TIDMSFI
RNS Number : 3504T
Sagicor Financial Corporation Ltd
14 November 2019
Sagicor Financial Corporation Limited
Chairman's review
Q3 Financial Results
The Sagicor Group maintained a solid performance for the nine
months to September 30, 2019. Group net income closed the period at
US $79.5 million against a prior year result of US $59.0 million.
Net income attributable to shareholders from continuing operations
was US $32.5 million compared to the prior year result of US $28.5
million. Net income to shareholders from continuing operations in
2018 included the impact of a provision on the Government of
Barbados Debt and was partially offset by certain one-time positive
earnings releases.
Total revenue for the Group amounted to US $1,399.0 million,
against a prior year amount of US $1,063.4 million, an increase of
US $335.6 million or 32%. Revenue growth was driven primarily by
the USA business segment which generated premium growth, amplified
by our strategic decision to cease reinsuring its premiums to third
parties. Revenues continue to grow year over year in the Sagicor
Jamaica and Sagicor Life business segments as well.
Benefits including change in actuarial liabilities for future
benefits were US $888.0 million, compared to US $537.4 million for
the previous year and was consistent with the growth in premium
income. Expenses including credit impairment losses were US $393.8
million, compared to US $443.0 million for the same period in the
prior year, a decrease of 11%.
Expenses in the prior year included credit impairment losses of
US $96.0 million, largely related to the impairment of the
Government of Barbados debt. Current year expenses include the
impact of higher commissions related to sales growth in the USA
segment.
Our operating segments continued to perform well. The Sagicor
Life segment reflected robust organic growth, with net income
amplified by comparison to Q3 2018 which included certain debt
restructuring provisions on GoB debt. Sagicor Jamaica reflected
continued robust growth and profitability across the segment.
Sagicor Life USA segment reflected slowing growth in net premiums,
as the segment scaled back new business production in the quarter,
in response to relative net interest margins. Net income in the
Sagicor Life USA segment declined relative to a prior year
comparable quarter that included certain positive provisions.
Group comprehensive income was US $115.9 million, compared to a
loss of US $6.6 million for the prior year. Shareholder
comprehensive income from continuing operations was US $62.4
million, compared to a loss of US $10.0 million for the prior year.
The Group continues to benefit from significant net gains on
investments measured at Fair Value through Other Comprehensive
Income. Losses incurred on the retranslation of foreign currency
operations reduced this year when compared to the previous
year.
Results for the third quarter of 2019 reflected moderate
aggregate growth in our core operating segments, offset by losses
in non-core segments. Group net income from continuing operations
closed the three-month period to September 30, 2019 at US $21.1
million compared to US $19.6 million for the same period in 2018;
an increase of US $1.5 million (7.7%). Net income to shareholders
from continuing operations was
US $6.3 million compared to US $7.0 million in Q3 2018. During
Q3 2019, Sagicor took a provision of $2.5 million, representing our
maximum potential impact from Hurricane Dorian. During Q3 2018, the
Group increased its provisions on the Government of Barbados (GoB)
debt; net impact on the net income was US $16.4 million. Net income
from continuing operations in 2018, also benefitted from certain
one-time positive earnings releases that did not recur in 2019.
In the statement of financial position as at September 30, 2019,
assets amounted to US $8.1 billion, and liabilities amounted to US
$6.8 billion. Group equity was US $1,248.8 million, compared to US
$1,135.5 million at December 31, 2018. Shareholders' equity was US
$660.4 million, compared to US $600.9 million at December 31, 2018.
The Group's debt was US $512.4 million with a debt to capital ratio
of 29.1%, compared to 30.2% at December 31, 2018.
On June 4, our shareholders overwhelmingly approved the
previously announced transaction with Alignvest Acquisition II
Corporation ("AQY"), with 99.5% of shares voting in favour of the
transaction. Our shareholders showed further support by electing to
receive an aggregate of approximately US $20 million in cash
consideration out of the maximum available US $205 million we
offered to them. As a result, the vast majority of Sagicor's
shareholders will continue to retain their investment in Sagicor
post the transaction.
