

Guardian General Insurance (GGIL) 52

Fatum Holding N.V. 54

Guardian General Insurance Jamaica Limited (GGIJL) 56



Guardian Holdings Limited (GHL)5 Financial performance and analysis

Income Statement (FY13-TTM17)Net Results from InsuranceThe revenue from net insurance premium grew at a CAGR of 2.9% from TT$3,748m in FY13 to TT$4,295m in FY16.

This further grew to TT$4,575 for the TTM to September 2017

Net RevenueIncreased from TT$1,437m in FY13 to TT$1,767m in FY16 at a CAGR of 7.1%.

Net results from insurance activities accounted for 35% of the total revenue in FY16.

Expenses

Expenses grew at a CAGR of 6.9% from TT$918m in FY13 to TT$1,120m in FY16.

Net Insurance benefits and claims went up from TT$2,551 in FY13 to TT$3,039 in FY16.

Profit for the year

Profit in FY16 was TT$396m which showed a significant increase over the TT$44m in FY13.

For TTM to September 2017 profit was TT$390m.

Currency: TT$ m FY13 FY14 FY15 FY16TTM

Sep17Insurance premium income 5,053 5,033 5,172 5,499 5,786 Insurance premium ceded to reinsurers (1,493) (1,542) (1,584) (1,457)Reinsurance commission income 187 197 228 252 Net underwriting revenue 3,748 3,688 3,816 4,295 4,575 Policy acquisition expenses (617) (624) (643) (643)Net insurance benefits and claims (2,551) (2,575) (2,512) (3,039)Underwriting expenses (3,168) (3,198) (3,154) (3,682)Net result from insurance activities 580 490 662 613 434 Investing activities:Investment income 807 770 772 820 Net realised gains/(losses) on financial instruments (38) (1) 13 56 Net fair value (losses)/gains (27) 87 (7) 57 Fee income 82 48 48 54 Other income 105 39 31 105 Investment contract benefits (72) (73) (69) (64)Net income from investing activities 857 870 788 1,028 1,186 Fee and commission income from brokerage activities 52 84 127 137 Net income from all activities 1,437 1,412 1,534 1,767 1,757 Operating expenses (918) (905) (962) (1,120) (1,138)Finance charges (127) (130) (141) (130) (128)Operating profit 392 376 431 517 492 Fair value adjustment on Pointe Simon (457)Share of profit of associated companies 29 22 17 3 11 Profit before taxation (36) 398 449 521 502 Taxation (102) (86) (102) (130) (107)Profit after taxation -138 312 347 390 396Profit attributable to equity holders of the parent 44 341 335 396 390

1 Executive Summary 7 Appendices2 Transaction Background3 Economic overview4 Industry analysis5 Financial performance an ...6 Valuation



Guardian Holdings Limited (GHL)5 Financial performance and analysis

Balance Sheet

Total assets

Over the period Dec13-Dec16, total assets grew at CAGR of 4.7%, reaching TT$24,252m in FY16.

Financial assets increased by TT$2,950m over the period and accounted for 63% of total assets as at Dec16. Financial assets increased at a CAGR of 7.3%.

As at Sep17, assets have grown to TT$28,403m mainly due to reinsurance assets which grew by TT$2,035m and Cash which went up TT$1,061m in 9 months.

Total liabilities

Total liabilities grew from TT$18,521m as at Dec13 to TT$21,189m as at Dec16, a CAGR of 4.6%.

Insurance contracts accounted for 69% of total liabilities in as at Dec16.

Sep17 liabilities increased to TT$25,179m up by TT$3,990m mainly due to insurance contracts.

Total Equity

Total equity grew at a CAGR of 5.8% between Dec13 and Dec16 and was TT$3,224m as at Sep17.

Currency: TT$ m Dec-13 Dec-14 Dec-15 Dec-16 Sep-17Property, plant and equipment 537 537 564 593 603Investment properties 803 904 950 1,257 1,321Intangible assets 396 399 505 515 514Investment in associated companies 223 195 212 212 219Financial assets 12,442 12,853 13,757 15,392 15,974Financial assets of mutual fund unit holders 1,111 1,080 1,047 976 982Loans and receivables 1,678 1,799 1,821 2,046 2,354Properties for development and sale 360 171 189 169 181Pension plan assets 91 88 103 106 110Deferred tax assets 22 24 17 24 50Reinsurance assets 684 666 703 791 2,826Deferred acquisition costs 91 87 88 88 100Taxation recoverable 158 153 152 177 167Cash and cash equivalents 2,032 2,234 1,848 1,744 2,805Cash and cash equivalents of mutual fund unit holders

158 106 203 161 196

Assets held for sale 320 197 24 0 0Total assets 21,106 21,493 22,183 24,252 28,403Insurance contracts 12,442 12,779 13,232 14,663 17,555Financial liabilities 1,916 2,160 2,154 2,171 2,146Investment contract liabilities 1,580 1,623 1,698 1,812 1,931Third party interests in mutual funds 1,010 992 1,045 1,083 1,165Pension plan liabilities 162 100 86 68 72Post-retirement medical benefit obligations 75 73 79 90 92Deferred tax liabilities 227 208 231 247 267Provision for taxation 72 49 34 77 53Other liabilities 732 716 853 979 1,898Liabilities related to assets held for sale 305 182 18 0Total liabilities 18,521 18,882 19,430 21,189 25,179Total equity 2,585 2,611 2,753 3,064 3,224Total liabilities and equity 21,106 21,493 22,183 24,252 28,403




Guardian Life of the Caribbean Limited (GLOC)5 Financial performance and analysis

Income Statement (FY13-TTM17)Currency: TT$ m FY13 FY14 FY15 FY16 TTM17Gross premiums written 1,747 1,830 1,980 2,354 2,440 Reinsurance commission income - - - - (0)Outward reinsurance premiums (130) (147) (176) (138) (137)Net premiums written 1,618 1,683 1,804 2,216 2,302 Change in unearned premium provision (10) (1) (1) (3) (4)Net insurance premium revenue 1,608 1,682 1,803 2,213 2,298 Investment income 244 283 263 300 336 Net realised gains/loss on financial and other assets (2) (5) 0 11 10 Net fair value losses on financial and other assets 21 4 (6) (5) (1)Increase in value to shareholders of inforce long-term business

84 - - - -

Investment contract benefits - - - - (3)Fee income 8 14 10 13 12 Other operating gain/loss 16 (3) 11 51 50 Total revenue 1,979 1,976 2,080 2,584 2,701 Net insurance benefits and claims (1,296) (1,358) (1,392) (1,774) (1,905)Commissions expense - - - - (7)Policy acquisition expenses - - - - (1)Change in deferred acquisition costs - - - - 1 Expenses (553) (573) (606) (604) (612)Profit before taxation 129 45 82 205 178 Taxation (17) (11) (12) (18) (23)Profit after taxation 112 34 70 187 155 Amount attributable to participating policyholders (3) (6) (5) (12) (16)Profit for the year 109 28 65 176 139

Net Results from InsuranceThe revenue from net insurance premium grew at a CAGR of 5.9% from TT$1,608m in FY13 to TT$2,213m in FY16.

Total RevenueIncreased from TT$1,979m in FY13 to TT$2,584m in FY16 at a CAGR of 9.3%.

Effective January 1, 2015, the Company changed its reserving methodology to the Caribbean Policy Premium Method and as such the value to shareholders of inforce long-term business was eliminated in FY14 and FY15.

In FY16, GLOC’s net insurance premium revenue increased by TT$410m when compared to FY15 which is YoY growth of 22.7%

Net insurance premium revenue accounted for over 86% of the total revenue in FY16.

Expenses

Expenses grew at a CAGR of 3% from TT$553m in FY13 to TT$604m in FY16.

Net Insurance benefits and claims went up TT$478m from FY13 to FY16.

Profit for the year

Profit in FY16 was TT$176m which showed a significant increase over FY15 due to stable expenses while revenue went up during the same period. The YoY TT$111m increase represented a 171.4% change.

Guardian Life of the Caribbean Limited (GLOC) operates in T&T and engages in underwriting of all classes of long-term insurance business as well as personal accident business. The following table sets out selected historical income statement information for GLOC for the four years ended 31 December 2016 & TTM17 periods based on 6m17 data.




