Home' Trinidad and Tobago Guardian : September 13th 2015 Contents SEPTEMBER 13 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG11
Although Sagicor Group
Jamaica Ltd s top line con-
tinues to be dominated by
its traditional insurance
operations, its profitability
during the half-year to June
2015 has now shifted towards an increasing
reliance on its banking businesses. We will
see how the relative contributions from these
two major components evolve over time.
This change reflects the inclusion of the
RBC portfolio and was further enhanced by
the higher than anticipated recoveries on delin-
quent loans at the enlarged Sagicor Bank.
We will now expand further on Sagicor
Jamaica s (SJ) results for the half-year to June
Changes in financial position
Total assets expanded from the December
2014 figure of J$284.2 billion to J$289.7 billion
as at June 30, 2015, reflecting a modest increase
of 1.9 per cent; the latter figure corresponds
to about US$2.47 billion, which equates to
approximately TT$15.7 billion.
Financial investments, the largest compo-
nent, grew from J$179.5 billion to J$197.3 billion
or by 9.9 per cent. Net loans and leases rose
by 4.2 per cent to J$40.4 billion from J$38.8
billion; this increase reflected growth in its
banking activities. Meanwhile, other assets
expanded by 10.6 per cent to J$15.2 billion
from the earlier balance of J$13.7 billion.
The most prominent declining asset was
cash resources, which fell by J$10.16 billion
or 38.26 per cent to J$16.4 billion from the
December 2014 level of J$26.56 billion. Among
the most significant items that contributed to
this reduction were the purchase of investments
(J$11.8 billion) and the net change in other
operating assets and liabilities (J$6.5 billion).
Notable declines were also evident with
pledged assets, which fell to J$6.1 billion from
the previous level of J$8.4 billion. Also showing
a lower value was securities purchased under
resale agreements; this line item moved from
J$3.6 billion down to J$1.4 billion.
Total liabilities and policyholders funds
advanced by 1.7 per cent to J$242.2 billion
from J$238.2 billion.
The largest measure, securities sold under
repurchase agreements, contracted by J$8.2
billion or 10.8 per cent to J$67.8 billion from
J$76 billion last December.
Customers deposits grew by 3.4 per cent
to J$55.4 billion from the earlier balance of
J$53.59 billion; this mostly reflects growth in
its banking operations.
Amounts due to banks and other financial
institutions closed at J$24.3 billion; this rep-
resented an increase of almost J$4.6 billion
or 23.3 per cent over the J$19.7 billion as at
year-end 2014. This movement is consistent
with its lower cash balances.
Derivative instruments and structured prod-
ucts moved from J$3 billion to J$3.8 billion.
Meanwhile, other liabilities ended June 2015
at J$15.4 billion from last December s J$14.7
Total policyholders funds rose by six per
cent to J$75.4 billion from the earlier figure
of J$71.1 billion. The most significant increase
was noted with insurance contract liabilities,
which advanced by seven per cent to J$59.7
billion from J$55.8 billion.
Stockholders equity advanced to J$47.55
billion from the year-end balance of J$46.07
billion, reflecting an improvement of 3.2 per
Equity reserves fell to J$4.66 billion from
last December s J$6.41 billion. This contraction
was influenced by three factors.
Negative comprehensive income of J$751
million mostly reflected unrealised losses on
investments and gains recycled and reported
In addition, there were two transfers between
reserves; the first was a negative adjustment
of J$954.5 million, which related to the dif-
ference between regulatory loan provisioning
and IFRS. Finally, there was a transfer to a
special investment reserve of J$44 million.
In addition to the reserve transfers, retained
earnings was boosted by total comprehensive
income of J$3.76 billion and reduced by div-
idends of J$1.52 billion. Overall, the retained
earnings balance improved from J$30.5 billion
to J$33.7 billion.
With 3,905,634,916 shares outstanding as
at June 2015, each share has a book value of
J$12.17 (December 2014: J$11.79).
Income and profits
Total revenues advanced by 15.6 per cent
to reach J$26.64 billion from the comparative
2014 outturn of J$22.04 billion.
The largest component, net premiums,
declined to J$14.7 billion from J$15.4 billion;
this fall was mainly due to large one-off annuity
premiums that boosted the 2014 figure.
