Business

Zacca sets about restructuring Sagicor

BY KEITH COLLISTER

Friday, March 16, 2018

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In just a few short months, Sagicor Group Jamaica's new President and CEO Christopher Zacca has restructured his executive team with the overall goal of creating greater focus, driving performance and improving asset returns. He has created clearer lines of demarcation between the different business units in terms of their executive leadership, while, he argues, also creating new opportunities for upward mobility.

Sagicor Investments is now headed by Kevin Donaldson, whose portfolio includes Jamaica's largest stockbroker, an up and coming corporate finance unit and the Sigma mutual fund complex, as well as the investments on its own balance sheet.

Sagicor Bank has a new CEO, Chorvelle Johnson, formerly of Proven, who replaces interim CEO Philip Armstrong, who had himself replaced long-standing CEO Donovan Perkins.

As a key executive, Philip Armstrong is now executive vice-president, with the role of chief strategic and technology officer, and a key resource to the president's office.

A key emphasis will be on teamwork and collaboration, with Sagicor Bank and Investments working closely together as lead arranger in Jamaica for the local financing portion of Jamaica Energy Partners.

Donette Scarlett now operates as senior vice-president and group treasurer, while Merrick Plummer is now vice- president group sales, having been former assistant vice- president individual life, a new “shared service role” designed to drive cross-selling and “cooperation” across the group.

The opportunity here is that the average Sagicor customer only has 1.3 products, and Sagicor has 600,000 direct customers (or 1.5 million including dependents).

Zacca believes that the ability to innovate will be a key competitive advantage going forward, and he is therefore implementing a platform for innovation that allows different areas in the organisation to compete on a fair basis for resources — such as a piece of the capital budget — allowing projects to emerge that create the most value to the organisation.

Zacca is focused on creating “one Sagicor culture” of team engagement and cooperation across the group. He is consciously modelling this off the already existing “life insurance culture” which he describes as “performance-orientated, teamwork, high motivation, can do”, and seeking to drive it into all the “nooks and crannies” of the group.

As a metric of success, he says at the end of 2017 Sagicor had the highest “net promoter” score in its history — a Life Office Management Association (LOMA) metric- meaning the number of people who would promote the group to colleagues minus those who wouldn't. He was using the LOMA methodology to measure engagement across the group, “building on what he had inherited”, meaning a “client service ethic” of “only when clients win do we win”.

TOURISM

Addressing their recent hotel deal, Zacca described it as “leveraging our investment in tourism but diversifying our operational and regional risk while reducing our need for future capital”.

Looking at the portfolio, it was clear that the room stock would need refreshing, and that they would have to buy or build additional rooms to stay competitive.

By selling the portfolio to Playa, they were merging with the only publicly traded all inclusive hotel group listed in the US. The group had been founded in 2006 by American Bruce Wardinsky, a former senior executive at Marriott, and has 6,300 rooms spread between Mexico, Dominican Republic and Jamaica. It was financed by a combination of private equity and Hyatt (then its largest single shareholder), and went public last year in March to bring in fresh equity (its growth previously had been mainly organic and through the use of leverage).

Post the deal, Sagicor will become its largest single shareholder. In one move, Sagicor has reduced its operational, financial and financing risk (not having to raise capital itself), as well as making the underlying asset more liquid by making it part of a publicly traded entity.

Rather than managing the hotels themselves, they have brought in a professional management team who all they do is “live, eat, and sleep hotels”. They will no longer have a management company contract with Aimbridge once the deal is completed, creating greater alignment with the underlying returns of the hotel.

Playa, which already operates the Ziva family (the old Ritz Carlton) and Zilara (adults only) brands in Jamaica have plans to build another 760 rooms across the properties they have purchased.

Playa is also a good long- term investment, as formerly, it only operated its own brands (and Hyatt), but now they can also do Hilton and Marriott, etc, effectively positioning them to become “a consolidator in the all inclusive hotel market”.

Post the deal, Sagicor will become its second largest shareholder, with 15 per cent of the shares.

RESULTS

A brief look at the Sagicor Group's 2017 final results shows that Sagicor's impressive run of net profit increases under former CEO Richard Byles has continued under his successor Christopher Zacca, with net profits at $12.07 billion, a seven per cent improvement over last year, while earnings per share increased to $3.11.

Total group assets rose three per cent to $352.4 billion, while total assets under management (including pension fund assets managed on behalf of clients and Unit Trusts) rose 12 per cent to $679.82 billion, due to both stock market increases and portfolio expansion.

Stockholder's equity rose to $68.5 billion, as against $56.41 billion, a 21 per cent increase. This large increase led to a slight decrease in the return on equity from 22 per cent to 19 per cent in 2017.

Dividends per share in 2017 rose to $1.26 from $1.12 in 2016.

Most encouragingly, consolidated revenue grew by 18 per cent to $70.44 billion in 2017, with net premium income, at $41 billion (58 per cent of revenue) up 22 per cent over 2016.

Earned premiums for the individual lines of business were 11 per cent higher, due to record new business and improved “conservation” of existing insurance policies, while group insurance and annuity premiums were much higher as a result of very strong growth in the annuities portfolio.

Sagicor Bank's revenue was also up 18 per cent in 2017, while Sagicor Investments revenue was up nine per cent. Finally, total comprehensive income, which includes movement in reserves held in Equity, moved from $15.02 billion in 2016 to $17.81 billion in 2017, reflecting unrealised fair value gains on available for sale securities.

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