SAGICOR FINANCIAL CORPORATION LIMITED

CHAIRMAN'S REVIEW

FINANCIAL RESULTS

FOR THE YEAR ENDED DECEMBER 31, 2017

 

CHAIRMAN'S REVIEW

The Sagicor Group experienced a good performance for the 2017 financial year, with improvement in the key areas of revenue, net income and equity.

 

This performance was in the context of contrasting economic conditions, both regionally and internationally, where Sagicor operates. Regionally, the Caribbean experienced modest economic growth, but continued to engage in fiscal consolidation through various measures of tax increases and public expenditure cuts to reduce high levels of public debt. Internationally, the USA experienced growth, increases in interest rates and a significant, but favourable change in its tax regime for business.

 

Group Net Income was US $115.3 million, compared to US $109.3 million in the prior year, an increase of US $6.0 million. Group Equity was US $932.3 million, compared to US $795.4 million in the prior year, an increase of US $136.9 million.

 

Net income attributable to shareholders was US $72.2 million, compared to US $61.7 million in the prior year, an increase of US $10.5 million. Earnings per common share was US 23.7¢, and represented an annualised return on common shareholders' equity of 13.3% compared to 12.6% for the prior year.

 

Total revenue increased to US $1,220.9 million, compared to the prior year amount of US $1,134.1 million, an increase of US $86.8 million or 7.7%. Net premium revenue reached US $745.6 million, compared to US $664.0 million, an improvement of US $81.6 million or 12.3%. Premium income increased in all segments and benefited from the issuance of a single premium annuity relating to our Jamaica segment.

 

Net investment income was US $379.2 million, compared to US $353.4 million in the prior year, an improvement of US $25.8 million and benefited from higher investment gains in our international investment portfolios.

 

Fees and other revenue closed the year at US $93.7 million, compared to the prior year amount of US $116.8 million, a decline of US $23.1 million. There was a reduction in commissions income on insurance and reinsurance contracts amounting to US $19.8 million, reflecting commissions net of gains due to reinsurers on supporting assets in our USA segment. Exchange gains/(losses) also showed a loss of US $4.2 million, compared to gains of US $12.6 million in the prior year, a reduction of US $16.8 million. Foreign exchange movements were affected by a strengthening of the Jamaica dollar when compared to the United States dollar in 2017, resulting in foreign exchange declines in financial assets denominated in United States dollars in our Jamaica segment. Overall, the company experienced a gain on translation of the Jamaica segment, which is reported in other comprehensive income. In addition, the prior year included exchange gains relating to declines in the Trinidad dollar, when compared to the United States dollar, there was no significant foreign exchange movement, relative to this currency in 2017.

 

Total benefits closed at US $660.8 million, up from the prior year amount of US $560.4 million. The growth in benefits is consistent with that of the growth in premium revenue and partially represented increased provisions for future benefits. Included in benefits were net costs of US $8.5 million relating to claims exposure from hurricane activity during the year, along with an increase of US $14.2 million relating to the impact of the Tax Cuts and Jobs Act rate reduction in the United States, which came into effect in 2017.

 

Expenses (including agents' and brokers' commissions) closed the year at US $436.4 million, compared to the prior year amount of US $424.2 million, an increase of US $12.2 million. The Jamaica Segment incurred some non-recurring costs, together with higher administration costs relating to the expansion of cards and payments business.

 

Income taxes were US $18.6 million, compared to US $41.7 million in the prior year, a reduction of US $23.1 million. This was principally related to our USA Segment. During 2017 the Tax Cuts and Jobs Act was signed into law in the United States, which reduced the effective corporation tax rate. This contributed to a decrease of US $19.9 million in income taxes and an increase in the provision for future benefits of US $14.2 million in the segment.

 

Group comprehensive income was US $179.3 million, compared to US $96.7 million for the prior year, an increase of US $ 82.6 million. The principal sources of the increase were an improvement in net gains on financial assets of US $18.7 million, resulting from marked-to-market gains on financial assets in our international portfolios, a positive movement of US $38.2 million on retranslation of foreign currency operations, resulting from a gain in the Jamaica dollar when compared to the United States dollar and a positive change in gains/(losses) on defined benefit plans for employees of US $ 37.8 million.

