AFTER a disappointing performance in the first quarter as the coronavirus pandemic upended the world, Sagicor Group Jamaica Limited (SJ) delivered a superb quarter as net profit attributable to shareholders climbed by 54 per cent to $2.91 billion for the period ending March 31, 2021.

The conglomerate, whose business mainly covers insurance, investments and commercial banking, saw total revenue rise by a record 38 per cent to $23.12 billion. This strong recovery came largely from the reduction in expected credit loss (ECL) provisions and unrealised losses, with fees and net investment income ending higher over the prior year.

“I think we have successfully navigated the challenges posed by COVID-19 for business and our team. We performed creditably last year and we’re on an upward trajectory. One of the psychological things we faced in Q1 was that we were looking better months coming out of December. We had to go back to the drawing board and remotivate everybody to tell our clients that we are there for them,” stated President and Chief Executive Officer Christopher Zacca in an interview with the Jamaica Observer‘s Business Observer about the company’s performance.

The individual insurance segment led the advanced performance as net premium income grew by 5 per cent to $7.28 billion despite net profit declining by 9 per cent to $1.16 billion. The first quarter saw the segment grow its portfolio by 5 per cent to more than 630,000 policies in force across Jamaica and the Cayman Islands. This resulted in actuarial reserve strengthening due to higher-than-anticipated new business sales.

“We feel that our clients really realised the value of insurance both on the life and health side. Many would know someone who would have been impacted by the pandemic and how Sagicor would have stepped up to pay policies and health claims. Insurance is something you hope that you’ll never use, but if you don’t have it and need it, you’re in trouble,” said Zacca in response to the sharp uptick in new insurance policies. The life insurance portfolio was 17 per cent ahead of the first quarter in 2020.

The group’s employee benefits segment (EBS) performed below expectations as group insurance and annuity premiums came in at $4.76 billion in spite of new sales, leading to a 15 per cent growth in annualised premium income. Net profit for the segment was 11 per cent lower at $1.03 billion. Benefits expense grew by 5 per cent as health claims increased to levels not anticipated by the business. Zacca attributed this increase to medical inflation and a backlog of health claims. This has resulted in more analysis and attention being placed on this segment, which includes managing claims ratios.

The star performer of the EBS was SJ’s 50 per cent joint venture in Costa Rica which saw net profit grow by 239 per cent to $445 million for the quarter while representing 71 per cent of the 2020 financial year’s net profit. Zacca noted that travelling to Costa Rica now requires mandatory travel insurance, which its joint venture currently dominates. He noted that there are strategic discussions underway to expand its overall insurance business in Latin America, with one possible acquisition in the pipeline.

SJ’s commercial and investment banking segments performed better in the first quarter as ECL’s declined, with asset prices improving as well for more unrealised capital gains. However, the slow recovery in the economy has hampered the expected performance of Sagicor Bank related to its loan and credit card business while Sagicor Investments’ fee income remains low due to lower asset valuations on its managed portfolios coupled with fewer capital market transactions.

Total benefits and expenses for SJ rose by 49 per cent to $19.07 billion, largely arising from the strengthening of actuarial reserves by $1.71 billion compared to a $5.52-billion release in Q1 2020.

Due to SJ’s sale of Playa Hotels and Resorts in January, profit before taxation increased by 74 per cent to $4.04 billion albeit a $233.09-million loss on disposal of its former associate. Although SJ no longer holds Playa, its parent company owns 10 million shares and classifies it as an asset measured through profit and loss. Playa had a net loss of US $69.75 million ($10.46 billion) in its first quarter. Consolidated net profit for SJ was 154 per cent higher at $2.90 billion.

Total assets for SJ grew by 6 per cent to $483.71 billion, largely from the recovery in financial instruments along with the Playa sale which netted the company $13.6 billion. Cash and cash equivalents closed out the period at $34.8 billion. Total liabilities were 5 per cent higher at $359.27 billion while equity attributable to shareholders closed out the period at $124.44 billion.

“We manage risk on a group basis as well as on an individual subsidiary basis. Each company has its own risk appetite and have their own risk committees of their boards. We’re monitoring all the various risks, as COVID-19 creates and heightens risks every day. Each business line’s team is ready to capitalise on opportunity when one door closes and another opens. We are pleased with the performance of the group as a whole, as we continue to navigate a very difficult period globally. We intend to continue on this trajectory as we adapt to and innovate in the new environment,” Zacca said on SJ’s risk management and ability to move forward with COVID-19.