Count to self insure for professional indemnity
Count Financialhas cancelled its share buyback scheme and will move to self insure for its professional indemnity (PI) liabilities after claiming the costs of insurance were too high for the work carried out by the group.
The cancellation of the buyback scheme is tied to the self insurance move with Count saying it would improve the group’s financial compensation capacity in the event of a PI claim.
In an announcement to theAustralian Stock Exchange, Count says it bought 4.5 million shares at an average price of 77.8 cents after originally stating it would buy up to 7.5 million shares.
It also states that the cancellation was also driven by an demand from franchisees for business acquisition loans which is also expected to grow and additional capital was necessary to fund the loans.
In moving to self insure Count says its premium costs have always exceeded any insurance payouts and its premium for the past 12 months was about $1 million, aside from costs associated in investigating other arrangements.
According to the announcement the group’s policy also excludes a number of activities of the group and in its 23 year history has only had two payable claims over $100,000, both of which have been paid by Count without reimbursement from insurers.
Due to this Count says it will self insure under its licence conditions and will review the decision as PI insurance premiums are on line with the coverage the group needs.
Count says it has a good track record and thus questions the value of PI insurance but adds the decision to raise $8 million in new capital when it listed in 2000 was designed to lift its compensation capacity.
However it will halt further buybacks until shareholders’ equity reaches $15 million and increase that equity by $1 million each year until it reaches $20 million, of which half will be invested by the group as an insurance compensation war chest.
AUTHOR
Jason Spits
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