NIB funds increase, takes hit in investment income

Total funds under the management of the National Insurance Board (NIB) for 2005 might have increased but the company suffered losses  in its equity portfolio. Figures show that the NIB had $12.8B under its control, an increase of $1.3B or 11.3% over the previous year’s balance, the state company said in its 2005 report. But for the year ended June 2005, realised gross investment income ($708.0M) was $49.9M lower than that for the corresponding period last year ($758.3M).

This performance, it said, was directly attributable to lower than anticipated interest rates on Government Securities and Bonds, as well as lower than anticipated income from mutual funds and equity investments. There was a significant downward adjustment in the value of locally traded equities, especially during the last quarter of our 2005 financial year, NIB executive director Jeffrey McFarlene, noted.

In the financial year 2004/05, capital appreciation on the Board’s equity portfolio was 9.45% or $340.4M against 57.37% ($1,347.4M) for the previous financial year,  when the Trinidad and Tobago Securities and Exchange (TTSE) Composite Index increased by 47.01%. In comparison, for financial year 2004/05, the TTSE Composite Index increased by only 25.59%. Prime stocks on the TTSE -  Guardian Holdings Limited, Republic Bank Limited and RBTT —  were the worst hit by this general downward price adjustment, which is expected to continue until at least the end of the 3rd Quarter 2005. These stocks comprise a significant portion of the NIBTT’s equity holdings. “However, we expect the market to rebound in the short to medium term,” NIB said.

In its section, “Investment Portfolio Mix”, total funds moved 11.3% over the previous year, with the investment portfolio contributing $1.104B or 80% of the increase in total funds. The main contributions to this performance were Debentures, Corporate Bonds, Equities, Government Bonds and Government Project Financing Securities due to their better-than-overall budgeted yield and substantial weights in the overall portfolio.

“It is noteworthy that this growth was achieved in an environment of low interest rates, high liquidity and limited investment options,” the NIB said in its 2005 report. On the investment side, NIB said its total assets grew by 10.8% from $11.8B to $13.1B whilst total funds under management grew by approximately $1.3B or 11.3% from $11.5B to $12.8B. The report said the prevailing investment climate, however, was characterised by low interest rates, excess liquidity, and limited investment opportunities, “which impacted directly on the yields achieved on our investment portfolio.”