SAGICOR Financial Company Limited (SFC) has attained its long-desired goal of an investment grade credit rating following recent upgrades by S&P Global Ratings and Fitch Ratings.

SFC’s rating upgrades is driven by the acquisition of Ivari, a Canadian middle market life insurance company, on October 3 for CA$375 million (US$273.72 million or J$42.62 billion). S&P Global upgraded SFC by two notches from BB+ to BBB while upgrading the group credit profile from bbb to a- on a stable outlook. Fitch also pushed SFC’s rating from BB to BBB– and upgraded the senior unsecured debt from BB– to BB+ on a stable outlook.

Credit ratings BBB– and above are considered investment grade credit ratings by both rating agencies while BB+ and below are considered non-investment grade ratings.

“Sagicor’s strong credit profile has been enhanced by the acquisition of Canadian life insurer Ivari which led S&P and Fitch to upgrade our credit ratings. Ivari immediately enhances our earnings generation and expands our asset base in a highly rated investment grade jurisdiction. The new investment grade ratings reflect Sagicor’s solid capitalisation, resilience, and business and geographic diversification. Ivari remains a highly rated company under Sagicor ownership with an Insurer Financial Strength rating of ‘A-‘ as recently affirmed by Fitch,” said SFC president and Chief Executive Officer (CEO) Andre Mousseau in a press release.

An investment grade credit rating opens the door for any company or sovereign issuer to a breadth of new capital from around the globe. Institutional investors such as pension funds, mutual funds, and other collective pools of capital from certain jurisdictions are restricted from investing in instruments offered from non-investment grade jurisdictions, companies, or issuers.

As a result of SFC’s upgrade to an investment grade credit rating, it will now have access to a wider pool of potential capital which in turn will allow for it to command a lower interest rate when seeking potential debt financing or refinancing its existing debt facilities. S&P also recently upgraded Jamaica from B+ to BB– which in turn resulted in National Commercial Bank Jamaica Limited & TransJamaican Highway Limited receiving rating upgrades to BB–. This is because issuers are limited to the credit rating of the sovereign or country in which they are domiciled.

This was one of the reasons SFC chose to redomicile from Barbados to Bermuda as an exempted company in July 2016. Barbados at the time had seen downgrades in its credit rating which limited the rating of SFC from trending higher. Further upgrades in the rating of Jamaica will benefit the books of its 49.11 per cent subsidiary Sagicor Group Jamaica Limited (SJ) which in turn can improve SFC’s credit rating.

SFC’s current credit rating by the Caribbean Information and Credit Rating Services Limited (Caricris) is currently at ‘high’ which translates to a CariAA rating. SJ is rated ‘good’ or CariA with its direct subsidiary Sagicor Life Jamaica Limited rated ‘highest’ or CariAAA.

The improvement in SFC’s credit rating has also made JMMB Group Limited (JMMBGL) CEO Keith Duncan elated considering the Jamaican financial group being the largest shareholder with 33,213,764 shares or a 23.28 per cent stake. JMMBGL paid CA$332.14 million/US$250 million or J$34.40 billion in December 2019 for its SFC stake which has continued to increase due to the ongoing SFC share buyback programme.

“JMMB is pleased with the credit upgrade of Sagicor Financial Company. This underlies the strength and the diversity of the Sagicor Financial Group which comes on the heel of the very consequential acquisition of market leader Ivari in the Canadian market. This will also bolster JMMB’s earnings and strengthen the quality of JMMB’s balance sheet due its approximate 23 per cent stake in Sagicor Financial,” Duncan said in response to the Jamaica Observer.

JMMBGL has three board seats represented on SFC’s 14-member board of directors. It also collects a US$1.87-million dividend every quarter from SFC with the company contributing 43 per cent of its $6.28 billion consolidated net profit for the 2023 financial year.

SFC’s third quarter report is expected to be published around November 14 with its earnings call to take place on the following day. SFC is also set to publish a business acquisition report on Sedar+ by December 17 which will include pro-forma financial statements related to the inclusion of Ivari in its financials. SFC’s six months net investment income was US$335.58 million with net profit attributable to shareholders at US$50.25 million.

SJ is currently working on moving from the MCCSR (Minimum Continuing Capital and Surplus Requirement) to a Jamaican version of LICAT (Life Insurance Capital Adequacy Test) for its Sagicor Life Jamaica subsidiary. SJ’s six months net investment income was J$5.42 billion with net profit attributable to shareholders at J$3.42 billion.

Despite the positive trend upwards in SFC’s business, the stock price hit a 52-week low of CA$4.25 on August 24 before closing on Thursday at CA$5.03, which left it with a market capitalisation of CA$714.17 million. This is above SFC’s second quarter book value of US$3.24 or CA$4.44 under International Financial Reporting Standards (IFRS) 4.