Home' Trinidad and Tobago Guardian : April 26th 2015 Contents APRIL 26 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG11
At the end of March, we
saw that Sagicor Group
Jamaica (SJ), in which
ment Trust Ltd holds a
31.56 per cent stake,
accounted for a large
part of that trust s prof-
its. That arrangement seems to work well for
a Jamaican-based entity.
When we focussed on Sagicor Financial Cor-
poration last week, we learnt that the Jamaican
operations of Sagicor continue to account for
a large slice of SFC s pre-tax income.
One recurring problem for SFC, the 49.11
per cent majority shareholder, is that a large
portion of this positive result is eroded by trans-
lation losses, triggered by the persistent deval-
uation of the Jamaican dollar. This has the
effect of significantly reducing SFC s compre-
hensive income. To some extent, the dividends
that SFC receives from SJ compensates for the
negative adjustment to its comprehensive
I will comment further on these points later.
As usual, we start by reviewing Sagicor Group
Jamaica s annual performance for the year ended
December 31, 2014.
Changes in financial position
Total assets increased from J$198.3 billion to
J$284.2 billion. This change was largely influ-
enced by the RBC Royal Bank Jamaica acqui-
sition and, to a lesser extent, the purchase of
the minority shares in Sagicor Investments
The major component, financial investments,
rose from J$161.8 billion to J$183.1 billion. Within
this category, the available for sale assets
increased to J$119.6 billion from the previous
year s J$99.1 billion. Here, the largest compo-
nent, Government of Jamaica securities climbed
from J$49.7 billion to last year s J$62.1 billion.
In addition, the corporate bonds component
expanded to J$40.3 billion from the previous
level of J$34 billion.
Not surprisingly, net loans and leases soared
to J$38.8 billion from J$10.8 billion; we recall
that, in 2013, only the original and smaller Sagi-
cor Bank was in operation. Further, the purchase
of the RBC Royal Bank Jamaica triggered an
almost ten-fold increase in provisions for credit
losses, which jumped to J$2.31 billion from
J$236.6 million in 2013.
Also boosting assets was the rise in cash bal-
ances, which escalated to J$21.1 billion from
the 2013 level of J$4.1 billion. The major com-
ponent, demand balances with other banks,
rose to J$18.3 billion from the previous amount
of J$3.9 billion.
Other assets rose to J$10.3 billion from J$4.3
billion. Included in the 2014 balance is a legal
claim of J$3.9 billion, which is matched by a
corresponding liability of the same value. This
relates to the pre-acquisition matter concerning
the former RBC Royal Bank of Jamaica. Also,
unpaid premiums due of J$1.8 billion showed
an increase from the 2013 level of J$1.7 billion.
When placed in the context of a marginal decline
in net insurance premiums, this item may require
Total liabilities rose to J$238.2 billion from
the previous year s J$160.7 billion.
The major component, deposit and security
liabilities rose by 76 per cent to J$151.6 billion
from J$86.1 billion. Within this grouping, secu-
rities sold under re-purchase agreements moved
to J$76 billion from the earlier balance of J$55.6
billion. Also exhibiting robust growth was cus-
tomer deposits and other accounts, which closed
2014 at J$53.6 billion; this was 451 per cent
greater than the 2013 level of J$11.9 billion.
Policyholders funds rose to J$71.1 billion
from J$64.5 billion. Within this category, invest-
ment contract liabilities fell to J$12.3 billion
from J$13.3 billion. This mainly reflected a
decline in policyholders saving plan to J$2.1
billion from J$3.6 billion. Also, insurance contract
liabilities increased to J$55.8 billion from J$48.6
billion. This improvement of J$7.2 billion was
less robust that the J$9.3 billion recorded over
the 2012 to 2013 period, when a very large single
premium annuity was sold.
Total equity increased to J$46 billion from
Included in the 2013 figure was J$1.7 billion
relating to non-controlling interests in Sagicor
Investments Jamaica Limited (SIJL). In May
2014, SJ acquired the remaining 14.55 per cent
of SIJL by issuing additional shares. This change
largely explains the increase in share capital
from J$7.85 billion to last year s J$9.16 billion.
Retained earnings rose from J$22.7 billion to
J$30.5 billion. Comprehensive income of J$9.52
billion together with J$0.5 billion relating to
the SIJL purchase increased the brought forward
balance while dividends of J$2.41 billion reduced
With 3,905,634,920 shares outstanding, each
share has a book value of J$11.79 (2013: J$9.55).