Guardian Life of the Caribbean Limited (GLOC)5 Financial performance and analysis

Balance SheetCurrency: TT$ m Dec13 Dec14 Dec15 Dec16 Jun17Cash and cash equivalents 845 680 600 419 398 Cash and cash equivalents of mutual fund unit holders - - - 179 183 Deferred policy acquisition costs - - - 3 3 Deferred tax assets - - - 3 3 Due from group companies 36 14 - 2 8 Due from policyholders, brokers and agents - - - - -Financial assets 5,403 5,902 6,464 7,331 7,523 Financial assets of mutual fund unit holders - - - 74 79 Investment in Subsidiaries 114 114 127 127 140 Investment properties 170 176 177 305 304 Loans and receivables 455 551 532 608 708 Pension plan assets 1 1 2 2 2 Property, plant and equipment 178 183 176 169 171 Reinsurance assets 12 12 22 28 35 Taxation recoverable 11 11 11 20 20 Total assets 7,225 7,646 8,112 9,270 9,576 Deferred tax liabilities 125 113 123 125 131 Due to group companies - - - 7 4 Financial Liabilities 694 - - - -Pension Plan Liabilities 105 63 57 45 47 Due to affiliate companies 10 10 - - -Investment contract liabilities - 733 804 869 900 Insurance contracts 5,025 5,418 5,771 6,589 6,804 Other liabilities 161 185 177 176 172 Post retirement medical benefit obligations 15 18 19 29 30 Provision for taxation 31 31 9 27 33 Taxation payable - - - - -Total liabilities 6,166 6,570 6,961 7,866 8,121 Equity attributable to owners of the parent 1,059 1,076 1,151 1,404 1,455 Total liabilities and equity 7,225 7,646 8,112 9,270 9,576

Total assets

Over the period Dec13-Dec16, total assets grew at CAGR of 8.7%, reaching TT$9,720m in FY16.

Financial assets increased by TT$2,045m over the period and accounted for 79% of total assets as at Dec16. Financial assets increased at a CAGR of 10.7%.

As at Jun17, assets have grown by TT$306m majorly due to Financial assets which grew by TT$191m and Loans and Receivables which went up TT$ 100m in 6 months.

Total liabilities

Total liabilities grew from TT$6,166m as at Dec13 to TT$7,866m as at Dec16, a CAGR of 8.5%.

Insurance contracts accounted for 84% of total liabilities in as at Dec16.

Jun17 liabilities increased to TT$ 8,121m up by TT$255m mainly due to insurance contracts which contribute TT$214m.

Total Equity

Equity attributable to owners grew at a CAGR of 9.9% between Dec13 and Dec16.




Guardian Life Limited (GLL)5 Financial performance and analysis

Income Statement (FY13-TTM17)Currency: J$’m FY13 FY14 FY15 FY16 TTM17Insurance premium income 8,684 8,653 9,317 10,398 11,313 Reinsurance commission income 19 - - 92 106 Insurance premium ceded to reinsurers (281) (296) (344) (365) (389)Net underwriting revenue 8,421 8,357 8,973 10,124 11,030 Policy acquisition expenses (1,233) (1,383) (1,552) (1,618) (1,587)Commissions expense - - - - (59)Net insurance benefits and claims (4,767) (4,725) (4,958) (5,570) (6,490)Decrease/(Increase) in reserves for future policy benefits (1,236) (1,146) 1,188 (331) (331)Underwriting expenses (7,236) (7,254) (5,323) (7,519) (8,466)Net result from insurance activities 1,186 1,103 3,651 2,606 2,564 Net investment income 3,869 4,136 3,685 3,781 4,035 Net realized gains on financial assets (586) 24 309 43 42 Net unrealized fair value gains on financial assets and investment properties

(96) 259 1,900 1,751 2,232

Fee income 395 417 466 523 559 Other income 571 335 300 443 158 Investment contract benefits (903) (1,223) (2,215) (1,930) (1,940)Net income from investing activities 3,250 3,948 4,446 4,612 5,086 Net income from all activities 4,435 5,052 8,097 7,218 7,650 Operating expenses (2,095) (2,226) (2,875) (2,438) (2,498)Operating profit from continuing operations 2,340 2,826 5,222 4,780 5,152 Impairment of asset held for sale - - (63) 279 279 Profit before taxation from continuing operations 2,340 2,826 5,158 5,058 5,430 Taxation (258) (240) (614) (979) (950)Profit after taxation from continuing operations 2,082 2,586 4,544 4,079 4,481 Discontinued operations: - - - - -Net loss on discontinued operations (79) (26) - - -Gain on sale of discontinued operations - - 240 - -Profit attributable to equity holders of the parent 2,003 2,559 4,784 4,079 4,481

Guardian Life Limited (GLL) operates in Jamaica and provides group life and health insurance and group pension administration services. The following table sets out selected historical income statement information for GLL for the four years ended 31 December 2016 & TTM17 period based on 6m17 data.

Net underwriting revenue

Net underwriting revenue increased in FY16 by J$1,151m, from J$8,973m in FY15 showing growth of 12.8%. This also represented a CAGR of 6.3% since FY13.

Underwriting expenses

Increased from J$7,236m in FY13 to J$7,519m in FY16 by a CAGR of 1.3%. It fell in FY15, which was driven by the change in reserves for future policy benefits.

Net insurance benefits and claims accounted for approximately 74% of underwriting expenses in FY16. However, in FY15 it accounted for 93% as a result of a decrease in underwriting expenses, which was due to the change in GGL’s tax regime to release of tax reserves.

Income from Investing activities

Investment income grew from J$3,250m in FY13 to J$4,612m in FY16 at a CAGR of 12.4%.

Earnings after tax from continuing operations

Effective January 2015, the Group received conditional regulatory approval to transfer all contracted life insurance policies in Belize.

As such, the assets supporting the life insurance and investments contracts of the Belize branch were reflected in discontinued operations of J$240m in FY15.

FY16 showed a downfall from FY15 and ended at J$4,079m, however CAGR from FY13 was at 25.1%.




Guardian Life Limited (GLL)5 Financial performance and analysis

Balance SheetCurrency: J$’m Dec13 Dec14 Dec15 Dec16 Jun17

Assets held for sale 161 167 111 - -Cash and cash equivalents 5,623 6,121 5,449 3,012 2,901 Due from group companies - - - 1 43 Financial assets 42,266 45,343 48,457 45,883 48,204 Financial assets of mutual fund unit holders - - - 4 8 Intangible assets 28 46 72 91 78 Investment properties 670 705 1,032 1,393 1,839 Loans and receivables 1,468 1,297 1,618 1,636 1,611 Assets of discontinued operations - 555 - - -Property, plant and equipment 1,792 2,021 2,064 2,617 2,579 Reinsurance assets 155 155 140 - -Taxation recoverable 1,988 2,094 1,735 1,657 1,185 Total assets 54,152 58,503 60,679 56,294 58,449

Deferred tax liabilities 365 402 596 749 778 Due to group companies - - - 8 -Insurance contracts 21,986 22,722 21,520 22,612 23,530 Investment contract liabilities 21,377 23,104 25,098 17,755 18,287 Other policy liabilities 1,048 1,269 1,203 - -Other liabilities 719 796 1,391 1,445 1,397 Liabilities of discontinued operations - 555 - - -Provision for taxation 318 12 11 594 -Total liabilities 45,813 48,860 49,819 43,163 43,992 Equity attributable to owners of the parent 8,339 9,643 10,860 13,131 14,457 Total liabilities and equity 54,152 58,503 60,679 56,294 58,449

Total assets

Over the period Dec13-Dec16, total assets grew at CAGR of 1.3%, closing at J$56,294m in FY16.

Financial assets increased by J$3,616m over the period and accounted for 82% of total assets as at Dec16. Financial assets grew at a CAGR of 2.8%.

As at Jun17, total assets grew by a further J$2,154m mainly due to financial assets which grew by J$2,322m.

Total liabilities

Liabilities declined over the review period, registering a CAGR of -2%.

However, the decline was due only to the Dec16 performance, which had a decline of 13% YoY.

The main driver of this decrease was Investment contract liabilities which declined from J$25,098m in FY15 to J$17,755 in FY16.

