SAGICOR Financial Company Limited (SFC) has received a rating upgrade from Fitch Ratings as it continues to reap the benefits of its Ivari acquisition.

SFC’s long-term issuer default rating was upgraded from BBB– to BBB while its senior unsecured debt was upgraded from BB+ to BBB–. SFC’s rating outlook remains stable while Ivari had its insurer financial strength rating maintained at A– with a stable outlook.

“The upgrade reflects strengthening core profitability and two years of consolidated contributions from Ivari, complemented by lower debt financing costs and a strong capitalisation profile. These positives are partly offset by continued exposure to below-investment-grade sovereign holdings. The rating also incorporates a moderate business profile, supported by leading positions in the Caribbean and niche life insurance presence in Canada,” Fitch Ratings stated.

SFC acquired Ivari, a Canadian middle-market life insurance company, in October 2022 for CA$375 million (US$273.72 million or $42.62 billion). That acquisition changed the financial profile of SFC and became the catalyst for S&P Global Ratings and Fitch Ratings to upgrade SFC to investment-grade credit ratings. S&P Global Ratings assigned a BBB rating while Fitch Ratings assigned a BBB– rating.

Prior to the Ivari acquisition, SFC had 58 per cent of its asset base in the Caribbean and the remainder in the United States of America (USA). With respect to revenue (under IFRS 4), 47 per cent of this figure came from the USA.

In 2024 SFC had 73 per cent of its assets in Canada and the USA, with 54 per cent of insurance revenue (under IFRS 17) coming from these two markets. Ivari or Sagicor Canada was responsible for 47 per cent of the group’s insurance revenue and approximately 47 per cent of group assets.

“Fitch weighted the operating environments of Barbados, Jamaica, Canada, and the US, resulting in an implied OE improvement to ‘a’ from ‘bbb’. This lifted the bespoke IPOE [industry profile and operating environment] range to ‘aa- to bbb’ from ‘a+ to bb’. Under this framework, SFC’s business profile is assessed as ‘moderate’,” Fitch Ratings added in its latest update.

SFC is a diverse conglomerate which owns Ivari, Sagicor Life Insurance Company, Sagicor Life Inc and 49.11 per cent Sagicor Group Jamaica Limited (SJ). While its North America and Eastern Caribbean businesses are largely insurance focused businesses, SJ also operates a commercial bank, a securities dealer (investment bank) and a property management services business. That is reflected by having the fourth-largest commercial bank in Jamaica by assets, one of the largest securities dealers which manages the largest unit trust portfolio in Jamaica, and a life insurance arm that manages the largest pension portfolio in the country.

“Fitch considers SFC to be well diversified across business lines and geographies, with a business risk profile in line with its life insurance peers. The company profile reflects its dominant market position and ‘most favourable’ operating scale in the Caribbean, balanced by Ivari’s ‘moderate’ competitive position in Canada and the more limited operating scale and market position in the US,” Fitch explained on SFC’s business profile.

Although SFC’s US$24.14-billion balance sheet is buttressed by Ivari’s conservative investment portfolio comprised mainly of cash and highly rated fixed-income holdings, Fitch did highlight the investment risk related to sovereign concentration in certain Caribbean jurisdictions. SFC’s investment portfolio saw the concentration of investment-grade debt securities move from 69 per cent to 83 per cent after the Ivari acquisition. However, certain conditions in the Caribbean require its subsidiaries to hold certain forms of government debt.

“SFC’s investment risk improved post-Ivari acquisition but exposure to risky and below-investment-grade assets relative to shareholders’ equity remains above peers, amplified by sovereign holdings tied to local requirements. Concentration is driven by Jamaica, with Jamaican sovereigns equal to 48 per cent of equity. Barbados and Jamaica carry positive outlooks, which could ease the sovereign cap over time. The risky asset ratio improved to 172 per cent in 2Q25 from 181 per cent at YE24,” Fitch added.

Although SFC’s consolidated insurance revenue improved three per cent to US$737.19 million for the six months period, it reported net income attributable to shareholders of US$250,000 compared to a net loss attributable to shareholders of US$14 million. The bulk of this lower earnings was attributed to the 74 per cent rise in finance expenses from insurance contracts issued from US$272.08 million to US$472.26 million. This expense movement is related to the movement in interest rates which impacted SFC’s insurance contract liabilities, largely in its Canadian segment.

However, SFC’s core earnings to shareholders (non-IFRS measure to remove market experiences and changes in actuarial methods) was up 95 per cent from US$38.9 million to US$75.7 million. SFC is projecting core earnings of US$120 million to US$130 million for the 2025 financial year (FY).

SFC also reported new business CSM (contractual service margin) of US$85.3 million and is currently projecting to report between US$155 million to US$175 million for the 2025 FY. SFC’s third-quarter report should be published by November 14.

SFC is currently benefiting from an estimated US$12 million in savings from the refinancing of a debt facility during 2024 related to the prior Ivari acquisition. That was facilitated via a CAD$250-million senior unsecured note with a June 2029 maturity date and a CAD$200-million credit agreement with an initial maturity date of August 2027 or to a newly extended date.

SFC’s listed bond with a US$550-million face value matures in May 2028. This facility has an optional redemption premium with a US$4.6 million fair value as of December 2024. The recent upgrades on its credit ratings may give SFC the space to refinance below the 5.30 per cent offered on the current notes.

SFC repurchased 512,500 ordinary shares between July to September for CA$4.02 million (US$2.87 million) and cancelled the equivalent amount. SFC had 135,891,504 ordinary shares as of June 30, with JMMB Group Limited (JMMBGL) as its largest owner with 33,213,764 ordinary shares. That gives it an estimated stake of 24.53 per cent––– well above the 22.52 per cent it owned in March 2020.