The Cayman Islands faces a dilemma of what to do with the 24 per cent stake of Cayman General Insurance – now known as Sagicor General Insurance (Cayman) Ltd. – it received as part of its Hurricane Ivan settlement.
The previous government accepted CI$50 million plus common shares in Cayman General as settlement of the agreed-to CI$70 million settlement position.
The Auditor General’s report on the settlement issued last week noted estimated that the shares were worth only slightly less than CI$3 million.
‘It was a very poor business decision,’ said Education Minister Alden McLaughlin at a press briefing last week. ‘It was the previous government who decided to compromise the claim with Cayman National Corporation.’
Cayman National owned Cayman General Insurance when Ivan struck in September 2004. Since then, Sagicor General Insurance has purchased a controlling interest in CGI, with Cayman National and the government retaining about 24 per cent each of the remaining shares.
In a written response to an Auditor General’s report which was critical of the transaction, Financial Secretary Kenneth Jefferson said the government agreed to take less than 50 per cent of CGI stock in hopes another private company would buy it and return CGI to a successful financial position.
Mr. Jefferson also said it was believed the shares would help government recover $20 million in cash.
‘We think ultimately government ought to dispose of the shares,’ said Mr. McLaughlin. ‘What we’re not going to do is compound one bad business decision by another. The shares, as we’ve been made to understand, are increasing in value. This government is not going to sell them on the basis of a fire sale.’
However, selling for a good price may be difficult, according to Auditor General Dan Duguay.
Mr. Duguay noted in his report that CGI is not a publicly traded company, which makes it more difficult to dispose of the shares because there is no stock market for them.
Also, the Auditor General said common stock shares do not allow government to force CGI to pay dividends even if the company makes a substantial profit.
At this point, Mr. McLaughlin said there’s very little that can be done
‘The arrangements have already been made; the government’s claims have been compromised. The best that we can do is watch the market carefully.’