Total Equity

Equity attributable to owners grew at a CAGR of 16.3% between Dec13 and Dec16. Equity increased J$2,271 in Dec16 from Dec15, and continued the upward trend in Jun17 where it showed an increase of TT$1,325 for the 6 months.

The following table sets out selected balance sheet items for Guardian Life Limited for the four years ended 31 December 2016 and the six months ended June 2017.




Guardian General Insurance (GGIL)5 Financial performance and analysis

Income Statement (FY13-TTM17)

Currency: TT$ m FY13 FY14 FY15 FY16 TTM17Gross premiums written 1,554 1,474 1,384 1,151 1,189 Outward reinsurance premiums (1,141) (1,107) (1,038) (824) (856)Net premiums written 412 367 346 327 333 Change in gross provision for unearned premiums (32) 19 (4) 40 13 Change in provision for unearned premiums reinsurers' share 31 (16) 12 (24) (10)Net insurance premium revenue 412 369 354 343 336 Reinsurance commission 133 122 112 109 122 Underwriting revenue 545 491 467 452 458 Net claims incurred (135) (99) (134) (132) (132)Acquisition costs (151) (132) (128) (131) (131)Change in deferred acquisition costs 3 (1) 0 (2) (2)Commissions expense - - - - (11)Change in deferred acquisition costs - - - - 1 Net insurance benefits and claims - - - - (5)Expenses of management (156) (146) (131) (145) (145)Underwriting expenses (438) (378) (393) (410) (425)Underwriting profit 107 113 74 41 33 Investment income 23 17 24 20 20 Net realised losses on financial assets (1) (1) (0) 0 (0)Net fair value gains/(losses) on financial assets at fair value through profit or loss

10 (6) (6) 2 5

Other operating income 6 (1) 2 16 6 Net investment and other income 38 9 20 39 31 Operating expenses - - - - (7)Share of profit and associated companies 6 5 - - -Profit before taxation 151 127 93 81 57 Taxation (32) (35) (27) (14) (8)Profit for the year 119 91 66 66 49 Income attributable to non-controlling interests - (2) - - -Profit attributable to equity holders of the parent 119 89 66 66 49

Underwriting revenue and expenses

Underwriting revenue decreased at a CAGR of -6.1% from TT$545m in FY13 to TT$452m in FY16.

Underwriting expenses declined by a CAGR of -2.2% to TT$410m over the four year period.

Even though underwriting expenses decreased over the period, the decline in underwriting revenue resulted in a 27% decrease in underwriting profit over the period.

Net investments and other income

Net investments and other income increased by 101% y-o-y in FY16. The same was up 119.5% in FY15 as against FY14.

This change was mainly due to the TT$14m increase in other operating Income over the period.

Profit for the year

Profit decreased at a CAGR of 17.7% over the four year period to TT$66m in FY16.

Profit was consistent between FY15 and FY16 at TT$66m and decreased in TTM17 to TT$49m.




Guardian General Insurance (GGIL)5 Financial performance and analysis

Balance SheetCurrency: TT$ m Dec13 Dec14 Dec15 Dec16 Jun17Cash and cash equivalents 360 306 217 173 224 Cash and cash equivalents of mutual fund unit holders

- - - 10 10

Deferred policy acquisition costs 42 41 41 40 41 Deferred tax assets 5 4 3 5 5 Pension plan assets 3 2 5 4 5 Due from group companies 6 9 2 3 4 Financial assets 548 557 548 505 469 Investment properties 22 22 18 36 23 Investment in associated companies 60 61 16 16 16 Investment in subsidiaries - - 9 6 6 Loans and receivables 98 89 121 193 123 Property, plant and equipment 27 28 29 35 35 Reinsurance assets 278 280 266 311 361 Taxation recoverable 4 5 8 16 21 Total assets 1,452 1,404 1,283 1,353 1,342 Deferred tax liabilities 19 18 19 15 15 Due to group companies 4 9 3 7 18 Pension Plan obligation 9 4 1 1 1 Insurance contracts 780 742 703 728 769 Other liabilities - - - 185 139 Post retirement medical benefit obligations 4 4 4 6 6 Provision for taxation 8 3 2 2 2 Total liabilities 936 881 815 945 950 Equity attributable to owners of the parent 517 523 468 409 392 Total liabilities and equity 1,452 1,404 1,283 1,353 1,342

Total assets

Total assets fell from TT$1,452m as at Dec13 to TT$1,353m as at Dec16 at a CAGR of -2.3%.

Financial assets were the dominant contributor to total assets with 37% contribution in Dec16, however, cash and cash equivalents was the main driver to the decrease which declined by TT$187m, partially offset by an increase in Loans & receivables by TT$96m.

Total liabilities

Over the period, total liabilities decreased marginally by a CAGR of 0.3% reaching a value of TT$945m as at Dec16.

Insurance contracts over the period declined by TT$25m and accounted for over 77% of total liabilities in Dec16.

Total Equity

Equity attributable to owners declined at a CAGR of -7.5% between Dec13 and Dec16, which decreased from TT$517m at Dec13 to TT$409m at Dec16.




Fatum Holding N.V.5 Financial performance and analysis

Income Statement (FY13-TTM17)Currency: ANGm FY13 FY14 FY15 FY16 TTM17Insurance premium income 256 261 288 297 303

Insurance premium ceded to reinsurers (52) (46) (71) (85) (99)

Reinsurance commission income 9 12 23 28 31

Net underwriting revenue 213 226 240 240 235

Policy acquisition expenses (30) (30) (32) (34) (34)

Change in gross provision for unearned premiums - - - - (2)

Commissions expense - - - - (4)

Change in deferred acquisition costs - - - - 1

Change in provision for unearned premium reinsurers' share - - - - 5

Net insurance benefits and claims (166) (183) (198) (193) (190)

Underwriting expenses (195) (213) (229) (227) (223)

Net result from insurance activities 18 13 11 13 12

Investment income 63 61 61 63 63

Net realized gains on financial instruments 0 0 0 10 11

Net fair value losses on financial instruments (14) 11 (11) (1) 2

Fee income 13 1 4 4 4

Other income 5 1 3 2 1

Investment contract benefits (0) (0) (0) (0) (0)

Net income from investing activities 66 75 57 78 80

Commission income from brokerage activities - 14 22 33 33

Net income from all activities 84 102 90 124 125

Operating expenses (73) (75) (81) (99) (104)

Finance charges (5) (5) (5) (5) (4)

Operating profit 6 23 3 20 16

Share of profit of associate 6 10 6 8 8

Profit before taxation 12 33 9 28 24

Taxation (3) (5) (2) (6) (6)Profit for the year 10 27 8 23 18

Net underwriting revenue

Net underwriting revenue grew at a CAGR% of 4% between FY13-FY16, and was ANG 240m in FY16. TTM17 revenue was marginally lower at ANG 235m.

Underwriting expenses

Underwriting expenses increased at a CAGR of 5.2%, from ANG 195m in FY13 to ANG 227m in FY16.

Net results from insurance activities

Net insurance results decreased by 11.1% over the four year period to ANG 13m in FY16.

This decrease was due to the growth in underwriting expenses over the period, which went up to ANG 227m in FY16 from ANG 195m in FY13.

Net income from all activities

Income from all activities increased by 38.3% in FY16, i.e. to ANG 124m from ANG 90m in FY15. FY15 showed a YoY decline of 12.6%.

TTM17 shows a marginal increase at ANG 125m due to lower underwriting expenses.

Operating Profit in FY16 is at ANG 20m from ANG 3m in FY15.

Profit of the year

Net profit grew from ANG 10m in FY13 to ANG 23m in FY16. For FY16, net profit grew 187.5% from ANG 8m in FY15.




