Sagicor Financial Company Limited (SFC) expects to save US$12 million ($1.87 billion) in annual interest expense after recently completing two debt rounds for CA$450 million to refinance debt related to its previous acquisition of Canadian life insurance company Ivari.

SFC acquired Ivari in October 2023 for CA$375 million (US$273.72 million or $42.62 billion) and tapped several Canadian and international banks through a five-year syndicated term loan for US$320 million to complete the deal. The interest rate on this was based on the SOFR (secured overnight financing rate) of 5.33 per cent as at October 3, 2023 plus the five per cent spread, which translated to a 10.33 per cent rate when Ivari was acquired.

However, the acquisition of Ivari not only improved Sagicor’s earnings and double its balance sheet but was the catalyst for SFC to be upgraded to an investment grade credit rating with a BBB rating by S&P Global Ratings and BBB– by Fitch Ratings. The company also received a senior debt rating of BBB from DBRS Limited in April. This improvement in SFC’s credit rating became the platform for it to refinance its debt and save between 200 – 300 basis points (2 – 3 per cent) on the debt to acquire Ivari.

SFC completed its first refinancing round on June 20 when it raised CA$250 million in a private placement offering with a 6.359 per cent interest rate. This unsecured note is set to mature in June 2029 with all of the proceeds used to partially repay the Ivari acquisition term loan and transaction costs. SFC then announced on December 4 that it closed a CA$200-million (US$141.10-million) term loan with a syndicate of major Canadian and USA banks. US$113 million of these proceeds were used to repay the outstanding principal on the existing term loan.

“We remain on track with our growth initiatives, the integration of Sagicor Canada, and continue to optimise our balance sheet through debt refinancing and opportunistic share repurchases, all of which we believe will drive return on shareholders’ equity growth in 2025 and beyond,” said Andre Mousseau, president and CEO of SFC, in the press release.

Mousseau expanded his executive responsibilities when he became the president and CEO of Ivari on July 31. It was stated that, “Mr Mousseau will oversee all elements of operations of Sagicor in North America, including efforts to drive collaboration between Sagicor Canada and Sagicor USA.”

This role was previously occupied by Todd Lawrence who had the role since October 2018 and had been with Ivari since June 2017. There was no additional disclosure on Lawrence whereabouts or if there are any plans to bring Ivari under the Sagicor brand.

Other notable executive appointments include Paula Walcott being appointed Chief people officer and Neil Freyke being appointed executive vice-president (EVP) – technology and chief digital officer on June 1. Edwin Huc was also appointed to the role of senior vice-president and head of internal audit as of November 4. Ronald Blitstein retired as EVP and chief information officer on May 31. Cathleen McLaughlin was elected a director at the June 13 annual general meeting (AGM).

Ivari, which falls under the Sagicor Canada segment, contributed 47 per cent of SFC’s third quarter (Q3 – July to September) insurance revenue of US$175.60 million with the insurance service result coming in at US$15.20 million, or 40 per cent of SFC’s consolidated insurance service result. After reporting a net insurance and investment result of US$102.25 million, Sagicor Canada reported US$62.71 million in net profit for SFC with core earnings to shareholders of US$19.5 million.

For the overall nine months, Sagicor Canada generated US$518.20 million in insurance revenue and delivered an insurance service result of US$63.95 million or 54 per cent of SFC’s total insurance service result. After reporting a net insurance and investment result of US$167.94 million, the segment generated a net profit of US$88.33 million with core earnings of US$62.4 million.

SFC insurance revenue rose 105 per cent to US$371.32 million for Q3 with the net insurance and investment result rising at the same pace to US$200.34 million. After accounting for higher operating expenses during the period, SFC reported a 504 per cent rise in consolidated net profit to US$67.57 million with net profit attributable to shareholders at US$59.05 million and core earnings to shareholders of US$24.1 million.

For the overall nine months, SFC’s insurance revenue was up 111 per cent to US$1.08 billion with the net insurance and investment result rising 27 per cent to US$435.98 million. However, SFC’s consolidated net profit dipped 17 per cent to US$66.64 million due to a near doubling in finance costs and the company benefiting from a US$9.7 million gain on the sale of its operations in Curaçao and St Maarten. Net profit attributable to shareholders was US$45.06 million with core earnings at US$62.9 million. Mousseau had noted at the beginning of the year that he expected SFC to deliver US$90-105 million in core income to shareholders for 2024.

SFC’s total assets were up three per cent over the nine months to US$23.02 billion with financial investments standing at US$17.30 billion and cash at US$330.47 million. Total liabilities and equity attributable to shareholders was US$21.70 billion and US$952.32 million, respectively.

SFC’s stock price traded at CA$6.48 on Tuesday which leaves it up nine per cent year-to-date with a market capitalisation of CA$898.98 million, but below the CA$7.40 high set in April. This was below SFC’s normal book value of CA$9.26 (US$6.86) and its book value with the contractual service margin (CSM) of CA$20.24 (US$14.99). The company’s s 34,774,993 warrants with an exercise price of CA$11.50 expired on December 5. A warrant gives the right to the holder to purchase new ordinary shares in the company at a specific price at a future date.

SFC repurchased 2,391,800 ordinary shares during Q3 and cancelled 1,622,504 ordinary shares which cost US$7.1 million while the remaining treasury shares were purchased for US$3.2 million. This further reduced SFCs share count, net of treasury shares, to 138,826,103 ordinary shares as of September 30. SFC has repurchased 12,697,610 ordinary shares since January 2020 to September 2024.

The continued repurchase of shares has pushed JMMB Group Limited, its largest single shareholder, stake from 22.52 per cent in December 2019 to 23.84 per cent as of September 30. JMMB Group was also set to receive a US$1.99 million dividend (US$0.06 per share) on December 17 based on shares held on the record date of November 26. It represents SFC’s 20th dividend paid since listing on the Toronto Stock Exchange.

“That said, we think there are tremendous opportunities for our Caribbean businesses, potentially inorganic, but organically, our franchises in the Caribbean, both in the southern Caribbean in SLI and our Jamaican franchise, are so strong that we anticipate the return from modernising those businesses and enabling our teams there with technology could be very high. The only thing is that the returns are longer term than share buybacks where you see the immediate accretion. If you look at what we’re doing this year, we’re splitting the baby a little bit in terms of flexing up the share buyback while at the same time still allocating capital into the US for growth and working on plans to deploy capital to technology in the Caribbean, which are things you’ll see in the coming years,” Mousseau said at the November 18 earnings call.