Following completion of the Transaction, which is expected to
close in the fourth quarter of 2019 subject to customary regulatory
approvals, it is expected that Sagicor will retain over US $420
million of net cash from the transaction, leaving our company
exceptionally well capitalized for future growth.
Effective 30 September 2019, the group acquired 60% of the share
capital of Advantage General Insurance Company Limited domiciled in
Jamaica for a purchase consideration of US $31.4 million. The
acquired business had no impact on the results for the nine months
ended September 2019.
On October 18, 2019 the Government of Barbados (GOB) announced
agreement in principle with the External Creditor Committee for the
restructuring of its US dollar denominated commercial debt. In
consideration of the recently released terms for the restructure of
the US dollar denominated commercial debt, management believes that
it has fully provided for this exposure.
Sagicor had announced its intention in November 2018 to acquire
Scotia Jamaica Life Insurance Company Limited ("Scotiabank
Insurance Jamaica") and ScotiaLife Trinidad and Tobago Limited
("Scotiabank Insurance Trinidad and Tobago"). Sagicor and The Bank
of Nova Scotia Jamaica Limited have mutually agreed not to proceed
with the 20-year distribution agreement for insurance products and
solutions in Jamaica. As a result, Sagicor will not proceed with
the acquisition of Scotiabank Insurance Jamaica at this time.
Sagicor, Alignvest Acquisition II Corporation and Scotiabank
Trinidad and Tobago Limited remain parties to a share purchase
agreement dated November 27, 2018 (the "Trinidad SPA") pursuant to
which Sagicor agreed to establish a 20-year distribution agreement
for insurance products and solutions in Trinidad and Tobago, and
acquire all of the issued and outstanding shares in the capital of
Scotiabank Insurance Trinidad and Tobago, subject to the
satisfaction of certain conditions precedent. Sagicor continues to
pursue the transactions contemplated in the Trinidad SPA.
On behalf of the Board of Sagicor, I wish to thank our
Shareholders and Customers for their continued support.
Stephen McNamara
Chairman
November 12, 2019
Financial Highlights
Nine months ended SEPTEMBER
FINANCIAL HIGHLIGHTS 30
(in US Currency except percentages) 2019 2018
------------------------------------------- -------------- --------------
$1,399.0 $1,063.4
Total revenue m m
Overall Group net income $79.5 m $59.0 m
Overall shareholders' net income $33.0 m $31.7 m
Net income allocated to non-controlling
interests $47.3 m $35.0 m
$1,248.8
Total equity m $895.9 m
--------------
Book Value per share $2.16 $1.96
------------------------------------------- -------------- --------------
Ratio of Debt to Capital 29.1% 31.1%
------------------------------------------- -------------- --------------
Earnings per common share 10.6c 9.3c
Annualised return to common shareholders'
equity 7.1% 6.4%
------------------------------------------- -------------- --------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Amounts expressed September September December
in US $000 30 30 31
2019 2018 2018
(unaudited) (unaudited) (audited)
------------------------ ------------- ------------- -----------
ASSETS
Financial investments 6,052,166 5,077,123 5,347,663
Other investments
and assets 2,004,278 1,730,970 1,960,522
Assets of discontinued
operation 0 13,301 17,239
Total assets 8,056,444 6,821,394 7,325,424
-------------
LIABILITIES
Policy liabilities 4,250,733 3,590,893 3,662,438
Other liabilities 2,556,905 2,334,648 2,527,525
Total liabilities 6,807,638 5,925,541 6,189,963
------------- -------------
EQUITY
Shareholders'
equity 660,370 598,107 600,869
Participating
accounts 3,423 (10,528) 4,078
Non-controlling
interests 585,013 308,274 530,514
Total equity 1,248,806 895,853 1,135,461
-------------
Total liabilities
and equity 8,056,444 6,821,394 7,325,424
------------------------- ------------- -------------
These financial statements have been approved for issue by the
Board of Directors on November 12, 2019.