Fatum Holding N.V.5 Financial performance and analysis

Balance SheetCurrency: ANGm Dec13 Dec14 Dec15 Dec16 Jun17Financial assets 1,055 1,082 1,152 1,234 1,279 Loans and receivables 194 186 209 206 252 Cash and cash equivalents 110 166 138 142 173 Investment in associated companies 36 43 49 63 65 Intangible assets 37 38 70 64 64 Reinsurance assets 21 27 35 43 49 Property, plant and equipment 34 33 35 39 40 Pension plan assets 24 24 27 27 27 Deferred acquisition costs 8 8 8 8 12 Due from group companies 8 11 6 6 11 Taxation recoverable 7 7 8 10 10 Deferred tax assets 1 - - - 2 Investment properties 3 2 2 1 1 Financial assets of mutual fund unit holders 0 0 - 0 0 Total assets 1,538 1,627 1,738 1,843 1,984 Insurance contracts 1,182 1,263 1,332 1,415 1,494 Other liabilities 58 59 105 108 151 Financial liabilities 93 93 95 89 91 Deferred tax liabilities 13 12 15 13 16 Post retirement medical benefit obligations 14 13 13 11 11 Investment contract liabilities - - - 5 6 Provision for taxation - - - 3 2 Due to group companies - - 0 0 0 Due to affiliates 0 0 - - -Pension plan liabilities - - - - -Total liabilities 1,359 1,440 1,560 1,645 1,771 Equity attributable to owners of the parent 179 187 178 198 214 Total liabilities and equity 1,538 1,627 1,738 1,843 1,984

Total assets

Over the four year period, total assets grew at a CAGR of 6.2%, to ANG 1,843m.

As at Jun17, assets increased to ANG 1,984m which represented growth of ANG 141m or 7.7%.

Financial assets grew by ANG 83m in Dec16 as compared to Dec15 and accounted for 67% of total assets in FY16.

Reinsurance assets and Investment in associated companies grew at a CAGR of 27% and 21% respectively.

Total liabilities

Total liabilities grew from ANG 1,359m as at Dec13 to ANG 1,645m as at Dec16, at a CAGR of 6.6%.

Other Liabilities grew at a CAGR of 22.7% from Dec13 to Dec16 and Insurance contracts grew by ANG 83m over the period.

Deferred tax liabilities have been stable over the period.

Equity attributable to owners of parent

Equity as at Dec16 was ANG 198m as compared to ANG 178m in the previous year.




Guardian General Insurance Jamaica Limited (GGIJL)5 Financial performance and analysis

Income Statement (FY13-TTM17)Currency: J$m FY13 FY14 FY15 FY16 TTM17Gross premiums written 2,808 5,250 5,493 6,747 6,978 Reinsurance commission income - - - - (44)Outward reinsurance premiums (1,713) (3,479) (3,895) (5,076) (5,208)Premiums written, net of reinsurance 1,094 1,770 1,598 1,671 1,726 Change in provision for unearned premiums 85 38 45 7 279 Change in provision for unearned premium reinsurers' share - - - - (336)Premiums earned, net of reinsurance 1,179 1,809 1,644 1,678 1,670 Claims incurred, net of reinsurance (877) (1,361) (1,153) (1,109) (1,175)Commissions earned 353 621 666 630 630 Commissions paid (275) (500) (492) (484) (512)Change in net deferred policy acquisition costs 8 8 (20) (6) 20 Administrative expenses (427) (556) (560) (576) (576)Underwriting profit (39) 21 84 134 58 Investment income 264 427 404 399 403 Net fair value gains/(losses) on financial instruments - - - - 61 Fee income - - - - (0)Other income/(loss) - - - - (94)Operating expenses - - - - (36)Finance charges - - - - -Other income 1 5 3 2 2 Foreign exchange gains 108 57 90 121 121 Profit before taxation 334 511 580 656 515 Taxation (83) (145) (166) (177) (129)Net profit attributable to owners of the parent 251 366 414 479 386

Premium earned, net of reinsurance

Net premiums earned grew at a CAGR of 12% from FY13-FY16, from J$1.1b to J$1.7b.

Claims incurred, net of reinsurance

Claims increased by 55% from J$877m in FY13 to J$1,361m in FY14 and decreased to J$1,153m in FY15 and further decreased by J$1,109m in FY16.

Underwriting profit

Underwriting profit increased from a loss of J$39m in FY13 to J$134m in FY16, and decreased by J$76m in TTM17.

Net profit

Net profit grew at a CAGR of 24% over the four year period, from J$251m to J$479m.

This increase was due mainly to the growth in investment income by 51% over the period i.e., from J$264m in FY13 to J$399m in FY16.




Guardian General Insurance Jamaica Limited (GGIJL)5 Financial performance and analysis

Total assets

Over the period, total assets grew at a CAGR of 7.9%, to J$10,875m.

Jun17 assets increased 28% to J$13,963m as compared to Dec16, a movement of J$3,088m.

Financial asset contributed 55% of total assets at Dec16 and increased from J$5,956m at Dec16 to J$6,047m at Jun17.

Loans and receivables grew by 135% from J$937m at Dec16 to J$2,205m at Jun17.

Reinsurance Assets is grew by 33% from J$3,027m at Dec16 to J$4,036m at Jun17.

Total liabilities

Total liabilities grew from J$5,782m as at Dec13 to J$7,217m as at Dec16, at a CAGR of 7.7%.

Other Liabilities grew 46.9% from Dec13 to Dec16, and grew further by J$1,961m to J$2,440m as at Jun17.

Insurance contracts grew by J$1,275m from J$5,189m at Dec13 to J$6,464m at Dec16.

Equity attributable to owners of parent

Shareholders’ equity grew from J$2,869 at Dec13 to J$3,658m at Dec16, at CAGR of 7.9%.

Balance SheetBalance SheetCurrency: J$m Dec13 Dec14 Dec15 Dec16 Jun17Cash and cash equivalents 553 593 890 653 1,303 Deferred policy acquisition costs 230 234 227 209 269 Deferred tax assets - - - 5 5 Due from group companies - - - - 16 Due from policyholders, brokers and agents 660 749 863 - -Financial assets - - - 5,956 6,047 Intangible assets 29 25 4 - -Investment properties 5,136 5,286 5,639 - -Loans and receivables - - - 937 2,205 Non-current assets held for sale 104 104 - - -Other receivables 27 19 - - -Property, plant and equipment 109 113 114 88 75 Receivables and prepayments - - 18 - -Recoverable from reinsurers 1,751 1,789 1,935 - -Reinsurance assets - - - 3,027 4,036 Taxation recoverable 55 20 - - 7 Total assets 8,651 8,931 9,690 10,875 13,963 Deferred tax liabilities 62 107 124 166 183 Due to group companies - - - 5 0 Due to insurers and co insurers 371 347 439 - -Employee benefit obligation 9 9 - - -Employee benefit obligations - - 11 - -Insurance contracts 5,189 5,415 5,550 6,464 7,696 Other liabilities 151 101 178 479 2,440 Post retirement medical benefit obligations - - - 11 11 Provision for taxation - - - 93 -Taxation payable - - 54 - -Total liabilities 5,782 5,980 6,356 7,217 10,330 Equity attributable to owners of the parent 2,869 2,951 3,334 3,658 3,633 Total liabilities and equity 8,651 8,931 9,690 10,875 13,963




Valuation

6


Overview of Valuation Approach 59

Income-Based Valuation 60

Market Approach 65

Market approach 66

Adjusted Net Asset Value 67



Premise of value

When measuring FMV, it is appropriate to adopt the premise of value (going concern or standalone) that will maximize the value of the subject entity. In determining the highest and best use of the component assets, and hence the appropriate valuation premise for each, it is necessary to consider whether the overall entity value is maximized by measuring each asset’s value on a standalone (“in exchange”) basis or as part of a going concern (“in use”) asset grouping.

Considering the nature of GHL’s business operations, we concluded that it was appropriate to value the company on a going concern basis. Given the valuation premise adopted, values may be estimated through one or more of the Cost, Market, and Income approaches. A number of relevant valuation methodologies and techniques exist for each approach. Appendix D provides a more detailed description of the premise of value concept and of generally accepted valuation approaches and methods.

Selected valuation approaches and methodologies

The selection of appropriate valuation methodologies and the value conclusions drawn after their application are matters of professional judgement. Generally, for companies providing a product or service, the Income and Market Approaches would generally provide the most reliable indications of value since such companies are more dependent on their ability to generate earnings than on the value of the assets used in the production/service process.

The Income Approach involves estimating the future earnings and discounting those earnings to present value using a rate suitable for the risks associated with realizing those benefits. This approach can be applied using the discounted cash flow method, capitalized earnings or cash flow method or the dividend valuation method.