 

The discontinued operation represents our UK business, which was sold on December 23, 2013. The terms of the sale required Sagicor to retain an interest in the 2011, 2012 and 2013 underwriting years of account, subject to a limit denominated in pound sterling. At the end of 2015, the Company had fully provided for the contingent exposure relating to this business (the limit). During 2017 there were positive developments in this exposure which resulted in net income of US $10.1 million.

 

In the statement of financial position as at December 31, 2017, assets amounted to US $6.8 billion, compared to US $6.5 billion in the prior year. Liabilities closed at US $5.9 billion, compared to US $5.7 billion in the prior year. Sagicor's Group equity totalled US $932.3 million, compared to US $795.4 million in the prior year; an increase of US$136.9 million.

 

The Group's debt, which is included in other liabilities, was US $413.8 million. The debt to capital ratio was 30.7%, down from 33.2% for the prior year.

 

Sagicor has voluntarily adopted the Canadian international capital standard, "Minimum Continuing Capital and Surplus Requirements" (MCCSR), and has been following this standard since 1991. The MCCSR seeks to demonstrate to policyholders and shareholders the capital strength of the life insurance companies of the Group, as a measure of its ability to meet its longterm obligations. Canadian regulators expect insurance companies to maintain an MCCSR ratio of 150% and Sagicor has consistently maintained a ratio above 175%. As at the end of the year our MCCSR Ratio was 258%.

 

Sagicor is listed on the Barbados Stock Exchange, The Trinidad and Tobago Stock Exchange and the London Exchange. We comply with the rigorous requirements of these exchanges.

 

Sagicor is rated on an annual basis by AM Best, Standard and Poor's Global Ratings, and Fitch Ratings. We have been rated by AM Best since 1998, S&P since 2006 and Fitch since 2015. These ratings are an independent measure of our financial strength. The current ratings are as follows:

·      AM Best - "A" Excellent

·      S&P - BB- stable

·      Fitch - B stable

 

Sagicor has embarked on a programme to provide relief from the recent hurricanes. To date, Sagicor has made a financial contribution of US $300,000, as well as the provision of goods and services. Consistent with our vision to improve the lives of the people in the communities in which we operate, key initiatives include a school feeding programme to students, a mobile medical clinic and assistance to the regional airline, LIAT. We have also partnered with The University of the West Indies to host a Celebrity T20 Cricket Hurricane Relief Benefit to raise additional funds for the islands which have suffered significant damage during the passage of hurricanes Irma and Maria in 2017.

 

During 2018, the Sagicor Group will continue to work on the corporate re-organisation to respond to the changing regulatory environment, while we continue to pursue opportunities for growth. On behalf of the Board of Sagicor, I wish to thank our shareholders and customers for their continued support.

 

Stephen McNamara

Chairman  

April 4, 2018

 

FINANCIAL HIGHLIGHTS (in US currency except percentages)	Years ended December 31,
	2017	2016
Total revenue	$1,220.9m	$1,134.1m
Overall Group net income	$115.3m	$109.3m
Overall Shareholders' net income	$72.2m	$61.7m
Net income allocated to non-controlling interests	$44.1m	$47.5m
Group total comprehensive income	$179.3m	$96.7m
Total comprehensive income attributable to Shareholders	$106.3m	$47.2m
Total equity	$932.3m	$795.4m
Ratio of Debt to Capital	30.7%	33.2%
Earnings per common share	23.7¢	20.0¢
Book value per share	203.8¢	177.0¢
Annualised return on common shareholders' equity	13.3%	12.6%

 

Enquiries

Sagicor Financial Corporation	+1 246 467 7500
Althea C Hazzard, Corporate Secretary
Instinctif Partners	+44 (0)20 7457 2020
Mark Garraway
Rosie Driscoll

 

 

