Sagicor now Jamaica's 2nd Most Profitable Listed Company

Jamaica Observer April 17, 2019

Via Jamaica Observer

In a media briefing on Monday, President and CEO Chris Zacca announced that Sagicor Group Jamaica had become the Jamaica Stock Exchange's second most profitable listed company, with increased profits of $14.23 billion on total revenue of $70.66 billion, or 18 per cent above the $12.07 billion net profit recorded in 2017, moving it up from third and continuing its long run of increasing annual profitability.

This was despite an $875 million impairment provision against their investment in Government of Barbados bonds, and the general cost of implementing the new forward looking Expected Credit Losses (ECL) methodology following the adoption of the new IFRS 9 accounting standard in their 2018 calendar year.

Stockholder's equity had increased by nine per cent to $74.34 billion, after the distribution of $1.20 in dividends per share in 2018, and an interim dividend of 79 cents per share will be paid on May 9, up from 66 cents per share last year.

Earnings per share increased by 17 per cent to $3.65, giving a very healthy return on equity of 20 per cent. Total group assets at December 2018 were $394 billion, up from $352 billion.

Zacca re-introduced his management team, and observed that in their core business, Sagicor Life, they remained the market leaders in individual life insurance (around 65 per cent), group health (around 68 per cent), group life insurance (over 50 per cent), and pension fund management (over 30 per cent), and were actually continuing to grow market share, resulting in a combined $9 billion in net profits.

He emphasised that Sagicor Bank had also had a very good year, with a 60 per cent increase in profits to $2.85 billion for 2018, all on a 14 per cent increase in revenues to $12.4 billion, with no increase in fees, driven instead by double-digit growth in loans and credit cards, and the introduction of two new products aimed at improving financial inclusion — namely SWYPE (a mobile point of sale that fits in a pocket) and MYCASH (a prepaid card partnering with Digicel using internationally accepted mastercard).

Zacca advised the bank also has two more products in this space awaiting central bank approval. Sagicor Bank CEO Chorvelle Johnson described her strategy as listening, focusing on clients “pain points” and training team members to address these areas.

Zacca noted the bank had seen sharply increased customer satisfaction scores. They were also in the process of reviewing their fees, which would be announced shortly.

Zacca noted that Sagicor Investments, led by Kevin Donaldson, recently completed one of the largest local bond transactions for utility company JPS, a debt financing of US$180 million, with strong support from Sagicor Bank, which led the raising of US$66 million in syndicated loans.

Their asset management business had grown from $89 billion to $140 billion under management, and they were in the process of expanding their regional asset management and investment banking business.

They had an asset management business in Cayman, and were in the process of applying for an investment banking licence there, and were already doing investment banking deals across the region in Barbados, Trinidad and St Lucia.

They would soon be launching an infrastructure fund, and were involved in several real estate developments that were being started or coming to fruition.

Importantly, and a reason for the delay in their financial statements, Executive Vice-President Finance and Group CFO Ivan Carter noted that they had reclassified their 15 per cent holding in Playa Hotels to an “associate” company from June 2nd, from a “portfolio” investment, reflecting their “significant influence”, meaning that they would “pick up” the corresponding portion of their net profits.

This influence reflects the fact that in addition to Sagicor having two board directors on Playa, Zacca is a member of their audit committee, and Richard Byles is a member of their “capital allocation” committee, which reviews all significant new investments.

Playa is expanding with a new 750 room hotel in the Dominican Republic, and has recently converted two of its hotels to the Hilton Brand. Zacca noted that Playa had four main shareholders, the largest being a hedge fund, with Sagicor as the second largest, ahead of Hyatt, whose brands include Hilton. The stock is thinly traded on Nasdaq, and therefore volatile, and in his view this better reflects their strategic investment role.

The group also took control of the X Fund from October 1st, and now accounts for it as a subsidiary rather than as an associate, reflecting their effective control despite only owning 31 per cent. As a result, they recognised a one-off gain of $1.52 billion, of which $1.29 billion relate to stockholders.

Effective December 1st, they also acquired a 51 per cent stake in a micro – financing business, Travel Cash.

In response to a question on the deal with Scotia Insurance, he noted that the Scotia Life partnership was at the level of their parent company, and would be part of the overall deal to list Sagicor Financial Corporation on the Toronto Stock Exchange which was still subject to shareholder approval.