6 ValuationOverview of Valuation Approach

► Income Approach – Discounted Cash Flow

DCF analysis involves forecasting cash flows over an appropriate period and then discounting each year’s cash flow to a present value at an appropriate discount rate.

► Market Approach – Trading Multiples

Market approach methodologies applied in the determination of value normally are based on the application of a market multiple. The multiple expresses the relationship between observed market prices and an observable business factor, such as revenue or earnings.

We have considered trading multiples in estimating the value of GHL under the market approach.

► Cost Approach – Adjusted Net Asset Value

In deriving the value using the adjusted net asset method we relied on GHL’s balance sheet as at 30 September 2017. Under this method, the book values were assumed to be reflective of the fair market values for each asset and liability. The only adjustment made was to account for the increase in the value of equity as a result of profit (estimated) for the month of October 2017

Selected Valuation Methods

Definition of Fair Market Value

An opinion expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, as of a specific date. As required in the Securities Industry (Take-over) by-laws, 2005, by-law 18(1), we have arrived at a range of values without any downward adjustments in value on account of any of the participating securities not being part of a controlling interest.




Income-Based Valuation6 Valuation

DCF valuationNotes & 2-months Forecast For the Years Ending December 31,

References 31-Dec-17 2018 2019 2020 2021 2022 Terminal

Gross premiums written 1 881 5,469 5,660 5,858 6,064 6,276 6,433

Net premiums written 1 639 3,968 4,119 4,264 4,413 4,567 4,681

Net premiums earned 1 639 3,969 4,119 4,264 4,413 4,567 4,681

Add: Reinsurance commission & income 1, 2 42 260 266 276 285 295 303

Net underwriting revenue 1 681 4,229 4,386 4,539 4,698 4,862 4,984

Policy acquisition expenses 1 (118) (732) (761) (788) (816) (844) (865)

Net insurance benefits and claims 3 (477) (2,957) (3,056) (3,163) (3,274) (3,389) (3,473)

Net result from insurance activities 86 540 568 588 608 630 645

Investment income 4 149 936 969 1,003 1,038 1,074 1,101

Other income/(loss) 1 26 217 238 246 255 264 270

Net income from all activities 260 1,693 1,775 1,837 1,901 1,967 2,017

Operating expenses 5 (154) (944) (977) (1,011) (1,046) (1,083) (1,110)

Profit before taxation 107 749 798 826 855 884 907

Less: Unlevered cash taxes (20) (151) (162) (168) (175) (181) (186)

Less: Regulatory capital requirements 6 (11) (76) (79) (82) (84) (87) (65)

Net cash flow 76 521 557 576 596 616 656





DCF valuation (cont’d)

Net cash flow 76 521 557 576 596 616 656

Terninal value 7 6,905

Discount period 0.08 0.67 1.67 2.67 3.67 4.67 4.67

Discount factor at 12.0% 8 0.9906 0.9272 0.8279 0.7392 0.6600 0.5893 0.5893

Present value 75 483 461 426 393 363 4,069

Business enterprise value before associates and non-operating assets at 12.0% 6,270

Terninal value 7 6,247

Discount period 0.08 0.67 1.67 2.67 3.67 4.67 4.67

Discount factor at 13.0% 8 0.9899 0.9218 0.8157 0.7219 0.6388 0.5653 0.5653

Present value 75 480 454 416 380 348 3,532

Business enterprise value before associates and non-operating assets at 13.0% 5,686

Summary of DCF Valuation 13.00% 12.00%

Business enterprise value before associates and non-operating assets as above 5,686 6,270

Add: Associates and non-operating assets 9 400 400

Less: Interest bearing debt 10 (2,146) (2,146)

Total Value of Equity 3,940 4,524

DCF value per share (TT$) 16.99 19.51





Notes to projections

1. Cash flow projections are based our review of historical performance including financial results up to 30 September 2017, budgets prepared by management (3 years up to 2019) and EYSL’s review of economic and industry conditions, especially in GHL’s key markets. Based on our review, for the period 2018 – 2022 premiums have been projected to increase at 3.5% p.a., and a nominal terminal growth rate of 2.5%. Our industry analysis shows both real and nominal growth rates for territories in which GHL operates. No material changes projected in relation to percentages ceded to reinsurers.

2. Commission ratios for the Life and P&C segments have been budgeted in line with historical experience, to be around 14% and 4% respectively.

3. For the Life segment, net insurance benefits and claims have been projected to be approximately 82% - 83% of premium income, which is in line with historical experience. For P&C, the claims ratio has been projected at 44%.

4. Investment income has been projected based on management’s current expectation of 5% p.a.. Investments have been projected toincrease in line with the growth in net premiums.

5. Expenses have been projected using an Expense ratio of 16.5%, which is in line with the historical experience.





Notes to projections (cont’d)

6. Targeted regulatory capital requirements have been estimated based on the regulatory minimum capital plus 25% safety margin for operational and contingency purposes. Projected capital requirements assume no major shifts in risk profile, and that the required increases in capital requirements will be in line with the projected growth rates in premiums. The table below shows the projected movement in regulatory capital requirements.

2016 2016 2017 2018 2019 2020 2021 2022 2022

Safety margin 25.00% Minimum Target Target Target Target Target Target Target Target

$000 $000 $000 $000 $000 $000 $000 $000 $000

T&T life insurance companies 901,291 1,126,614 1,160,412 1,201,027 1,243,063 1,286,570 1,331,600 1,378,206 1,412,661

Dutch Caribbean 347,010 347,010 357,420 369,930 382,878 396,278 410,148 424,503 435,116

Jamaica life insurance 258,734 323,418 333,120 344,779 356,846 369,336 382,263 395,642 405,533

Jamaica General Insurance 141,524 176,905 182,212 188,590 195,190 202,022 209,093 216,411 221,821

Guardian General Insurance 65,469 81,836 84,291 87,242 90,295 93,455 96,726 100,112 102,614

Guardian Re 32,236 40,295 41,504 42,956 44,460 46,016 47,627 49,294 50,526

Guardian General Insurance (OECS) 12,642 15,803 16,277 16,846 17,436 18,046 18,678 19,331 19,815

Total capital requirement 1,758,906 2,111,880 2,175,236 2,251,370 2,330,168 2,411,723 2,496,134 2,583,498 2,648,086

Change in capital requirement (63,356) (76,133) (78,798) (81,556) (84,410) (87,365) (64,587)

Change in capital requirement ($ millions) (11) (76) (79) (82) (84) (87) (65)





Notes to projections (cont’d)

7. Terminal value has been estimated using a perpetual growth assumption (i.e., “Gordon Growth Model”) as applied to the cash flow level for the final year of the projections. We have considered a 2.5% terminal growth rate.

8. Post-tax WACC has been estimated at 12.32%, which is given in Appendix E. Therefore, we have estimated the net present value of cash flows using post tax WACC of 12% and 13%.

9. Associates and non-operating assets comprise the following:

a) Investments in associates have been taken at book value as at 30 September 2017. To avoid double counting, income from associates have been excluded from projections

b) Properties for development and sale have been taken at book value as at 30 September 2017. These properties do not earn any income at this time.

Operating assetsAssociates and non-operating assets TT$ Millions

(a) Investment in associates 219

(b) Properties for development and sale 181

400




In applying the Multiple of Earnings method to the valuation of the GHL we performed the following steps:

1. Determined normalized TTM earnings based on 9-mths results to September 2017

2. Determined a range of appropriate Price/Earnings multiples based on market comparables

3. Calculated the range of values per share (Earnings times market multiple).

In applying the Multiple of Book Value method, we considered the book value of equity and calculated the book value per share based on the number of shares outstanding as at 31 October 2017.

Market Based Valuation Approach – Trading MultiplesThe market approach measures values based on what other purchasers in the market have paid for the shares being considered or similar to those being considered. Commonly used market based methods include the use of market observable ratios such as EBITDA, EBIT, P/E Revenue and Book Value multiples as well as other industry specific market indicators.

As GHL’s shares are thinly traded on the TTSE, in estimating the value of GHL under the market approach, we analysed trading multiples for selected publicly listed companies considered as somewhat comparable.

We considered the Price/Earnings and the Price/Book value trading multiples as the most appropriate under the market approach.