CONSOLIDATED STATEMENT OF INCOME
Amounts expressed ---- Nine months ---- Three months
in US $000 to ---- to ----
----- September ----- September
30 ----- 30 -----
2019 2018 2019 2018
(unaudited) (unaudited) (unaudited) (unaudited)
-------------------------------- ------------- ------------- -------------
REVENUE
Net premium
revenue 941,089 720,000 263,319 309,970
Net investment
and other income 457,885 343,437 142,832 120,188
Total revenue 1,398,974 1,063,437 406,151 430,158
-------------
BENEFITS AND EXPENSES
Benefits 887,995 537,381 248,295 238,965
Expenses 393,807 442,958 125,487 156,040
Total benefits
and expenses 1,281,802 980,339 373,782 395,005
-------------
OTHER
(Loss) / gain arising
on business combinations,
acquisitions and divestitures (478) 5,267 (131) (13)
INCOME BEFORE
TAXES 116,694 88,365 32,238 35,140
Income taxes (37,670) (32,591) (11,096) (15,396)
NET INCOME FROM CONTINUING
OPERATIONS 79,024 55,774 21,142 19,744
Net income from
discontinued operation 517 3,191 0 (166)
NET INCOME FOR
THE PERIOD 79,541 58,965 21,142 19,578
-------------
NET INCOME / (LOSS)
ATTRIBUTABLE TO:
Common Shareholders
From continuing
operations 32,506 28,541 6,312 6,998
From discontinued
operation 517 3,191 - (166)
33,023 31,732 6,312 6,832
Participating
policyholders (804) (7,722) (1,509) 588
Non-controlling
interests 47,322 34,955 16,339 12,158
79,541 58,965 21,142 19,578
-------------
Basic earnings
per common share:
From continuing 9.3 2.1 2.3
operations 10.6 cents cents cents cents
From discontinued 1.0 0.0 (0.1)
operation 0.2 cents cents cents cents
10.3 2.1 2.2
10.8 cents cents cents cents
-------------
Fully diluted earnings
per common share:
From continuing 9.1 2.0 2.2
operations 10.3 cents cents cents cents
From discontinued 1.0 0.0 (0.1)
operation 0.2 cents cents cents cents
10.1 2.0 2.1
10.5 cents cents cents cents
-------------------------------- -------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Amounts expressed ---- Nine months ---- Three months
in US $000 to ---- to ----
----- September ----- September
30 ----- 30 -----
2019 2018 2019 2018
(unaudited) (unaudited) (unaudited) (unaudited)
-------------------------------------- ------------- ------------- -------------
NET INCOME FOR THE
PERIOD 79,541 58,965 21,142 19,578
------------- ------------- -------------
Items net of tax that may
be reclassified subsequently
to income:
Financial assets measured
at fair value through other
comprehensive income (FVOCI):
Gains / (Losses) on revaluation 151,001 (57,623) 31,550 7,490
Gains transferred to income (6,683) (964) (5,578) 785
Net change in actuarial
liabilities (84,294) 27,297 (20,188) (2,577)
Retranslation of foreign
currency operations (21,267) (34,946) (13,614) (17,164)
38,757 (66,236) (7,830) (11,466)
Items net of tax that will
not be reclassified subsequently
to income:
Unrealised (losses) / gains
arising on revaluation of
owner occupied property (2,423) 816 541 (16)
Net gains / (losses) on equity
securities designated at fair
value through through other
comprehensive income 18 (173) 0 (200)
Gains / (losses) on defined
benefit plans 13 0 13 2,500
OTHER COMPREHENSIVE INCOME
/ (LOSS) FROM CONTINUING OPERATIONS 36,365 (65,593) (7,276) (9,182)
TOTAL COMPREHENSIVE INCOME
/ (LOSS) FOR THE PERIOD 115,906 (6,628) 13,866 10,396
------------- ------------- -------------
TOTAL COMPREHENSIVE INCOME
/ (LOSS) ATTRIBUTABLE TO:
Common Shareholders
From continuing operations 62,429 (10,035) 4,976 2,941
From discontinued
operation 517 3,191 - (166)
62,946 (6,844) 4,976 2,775
Participating policyholders (505) (8,307) (1,830) 754
Non-controlling interests 53,465 8,523 10,720 6,867
115,906 (6,628) 13,866 10,396
--------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Amounts Share Share Retained Participating Non-controlling
expressed
in US
$000
(unaudited) Capital Premium Reserves Earnings Accounts Interest Total
