Home' Trinidad and Tobago Guardian : September 20th 2015 Contents SEPTEMBER 20 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG11
Financial Corporation (SFC)
is the parent of Sagicor Group
Jamaica and has extensive
operations throughout the
Caribbean and the USA. Its
broad T&T operations are grouped (or "lost")
under the Sagicor Life heading (see column
1).Based on 2014 disclosures, T&T s portion
of SFC s external revenues amounted to
US$145.7 million or about 14 per cent of total
revenues of US$1.05 billion. In addition, assets
denominated in TT dollars were equivalent to
US$465.6 million, which represented about
7.5 per cent of the company s total of US$6.18
Despite growth in its continuing operations
at both the top and bottom lines, SFC con-
tinued to be challenged by its discontinued
operations and its need to restructure its debt
Let us now review SFC s results for the six
months to June 2015.
Changes in financial position
Total assets rose from last December s
US$6.18 billion to US$6.3 billion as at June
30, 2015, reflecting growth of 1.9 per cent.
Financial investments rose from last Decem-
ber s US$4.66 billion to US$4.77 billion or by
2.24 per cent. Other investments and assets
advanced by less than one per cent to US$1.53
billion from US$1.52 billion.
Total liabilities rose by 2.4 per cent to
US$5.53 billion from last December s US$5.41
Policyholders liabilities moved from US$3.12
billion to US$3.22 billion, reflecting a change
of 3.1 per cent. Other liabilities rose by 0.6
per cent to US$2.26 billion from US$2.24 bil-
Resulting from the delay in signing the
underlying agreements related to the sale of
its discontinued (UK) operations, those lia-
bilities climbed to US$60.7 million from the
2014 year- end balance of US$45.8 million.
(In the first quarter, this figure was zero.)
Total equity fell to US$763.7 million from
last December s US$773.5 million. The only
positive movements were recorded under par-
ticipating accounts and minority interests.
The former rose from US$0.36 million to
US$1.03 million while the latter climbed to
US$244.4 million from US$241.5 million.
The latter s improvement reflects the higher
profitability of its Jamaican operations in which
it holds a 49.11 per cent stake.
Stockholders equity declined to US$518.2
million from the year-end balance of US$531.7
The retained earnings component improved
to US$250.3 million from the opening level of
US$244.5 million. Comprehensive income
from continuing operations contributed a pos-
itive US$21.8 million, but this was restrained
by negative comprehensive income from dis-
continued operations of US$15 million.
Further, transfers and other movements
contributed a positive US$9 million while div-
idends to shareholders consumed US$9.9 mil-
The reserves column suffered the greatest
decline, moving from a negative US$8.8 million
at the start of the year to end at a negative
US$28 million as at June 30, 2015. The bulk
of this movement resulted from negative com-
prehensive income from continuing operations
(US$13.6 million) and transfers and other
movements (minus US$7.6 million). Only a
positive US$1.9 million related to changes in
reserve for equity compensation benefits helped
mitigate the decline.
With 309,917,020 shares outstanding, each
share has a book value of US$1.67 (December
Income and profits
Both major components of revenue recorded
advances. Total revenues rose by 9.3 per cent
to reach US$548.5 million from the comparative
2014 outturn of US$501.7 million.
Net premiums registered at US$322 million
or 4.3 per cent greater than the US$308.8 mil-
lion recorded for the first six months of 2014.
Net investment and other income rose by
a strong 17.4 per cent to US$226.4 million
from US$192.8 million in the first half of 2014.
Claims disbursed and benefits paid to pol-
icyholders registered at US$297.2 million; this
was 4.2 per cent greater than the US$285.2
million paid in 2014 s half-year.
Unfortunately, expenses rose by 16.6 per
cent to reach US$202 million from last half-
year s US$173.3 million. This increase reflected
a US$8 million asset tax and one-off expenses
relating to the acquisition of RBC Bank Jamaica,
now rebranded as Sagicor Bank.
These changes saw pre-tax income improve
to US$49.3 million from US$43.2 million; this
reflects an increase of 14.1 per cent.
After allocating US$11.8 million to income
taxes, the net income from continuing oper-
ations registered at US$37.5 million (2014 half-
year: US$33.2 million).
