Home' Trinidad and Tobago Guardian : June 29th 2014 Contents JUNE 29 • 2014 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG13
During 2013, four major factors
impacted on the results of
SFC. The European opera-
tions were sold and the
process of unwinding has
begun. The estimated net
remaining liability of US$55 million is intended
to capture the total value of any future liabilities
up to the period ended March 31, 2019. How-
ever, there is a further US$68.1 million, which
is the group s maximum possible contingent
liability for future price adjustments during
In Jamaica, the economy continued to expe-
rience challenges and, as part of an IMF
restructuring exercise, existing public and pri-
vate debt was replaced by new debt having
lower coupons and longer maturities. This
change negatively impacted SFC shareholders
to the tune of US$5.7 million.
Due to uncertainties about that country s
economic prospects, debt due by the Govern-
ment of Grenada was written down, which
impacted shareholders to the extent of US$3.6
The company also acquired the Eastern
Caribbean portfolio of group pensions and
traditional life insurance policies from BAICO.
The purchase consideration of US$5.6 million
for net assets of US$1.4 million resulted in an
acquisition loss of US$4.2 million. This loss
was recorded under the fees and other revenue
Let us now consider SFC s results for its 2013
Total assets declined from the restated 2012
figure of US$5.55 billion to last year s US$5.3
billion. The most significant decline was exhib-
ited in the value of its discontinued operations;
this item moved down to zero from US$705.7
million as at year-end 2012.
On the other hand, the value of reinsurance
assets increased to US$336.4 million from
US$102.7 million as at year-end 2012. The
major change was in the reinsurer s share of
actuarial liabilities component, which increased
from US$56.7 million as at December 2012 to
US$285.3 million as at last year-end.
Of this figure, US$260 million represented
the reinsurer s share of non-participating
annuity and life policies issued to individuals.
Most of this figure represents the reinsurer s
share of annuity policies written in the USA.
In 2013, the company began to reinsure 90
per cent of new annuity policies that it issues
in that market.
Similar to its assets declines, total liabilities
moved down to US$4.57 billion from US$4.75
billion as at year-end 2012. Here again, the
biggest decline was due to the liabilities of
discontinued operations falling to US$55 million
from US$631 million as at December 2012.
Actuarial liabilities posted an increase of
US$283.4 million, moving from US$2.04 billion
as at December 2012 to US$2.34 billion last
December. The largest change was in the non-
participating life insurance and annuity policies
issued to individuals; this balance increased
from US$1.18 billion as at year-end 2012 to
US$1.42 billion last December.
Also increasing was notes and loans payable;
this balance climbed to US$290.2 million from
2012 s US$241.6 million. The major change
was due to the issuance on December 18, 2013
of 18-month notes having a face value of
US$43 million, which will mature in June 2015.
Primarily resulting from this new debt issue,
SFC s debt (US$290 million) as a percentage
of total capital employed (US$1.015 billion)
increased to 28.6 per cent from 23.2 per cent
as at year-end 2012.
Shareholders equity declined to US$512.1
million from the 2012 level of US$587 million.
The largest movement was experienced in
the retained earnings component, which fell
to US$221.5 million from the 2012 level of
Total comprehensive income from contin-
uing operations added US$35.9 million to this
balance; this result was more than negated by
the negative total comprehensive income from
its discontinued operations of US$75.5 million.
In addition, dividends on both common and
preference shares consumed US$19.8 million.
Reserves moved from a positive US$16.4
million as at year-end 2012 to a negative
US$4.8 million last December. A major factor
in this decline was the retranslation of the
results from its Jamaican operations.
The book value of each share stood at
US$1.68 as at December 2013 (2012: US$1.93).
Net results and EPS
Still weighted down by its discontinued
operations, net income for the year registered
at US$4.1 million from US$33.3 million in
2012. Of this total, shareholders portion was
a loss of US$36.4 million versus a profit of
US$11 million in 2012.
This result translated into negative EPS of
US$0.126 (2012: positive EPS of US$0.31).
Due to its size and complexity, it might be
more helpful to refer to the two tables and
When we look at Table 1 above, we see
that, even though more than 65 per cent of
SFC s revenues are derived from premium
income, more than 73 per cent of its "operating
profit" is generated from investment income,
fees and related items. This is not unusual at
many insurance-based companies.
From the company s perspective, after set-
ting aside a prudent sum, premium income
provides the "gravy" which it uses to invest
for both immediate and long-term gains,
according to internal and regulator established
From the previously generated "surplus",
SFC has to allocate depreciation and amor-
tisation, pay administrative expenses, com-
missions and related compensation, taxes and
Administrative expenses consumed almost
$204 million in 2013 (2012:$191 million). The
next largest expense was commissions and
related compensation, which registered at
$99.8 million last year.
If we deduct this sum from the total of the
2013 pure insurance net income of $122 million
($83+$28+$11), we derive a very modest $22.2
million result for its insurance operations. If
we could reasonably allocate administrative
expenses, premium taxes and finance costs,
then this figure would fall to a much lower
level, maybe even registering a significant
Looking next at Table 2 above we see the
relative contributions from the group s three
major segments, excluding the discontinued
Helped by higher net premiums and lower
actuarial adjustments, operations in the East-
ern Caribbean and T&T delivered a 21.2 per
cent improvement in profit attributable to
In contrast, the 51 per cent owned Jamaican
operations were negatively impacted by lower
investment income and higher actuarial
adjustments. Both these factors are related to
the lower level of interest rates.
SFC s 100 per cent owned American oper-
ations delivered significantly lower results,
mainly due to last year s decision to reinsure
90 per cent of new annuity premiums. Starting
from a lower base, premiums and profitability
should now grow at a faster pace.
Dividends and shareholders' returns
On June 24, 2013, SFC s share price on the
local exchange was TT$6.27, it then surged to
TT$7.98 on February 11, 2014 before it closed
on June 24, 2014 at TT$6.69.
Over this period, dividends of TT$0.26 were
paid to shareholders. The combined capital
appreciation and dividends gave shareholders
a total one-year return of TT$0.68 per share,
or 10.8 per cent.
Resulting from the reorganisation and delist-
ing of Sagicor Investments Jamaica Ltd in early
2014, SFC s holding in Sagicor Jamaica slipped
to 49.11 per cent.
Translation losses at this company are likely
to continue for some time. However, a move
to increase its presence in Central America
should help diversify its profit stream over
The Jamaican subsidiary s acquisition of the
Jamaican business of the Royal Bank of Canada
for J$9 billion was recently approved by reg-
Sagicor Financial Corporation prepares for...
A BRIGHTER FUTURE
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