CURRENCY revaluation losses resulted in a decline in second quarter profits for Pan-Jamaican Investments Limited (Pan-Jam).

The company realised losses of $107.6 million in the three months to June 2010, 25 per cent below the $427.6 million recorded in the similar three months ended last year.

Income from investments fell precipitously to a loss of $1.4 million, a 101.6 per cent drop from the gain of $88 million recorded in the similar quarter of 2009. A four per cent gain on commissions and a 23 per cent gain on other income were not enough to offset the losses, nor were they sufficient to make up for the 15 per cent increase in operating expenses.

Foreign exchange losses as a result of the four per cent appreciation in the Jamaican dollar relative to the USD, as well as a reduction in interest income consequent of the lower interest rate environment created by the Jamaica Debt Exchange (JDX) early this year also impacted investment income. The JDX saw the Government of Jamaica (GOJ) exchange its high interest bearing instruments for those with lower yields and longer maturities, effectively reducing the interest rates on GOJ investments and signalling a rate reduction on investments in the market.

Pan-Jam’s share of results from associated company, Sagicor Life Jamaica (SLJ), also fell 18.5 per cent from $324 million in the June 2009 quarter, to $264 million, also as a result of the Jamaican dollar appreciation which reduced investment earnings for SLJ.

The change in investment income was partially offset, however, by an increase in property income of 24.5 per cent, $68.4 million higher than the corresponding quarter’s $211.4 million. Pan-Jam director, Stephen Facey, noted in a statement to shareholders that the increased income from property resulted from revaluation gains not recorded in the similar quarter of 2009 and “consequent on continued reduced interest rates and a more favourable outlook for commercial property”.

Despite losses, however, the directors seem confident that Pan-Jam will rebound given more facilitating environment.

“Lower interest rates and a compressed economic environment have affected both the group and Sagicor this year and are likely to continue to do so for the next 12 months,” they said in a statement, adding “We are, nevertheless, very supportive of the government’s initiative relative to the country’s hitherto unsustainable debt level, and continue to look forward to the announcement of additional initiatives to reduce the fiscal deficit and put the country on a path of sustainable growth.”