--------------------------- -------- -------- --------- --------- -------------- ---------------- ----------
Nine months
to September
30, 2019:
Balance, beginning
of period 3,061 300,665 (76,995) 374,138 4,078 530,514 1,135,461
Total comprehensive
income from continuing
operations 0 0 29,913 32,516 (505) 53,465 115,389
Total comprehensive
income from discontinued
operation 0 0 0 517 0 0 517
Transactions
with holders
of equity instruments:
Movements in
treasury shares 3 194 0 0 0 0 197
Changes in reserve
for equity
compensation
benefits 0 0 5,303 0 0 0 5,303
Acquisition /
disposal of subsidiary
and insurance
business 0 0 0 0 0 14,911 14,911
Dividends declared 0 0 0 (7,658) 0 (11,915) (19,573)
Transfers and
other movements 0 0 502 (1,789) (150) (1,962) (3,399)
Balance, end
of period 3,064 300,859 (41,277) 397,724 3,423 585,013 1,248,806
---------------------------- -------- --------- --------- -------------- ----------------
Nine months
to September
30, 2018:
Balance, beginning
of period 3,059 300,470 (47,482) 367,327 865 308,089 932,328
Prior period
adjustment 0 0 94 1,124 0 3,677 4,895
January 1, 2018
adjustment-change
on initial application
of IFRS 9 0 0 (217) (10,442) (2,930) (2,352) (15,941)
Balance as restated 3,059 300,470 (47,605) 358,009 (2,065) 309,414 921,282
Total comprehensive
income from continuing
operations 0 0 (38,576) 28,541 (8,307) 8,523 (9,819)
Total comprehensive
income from discontinued
operation 0 0 0 3,191 0 0 3,191
Transactions
with holders
of equity instruments:
Movements in
treasury shares 0 1 0 0 0 0 1
Changes in reserve
for equity compensation
benefits 0 0 (750) 0 0 0 (750)
Disposal of interest
in subsidiaries 0 0 (935) 935 0 (2,221) (2,221)
Dividends declared 0 0 0 (7,648) 0 (10,237) (17,885)
Transfers and
other movements 0 0 (45) (540) (156) 2,795 2,054
-------- -------- --------- --------- -------------- ----------------
Balance, end
of period 3,059 300,471 (87,911) 382,488 (10,528) 308,274 895,853
---------------------------- -------- -------- --------- --------- -------------- ----------------
CONSOLIDATED STATEMENT OF CASH FLOWS
Amounts ---- Nine months
expressed to ----
in US
$000
----- September
30 -----
2019 2018
(unaudited) (unaudited)
-------------
CASH FLOWS
Operating
activities:
Cash from income,
interest and taxation 419,609 234,171
Net increase in
investments and
operating assets (465,327) (304,492)
Net change
in operating
liabilities 61,181 156,746
15,463 86,425
Investing
activities (38,860) (27,077)
Financing
activities 5,282 (22,059)
Effects of
exchange rate
changes (7,411) (8,490)
Net change in cash and cash equivalents
- continuing operations (25,526) 28,799
Net change in cash and cash
equivalents - discontinued
operation 17,756 0
Cash and cash equivalents,
beginning of period 321,561 338,349
Cash and cash equivalents,
end of period 313,791 367,148
-------------------------------------------
STATEMENT OF INCOME BY SEGMENT
Amounts
expressed
in US $000 Nine months to September 30, 2019
(unaudited) Sagicor
Sagicor Sagicor Life Head Office Inter-segment
Life Jamaica USA and other eliminations Total
--------------------- --------------------- --------------------- --------------------- -------------------
Total revenue 372,931 542,760 458,476 64,537 (39,730) 1,398,974
Total benefits
and expenses 335,659 426,656 434,523 73,246 11,718 1,281,802
Loss arising
on business
combinations,
acquisitions
and
divestitures (478) - - - - (478)
INCOME BEFORE
TAXES 36,794 116,104 23,953 (8,709) (51,448) 116,694
Income taxes (6,098) (24,899) (5,030) (1,698) 55 (37,670)
NET INCOME
/ (LOSS)
FROM
CONTINUING
OPERATIONS 30,696 91,205 18,923 (10,407) (51,393) 79,024
Net income
/ (loss)
attributable
to
shareholders
from
continuing
operations 31,500 43,153 18,923 (35,465) (25,605) 32,506
--------------------- --------------------- --------------------- --------------------- -------------------