GHL’s share price has fluctuated between $12.51 and $16.60 over the 52 weeks ended 31 October 2017, an average price of $$14.81. Trading has been relatively thin with daily volumes averaging approximately 22,000 units over the same period, and with 84 trading days with no volumes registered.

In arriving at market multiples for GHL in the absence of sufficient Caribbean insurance industry comparables, we considered information for comparable companies from S&P Capital IQ as follows:

1. Companies operating in the Caribbean, Latin America, and USA providing the following services:

► Life and Health Insurance

► Multi-line Insurance

► Property and Casualty Insurance (Primary)

2. Banking and non-bank finance companies listed on the TTSE

6 ValuationMarket Approach

GHL price volume movement

0

2

4

6

8

10

12

14

16

18

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

Oct-1

3

Jan-

14

Apr-1

4

Jul-1

4

Oct-1

4

Jan-

15

Apr-1

5

Jul-1

5

Oct-1

5

Jan-

16

Apr-1

6

Jul-1

6

Oct-1

6

Jan-

17

Apr-1

7

Jul-1

7

Oct-1

7

Price

Volum

e

Volume Price

Source: TTSE




Price/Book Multiple

Based on the average multiples for the companies included in our analysis and GHL’s specific circumstances, we consider a Price/Book multiple range between 1.1x and 1.4x as reasonable to estimate the market value of GHL as at valuation date. The following table shows the range of equity value for GHL based on the Price/Book multiple.

Price/Earnings MultipleThe median P/E Multiple for the selected LATAM & US peer group was 15 times.

► Banking and non-banking companies listed on the TTSE averaged 13.1 times.

In estimating a reasonable range of P/E to apply to GHL we considered the above and circumstances within the primary markets in which GHL operates.

Having regard to the above, in our view, a P/E multiple of 12-15 times could be considered as reasonable to value GHL using this method.

The following table summarizes the range of values using this method.

6 ValuationMarket approach

Market approach – Price/Earnings multiple

Range of P/E MultiplePrice/Earnings Multiple 12x 13x 14x 15xTTM Earnings (TT$'m as at Sep 2017) 390 390 390 390Value (TT$'m) 4,678 5,067 5,457 5,847Value per share (TT$) 20.17 21.85 23.53 25.21

Market approach – Price/Book Value multiple

Range of P/B MultiplePrice/book value 1.1x 1.2x 1.3x 1.4xBook Value (TT$'m as at Sep 2017) 3,202 3,202 3,202 3,202Value (TT$'m) 3,522 3,843 4,163 4,483Value per share (TT$) 15.19 16.57 17.95 19.33

Value Range Market Approach

$15.19- $25.21Market approach suggest values between a low of TT$15.19 and a high of TT$25.21 an average of TT$20.20 per share.

Observed market multiples

Details - Market Minimum Maximum Average Median

Price/EarningsLATAM & US Comparables 7.8 26.6 15.8 15.0TTSE bank and non-bank finance 7.8 21.3 13.6 13.1

Price/Book ValueLATAM & US Comparables 0.6 1.7 1.1 1.1TTSE bank and non-bank finance 0.6 1.9 1.4 1.4




6 ValuationAdjusted Net Asset Value

Adjusted Net Asset Value – 31 October 2017

Adjusted Net Asset Value

$13.95Estimated Fair Value per share of Equity 31 October 2017

► Adjustment made to account for profit for the month of October 2017. Profit for the month taken as the pro-rated amount based on net profit for the TTM to September 2017 of $390m.

► No PPE adjustments

► Fair market value of all other assets and liabilities are assumed to approximate book value.

► We have applied this method as a reasonability check rather than a primary approach

Key pointsCurrency: TT$ m Sep-17 Adjustments Adjusted Value

Property, plant and equipment 603 603

Investment properties 1,321 1,321

Intangible assets 514 514

Investment in associated companies 219 219

Financial assets 16,956 16,956

Loans and receivables 2,354 2,354

Properties for development and sale 181 181

Pension plan assets 110 110

Deferred tax assets 50 50

Reinsurance assets 2,826 2,826

Deferred acquisition costs 100 100

Taxation recoverable 167 167

Cash and cash equivalents 3,002 32 3,034

Total assets 28,403 32 28,435

Insurance contracts 17,555 17,555

Financial liabilities 2,146 2,146

Investment contract liabilities 1,931 1,931

Third party interests in mutual funds 1,165 1,165

Pension plan liabilities 72 72

Post-retirement medical benefit obligations 92 92

Deferred tax liabilities 267 267

Other liabilities 1,951 1,951

Total liabilities 25,179 25,179

Non-controlling interest 22 22

Equity attributable to owners 3,202 32 3,235




Appendices

7


Appendix A - Abbreviations 69

Appendix B - Sources of information 71

Appendix C - Statement of limiting conditions 72

Appendix D: Valuation approach and methodology 74

Appendix E: Weighted Average Cost of Capital 78



7 AppendicesAppendix A - Abbreviations

Acquirer NCB Financial Group Limited

BMI BMI Research

bps basis point

BS Balance Sheet

CAC Contributory asset charge

CAGR Compound annual growth rate

CAPM Capital Asset Pricing Model

CBA Central Bank of Aruba

CBB Central Bank of Barbados

CBTT Central Bank of Trinidad and Tobago

CGU Cash generating unit

Client,NCBFG NCB Financial Group Limited

DCF Discounted cash flow Consider defining as DCF Method if appropriate

DNB De Nederlandsche Bank

€ or EUR Euro

e estimate

EBIT Earnings before interest and taxes

ERP Market equity risk premium

EYSL Ernst & Young Services Limited

FSC Financial Services Commission

GDP Gross domestic product

GHL Guardian Holdings Limited

GIM Global insurance market

GLI Global life insurance

GNLI Global non-life insurance sector

GWP Gross written premiums

IAJ Insurance Association of Jamaica

IAS 28 International Accounting Standards No. 28, Investments in Associates andJoint Ventures

IAS 38 International Accounting Standards No. 38, Intangible Assets

IFRS International Financial Reporting Standards

IFRS 3 International Financial Reporting Standards No. 3, Business Combinations

IMF International Monetary Fund

IPR&D In-process research & development

IRR Internal rate of return

IRS Internal Revenue Service

IS Income statement

JMMB Jamaica Money Market Brokers Limited, JMMB Group

Management NCBFG’s management

MarketLine MarketLine Industry Profile

MFSA Malta Financial Services Authority

MPEEM Multi-Period Excess Earnings Method

MSBL Mutual Security Bank Jamaica Limited

NAf Netherlands Antillean guilder

NBV Net book value

NCBCM NCB Captial Markets Limited

NOI Net operating income




7 AppendicesAppendix A - Abbreviations

NOPAT Net operating profit after-tax

PFI Prospective financial information

PPI Producer price index

R&D Research & development

RCN Replacement cost new

Report This report

RU Reporting unit

Sagicor Sagicor Investments Jamaica Limited

Scotia Scotia Investments Jamaica Limited

SLE Standard Life of Edinburgh

SQM Square meters

TAB Tax amortization benefit

Target Guardian Holdings Limited

TI, T&T Trinidad and Tobago

Transaction The acquisition of 22.99% shareholding in Guardian Holdings Limited

UEL Useful economic life

US$ or USD US dollar

TT$, TTD Trinidad and Tobago dollar

$k Thousand dollar

$m Million dollar

$b Billion dollar

ECD, EC$ Eastern Caribbean dollar

USPAP Uniform Standards of Professional Appraisal Practice

Valuation Date 31 October 2017

WACC Weighted average cost of capital

y-o-y Year on year




The primary sources of information on which our analysis was based included the following:

► MarketLine Industry Profile

► NYU/Damodaran Website

► S&P Capital IQ

► EY Internal Resources

► BMI Research

► From GHL’s Management

► Audited financial statements of GHL for FY13-FY16

► In-house financial statements for the six months ended June 2017

► Websites of central banks

► Bank of Jamaica

► Central Bank of Aruba

► Central Bank of Trinidad and Tobago

► Financial Services Commission –Jamaica (website)

7 AppendicesAppendix B - Sources of information




5. Provision of value conclusions and/or recommendations and considerations of the issues described herein are areas of valuation practice for which we believe that we have knowledge and experience. The services provided are limited to such knowledge and experience and do not represent audit, advisory or tax-related services that may otherwise be provided by EYSL.

