Bahamas First, a Bahamian general insurer, is poised to acquire a controlling interest in Sagicor General Insurance Company (Cayman), the Bahamas Tribune has reported.

A Letter of Intent for Bahamas First’s purchase of the stake in the Caymanian company has reportedly been signed and an announcement is expected any day.

However, Bahamas First’s chairman, Ian Fair, told the Tribune on Friday, “It’s premature for us to make any comment.”

It was not clear at press time whether Bahamas First was acquiring 100 per cent of Sagicor General or just the majority stake (believed to be 75.8 percent) owned by the Sagicor group.

The remaining 24.2 percent interest in Sagicor General is owned by the Cayman Islands government, having been acquired in the aftermath of Hurricane Ivan, in a deal that came in for some criticism from the Auditor General.

Prior to Hurricane Ivan in September 2004, Sagicor General (then known as Cayman General Insurance) was wholly owned by Cayman National Corporation (CNC), the parent company of Cayman National Bank, and in which Truman Bodden and Benson Ebanks, both former Executive Council (Cabinet) members, are directors and significant shareholders.

At the time of Ivan, most, if not all, of government properties were insured with Cayman General and the damage claims resulting from the hurricane amounted to some $108 million, which would have led to a potential insolvency on the part of Cayman General.

In order to resolve the situation, the government, then headed by current Premier, Hon. McKeeva Bush, agreed to accept a reduced settlement of $50 million, along with the transfer of a 24.2 percent shareholding in Cayman General.

Subsequently, 51 percent of Cayman General was sold by CNC to Sagicor for $8 million and the company renamed Sagicor General Insurance. It is believed that the 24.8 percent interest originally retained by CNC was later sold to Sagicor, thereby increasing the latter’s stake to 75.8 percent.

According to the Tribune, the purchase price is also unknown at this time, although insurance industry sources expressed doubt as to whether Bahamas First would pay book value -- or match the $15 million in net shareholder equity that Sagicor General had according to its 2008 year-end accounts -- due to the fact that the company had performed relatively poorly in recent years and not been very profitable.

There were also questions, the Tribune said, as to why Bahamas First would seek to enter the Cayman general insurance market, given that property and casualty, plus auto rates, were falling, coupled with the fact Cayman is reportedly viewed as having the highest risk profile in the Caribbean, given its relatively flat geography (storm surge exposure) and high concentration of development (meaning risk) in a small area.

The Tribune was told that according to its 2008 financials, Sagicor General wrote $46 million of gross premiums that year, some 31 per cent of which were health premiums.

According to insurance industry sources, Bahamas First, which is solely a general insurer, will either sell or spin-off the health portfolio given that it does not fit its business model.

The Bahamas First acquisition of Sagicor General closely follows the recent purchase by another Bahamian group, British American Financial, of British American Insurance Company (Cayman) from the receivers earlier this month.