Scotia Group Jamaica (SGJ) is looking to expand its presence in the insurance market and is eyeing general insurance to do so once it gets the go-ahead from the Financial Services Commission (FSC).

The financial services group made the announcement on Friday at its 15th virtual annual general meeting. SGJ is the parent company of Bank of Nova Scotia Jamaica Limited, Scotia Investments Limited, and Scotia Jamaica Life Insurance Company (SJLI). SGJ earned $37.81 billion in net operating income and $8.41 billion in net profit from its $585.44 billion asset base in its 2021 financial year.

“Our primary reason is that we’re a full financial services provider. In Scotia Group, we have our corporate and commercial banking, retail banking, investments, and personal insurance. We know that our customers do have needs for general insurance and that is the basis on which we’re entering the market. Yes, pending approval, our plan would be to enter the market this year,” said President and Chief Executive Officer Audrey Tugwell Henry to shareholders in attendance.

SGJ currently offers ordinary long-term insurance through SJLI, which brought in $2.12 billion in gross premiums for the 2021 financial year (FY) through individual and group life. This was nine per cent lower than the $2.34 billion brought in the prior FY as group life brought in 22 per cent less premiums of $971.12 million arising from the continued fallout associated with the novel coronavirus pandemic.

However, SJLI turned around its fortunes in the first quarter as it recorded a 35 per cent rise in external revenue to $1.33 billion and a 51 per cent growth in profit before tax (PBT) to $857.31 million. This was due to higher transaction volumes from higher transaction volumes due to cross-selling and higher actuarial reserve releases.

When quizzed about the move to enter the highly competitive space now, Tugwell Henry responded, “What we see is continued value creation for our customers and then, of course, to our shareholders as this would be an additional business line. What we want to make sure that we can do is that when our customers interact with us they can experience a one-stop financial service shop. That’s the driving force. For example, say we do a mortgage for our client. We would want to have that opportunity to support the end-to-end process of offering general insurance. The main driver really is to satisfy the demand of our customers and to make handling the financial affairs of our customers frictionless and as seamless as possible.”

Currently, there are 18 licensed insurance companies regulated by the FSC with 6 operating in the life insurance space and 11 actively in the general insurance space. The last entrant to the space was Massy United Insurance Limited which generated $1.22 billion in revenues and $89.55 million in net profit for its 2020 FY. Massy is currently being sold to the Coralisle Group for US$90.5 million, with the FSC waiting until March 24 to see if it receives any objections from the public on the sale.

Total assets for general insurance companies stood at $106.9 billion as of June 2021, with the sector seeing a slight reduction in gross premiums to $10.7 billion, according to FSC data. Despite this slight decline in earnings, there was a 180 per cent turnaround in the sector’s net profit to $1.4 billion.

Of the publicly listed entities on the Jamaica Stock Exchange, Key Insurance Company, Ironrock Insurance Company, and General Accident Insurance Company all reported higher year-on-year premiums and net profit in 2021. Advantage General Insurance Company reported a 42 per cent decline in net profit to $429.43 million, while Gracekennedy Limited’s insurance segment reported higher revenue and a 35 per cent rise in PBT to $1.34 billion for 2021. Market leader British Caribbean Insurance Company Limited suffered a 27 per cent decline in PBT to $760.15 million, while Guardian General Insurance Jamaica Limited reported a 59 per cent drop in PBT to $409.02 million for 2002.

When pressed if SGJ will create a new subsidiary or go the route of an acquisition, Chairman Jeffrey Hall said, “At the end of the day, Scotia looks at instances in the financial services space and asks how best we can address those needs within the context of our shareholder objectives as well. As we go forward, clearly there will be a lot more information but at the headline level, we’ve identified a need as mentioned in a specific case of people who will be in the loan portfolio looking at mortgages. There will be customer needs that we intend to fill. How we do it, when we do it, etc, will definitely be the subject of further discussion.”

While SGJ saw a moderate two per cent rise in net profit to $1.78 billion, its loan book decreased by eight per cent to $200.56 billion, which the CEO attributed to corporate and commercial clients using cash flow rather than debt in the existing environment. She did note that retail customer demand has been pretty robust in recent times, which was highlighted by the mortgage book growing by 14 per cent to $48.4 billion at the end of the 2021 FY. Group operating income declined by four per cent to $10.37 billion as a result of the one-off $677.1 million gain in the prior period.

As part of its 2022 initiatives, Tugwell Henry noted that SGJ would be focused on improving its technology for its clients. This will be facilitated by its global banking partners, including its parent company Scotiabank Canada. This has been manifested through the use of Mastercard ID check to reduce fraud and other digital initiatives to grow Scotia Investments. There would also be a new rewards mobile application for credit card customers and allowing for new customers to open accounts online.

SGJ’s slow recovery comes against the backdrop of the Caribbean and Central America segment of its parent seeing a 102 per cent rise in net income to CA$100 million ($12.01 billion) for the quarter. The segment experienced a four per cent reduction in total revenue to CA$508 million.

Total assets for SGJ rose by seven per cent to $590.63 billion, which was largely comprised of $172.51 billion in cash and cash equivalents. Total liabilities and shareholders equity grew to $475.27 billion and $115.42 billion respectively. SGJ will pay a $0.35 dividend on April 20 to shareholders on record as of March 29. This payment totals $1.09 billion.