Total
Comprehensive
income /
(loss)
attributable
to
shareholders
from
continuing
operations 40,454 49,443 31,549 (33,804) (25,213) 62,429
--------------- --------------------- --------------------- --------------------- --------------------- -------------------
Nine months to September 30, 2018
Sagicor
Sagicor Sagicor Life Head Office Inter-segment
Life Jamaica USA and other eliminations Total
--------------------- --------------------- --------------------- --------------------- -------------------
NET INCOME
/ (LOSS)
FROM
CONTINUING
OPERATIONS 26,395 70,922 11,699 11,245 (64,487) 55,774
--------------------- --------------------- --------------------- --------------------- -------------------
Net income
/ (loss)
attributable
to
shareholders
from
continuing
operations 34,117 34,833 11,699 (12,925) (39,183) 28,541
--------------------- --------------------- --------------------- --------------------- -------------------
Total
Comprehensive
income /
(loss)
attributable
to
shareholders
from
continuing
operations 29,990 8,564 2,745 (13,640) (37,694) (10,035)
--------------- --------------------- --------------------- --------------------- --------------------- -------------------
STATEMENT OF FINANCIAL POSITION BY SEGMENT
Amounts
expressed
in US $000 September 30, 2019
(unaudited) Sagicor Head
Sagicor Sagicor Life Office Inter-segment
Life Jamaica USA and other eliminations Total
---------------- ---------------- ----------------- --------------------- ----------------
Total assets 2,041,470 3,412,182 2,733,751 390,902 (521,861) 8,056,444
Total
liabilities 1,525,378 2,501,461 2,454,840 847,820 (521,861) 6,807,638
Net assets 516,092 910,721 278,911 (456,918) - 1,248,806
---------------
September 30, 2018
----------------------------------------------------------------------------------------------------------------
Sagicor Head
Sagicor Sagicor Life Office Inter-segment
Life Jamaica USA and other eliminations Total
---------------- ---------------- ----------------- --------------------- ----------------
Net assets 527,170 563,609 241,760 (436,686) - 895,853
--------------- ---------------- ---------------- ----------------- --------------------- ----------------
PRODUCTS AND SERVICES
Total external revenues relating to the Group's products and
services are summarised as follows:
Amounts expressed ---- Nine months to
in US $000 ----
----- September 30
-----
2019 2018
(unaudited) (unaudited)
-----------------
Life, health and
annuity insurance
contracts issued
to individuals 924,978 669,307
Life, health and
annuity insurance
and pension administration
contracts issued
to groups 238,819 210,171
Property and casualty
insurance 38,283 34,706
Banking, investment
management and other
financial services 134,756 127,162
Other revenues 62,138 22,091
1,398,974 1,063,437
-----------------------------
NOTES TO THE FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
These condensed interim financial statements have been prepared
in accordance with the accounting policies set out in note 2 of the
December 31, 2018 audited financial statements, except for the
adoption of IFRS 16 - Leases'. This standard became effective from
January 1, 2019. IFRS 16 removes the distinction between operating
and finance leases and requires recognition of an asset (the right
to use the leased item) and a financial liability to pay rentals,
for virtually all lease contracts.
In accordance with the transition provisions in IFRS 16, the
standard has been implemented using the modified retrospective
method with no restatement of comparative information. In applying
IFRS 16 for the first time, the group has used the practical
expedients permitted by the standard.
This information is provided by RNS, the news service of the
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END
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