Unfortunately, the loss on its discontinued
operations expanded to US$15.1 million. This
result comprised entirely of adverse movements
in claims reserves. In addition to the first quar-
ter s loss of US$12.7 million, an additional sum
of US$2.4 million related to the second quar-
ter.This movement pulled down the period
profit to US$6.8 million; this compares very
favourably with the loss of US$8.2 million for
the half-year to June 2014.
These results translated into 2015 diluted
EPS of US$0.02 compared with a loss of
US$0.031 for the comparative 2014 period.
It was only in the third quarter of 2014 that
SFC started to break-out its results by its
major segments; this explains why the 2014
revenues and benefits line have a "n/r" nota-
tion. There is still considerable room to improve
its interim reporting.
The largest contributor to shareholders
profit was Sagicor Life (EC), but this grouping
is an amalgam of several countries, including
Barbados, The Eastern Caribbean and T&T.
Sagicor Jamaica is very probably the largest
single country gross and net profit contributor,
even though SFC holds slightly less than 50
per cent equity in that company.
The American subsidiary s profit decline
reflects its decision to reinsure a greater portion
of its premiums.
Dividends and share price
Based on its calendar 2014 results, SFC paid
dividends totalling US$0.04 (about TT$0.25).
On the TTSE, SFC s share price ended 2014
at TT$5.95. On February 11, 2015, the price
dropped to TT$5.00 when 811,070 shares
changed hands. By mid-April, the price had
recovered to TT$6.25. From since about May
2015, it has mostly traded between the TT$5.75
and TT$6.30 price range.
At the latter price, the share gives investors
a yield of 4 per cent. It is very likely that an
interim dividend, probably unchanged at
US$0.02, for 2015 would be announced some-
time in October. Despite SFC s up and down
profitability in recent years, its annual dividend
to shareholders has remained constant at
Winding down the UK business
Its European business continues to inject a
strong element of uncertainty into shareholders
mind. The underlying agreement to exit this
situation was not executed, thus inflicting an
additional US$2.4 million loss on to the books
in the second quarter.
Unfortunately, we have not been advised
when this agreement is likely to be finalised.
The Chairman s report only states that: "The
maximum residual contingent exposure under
the sale agreement is approximately US$10.2
New debt arrangements
On August 11, 2015, SFC via a new sub-
sidiary, Sagicor Finance (2015) Limited, raised
US$320 million unsecured seven-year senior
notes. The relatively high coupon of 8.875 per
cent reflects its unsecured status while giving
it the option to repurchase the debt in four
At that time, it expects that, operating from
its new investment grade domicile, would
allow it to refinance its new debts at a sig-
nificantly lower interest rate.
On December 18, 2013, SFC took out an
eighteen month note for US$43.363 million
at 4.6 per cent annual interest. In June 2015,
that note would have been cleared, probably
using a short term loan. With new financing
in place, settlement of that rolled-over debt
could now be facilitated.
On September 10, 2015, SFC settled its
US$150 million 7.50 per cent 2016 bond at a
total redemption price of US$160,493,000.00.
This extra sum would have likely included
pre-payment penalties and lost interest costs.
The next likely step is to redeem its pref-
erence shares, which carried a December 2014
value of US$107,689,000.00. This instrument
had a fixed rate of 6.5 per cent. One disad-
vantage of this type of financing is that div-
idend payments are not tax deductible.
Pending recommendation on new
Three jurisdictions, including T&T , have
been short-listed as the proposed new domicile
for SFC. When a decision is made, the directors
will then make a recommendation to share-
holders for their approval at a special meeting
called for that purpose. It is expected that the
new domicile will require a transfer of less
than twenty employees from Barbados.
Two of the biggest reasons for this change
are that it is expected to lower the cost of
financing and should reduce the expense of
operating the company headquarters.
The new domicile will also raise the profile
of the selected country and very likely signal
to other regional businesses that it should be
considered as a possible location for their
headquarters. Properly handled, this could
easily develop into an important form of "busi-
(Next week, we return to Suriname and
review the 2014 results of United Suriname
Holding Company (VSH), which owns 24.63
per cent of Assuria NV)
Sagicor Financial's half-year results
Links Archive September 19th 2015 September 21st 2015 Navigation Previous Page Next Page