Revenues and profits
Net premium income declined marginally to
J$29.17 billion from J$29.22 billion in 2013. All
categories of group and individual insurances
exhibited increases. However, as indicated earlier,
bulk annuities contracted to J$2.2 billion from
the 2013 figure of J$4.8 billion.
Premiums generated in the Cayman Islands
of J$1.88 billion now account for 6.45 per cent
of the total; in 2013, premiums of J$1.56 billion
from that source contributed 5.33 per cent of
SJ s total net premiums.
Net investment income advanced to J$12.55
billion from J$8.78 billion. The main component,
interest income on available-for-sale assets,
increased to J$7 billion from J$5.7 billion in
2013. Loan interest jumped to J$2.9 billion from
the previous year s J$1.1 billion. Net realised
gains on investment securities moved from
J$1.4 billion in 2013 to J$2.4 billion. In addition,
net foreign exchange gains increased from J$0.44
billion to J$1.06 billion.
Fees and other income declined to J$3.91 bil-
lion from J$4.35 billion. Banking fees rose strong-
ly to J$591.2 million from J$74.8 million. On
the other hand, both foreign exchange gains
and other operating income posted declines.
The former fell to J$488.6 million from the
previous year s J$1.04 billion. In the case of the
latter, the 2014 figure of J$901 million was
almost 43 per cent lower than the J$1.57 billion
recorded for 2013.
These changes allowed SJ to post 2014 rev-
enues of J$45.6 billion versus J$42.4 billion in
2013. Total benefits and expenses increased
from 2013 s J$35.3 billion to J$40 billion last
One notable decline was recorded under
changes in insurance and annuity liabilities,
which fell to J$5.5 billion from J$7.5 billion pre-
Net insurance benefits incurred rose to J$17.3
billion from J$15.8 billion. Here, the largest pay-
ment, health claims, increased to J$6.39 billion
from J$6.14 billion. Segregated funds with-
drawals were at J$3.79 billion from J$3.18 billion
a year earlier. Finally, annuity payments increased
to J$2.93 billion from J$2.52 billion in 2013.
Administrative expenses rose by almost 58
per cent to J$11.96 billion from J$7.59 billion.
SJ s 50 per cent interest in its Costa Rican oper-
ations improved from a loss of J$10 thousand
to a profit of J$6.3k.
Also, negative goodwill relative to the RBC
Royal Bank Jamaica acquisition brought in J$3.2
billion. These changes saw pre-tax profit for
2014 register at J$8.86 billion (2013: J$6.30 bil-
Corporation and investment tax fell to J$298.5
million when compared to J$561.8 million in
2013. The lower tax bite was largely due to
higher levels of investment income not subject
to tax; this type of income increased to J$3.1
billion from J$2 billion in 2013.
These changes allowed SJ to report after-tax
income of J$8.56 billion versus J$6.45 billion
previously. Of this figure, J$8.51 billion related
to stockholders of the parent company (2013:
Using the year-end stock units outstanding,
EPS for 2014 was J$2.18 versus J$1.67 for 2013.
The results of the most profitable segment,
employee benefits, were driven by both new
business and realised capital gains.
The RBC Royal Bank Jamaica acquisition
boosted revenues for the commercial banking
division. On the down side, the one-time re-
branding and rationalising costs of this acqui-
sition pulled down profits for this segment.
Individual lines recorded a 14.8 per cent
increase in revenues although the profit improve-
ment was less robust.
Share price, dividends and prospects
Over the past year or so, SJ shares have trend-
ed positively, moving from J$8.76 on May 27,
2014 to J$10.55 on April 22, 2015.
This variability impacts on both SFC and
Pan-Jam Trust s income streams; ideally, both
main shareholders should have a preference for
receiving steadily increasing dividend flows
from this major investment.
On April 10, 2015, SJ paid a dividend of J$0.39.
This is higher than the J$0.35 paid around the
same time in 2014, suggesting that dividends
for the calendar year 2015 could be greater than
Relating the 2014 calendar dividend to the
recent share price of J$10.55, we derive a yield
of 5.97 per cent. Also, at the recent market
price of J$10.55 and EPS of J$2.18, the P/E mul-
tiple is only 4.84.
We have seen how one-off items, including
negative goodwill and the ticklish matter of tax
management, have boosted 2014 earnings. If
its earnings can be underpinned in a more pre-
dictable manner to its core businesses, then SJ
should command both a higher price and P/E
Sagicor Group Jamaica...
Is it the crown jewel for SFC?
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