Guyana's National Insurance Fund Took In G$2.68 Billion More Than It Paid Out in 2023. It Still Shrank by G$4.76 Billion.

By LCN Business Desk

The National Insurance Scheme collected G$2.684 billion more than it paid out in 2023. Its fund ended the year G$4.764 billion smaller.

Guyana's did not. The National Insurance Scheme's 2023 annual report puts the fund at G$43.296 billion in January and G$38.532 billion in December.

How does a fund with a surplus get smaller?

Through a loss that never passes the income and expenditure account.

The Scheme states it directly: "At the beginning of the year, the National Insurance Fund was $43.296B. Income received during the year totaled $37.160B, while expenses amounted to $34.476B. The Fund therefore realized a surplus of $2.684B. However, due to a comprehensive loss of ($7.448B)," the fund closed at G$38.532 billion.

Source: National Insurance Scheme, Annual Report 2023. The four movements reconcile exactly: 43.296 plus 2.684 less 7.448 is 38.532.

Income rose 15.66 per cent on 2022, when it was G$32.128 billion. Benefits took G$31.599 billion of the G$34.476 billion spent, and the Long-Term Branch, which pays old age pensions, took G$29.207 billion of the benefits, or 92.43 per cent. Administration cost G$2.877 billion, up 10.3 per cent on 2022.

Every one of those lines sits inside the surplus. The G$7.448 billion sits outside it.

What was the loss taken on?

Equities, all of it, and the Scheme's own notes close the arithmetic to the thousand.

Note 12 names the movement a "fair value adjustment (see note 8)" of G$(7,448,079) thousand. Note 8 shows the equity portfolio falling from G$25,471,593 thousand to G$18,193,760 thousand while its cost rose G$170,246 thousand on purchases. The fall plus the purchases is G$7,448,079 thousand.

Source: National Insurance Scheme, Annual Report 2023, note 8. Equities include Berbice Bridge Company Inc ordinary shares of G$80,000,000 at both dates.

The fair value fell 28.6 per cent. Nothing else in the fund moved through the reserve: investment property was revalued upward by G$67,566 thousand and that gain sits inside income.

What is the portfolio that fell?

A holding valued at twenty times what was paid for it, in companies the report does not name.

Note 8 states the method. Equities "are valued at market prices provided by Guyana Association of Securities Companies and Intermediaries Inc. and based on professional valuation adopted by Directors where investments are not traded." The risk note adds that "the Scheme does not actively trade in equity investments."

So the G$18.193 billion carrying value rests on market prices where a price exists and on a valuation the Directors adopt where one does not. The report sets out no split between the two and names no company in the portfolio.

The reserve that holds the difference between cost and fair value went G$11,202,339 thousand at the start of 2022, to G$24,747,867 thousand at the end of it, to G$17,299,788 thousand at the end of 2023. A gain of G$13,545,528 thousand in one year and a loss of G$7,448,079 thousand in the next.

What did the report say the risk was?

A five per cent move. The year delivered 28.6.

The price risk note reads: "If the value of the Fair Value Through Other Comprehensive Investments (FVTOCI) were to change by 5% the effect on other comprehensive income would approximately be G$1,269,580 (2022 - G$1,273,580)."

G$1,269,580 thousand is five per cent of G$25,391,600 thousand. The Scheme's equities stood at G$18,113,760 thousand at 31 December 2023 and at G$25,391,593 thousand a year earlier. Five per cent of the closing balance is G$905,688 thousand.

The loss the fund actually took was G$7,448,079 thousand, which is 5.9 times the sensitivity the note illustrates.

What is the fund actually made of?

Investments make up 82.5 per cent of it, and note 8 gives the whole of the 2023 split.

Source: National Insurance Scheme, Annual Report 2023, notes 8 and the face of the fund. Deposits with banks rose from G$9,002,849 thousand in 2022.

Equities are 57.3 per cent of the investments and 47.2 per cent of the whole fund. Deposits with banks are the second line and they grew during the year. Two of the eight lines are Berbice Bridge Company Inc paper and a third holding sits inside the equities line, G$906.5 million together, with two maturity dates falling in 2026.

What does a contributor take from this?

That the surplus and the fund move separately, and the cover moved the wrong way while contributions rose.

The 2011 Actuary recommended a funding policy triggered whenever reserves were expected to fall below two times annual expenditure. That recommendation was not implemented, and the closing fund is 1.12 times the year's expenditure.

The opening balance adds the direction. Against the same year's expenditure, G$43.296 billion is 1.26 times. The ratio moved from 1.26 to 1.12 in a year when income rose 15.66 per cent.

Every Guyanese employer pays into this fund on every wage up to a ceiling that has not moved since January 2020. The figure that describes what those contributions bought in 2023 is not the G$2.684 billion surplus. It is the G$4.764 billion the fund lost.

The Scheme published both figures. Only one of them is the direction the fund moved.

The entities

- National Insurance Scheme is Guyana's social security scheme, which published the 2023 annual report. - National Insurance Fund is the fund the Scheme holds, G$38.532 billion at 31 December 2023. - Long-Term Branch is the branch that pays old age pensions and took 92.43 per cent of benefits. - Fair Value Through Other Comprehensive Income is the classification the Scheme elected for its equity instruments. - Actuary recommended in 2011 a funding policy triggered below two times annual expenditure.

What the title card says

- Headline: Guyana's National Insurance Fund took in G$2.68 billion more than it paid out in 2023 and still shrank by G$4.76 billion. - Fund at 1 January 2023: G$43.296 billion. - Fund at 31 December 2023: G$38.532 billion. - Income in 2023: G$37.160 billion, up 15.66 per cent on 2022. - Expenditure in 2023: G$34.476 billion. - Surplus: G$2.684 billion. - Comprehensive loss: G$7.448 billion. - Investments as a share of the fund: 82.5 per cent. - Cover against the year's expenditure: 1.26 times at the start, 1.12 times at the end.

Frequently Asked Questions

How much did the National Insurance Fund fall in 2023?

From G$43.296 billion to G$38.532 billion, a fall of G$4.764 billion, or 11 per cent.

If income exceeded expenditure, why did the fund fall?

A comprehensive loss of G$7.448 billion. The Scheme's own report gives the surplus as G$2.684 billion and the comprehensive loss separately, and the four figures reconcile to the closing balance.

What is a comprehensive loss?

A movement in the value of assets that the Scheme has elected to carry at fair value through other comprehensive income rather than through its income and expenditure account. The report states that election for its equity instruments.

How much of the fund is investments?

G$31.774 billion of G$38.532 billion, or 82.5 per cent. Fixed assets are G$2.927 billion and net current assets G$3.831 billion.

What does that leave in cover?

The closing fund is 1.12 times the year's expenditure. The 2011 Actuary recommended a funding policy triggered if reserves were expected to fall below two times annual expenditure.