Home' Trinidad and Tobago Guardian : September 5th 2013 Contents SEPTEMBER 2013• WEEK ONE www.guardian.co.tt BUSINESS GUARDIAN
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Sagicor Life Jamaica
For the six months period to June 2013, total
assets of SLJ rose by 5.5 per cent from its
December 2012 base of $J$175 billion to J$184.6
billion. Despite an improved EPS result in the
second quarter of J$0.42 (2012: J$0.30), the
year-to-date EPS came in at J$0.58; this com-
pares with J$0.69 earned for the first six
months of 2012. The interim dividend has
been reduced from last year s J$0.28 to J$0.19
in the current period.
Income and profitability
Net premium revenue advanced by a modest
4.1 per cent to J$9.89 billion from the earlier
period s J$9.5 billion. On the other hand, net
insurance benefits climbed by 18.9 per cent
to J$6.1 billion from last half-year s J$5.1 billion.
Consequently, underwriting profits fell by 13.6
per cent from last year s J$4.4 billion to J$3.8
billion, before considering commissions and
The net investment income line was impact-
ed, in the first quarter, by the Jamaican gov-
ernment s debt exchange programme while,
in the second quarter, lower prices for USA
corporate bonds. These events triggered a
reduction in net investment income from J$4.5
billion in the 2012 half-year to J$3.2 billion in
the 2013 comparative period.
The major bright spot was fees and other
revenues, which rose by almost 96 per cent
to J$2.16 billion from the 2012 comparative
figure of J$1.1 billion.
Total revenues advanced marginally to J$15.2
billion from last half-year s J$15.1 billion. In
contrast, total expenses, including claims paid,
increased by 7 per cent to J$12.87 billion from
last period s J$12 billion. Included under
expenses is a legal claim for J$120million and
higher loan loss provisions for the banking
These changes resulted in a fall in pre-tax
profit to J$2.37 billion in the current period
from J$3.1 billion for the same period last year.
After allowing for investment and corporate
taxes and minority interests, the profit attrib-
utable to shareholders came in at J$2.18 billion
versus the J$2.6 billion for the same period in
The banking and asset management segment
is the company s largest division with total
assets of J$88.1 billion. External revenues
declined from last year s J$2.05 billion to J$1.56
billion in the current period. In a similar vein,
after-tax profits contracted from the 2012
figure of J$731.4 million to a more modest
figure of J$305.5 million, reflecting a decline
of 58.2 per cent. The main culprit for this
steep falloff was the capital losses and reduced
income occasioned by the NDX programme.
Higher loan loss provisions also contributed
to the lower result.
The individual insurance segment saw its
asset base advance by more than 20 per cent
from J$40.9 billion as at June 2012 to J$49.3
billion as at June 2013.
External revenues for both half-year periods
were almost identical at J$5.1 billion. The net
results for this segment were pulled down by
increases in both "benefits and expenses" and
"premium and other taxes". The after-tax
results for the current period came in at J$702.7
million; this reflects a15.5 per cent decline
from the J$831.5 million reported for the 2012
The employee benefits segment reported a
12.6 per cent improvement in total assets,
moving from J$34 billion last June to J$38.4
billion as at June 2013. External revenues
increased to J$7.58 billion from last period s
J$7.18 billion, or by 5.5 per cent. Despite the
challenges of much higher benefits and expens-
es paid, after-tax profit came in at J$1.03
billion compared with last year s J$1.05 billion.
This result was helped by a much lower pro-
vision for changes in provisions for actuarial
As a result of its ownership position, 51 per
cent of the results of SLJ flow through to its
parent, Sagicor Financial Corporation.
On August 2, SLJ announced that it will
undertake a corporate reorganisation exercise
that will eventually see a new holding company
become the parent of the three major entities
of this group, that is, Sagicor Life Jamaica Ltd,
Sagicor Investments Jamaica Limited and Sagi-
cor Bank Jamaica Limited.
This reorganisation was triggered by the
requirement of new omnibus legislation for
deposit taking institutions, which is soon to
be promulgated by the Jamaican Parliament.
This exercise requires approvals from both
regulators and shareholders. When completed,
it is expected that the ultimate parent, SFC,
will also benefit.
The inclusion of losses on discontinued
operations continues to mask the real progress
that is being made in SFC s core operations.
Premium growth of 20 per cent has been
reported for its USA business, while in Trinidad,
growth of 12 per cent was achieved.
Locally, the Central Bank reports that growth
in life insurance business shows annual increas-
es of between 6.4 and 7.2 per cent; thus, Sagi-
cor s 12 per cent growth indicates that the
company is gaining market share. This fact
should soon be followed by improved earnings.