Net investment income expanded robustly
by 67.2 per cent to J$9.11 billion from J$5.45
billion. Several factors contributed to this pos-
itive movement. Recovered interest on impaired
loans and organic growth related to the acquired
RBC business. The return on investments was
also higher. Finally, greater realised capital
gains on security trades contributed to the
Fees and other income advanced by 29.3
per cent to J$2.8 billion from J$2.2 billion; this
improvement mainly reflected its expanded
commercial banking activities. Lower unrealised
foreign exchange gains restrained the overall
Total benefits and expenses rose by 11.8 per
cent to J$22.1 billion from J$19.75 billion.
The largest increase was with administrative
expense, which climbed to J$6.24 billion from
J$4.1 billion or by 52.4 per cent. This was
largely attributed to the newly acquired RBC
Net insurance benefits incurred combines
death and health claims, annuity payments,
surrenders and fund withdrawals; this line
item rose by 9.35 per cent to J$9.1 billion from
J$8.3 billion. This claims component is con-
sistent with premium income.
Insurance and annuity liabilities fell to J$3.5
billion from J$4.95 billion. This contraction
mainly reflects the adjustment to the large
one-off annuity premiums recorded during
the first quarter of 2014.
Consistent with IFRIC 21, the asset tax for
the full year consumed J$964.13 million; this
sum was paid at the end of March 2015 and
contributed to the fall in cash resources. The
2014 figure was J$198.4 million.
After allowing for a small loss on its joint
venture of J$27 million, pre-tax profit registered
at J$4.5 billion versus J$3.3 billion for 2014 s
Taxation for the period consumed J$771
million (2014: J$385 million) leaving an after-
tax sum of J$3.76 billion (2014: J$2.9 billion).
These results translated into EPS of J$0.96
compared with J$0.74 for the half-year to June
Although individual lines recorded higher
revenues, pre-tax profits were slightly lower.
The lower revenues shown under employee
benefits reflect the decline in large annuity
premiums, which boosted the 2014 figure.
This reduction also impacted the pre-tax result.
Both investment and commercial banking
units benefitted from the inclusion of the for-
mer RBC operations. This is reflected in the
robust improvements in both revenues and
pre-tax profits at those segments.
The combined pre-tax profit of both banking
divisions of J$2.2 billion now represents almost
49 per cent of the total pre-tax profit of J$4.5
billion. In 2014, those segments pre-tax profit
represented less than 22 per cent of the half-
year s pre-tax profit of J$3.3 billion.
Dividends, share price
and future prospects
On April 10, 2015, SJ paid a dividend of
J$0.39. This compares with J$0.35 paid around
the same time in 2014. Total dividends paid
in the last twelve months were J$0.67.
SJ s share price closed at J$10.03 on January
2, 2015. From that base, the price has mostly
trended upward. It closed at J$12.00 on May
7, 2015. After closing at J$13.00 on June 29,
2015, the price peaked at J$13.74 on July 9,
2015. Last Tuesday, it closed at J$12.59.
At that price, the trailing twelve month div-
idend of J$0.67 gives investors a handsome
yield of 5.32 per cent.
Also, relating that market price to the share
book value of J$12.17, we derive a premium of
about 3.5 per cent. Many Jamaican companies
have often traded at prices below their book
or intrinsic value; perhaps, this may be chang-
Notably, one of the principal officers of both
Sagicor Group Jamaica and the Sagicor X Fund,
which we highlighted last week, is Richard O
The Jamaican economy continues to make
progress in many areas. The Directors report
cites higher business confidence, improved
international credit ratings and the buyback
of Petro Caribe debt at a discount as factors
that will support continued positive economic
Given recent developments, including greater
efficiencies at its acquired RBC banking busi-
ness helped by a new IT system, it is very
likely that SJ will generate higher profits in
the second half of its fiscal year than it did
during the first six months of 2015.
Confidence in a company s future prospects
can also be gauged by the frequency and
amounts of shares its senior managers and
directors buy (or, sometimes, sell) from time
to time; in SJ s case, we have multiple instances
in the current year when such transactions,
which have to be reported on a timely basis,
have been executed.
In totality, these factors suggest that SJ s
share price will, sooner rather than later, exceed
(In next week's article, we will focus on
the half-year results for the parent company,
Sagicor Financial Corporation.)
Banking profits boost Sagicor
Jamaica's 2015 half-year results
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