Following its bargain purchase of Canadian insurer Ivari last month, Sagicor Financial Company Limited (SFC) is projecting that its net profit will jump to US$100 million which will be supported by its recently attained investment grade credit rating.

SFC generated consolidated net profit of US$11.19 million for the third quarter (Q3) but had a net loss attributable to shareholders of US$3.53 million due to the annual review of its actuarial assumptions along with other expenses. Without strengthening of actuarial assumptions and associated costs with the Ivari acquisition and IFRS 17, SFC estimates its core earnings to shareholders would have been US$9 million.

For the overall nine months, consolidated net profit was US$80.72 million with net profit attributable to shareholders at US$46.72 million. Thus, SFC is projecting to double its net profit for shareholders with the inclusion of Ivari and new business to be generated from Sagicor Life USA.

“Beyond 2024, the pro forma company will continue to target high single-digit net CSM (contractual service margin) to shareholders growth and double-digit net income to shareholders growth. So, our math continues to point you to net income guidance of either side of US$100 million for 2024. We will further refine this guidance upon filing of our business acquisition report, which we expect to file in mid-December,” said SFC President and CEO Andre Mousseau in the company’s November 14 earnings call.

SFC acquired Proj Fox Acquisition Inc, which holds Ivari, for US$271 million on October 3. SFC also transitioned from IFRS 4 to IFRS 17 on January 1 which resulted in the restatement of 2022’s numbers with the CSM to be released as time goes along.

SFC’s total assets at the end of the Q3 was US$11.03 billion with shareholders equity of US$762.25 million, of which, US$442.51 million being attributable to shareholders. SFC’s guidance is that shareholders equity will be at or above US$650-$725 million with total deployable shareholders capital which includes the CSM at US$1.8-$2.0 billion. It also expects return on shareholders’ equity to be in the 14-16 per cent range.

Sagicor Life USA brought in US$129.28 million in net insurance and investment with US$64.06 million as net profit for the overall nine months. Despite rising interest rates impacting different segments of SFC’s Caribbean markets, it has been a benefit to its USA business as higher rates make the unit economics of new policies more profitable. With the current growth path, SFC expects to end the year with US$800 million in new production/business which is expected to accelerate further in 2024.

Sagicor Life in the Southern Caribbean had US$51.38 million in net insurance and investment result with US$17.40 million in net profit for the nine months period. While there was growth in the insurance revenue during Q3, this was offset by higher insurance expenses from continued negative mortality and policyholder behaviour experience. However, the segment is pushing forward with its digitalisation efforts as it benefited from 14 per cent in new business sales based on the improving economic environment.

“We remain very positive on the prospects for our business. If you step back away from the quarterly movements, our major markets in the Caribbean were disproportionately affected by the COVID pandemic, which resulted in, in effect, a shutdown of the tourism sector for two full seasons and then knock-on effects into the third. And so, what we’re seeing is a very strong rebound in that tourist trade, which is contributing to growth that, in 2024 and beyond, is expected to continue to persist at higher than the pre-pandemic levels,” Mousseau said on his outlook for the Caribbean.

SFC’s share price has rebounded considerably from CA$4.80 when it acquired Ivari to CA$5.94 as of Tuesday which leaves the stock up 8 per cent year to date with a market capitalization of CA$843.76 million.

SFC declared a dividend of US$0.05625 to be paid on December 13 to shareholders on record as of November 22. This payment totals US$7.99 million based on the 141.98 million ordinary shares following SFC’s latest share buyback.

SFC’s debt to capital ratio currently stands at 31 per cent with its MCSSR (minimum continuing capital and surplus requirements) at 259 per cent for its insurance business. SFC intends to produce a LICAT measure by the end of 2023.

Sagicor Jamaica earnings mixed

Although Sagicor Group Jamaica Limited’s (SJ) earnings from its insurance segment recorded an improvement for the nine months, the same could not be said for its investment and banking segments which experienced a decline in earnings for the period.

Sagicor’s long term insurance segment $8.50 billion in net insurance and investment results for the nine months which was driven by generating new business and a $4.08 billion release from the CSM from its recent actuarial review. The segment reported net profit of $6.72 billion for the period despite negative foreign exchange rate fluctuations.

The short-term segment generated $1.92 billion in net insurance and investment results with net profits improving to $1.43 billion from improved loss ratios under health insurance portfolios. There was new business sales of $1.60 billion for group health and life products, largely with corporate clients.

Its 50 per cent joint venture Sagicor Costa Rica, SA saw a significant jump in third quarter net profit from $12.07 million to $159.45 million, with half of the earnings recorded on SJ’s income statement. The joint venture is set to purchase SFC’s wholly owned subsidiary Sagicor Panama SA subject to regulatory approval.

Sagicor’s investment banking segment experienced an 11 per cent dip in revenue to $3.47 billion with net profit declining by a third to $801.54 million for the nine months. This was driven by a decline in net interest income from higher funding costs while the Cayman operation had an increase in revenue and net profit. Sagicor Investments Jamaica Limited’s capital adequacy ratio stood at 14.80 per cent.

While Sagicor Bank Jamaica Limited was able to improve its revenues by 11 per cent for the nine months to $14.08 billion for the nine months, its net profit dipped nine per cent to $2.14 billion as a result of the 19 per cent jump in administrative expenses. There was greater card volume and increased net interest income during the period based on the economic vibrance during the period.

With the Basel III implementation not far away, Sagicor Bank has transferred $800 million to its retained earnings reserve while also transferring $42.91 million to the loan loss reserve. Sagicor Bank’s capital adequacy ratio was 13.25 per cent as at September 30.

SJ’s total assets stood at J$541.66 million with its financial investments at J$334.22 million and loans and leases at J$121.56 billion. Total liabilities were J$450.16 billion with deposits and security liabilities at J$263.68 billion along with insurance contract liabilities at J$140.38 billion. Equity attributable to shareholders stood at J$89.15 billion with the inclusion of the CSM bringing it to J$132.43 billion. There was a $127.92 million dividend under non-controlling interest which likely means that a $319.80 million dividend was paid by its subsidiary Advantage General Insurance Company Limited.

SJ’s stock price closed Tuesday at J$40.04 which leaves the stock down 30 per cent year to date with a market capitalisation of J$156.30 billion. This leaves it as the third-largest company on the Jamaica Stock Exchange.