In the Eastern Caribbean, growth registered
at 5 per cent with some of this being attrib-
utable to the acquisition of 18,000 BAICO
policies in the second quarter.
Total assets increased from US$5.55 billion
as at December 2012 to US$5.71 billion as at
June 2013. This figure includes net assets of
its discontinued operations of US$97.7 billion.
EPS delivered by continuing operations reg-
istered at US$0.06. In contrast, its discontinued
operations posted a loss of US$0.138 for the
six months; of this total, US$0.118 was incurred
in the second quarter.
In summary, the total operations posted a
negative EPS for the six months to June 2013
Despite these challenges, it is expected that
the regular interim dividend on both the pref-
erence and ordinary shares will be paid in
mid-November. These payments will probably
coincide with the improved cash flows that
would attend the finalisation of the sale of its
Revenue and profits
Despite a small decline in the second quarter,
net premium revenue for the first six months
of 2013 improved from last year s US$302 mil-
lion to US$314.7 million, or by 4.2 per cent.
On the other hand, benefits paid advanced by
less than half a percentage point to US$288
million from last year s US$286.6 million.
Consequently, primary insurance operations
improved from last half-year s US$15.33 million
to US$26.53 million in the current period.
Net investment and other income improved
by almost 5 per cent to reach US$184 million
from the US$175.3 million recorded for the
first six months of 2012. This result is more
commendable because it was attained after
factoring in the negative effects of the Jamaican
NDX exercise. This programme precipitated
a capital loss of US$11.8 million, of which
shareholders bore US$5.7 million.
Expenses, which include commissions to
agents and brokers, increased by 10.3 per cent
to US$173.6 million from the 2012 half-year
figure of US$157.4 million. These costs are
higher in the early years and taper off as policies
age. Consequently, as SFC gains market share,
commission expenses are likely to increase at
a disproportionate higher clip.
Overall, income before taxes from continuing
operations rose to US$37 million from last
period s US$33.2 million; this reflects an
improvement of 11.3 per cent. Due to a slightly
lower level of taxation, the after-tax profit
was US$28.4 million; this was 16.3 per cent
more than the US$24.4 million earned for the
comparative period in 2012.
These results reflect a diluted EPS figure of
US 6 cents and compares very favourably with
US 3.7 cents earned for the same period in
On July 26, SFC and AmTrust Financial
Services Inc signed an agreement under which
AmTrust will take ownership of Sagicor Europe
Ltd (SEL), including Sagicor at Lloyd s Ltd.
The selling price of US$85 million represents
a US$23 million premium over the net tangible
value of SEL.
When completed, which is expected in the
early part of the fourth quarter, the US$45 mil-
lion that is currently being used to support
the syndicate will be released. Consequently,
the total positive cash flow from the sale will
be US$130 million. No doubt, this can be used
to fund new acquisitions in more favourable
western hemisphere markets. This would be
especially true as new legislation makes it more
difficult for smaller companies to fully comply
with updated financial (capital) requirements
and compliance measures.
The identifiable losses from the discontinued
operations for the six months to June 2013
were US$41.7 million. This figure comprises
an operating loss of US$23.6 million together
with foreign exchange and finance costs of
In addition, there is a further provision of
US$10.1 million, which is intended to take care
of all future losses. This estimate is subject to
currency exchange movements and is also vari-
able to the extent that actual results differ from
the original provision. In all likelihood, a modest
downward (positive) adjustment is possible.
The share price
Shareholders and other stakeholders probably
breathed a sigh of relief upon hearing the news
of the sale of Sagicor Europe Ltd. This is reflect-
ed in the higher trading prices on the local
However, until there is more compelling evi-
dence that the SEL sale and any possible adjust-
ments are no longer an issue and very definitely
in the past, the share price will probably hesitate
to cross its apparent current "hurdle price" of
Based on annual dividends of TT$0.25 and
a recent price of TT$6.75, the yield on this
stock is an attractive 3.7 per cent.
This article clearly shows the different pres-
entation methods used by the two companies.
The Jamaican company (SLJ) presents its
results along segmental lines and shows both
revenue and assets along geographical lines. It
should also identify its geographical source of
profits. Unfortunately, the parent company
(SFC) severely compresses data and makes no
effort to follow the Jamaican company s lead.
Perhaps, we will see an improvement in sub-
sequent reporting periods? Any company that
wants to be taken seriously must (voluntarily)
adhere to a high standard of disclosure.
Half-year results for
the Sagicor Group
This article reviews the half-year performance
for both Sagicor Life Jamaica Ltd and its parent
company, Sagicor Financial Corporation.
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