SAGICOR Financial’s plan to combine its Jamaican and wider Caribbean operations could slip into the first half of 2027 if the group is not ready to complete the transaction by September 30, extending the timetable for a restructuring that will continue well beyond the merger itself.

The Toronto-listed financial group is still pushing for a fourth-quarter closing, but President and CEO André Mousseau told analysts that September 30 has become a practical cut-off because Sagicor wants to complete the internal transaction at the start of a quarter to simplify the accounting.

“If we are not ready to go September 30th, it moves the transaction into next year,” Mousseau said on Sagicor Financial’s second-quarter earnings call on August 13. He said the company would otherwise seek to close the transaction in the fourth quarter, but acknowledged that it could extend into the first half of 2027.

The change in timing would push back the creation of Sagicor Group Caribbean Limited (SGC), the new holding company that will combine Sagicor Group Jamaica Limited (SGJ) and Sagicor Life Inc (SLI), which houses much of the group’s insurance business elsewhere in the Caribbean.

When the transaction was announced last December, Sagicor said it expected completion during 2026, subject to regulatory approvals, SGJ shareholder approval, the Jamaican company raising certain financing and other closing conditions. Mousseau did not identify on the call which of those steps could determine whether the transaction closes this year.

The combination will create a business that, on a pro forma basis at September 2025, had US$6.9 billion of assets and US$1.3 billion of annual revenue. SGC is intended to replace SGJ as the Sagicor company listed on the Jamaica Stock Exchange, with Sagicor Financial expected to own about 55 per cent of the enlarged entity.

But the legal combination is only one part of a wider restructuring already under way across Sagicor’s Caribbean businesses.

Management expects one-off charges and investment spending associated with the transformation to begin appearing in the third and fourth quarters. The timing and size remain uncertain because some costs could coincide with the closing of the transaction, while others could appear beforehand if completion moves into next year.

That work includes a review of parts of the Caribbean balance sheet.

Questioned by an analyst about a fall in Sagicor Life’s contractual service margin, or CSM, following modifications to reinsurance contracts, Mousseau described the changes as “balance sheet cleanup of the Caribbean businesses” as they move towards combination.

The remark related specifically to decisions involving individual reinsurance arrangements at Sagicor Life rather than to any disclosed deterioration in SGJ’s balance sheet. Mousseau said the changes were being assessed according to the returns they were expected to generate over the longer term.

Sagicor Life’s net CSM fell seven per cent during the quarter to US$248.1 million, as underlying growth was outweighed by the impact of the reinsurance contract modification. CSM, introduced under IFRS 17, broadly represents profit on insurance contracts that has not yet been recognised.

Mousseau also said the eventual combination would allow Sagicor to establish a new combined Caribbean balance sheet. The group is reviewing balance-sheet items as part of a broader effort to improve returns while reshaping its operations.

The benefits, however, will not arrive at once.

Sagicor expects some early gains from the Caribbean programme this year and more in 2027, while the more complicated work of redesigning processes and consolidating operations on newer technology is expected to extend into 2028. Management has incorporated those initiatives into its target of lifting Sagicor Financial’s core return on equity to 14 per cent in 2027 and 15 per cent in 2028.

That longer timetable places greater weight on the performance of the businesses being brought together.

In Jamaica, the picture is mixed. Insurance sales remain strong, but earnings have fallen sharply from last year’s levels.

Sagicor Financial said net premiums generated by its Jamaica operation rose 13 per cent year on year during the June quarter, supported by policy renewals and new business. Net CSM increased three per cent from March to US$307.9 million, including US$13.7 million generated from new business.

Profitability moved in the opposite direction.

Sagicor Financial’s share of SGJ’s core earnings fell 31 per cent to US$10.1 million in the second quarter and was down 19 per cent to US$19.6 million for the first half. Its share of SGJ’s reported net income fell to US$8.8 million from US$14.6 million in the June quarter.

The numbers show a business still generating new insurance sales and expanding parts of its financial-services operation, but converting less of that activity into profit than a year earlier.

Commercial banking has provided a counterweight.

Sagicor Bank Jamaica earned net profit of $2.26 billion in the second quarter, up 38 per cent year on year, while originating $22.15 billion in new loans during the first half. Deposits stood at $217.03 billion at June, compared with $202.86 billion at the end of December.

At the parent company level, management said SGJ’s core earnings were supported by higher expected investment income from wider interest margins and growth in its commercial banking and investment portfolios, even as overall earnings remained below the comparable period last year.

Those competing trends help explain the significance of the Caribbean reorganisation. The merger is intended not simply to put SGJ and SLI under the same corporate roof, but to give Sagicor greater scope to capture revenue and cost synergies across businesses that have historically operated under separate structures.

When the deal was announced, Sagicor said management at the two companies had identified potential cost and revenue synergies with “meaningful financial upside”, although it did not quantify them. Before those benefits, the transaction is expected to be approximately neutral to Sagicor Financial’s core earnings.

The group is therefore likely to carry the costs of the restructuring before investors see its full benefits. Some charges and investment spending could appear over the remainder of this year, while the more substantial process and technology changes will take longer.

Missing the September 30 cut-off would move the corporate combination itself into 2027. Even if Sagicor makes that deadline, the merger will mark the start rather than the end of the integration, with the deeper restructuring of its Caribbean operations expected to run into 2028.

André Mousseau, president and chief executive officer of Sagicor Financial Company Ltd, says the planned combination of Sagicor’s Jamaican and wider Caribbean operations could extend into the first half of 2027 if the transaction is not ready to close by September 30.