Sagicor Financial Corporation Limited

2017 Financial Statements

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Amounts as expressed in US $000
			2017	2016
ASSETS
Investment property			80,816	80,662
Property, plant and equipment			165,560	167,723
Associates and joint ventures			97,223	87,293
Intangible assets			81,714	83,487
Financial investments			4,953,241	4,813,748
Reinsurance assets			797,391	777,344
Income tax assets			39,980	59,575
Miscellaneous assets and receivables			228,543	183,018
Cash resources			360,064	279,070
Assets of discontinued operation			10,110	-
Total assets			6,814,642	6,531,920
LIABILITIES
Actuarial liabilities			2,950,820	2,776,362
Other insurance liabilities			224,159	207,122
Investment contract liabilities			379,018	377,576
Total policy liabilities			3,553,997	3,361,060
Notes and loans payable			413,805	395,213
Deposit and security liabilities			1,559,232	1,623,325
Provisions			80,027	101,292
Income tax liabilities			28,277	50,641
Accounts payable and accrued liabilities			246,976	204,975
Total liabilities			5,882,314	5,736,506
EQUITY
Share capital			3,059	3,029
Share premium			300,470	297,050
Reserves			(47,482)	(64,795)
Retained earnings			367,327	300,865
Total shareholders' equity			623,374	536,149
Participating accounts			865	1,291
Non-controlling interest in subsidiaries			308,089	257,974
Total equity			932,328	795,414
Total liabilities and equity			6,814,642	6,531,920

 These financial statements have been approved for issue by the Board of Directors on April 4, 2018.

 

CONSOLIDATED STATEMENT OF INCOME

Amounts as expressed in US $000				2017	2016
REVENUE
Premium revenue				898,354	833,918
Reinsurance premium expense				(152,722)	(169,962)
Net premium revenue				745,632	663,956
Net investment income				379,236	353,352
Fees and other revenue				93,740	116,839
Gain arising on disposal				2,261	-
Total revenue				1,220,869	1,134,147
BENEFITS
Policy benefits and change in actuarial liabilities				720,651	693,173
Policy benefits and change in actuarial liabilities reinsured				(114,839)	(194,262)
Net policy benefits and change in actuarial liabilities				605,812	498,911
Interest expense				54,949	61,448
Total benefits				660,761	560,359
EXPENSES
Administrative expenses				267,427	255,326
Commissions and related compensation				98,749	98,570
Premium and asset taxes				13,569	10,679
Finance costs				34,746	38,333
Depreciation and amortisation				21,871	21,283
Total expenses				436,362	424,191
INCOME BEFORE TAXES				123,746	149,597
Income taxes				(18,577)	(41,700)
NET INCOME FROM CONTINUING OPERATIONS				105,169	107,897
	Net income from continuing operations			105,169	107,897
	Net income from discontinued operation			10,110	1,412
NET INCOME FOR THE YEAR				115,279	109,309
Net income/(loss) is attributable to:
Common shareholders:
From continuing operations				62,123	60,259
From discontinued operation				10,110	1,412
				72,233	61,671
Participating policyholders				(1,044)	110
Non-controlling interests				44,090	47,528
				115,279	109,309
Basic earnings per common share:
	From continuing operations			20.4 cents	19.5 cents
	From discontinued operation			3.3 cents	0.5 cents
				23.7 cents	20.0 cents
Fully diluted earnings per common share:
	From continuing operations			19.9 cents	18.7 cents
	From discontinued operation			3.2 cents	0.4 cents
				23.1 cents	19.1 cents

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

OTHER COMPREHENSIVE INCOME	2017	2016
Items net of tax that may be reclassified subsequently to income:
Available for sale assets:
Gains on revaluation	57,900	39,183
(Gains) / losses transferred to income	(12,259)	2,675
Net change in actuarial liabilities	(13,475)	(17,090)
Retranslation of foreign currency operations	9,721	(28,481)
	41,887	(3,713)
Items net of tax that will not be reclassified subsequently to income:
(Losses) / gains on revaluation of owner-occupied property	(1,759)	5,145
Gains/ (losses) on defined benefit plans	23,914	(13,875)
Other items	-	(128)
	22,155	(8,858)
OTHER COMPREHENSIVE GAIN / (LOSS) FROM CONTINUING OPERATIONS	64,042	(12,571)

 

 

TOTAL COMPREHENSIVE INCOME		2017		2016
Net income		115,279		109,309
Other comprehensive income / (loss)		64,042		(12,571)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR		179,321		96,738
Total comprehensive income / (loss) is attributable to:
Common shareholders:
From continuing operations		96,141		45,811
From discontinued operation		10,110		1,412
		106,251		47,223
Participating policyholders		(210)		132
Non-controlling interests		73,280		49,383
		179,321		96,738