6. No investigation of the titles of the subject company assets has been made, and the ownership claims by the Company are assumed to be valid. Therefore EYSL shall assume no responsibility for matters of legal description or title, and EYSL shall be entitled to make the following assumptions: (i) title is good and marketable, (ii) there exist no liens or encumbrances, (iii) there is full compliance with all applicable government regulations and laws, and (iv) all required Licences, certificates of occupancy, consents, or statutory requirements have been obtained or renewed.

7. The recommendations of fair value contained herein are not intended to represent the values of the subject assets, at any time other than the effective date that is specifically stated in the Report. Changes in market conditions could result in recommendations of value substantially different than those presented at the stated effective date. We assume no responsibility for changes in market conditions or for the inability of the owner to locate a purchaser of the subject assets, at the values stated herein.

8. Our Report assumes that the subject company is in full compliance with all statutory, industry regulatory and any other applicable laws and regulations, unless otherwise stated.

1. The facts described in this report were provided by the client or obtained from publicly available market research and macroeconomic statistics published sources, and commercial databases. We have accepted this information without further verification. Our valuation analysis assumed all information to be materially true, correct, reliable and prepared in good faith.

2. In the course of our analysis, we were also provided with written information, oral information, and/or data in electronic form, related to the structure, operation, and financial performance of the subject company. We have relied upon this information in our analyses and in the preparation of this Report and have not independently audited or verified its accuracy or completeness.

3. The historical financial data used in our value analysis were derived from audited and unaudited financial statements and are the responsibility of the Company’s directors. These financial statements may not have included disclosures required by accepted accounting principles. We have not independently verified the accuracy or completeness of the data provided and do not express an opinion or offer any form of assurance regarding its accuracy or completeness.

4. This Report is confidential and may be privileged. It has been prepared solely for the purpose stated, and should not be used for any other purpose. It should not be provided to any third party except for any regulatory purposes in relation to NCBFG’s offer to shareholders of GHL. Neither all nor part of the contents of this Report shall be disseminated to the public through advertising, public relations, news, sales, or any other public media without the prior written approval of EYSL. Our report does not constitute a recommendation to any party as to any course of action they might take. Despite any value conclusions reached herein, the circumstances of individual shareholders will determine what course of action they will take in responding to the proposed Transaction. EYSL has no responsibility to any party other than our Client (NCBFG).

7 AppendicesAppendix C - Statement of limiting conditions




9. The estimates of cash flow data included herein are solely for use in the valuation analysis and are not intended for use as forecasts or projections of future operations. Therefore we do not express an opinion or offer any form of assurance on the accompanying cash flow data or their underlying assumptions. We have used certain estimates of future performance, in our value analysis and have applied to this data and its underlying assumptions, generally accepted valuation procedures reflecting current economic and market considerations. We understand that any prospective financial information provided was based on expectations of competitive and economic environments as they may impact the future operations of the Company, and that the Company has not omitted any factors that may be relevant. In addition, the Company understands that any such omissions or misstatements may materially affect our valuation analysis. Furthermore, there will usually be differences between estimated and actual results because events and circumstances frequently do not occur as expected, and those differences may be material.

10.EYSL, by reason of services provided, is not required to furnish additional work or services, or to give testimony, or be in attendance in court with reference to the subject company assets, properties, or business interest or to update any report, recommendation, analysis, conclusion or other document relating to its services for any events or circumstances unless arrangements acceptable to EYSL have been separately agreed upon with the Company.

11.We reserve the right (but will not be obligated) to revise this Report in light of any relevant information that comes to our attention after the date of issuance.

7 AppendicesAppendix C - Statement of limiting conditions




Components of valueAs under a going concern premise, groups of assets and liabilities may bevalued in combination, it is often not necessary to value individual assetswithin the combined grouping. For example, operating businesses arenormally valued at a “total business enterprise” or “TEV” level, where a singlevalue or range of values is determined for the operating assets and liabilitiesin combination. Unless required for other purposes, it is not necessary toseparately value the working capital, capital assets, intangibles or otherassets that comprise TEV.

The equity value of an entity with business operations is normally calculatedby first determining the TEVs of the operating businesses. Assets andliabilities that are not included in TEV, such as redundant assets and liabilitiesand financing are generally calculated on a standalone basis at in-exchangevalues. The combination of TEV plus other assets, net of other liabilities anddebt financing represents total equity value.

Where an entity does not carry on business operations, equity value isnormally calculated on an “asset” basis, where individual assets and liabilitiesare valued on a standalone basis and equity is calculated as the sum of theparts.

General descriptionEn bloc equity value is measured as the sum of assets, tangible and intangible, less liabilities all at measured values. Value is measured in the context of a definition of value, which may be of common usage, such as “FMV” or “fair value”, or which may be specifically defined by a statute or contract.

The values of component assets and liabilities, either on a standalone basis or in combinations, may be estimated through application of a variety of valuation approaches and methodologies.

Value premiseWhen valuing a business entity, the FMV of the entity’s assets are measuredunder the premise of use that will maximize the value of the entity. The twogeneral premises of value are:

► Going concern premise: value is measured on an “in use” basis. A going concern premise is appropriate where value is maximized by the use of the asset in combination with other assets. Under this premise, the assets used in combination are normally measured as a combined group. Where a business enterprise is economically viable, it is generally appropriate to value the assets employed in the business in use and in combination.

► Standalone premise: value is measured on an “in-exchange” basis. When using a stand-alone premise, assets are valued based on the price that could be obtained in a transaction to sell the asset on a stand-alone basis. In a FMV context, a sale is assumed to proceed on an orderly basis, without compulsion to sell. When valuing assets or liabilities that are redundant to an entity’s business operations, it is normally appropriate to adopt a stand-alone premise. A stand-alone premise is also appropriate when a business operation is not economically viable and where maximum value is obtained by ceasing operations and liquidating the assets. Values obtained under a stand-alone premise may also be relevant as an indicator of the financial risk of a going concern business.

7 AppendicesAppendix D: Valuation approach and methodology




Cost approach

The cost approach is based on the premise that a prudent investor would pay no more for an asset than its replacement or reproduction cost. The cost to replace the intangible asset would include the cost of constructing a similar asset of equivalent utility at prices applicable at the time of the valuation analysis. This estimate may then be adjusted by losses in value attributable to obsolescence (physical, functional and/or economic).

In the valuation of a going concern business, cost approaches are sometimes appropriate when valuing early stage enterprises or new development projects, or in situations where the market and income approaches cannot be reliably applied due to information limitations.

Valuation approaches The standalone values of individual assets and liabilities or going concern values of combinations of assets and liabilities may be estimated through one or more of the Income, Market, and Cost approaches. Within each of the three approaches mentioned above, a number of methodologies exist from which one or a combination of several must be selected to perform the valuation. The following is a brief overview of each of the Income, Market, and Cost approaches along with a description of common valuation methods that are used within each one.

Income approach

The income approach focuses on the income-producing capability of the identified asset. The underlying premise of this approach is that the value of an asset can be measured by the present worth of the net economic benefit (cash receipts less cash outlays) to be received over the life of the asset. The steps followed in applying this approach include estimating the expected after-tax cash flows attributable to the asset over its life and converting these after-tax cash flows to present value through “discounting.” The discounting process uses a rate of return that accounts for both the time value of money and investment risk factors. Finally, the present value of the after-tax cash flows over the life of the asset is totalled to arrive at an indication of value.

Market approach

The market approach measures value based on what other purchasers in the market have paid for assets that can be considered reasonably similar to those being valued. When the market approach is utilized, data is collected on the prices paid for reasonably comparable assets. It is generally accepted that the highest level of assurance is obtained when comparable trading is based on actual sales or offers to transact in the subject asset or an identical asset. In the absence of trading in the subject asset, adjustments are made to the comparable assets to compensate for differences between those assets and the asset being valued. The application of the market approach results in an estimate of the price reasonably expected to be realized from the sale of the asset.





Market multiple methodologies

Commonly used market based methods include the use of market observable ratios such as EBITDA, EBIT and Revenue multiples as well as other industry specific market indicators.

