By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The largest shareholding in Bahamas First may soon change hands with the potential buyer already signalling its desire to expand that ownership interest beyond the initial 20 percent.

The BISX-listed property and casualty insurer, in a disclosure to the capital markets yesterday, said Canada-based Definity Insurance Company (formerly Economical Mutual Insurance Company) was in negotiations with an unnamed purchaser to sell its equity interest in Bahamas First.

Few specific details were provided, and there is no guarantee that a deal will be sealed, but the announcement disclosed the purchaser is interested in expanding its Bahamas First ownership beyond the near-20 percent it would immediately inherit should a sale close.

“The ultimate beneficial owner of The Economical Insurance Group (TEIG) Holding Company (Barbados) Ltd, which holds just under 20 percent of the issued ordinary shares of Bahamas First Holdings, is in discussions with an international property and casualty and reinsurance investor (the acquirer) to sell either TEIG or TEIG’s 20 percent interest in Bahamas First Holdings’ shares,” the notice said.

“The acquirer has also expressed interest in acquiring additional shares in Bahamas First Holdings.” Definity, and before it The Economical Insurance Group, likely held its Bahamas First stake via a Barbados holding company so it could exploit the double taxation treaty that Caribbean state has with Canada. This would ensure dividends paid by Bahamas First were taxed only at the lower Canadian rate.

Patrick Ward, Bahamas First’s group president and chief executive, was yesterday unable to say what kind of advantages and benefits the deal would bring to the property and casualty insurer, or what level of ownership interest the purchaser is ultimately seeking.

“I really don’t have an answer to either of those questions,” he told Tribune Business. “There’s very little I can say on this.” Nor was he able to give a timeline for the deal’s potential completion. “I don’t have anything definitive about a timeline,” Mr Ward said. “We will report developments that are material to the market as they occur, consistent with the securities legislation requirements.”

The negotiations are taking place outside, and away from, Bahamas First at the Definity level. Mr Ward, though, did confirm that any sale could either involve the buyer acquiring TEIG Holding Company (Barbados) or simply purchasing the Bahamas First block of shares from it.

“Both options are being contemplated,” he explained. “The holding company that holds the interest in Bahamas First, they will either buy the Barbadian entity as a continuing operation or effectively just buy the shares in Bahamas First from that entity.”

Based on a 20 percent ownership stake, TEIG Holding Company (Barbados) presently owns and controls some 7.302m shares in Bahamas First given that the latter has some 36.512m outstanding common shares issued.

Based on Bahamas First’s closing $2 share price on the Bahamas International Securities Exchange (BISX) last night, Definity’s stake is worth a total $14.605m. And its total share of Bahamas First’s eight cents per share dividend payout in 2022, worth a total $2.921m, was some $584,185.

The potential sale’s announcement appeared to spark the first trading activity in Bahamas First shares for more than two years, with some 9,690 shares changing hands yesterday at the $2 market price. This was the first trade to occur since August 9, 2021, when four trades involving a collective 6,480 shares took place at a $2.61 price.

Definity currently hold three of the 11 Board of Directors seats at Bahamas First via Linda Goss, Paul MacDonald and Liam McFarlane. Should it sell its 20 percent interest, the purchaser would likely inherit those three seats and may not stop there, given its interest in expanding its ownership interest, although it is unclear whether it would seek a majority and both Board and management control.

Given that Definity and its predecessor were approved to acquire their 20 percent Bahamas First interest, it is unlikely that a bona fide purchaser would be rejected by either the Insurance Commission, the industry regulator, or the Government via the National Economic Council (NEC) and Investments Board.

However, their attitude towards any attempt to purchase a majority Bahamas First interest is less certain. Multiple insurance industry and other sources, speaking on condition of anonymity, yesterday suggested Definity has been seeking to exit its Bahamas First interest for some time.

“I know they have been trying to sell that for the longest,” one contact said. “They’ve been trying to exit for a while, maybe two to three years at least. I don’t think it really made an awful lot of sense for them. It was a small interest, and not a lot of people have an appetite for the region or markets they are in.”

Another source suggested Definity had been seeking a buyer for at least 12 to 18 months. “They have found someone and are looking to exit the market,” they added. “Hopefully whoever comes in is good for The Bahamas and for the region. Bahamas First is too important right now for The Bahamas for them to disappear. We need all the reinsurance capacity for The Bahamas.”

Several also speculated that, if a deal was sealed for Definity’s stake, then the buyer may not encounter much resistance to its ambitions to increase its ownership. “There are a lot of old shareholders in Bahamas First that want to be made liquid,” one said. Another added: “There’s other shareholders who would exit if the price was right.”

Bahamas First recently celebrated its 40th anniversary, but sources said it now appears poised for a transition with several key management figures set to soon step down following the company’s annual general meeting (AGM), which is due to be held this week.

Richard Darville, a 30-year Bahamas First veteran and previously its vice-president for claims and support services, has taken over as Bahamas First General Insurance chief executive. He seemingly leaps over Warren Rolle who, in March 2022, was appointed to the newly-created role of Bahamas First’s group senior vice-president and chief operating officer.

Bahamas First has also been grappling with woes that resulted in regulators threatening to bar its Cayman affiliate from writing new life and health insurance business.

It confirmed to this newspaper in early May 2023 that its Cayman First subsidiary was non-compliant with that territory’s health insurance regulations due to a claims processing “backlog” that had resulted from the implementation of a new system in the 2022 third quarter, but the investigation’s launch suggested the issues have lasted longer - and are more deep-rooted - than previously thought.