STM Group said in a statement today (4 May) that the audited accounts for its two life company subsidiaries, London & Colonial Assurance PCC Plc and STM Life Assurance PCC Plc, will be delayed until expected sign off next week.
The Group's audited financial statements for the year ended 31 December 2021 were published on 8 June 2022.
But because "a number of planned and unplanned changes" in the management team and compositions of the boards of directors of its two life company subsidiaries in the second half of 2022 had triggered the need for Gibraltar Financial Services Commission's (GFSC) approval of a number of regulated roles at the same time.
The GFSC subsequently confirmed that the companies may not be meeting the threshold conditions for regulated individuals under Section 65 of the Financial Services Act.
No action has been taken by the GFSC and the Life Company Subsidiaries have been working closely with the GFSC to obtain the approvals, STM further said.
"As at today, only the role of Managing Director for each of the Life Company Subsidiaries is still awaiting regulatory approval, although he is in place and has been acting in an interim capacity for the last eight months. This will remain the case until the GFSC approves the application or otherwise."
STM made the announcement in an update on the audit for the 2022 Results and the outcome of its strategic review.
"A consequence of the above, is that the individual has been performing this regulated function whilst awaiting official regulatory approval from the GFSC as allowed for in the Financial Services (Insurance Companies) Regulations 2020.
"The Board and the directors of the Life Company Subsidiaries have remained satisfied throughout this period, that this is the most appropriate course of action, given the circumstances.
"Although Gibraltar legislation does allow for individuals to perform regulated roles whilst waiting for GFSC approval, there remains a level of uncertainty as to whether the GFSC will approve this application.
"Should the GFSC decide not to approve the application and in the event that no suitable alternative individual is put forward by the Life Company Subsidiaries then that would have a technical impact with regards to the Life Company Subsidiaries operating as going concerns, solely from a regulatory perspective."
The statement continued: "This is expected to result in the audited accounts of the Life Company Subsidiaries containing a material uncertainty relating to the going concern of those businesses until this role is filled with GFSC approved individuals. The Board is confident that this scenario is highly unlikely to materialise as if the individual in question is not approved an alternate candidate will be put forward by the Life Company Subsidiaries to fill the regulated role.
"The Board is not aware of any other regulatory matters which would impact the going concern assessment and are confident in the ability of the current boards and management teams of the Life Company Subsidiaries including the individual pending regulatory approval. Furthermore, the Board remains confident in the Life Company Subsidiaries' ability to continue as a going concern from a business perspective."
STM further commented on its audit for the financial statements for the year ended 31 December 2022, pointing to a change in Group auditors from Deloitte to Grant Thornton was announced on 9 November 2022.
"Unfortunately, as a result of the delay in the completion of the audits of the Life Company Subsidiaries for the year ended 31 December 2021, Grant Thornton have been unable to commence the audit of the Life Company Subsidiaries for the year ended 31 December 2022 as Deloitte have not been able to resign as auditors of the Life Company Subsidiaries, until the financial statements of the Life Company Subsidiaries for the year ended 31 December 2021 have been signed.
"As such there will now be a delay in finalising the Group's audit for the year ended 31 December 2022 and the Board now expects to announce the Group's final audited results in June 2023.
"Other than the delay in the audit of the Life Company Subsidiaries, the audit across the rest of the Group is progressing well. No significant findings or material adjustments have been noted, and it is therefore expected that the Group's results will be consistent with the guidance provided in the Group's trading statement on 18 January 2022."
STM said that as with the wider audit, the strategic review is also progressing well with the external advisers engagement now complete.
"This review covered both market insights and opportunities as well as operational efficiency levers. In addition to providing a series of recommendations, the advisers have also delivered a set of guiding principles for the Group. The Board are considering the various options and recommendations made by the advisers and expects to update with its conclusions at the time of the results in June 2023."
As previously announced, STM said Therese Neish's twelve-month contract as interim CFO will come to an end in early October and as such the process to find her replacement is underway.
"A further update on this will be provided in June. Therese will remain on the Board to oversee the audit and sign the financial statements and thereafter will resign from the Board, expected to be on or around 1 July 2023.
"The process to find another non-executive director to replace Graham Kettleborough continues and a further update on this will be made in due course."
