FOLLOWING the shock of the novel coronavirus pandemic in 2020, which snapped two decades of consecutive net profit growth, Sagicor Group Jamaica Limited (SJ) returned to winning ways as net profit attributable to shareholders rose by 26 per cent from $13.78 billion to $17.40 billion for its 2021 financial year (FY) ending December 31.
This was the group's highest net profit to date with the consolidated figure rounding up to $17.64 billion which translated to an earnings per share of $4.46 relative to the $3.53 in 2020. As a result of the performance, SJ surpassed NCB Financial Group Limited (NCBFG) for the first time in terms of earning to shareholders with the Caribbean conglomerate earning $14.23 billion in its 2021 FY ending September 30. Had SJ not consolidated the $15.39 billion net loss of Sagicor Real Estate X-Fund in 2020, SJ's earnings would have topped $15.94 - $17.34 billion in that year.
“Our strategy is to not watch the competition like that, but to grow our business and introduce new lines of revenue. For example, there is the Alliance Financial Services acquisition which we are deep into and to expand geographically. We're cranking up Sagicor Investments Cayman which is now operational and licensed. We're continuously looking at the Central American insurance market where we have a partner over there. You'll hear more about that in short order this year. We're not looking at any particular competitor, but we're just trying to be the best and biggest in what we do,” stated president and CEO of Sagicor Group Jamaica Christopher Zacca in a virtual media briefing held on Thursday.
SJ's net revenue grew by 21 per cent to $102.56 billion as credit impairment losses decreased, the reversal of unrealised investment losses into unrealised investment gains, increased hotel revenue and a 29 per cent rise in fees and other income to $17.40 billion. Three of SJ's operating segments recorded their best performances ever with individual lines earning $8.95 billion, Sagicor Bank with $3.27 billion and Sagicor Investments with $2.91 billion. Sagicor's employee benefits segment experienced a 12 per cent decline to $3.67 billion due to actuarial reserve strengthening and increased claims due to medical inflation.
“We have seen a mitigation of that towards the end of last year. There are some signs that it could pick up again this year, but I think the strategies we put in place last year to manage that risk in terms of health insurance pricing and benefits. We will continue to support that business even if health insurance picks back up. There is a bigger demand for our products and it shows that we're not just used car salesmen but delivering a service and improving the lives of our clients,” stated Zacca on the matter of medical inflation heading into 2022.
When quizzed on the Alliance Financial Services Limited (AFSL) acquisition and discontinuation of the My Cash card, Zacca explained that the due diligence process is going well and that the prepaid card portfolio would fit well with the bank's shift to an international debit card. This is being facilitated by the current upgrade of Sagicor Bank's ABM's for the deployment of the Visa or Mastercard debit card. The My Cash card was introduced in August 2018 and will end on May 11.
“My Cash is a product that we launched several years ago in partnership with Digicel where there was a revenue share with them and Digicel provided a number of supporting services for the product. We both decided that we wanted to go our separate ways last year and we have just implemented the advisory to the public. The Alliance acquisition does give us the opportunity to develop products around prepaid cards and digital wallets. We'll be looking at that as we go forward. Part of our group strategy is to have much more sophisticated payment products than My Cash and I think going on our own will let us go with that strategy in a much more fulsome way,” Zacca added on the payment space for SJ.
He noted that the Alliance name would not be changed at the moment with the company's sub-agents eager to restart operations. SJ is currently awaiting on a 'no objection' approval from the Bank of Jamaica to complete the acquisition.
SJ is currently embarking on a variety of real estate projects across Jamaica between its managed funds, its own proprietary funds and investments. The sale of The Azaleas on Seymour Avenue will be completed shortly along with the Bessa project in Oracabessa, St Mary, in conjunction with KLE Group Limited which is set to be completed by mid-year. SJ is also working on the new JDP Plaza at Up Park Camp which received $193.02 million in additions in 2021. It is being developed by Garco Construction Limited and supported by other professionals including Martin E Lyn & Associates, Synergy Engineering Limited and Shiloh Consulting Partners.
SJ will also be announcing new projects outside of Jamaica especially in Central America. X-Fund will be having a major announcement in the next two months while SJ looks to expand its presence in the region following the double digit growth in its Costa Rican joint venture which earned $1.21 billion in 2021, half of which SJ records as profit.
Though Zacca and Chief Financial Officer Andre Ho Long didn't get into the details on passing on interest rate hikes, they did note that it is being assessed in the context of the BOJ's increasing policy rate. Zacca also added that although the BOJ's FX moratorium for the next six months will impact deal structures, he noted that refinancing plans are still underway and the US$285 million bond by New Fortress Energy is unaffected.
SJ's total assets rose by eight per cent to $528 billion while total liabilities and equity attributable to shareholders closed the period at $393.21 billion and $114.82 billion. SJ's share price is up two per cent year to date at $56.23 with a market capitalisation of $219.63 billion.
“We have on our strategic plans for the next three years a number of new products, geographies and real estate developments which will be announced. In terms of our strategies dealing with a difficult year including inflation, liquidity headwinds and geopolitical tensions, it always comes back to our pillars which are to grow new revenues, engage our clients with the best customer service and to keep our team engaged. Underpinning all of that is a drive towards operational process improvements, technological advancements to reduce pain paints with our clients and a number of strategies. It really is sticking to our main strategic plans and implementing as best as possible,” Zacca concluded to the members present.
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