Financial conglomerate Sagicor Jamaica has been hit by higher policyholder claims and increases in actuarial reserves in its insurance segment, which have negatively impacted profitability during its second quarter. The higher policyholder claims and increases in actuarial reserves impacted benefits and expenses. Rising medical costs in Sagicor’s Employee Benefits Division (EBD) and increases in death claims contributed to an increase of four per cent in net benefits in the June quarter, which is a direct result of the pandemic’s effect on health security.

In 2021, driven by continued strong performance in new business sales, net premium income showed a four per cent improvement over the first quarter of 2021 and ended one per cent higher than the prior year. Within this context, the group reported net profit attributable to shareholders of $4.85 billion, an 11 per cent increase over prior year and earnings per share of $1.24.

The group has seen steady performance in its individual life insurance, commercial banking and investment banking business lines and continues to experience strong sales of its insurance products.

Total revenues generated were $48.20 billion, being $9.35 billion or 24 per cent higher than the prior period and consolidated net profit attributable to stockholders was $4.85 billion, compared to $4.36 billion in prior year. Prior year’s revenues were adversely impacted by COVID-19, characterised by large unrealised fair value losses and high expected credit losses (ECL); a direct result of the slowdown influenced by the pandemic. The current period has seen some reversal of these factors resulting in improved revenues but benefits and expenses, outcomes of higher policyholder claims and increases in actuarial reserves have negatively impacted profitability. Net investment income increased by three per cent over prior year.

The group recorded an increase of $6.7 billion in unrealised capital gains over the comparative period reflecting the price recovery in its marketable securities. Substantially, lower ECLs were in part due to recoveries of outstanding loans and credit card accruals in the commercial banking segment.

Fee and other income of $7.91 billion increased by approximately $1 billion compared to prior year as the group benefited from increases in managed fund values as well as realised and unrealised foreign currency gains. The group maintained a strong liquidity position, increasing its cash holdings by $10.44 billion and growing its total asset base by seven per cent when compared to the prior year.

The Individual Life segment posted net profits of $1.71 billion, 11 per cent lower than 2020. This was driven by increases in actuarial liabilities in the current year. The segment continues to write exceptional levels of new business in Jamaica and Cayman, being 38 per cent ahead of prior year and seeing six per cent growth in its portfolio of policies. Net revenue showed significant growth over the comparative 2020 period.

The Employee Benefits segment produced profits of $1.36 billion, significantly lower than 2020 ($2.60 billion). Net group insurance and annuity premiums earned of $9.66 billion, included 25 per cent growth in new annualised premium income. However, rapidly rising medical costs and death claims led to a 20 per cent increase in benefits incurred compared to the prior year. The joint venture in Costa Rica continued its strong performance and contributed $496 million (2020: $149 million) to net profit for the six-month period.

Sagicor Bank contributed net profits of $987 million for the current period, a significant improvement over the $716 million in 2020. The results were positively influenced by $752 million net positive movement in its ECL account compared to 2020, due to significant recoveries on outstanding loans during the current period.

Fee based income of $2.73 billion was 9.3 per cent higher than prior year, driven by a 10.6 per cent increase in the credit card business, which yielded $1.13 billion in fee income. Total assets of $168.14 billion increased by 9.75 per cent against prior year and seven per cent since December 2020.

This was driven mainly by increases in loans and advances, which ended the period at $89.22 billion, an improvement over the prior year December 2020 position. Customer deposit liabilities of $127.43 billion also increased by $13 billion and $5 billion against prior year and December 2020, respectively.

The Investment Banking segment contributed $1.22 billion to the group’s net profit, a five per cent decrease over prior year. Total revenue grew by two per cent due to increases in unrealised foreign exchange gains and interest income, helped by a three per cent increase in interest earning assets. Growth in fee income has been challenged due to lower levels of capital market transactions but we expect an uptick in future market activity, as signalled by the recently announced US$280 million financing transaction for New Fortress Energy.

The group consolidated cash generated from investing activities was bolstered by $13.60 billion from the sale of the entire block of Playa shares in January 2021. The liquidity of the Group has remained strong with cash and cash equivalents at the end of June 2021 being $37.86 billion.

The group has maintained its strong capital position and continues to exceed regulatory capital requirements across all entities.