SAGICOR Financial Company Limited (SFC) is entering the Canadian insurance market after entering into a definitive agreement to acquire middle-market individual life insurer Ivari in a transaction valued at CA$325 million (US$251.27 million) or $37.88 billion.

SFC is a Bermudan-based financial services conglomerate, which is listed on the Toronto Stock Exchange (TSX), owns 49.11 per cent of Sagicor Group Jamaica Limited (SJ), and has wholly owned subsidiaries Sagicor Life Inc out of Barbados and Sagicor Life Insurance Company out of the United States of America. It has been in operation for more than 180 years across the Caribbean and has more than 4,500 employees operating in 22 countries. Its largest shareholder is JMMB Group Limited which owned 23.33 per cent as of June.

Ivari has been in operations for over 80 years, providing individual life and critical illness insurance solutions for the Canadian middle market. The company has more than 700,000 policyholders and 250 employees. The company is primarily a subsidiary of Wilton Re Limited. Wilton Re is owned by the Canada Pension Plan Investment Board, which is the investment arm of one of the largest pension funds in the world.

“Today we have taken a new step in shaping Sagicor’s future. The acquisition of Ivari transforms Sagicor into a leading North American insurer, serving the middle market in addition to our market leadership in the Caribbean. We are excited about Ivari’s leading position in the Canadian market and its focus on improving its customers’ financial well-being. It is a scaled business primed for growth with CA$13.9 billion in well-managed assets as of year end 2021 and a dedicated and focused management team. Through this acquisition Sagicor will double the size of its balance sheet and deliver its over 180 years of experience in individual life insurance to the Canadian market,” said group president and CEO of SFC Dodridge Miller in a news release.

The purchase will be funded through new debt and cash on hand at the SFC company level. A CA$320 million commitment of new debt financing has been entered into in the form of a five year senior secured term loan facility. SFC may opt to replace or refinance this term loan with debentures issued in the debt capital markets or other financing sources in whole or in part, if and when appropriate. SFC had US$409.71 million in cash across the group at the end of June.

The transaction is expected to close within the next six to 12 months, subject to regulatory approvals and completion of customary closing conditions. The share purchase agreement, new debt commitment, and an investor presentation will be filed on SEDAR in the near future. SFC hosted a conference call yesterday evening to discuss the acquisition. National Bank Financial acted as lead financial advisor, J P Morgan and RBC Capital Markets acted as financial advisors, and Stikeman Elliott LLP and Paul Hastings LLP acted as legal advisors to SFC.

Ivari earned CA$967.98 million (US$748.34 million) in gross premiums and derived a net profit of CA$73.76 million (US$57.02 million) for 2021. It held total assets of CA$13.90 billion, including an invested portfolio of CA$9.93 billion and had CA$1.44 billion in shareholders equity. Ivari had a net loss of CA$67.61 million in 2020 and currently has an accumulated deficit of CA$791.52 million at the end of 2021. Prior to the completion of the acquisition, Ivari is expected to have additional equity capital injected into the business to meet the life insurance capital adequacy test (LICAT) 2023 capital adequacy standard following the implementation of International Financial Reporting Standards 17 in January 2023. Ivari’s universal life insurance segment has seen paid premium grow at a compounded annual growth rate of 11 per cent between 2017 to 2021.

SFC earned US$1.82 billion in premium revenue and US$2.36 billion in total revenue for 2021. It had a consolidated net profit of US$196.48 million and net profit attributable to shareholders of US$133.18 million with an earnings per share of US$0.919, its highest showing to date. Its total assets stood at US$10.38 billion and had equity attributable to shareholders of US$1.13 billion at the end of 2021.

On a proforma basis, SFC would have US$20 billion of combined assets and US$2.6 billion in annual total gross premium value at the end of 2021. The transaction is expected to be accretive to 25 per cent of an earnings per share proforma 2021 basis. It would also result in the transaction internal rate of return well in excess of SFC’s targets. SFC’s minimum continuing capital and surplus requirements (MCCSR) ratio would be expected to improve by over 10 percentage points, with its debt-to-capital ratio unchanged. SFC’s MCCSR was 269 per cent, while its debt-to-capital ratio was 29.1 per cent for 2021.

SFC entered the USA market in 2006, after acquiring Laurel Life and American Founders Life Insurance Co, and the Jamaican market in December 2001 through the acquisition of Life of Jamaica. It operates joint venture Aseguradora Sagicor Costa Rica, S A (Sagicor Costa Rica, S.A.) in Costa Rica and recently launched neobank Sagicor Bank (Barbados) Limited plus its Sagicor Special Opportunity Funds SCC. SFC also operates in Trinidad & Tobago, Eastern Caribbean, Dutch Caribbean, and The Bahamas. SFC offers life and health insurance, annuities, and pension administration services and banking and investment management services.

This is the latest in a series of acquisitions for SFC this year. Sagicor Group Jamaica Limited acquired the securities dealer book of Alliance Investment Management Limited last week and completed the 100 per cent acquisition of Alliance Financial Services Limited on April 1 for an initial cash consideration of US$16.8 million plus a contingent cash consideration of US$5.8 million based on specified performance criteria.

It is yet to be seen how the $2.35 billion related to the sale of 280,898,056 shares in Sagicor Real Estate X Fund Limited over five trades at $8.35 on August 19 will be deployed at the SJ level. While there has been no disclosure on the Jamaica Stock Exchange relating to the trade, SJ sold 191,912,708 X Fund shares on March 24 at the same price for a $1.60 billion consideration. This was a day after the Bank of Jamaica deemed its latest acquisition Alliance Financial Services fit and proper to operate. SJ held 281,500,577 X Fund shares at the end of June.