Market approach methodologies applied in the determination of TEV normally are based on the application of a market multiple. The multiple expresses the relationship between observed market prices and an observable business factor, such as revenue or earnings. Where prices are based on business sale transactions, multiples are described as “transaction multiples”; where prices are drawn from the trading of shares in the market, multiples are described as “trading multiples”.

Trading multiples can be based on various earnings or revenue measures. Earnings or revenues are usually adjusted or “normalised” to eliminate unusual or non-representative historical revenues and expenses, with the objective of making results representative of expected future operations.

Trading multiples applied to earnings are most commonly applied at the EBITDA level; at the EBIT level; or at the net income level (relevant to the direct valuation of equity interests, rather than TEV). In the valuation of an operating business with positive earnings, the most commonly applied trading multiple approach calculates TEV as a multiple of EBITDA.

In some cases, simple market “rule of thumb” methods are used by market participants to determine pricing in actual transactions. Examples include pricing based on units of production, quotas, and numbers of employees. While sometimes used as a primary valuation method, these rules of thumb are most often used as a test of reasonableness.

Valuation methodologiesWithin each valuation approach there are a number of methodologies and techniques available. The following are overviews of common valuation methodologies.

Income approach - DCF methodology

In determining the value of a business enterprise or combination of business assets, the most commonly used income approach is a discounted cash flow (DCF) analysis. A DCF analysis involves forecasting cash flows over an appropriate period and then discounting each year’s cash flow to a present value at an appropriate discount rate. This discount rate should consider the time value of money, inflation and the risk inherent in ownership of the asset or security interest being valued. If cash flows are expected to continue beyond the period for which reliable cash flows are available, the present value of the terminal or reversionary value is calculated and added to the discounted income stream to arrive at the total present market value of the enterprise or assets. The value of the asset or interest at the end of the projection period (often referred to as the “Terminal Value”) is estimated using either a perpetual growth assumption (i.e., “Gordon Growth Model”) or an “exit” multiple as applied to the expected earnings or cash flow level for the final year of the projection.

Income approach - Capitalization of earnings or cash flow

The capitalization of earnings method is a simplification of the DCF model, which assumes after-tax earnings will be constant or will exhibit a uniform growth rate. As such, the capitalization of earnings method is most often used to value businesses with stable prospective earnings. Enterprise value is calculated by dividing normalised earnings from operations by a capitalization rate.

The capitalization of cash flows method is a variation of the capitalization of earnings method. Using this method, normalised after-tax cash flows from operations, net of the sustaining capital reinvestment are divided by a capitalization rate. The present value of future tax savings associated with existing tax balances are added to the capitalized cash flow value to arrive at enterprise value.





Adjusted net assets methodology

Where an entity does not carry on business operations or where value is most reliably measured based on a summation of the values of individual assets and liabilities, equity value is normally calculated on an “Asset” basis, where individual assets and liabilities are valued on a standalone basis and equity is calculated as the sum of the parts. Where appropriate, premiums or discounts may be applied to the sum of parts. This methodology is often described by valuators as an “Adjusted Net Assets methodology”. It is often employed in the valuation of investment holding companies and real estate companies.

An Adjusted Net Assets methodology may also be employed in certain circumstances where a “going concern” business exists. An example would be a situation where it is not possible to reliably measure the value on the entity’s operating business at a TEV level using either the market or income approach. In that circumstance, the values of all component assets and liabilities that can be separately identified and measured are valued using an income, market or cost approach, and then summed.

Cost methodologiesCost methodologies value assets by reference to the reproduction or replacement cost new (“RCN”) of modern equivalent assets, optimized for over-design, over-capacity and redundant assets, and adjusted to reflect losses in value attributable to physical depreciation and obsolescence:

Physical obsolescence measures the service potential consumed compared to the service potential remaining in the asset as a whole.

Technological obsolescence results from changes in the design and materials of construction of currently available assets. As manufacturing and construction techniques improve and lower cost materials become available, it becomes possible to construct assets with equivalent or improved output at lower cost levels. This form of obsolescence is particularly apparent in new or emerging technologies and is reflected in the calculation of the RCN having regard to the lowest cost modern equivalent assets.

Functional obsolescence also results from changes in the design and materials of construction of currently available assets; however the impact on value is measured by reference to changes in operating costs rather than reductions in capital costs.

Economic obsolescence results from external economic factors. It is defined as the impairment of desirability or useful life arising from economic forces, such as changes in optimum use, legislative enactments that restrict and impair the right to use the assets for their intended use, and changes in supply and demand relationships. The test of adequate profitability is the final step in the application of the cost approach and is required to identify and measure economic obsolescence. It can best be measured using the income approach or by comparing the value of the enterprise as a whole with the values allocated to the assets and liabilities used by that enterprise to generate cash flows.





Cost of equity

To estimate the cost of equity the Capital Asset Pricing Model (CAPM) is used. The CAPM postulates that the cost of equity is equal to the return on risk-free securities plus an individual risk premium. The risk premium is the systematic risk (beta) multiplied by the market price of risk (market risk premium), plus a premium for size and company specific risk where applicable.

The equation for the cost of equity is as follows:

KE = RF + ß * MRP + U

where:

KE = cost of equity

RF = risk-free rate of return

ß = systematic risk of the equity

MRP = market risk premium

U = unsystematic or company specific risk premium

Choice of discount rate

While the methodology described provides guidance in the selection of an appropriate discount rate, the choice of discount rate is a matter of professional judgement. Factors that may contribute to that judgement include the reliability of forecasts and other forecasting risks, observations as to discount rates being applied by others in decision analyses, discount rates observed in valuation practice, and other indicative information

Cost of capital

The application of discounted cash flow methods requires the determination of an appropriate discount rate. Discounted cash flow methods are applied under conditions of uncertainty. In common usage, the word risk refers to any exposure to uncertainty in which the exposure has potential negative consequences. It is assumed that marketplace participants are risk adverse. A risk-averse market participant prefers situations with a narrower range of uncertainty over situations with a greater range of uncertainty relative to an expected outcome. Marketplace participants seek compensation, referred to as a risk premium, for accepting uncertainty.

The determination of the asset-specific, risk-adjusted discount rate is based on the weighted average cost of capital (WACC). The following formula is applied to calculate WACC:

WACC = WE * KE + WD * KD

with:

WE = value of equity / value of total capital

KE = cost of equity

WD = value of interest bearing debt / value of total capital

KD = after tax cost of interest bearing debt

Since the WACC reflects the specific risk of an enterprise, adjustments have to be considered based on the asset-specific risk profile.

7 AppendicesAppendix E: Weighted Average Cost of Capital




7 AppendicesAppendix E: Weighted Average Cost of Capital

WACCJamaica Trinidad Dutch Caribbean

Details Group Life/Pen/Health P&C Life/Pen/Health Asset Mgt. P&C Life/Pen/Health P&C

Assumed net debt / total capital ratio 41.66% 23.73% 41.66% 38.11% 23.73% 41.66% 23.73%

Assumed unlevered beta 0.67 0.67 0.67 0.57 0.67 0.67 0.67

Risk component:

Equity risk premium 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50%

Multiplied by: Relevered beta 1.02 0.81 1.02 0.84 0.82 1.02 0.82

6.66% 5.25% 6.66% 5.43% 5.36% 6.66% 5.36%

Risk free rate 2.63% 2.63% 2.63% 2.63% 2.63% 2.63% 2.63%

Country Risk 9.25% 9.25% 3.13% 3.13% 3.13% 2.49% 2.49%

Premium for other risks 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%

Cost of equity 21.53% 20.12% 15.42% 14.19% 14.12% 14.78% 13.48%

Cost of Debt 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00%

Tax Rate 25.00% 33.33% 25.00% 25.00% 25.00% 25.00% 25.00%

Post-tax Cost of debt 6.00% 5.33% 6.00% 6.00% 6.00% 6.00% 6.00%

Weighted Average Cost of Capital 15.06% 16.61% 11.49% 11.07% 12.19% 11.12% 11.70%

Weighted Average Cost of Capital 12.32% 2.40% 0.77% 4.67% 0.23% 1.45% 2.14% 0.66%


EY | Assurance | Tax | Transactions | AdvisoryAbout EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US.

© 2016 Ernst & Young LLP.All Rights Reserved.

ncb financial group limited...2017/12/02 · ncb financial group limited, 32 trafalgar road,...

Documents