SFC Sagicor Financial Company Ltd

TORONTO and BARBADOS, Aug. 14, 2024 /CNW/ - Sagicor Financial Company Ltd. (TSX: SFC), a leading financial services provider in Canada, the United States and the Caribbean, today announced its results for the second quarter ended June 30, 2024. All figures are in US$ unless otherwise stated.

Q2 Highlights

• Core earnings to shareholders⁽¹⁾ of $25.3 million
• Annualised core return on shareholders' equity⁽¹⁾ of 10.9%
• Net loss to shareholders of $40.2 million driven by adverse market experience
• New business CSM⁽¹⁾ of $40.1 million
• Shareholders' equity of $897.7 million, with book value per share of US$6.36 or C$8.71
• Shareholders' equity plus net CSM to shareholders⁽1) of $2.0 billion, or US$14.51 or C$19.86 per share
• Financial leverage ratio⁽¹⁾ of 26.8%
• Group-LICAT ratio⁽¹⁾ of 138%
• MCCSR ratio⁽¹⁾ of 309%
• Dividend of US$0.06 per common share to be paid during the third quarter of 2024 (US$0.24 annualised dividend)

Andre Mousseau, President and Chief Executive Officer, said:

"We are pleased to announce our second quarter results with our revised and enhanced shareholder disclosure. Our new core earnings⁽¹⁾ framework will allow our investors to better understand the earnings generation of each of our operating segments. This enhanced disclosure will enable us to more meaningfully engage with the investment community and ultimately improve Sagicor's access to and cost of capital."

"Sagicor delivered $25.3 million of core earnings to shareholders⁽¹⁾ in Q2, within the range of our expectations and aided in part by positive aggregate insurance experience from our operating subsidiaries. Our net income to shareholders was lower with a loss of $40.2 million, driven primarily by negative market experience. The market experience was due to differences in changes of our mark to market valuation of our assets and the calculated value of our liabilities, as dictated by IFRS 17. We view this experience as transitory and subject to reversal over time, and therefore view core earnings⁽¹⁾ as a better representation of the performance of our business."

"We also continue excellent progress on many of our strategic initiatives to optimize our balance sheet, enhance our systems and drive operational synergies from our businesses.  We capitalized on our newly achieved investment grade ratings to issue our first bond in the Canadian market and expand our revolving credit facility, using the proceeds to repay a portion of our term loan taken on in conjunction with the ivari acquisition. These issuances are saving us approximately $7 million in annualized interest costs. We have made several executive appointments, elevating key team members to senior positions to drive organizational change. To oversee these initiatives in North America, I have taken on the role of President and Chief Executive Officer of ivari, in addition to my roles at Sagicor Financial Company Ltd. and at Sagicor USA. With these initiatives we are confident about our ability to expand our return on equity⁽¹⁾ in 2025 and beyond."

Overall Sagicor Group – Financial Highlights

In Q2 2024, core earnings to shareholders⁽¹⁾ was $25.3 million, an increase Y/Y resulting from positive core results in our Sagicor Canada segment offset by additional interest costs to fund the ivari acquisition. Our Sagicor Life and Sagicor Jamaica segments grew Y/Y due to business growth on short-term business associated with repricing and improved insurance experience on long-term business, while Sagicor Life USA's core earnings to shareholders⁽¹⁾ declined due to negative core insurance experience in Q1 and Q2 2024. Net loss to shareholders for the quarter was $40.2 million driven by $55.1 million of market experience losses⁽¹⁾, and was also affected by one time costs related to a debt financing and retirement of old debt, which are excluded from core earnings⁽¹⁾.

Sagicor's capital position remained stable during Q2. Sagicor remains well capitalized with a Group-LICAT ratio⁽¹⁾ of 138% and an MCCSR ratio⁽¹⁾ of 309% for its insurance businesses, and a financial leverage ratio⁽¹⁾ of 26.8%.

Consolidated Highlights

Outlook and Medium-Term Targets

Sagicor is updating its guidance on key measures:

• Core earnings to shareholders⁽¹⁾ for 2024 are expected to be $80 million to $90 million;
• New business CSM⁽¹⁾ for 2024 is targeted at $160 million to $180 million;
• 2025 target for core earnings to shareholders⁽¹⁾ growth of over 10% above 2024;
• Targeted core return on shareholders' equity (ROE)⁽¹⁾ over the medium-term of 13%+; and,
• Targeted dividend payout ratio⁽¹⁾ based on core earnings to shareholders⁽¹⁾ over the medium-term of 30% to 40%.

Business Segment Performance

Sagicor has four main reporting operating segments: Sagicor Canada (ivari), Sagicor Life USA, Sagicor Jamaica (of which the Company owns 49.1% and which is consolidated by the Company), and Sagicor Life (which includes the southern Caribbean).

Business Segment - Quarterly Highlights

Sagicor Canada

• Sagicor Canada had a solid quarter with strong sales primarily in universal life insurance resulting in new business CSM⁽¹⁾  of $10.7 million for the quarter.
• Core earnings to shareholders⁽¹⁾ of $26.0 million for the quarter was above expectations with the segment benefitting from insurance experience gains.
• Net income to shareholders of $20.4 million for the quarter compared to core earnings to shareholders⁽¹⁾ was primarily a result of market experience losses from the movement of interest rates and by positive experience in the equity markets.
• Total net CSM⁽¹⁾ was $566.3 million, which was a modest decrease Q/Q in US dollars and represented a modest increase in Canadian dollars.

Sagicor Life USA

• Sagicor Life USA's new business production⁽¹⁾ of $210.7 million was consistent with expectations for the quarter.
• Core earnings to shareholders⁽¹⁾ for the segment was $7.6 million which was behind expectations due to insurance experience losses of $3.7 million.
• Net loss to shareholders was $26.9 million for the quarter, driven by market experience losses. Market experience losses were composed of a $8.7 million after-tax mark to market loss on shares of Playa Hotels and Resorts held in this segment, and $20.6 million of mark to market increase of liabilities relative to assets, driven by liability calculations that do not exactly match asset value changes under IFRS 17. These losses were reversal of gains seen in Q1 2024.
• Total net CSM⁽¹⁾ was $212.8 million, an increase of 1% Q/Q as new business CSM⁽¹⁾ of $10.4 million was impacted by insurance experience losses and amounts recognized for service provided.

Sagicor Jamaica

• Sagicor Jamaica had strong results in its long-term insurance business while short-term insurance results declined largely as a result of higher claims than expected in its group health segment. The commercial banking division continued its trend of improved profits, and the investment banking division's net interest margins showed improvement over the prior year.
• Sagicor's share of Sagicor Jamaica's core earnings to shareholders⁽¹⁾ of $9.5 million grew 32% over Q2 2023, largely a result of the experience in the short-term insurance businesses.
• Sagicor's share of Sagicor Jamaica's net income to shareholders was $9.4 million for the quarter.
• Total net CSM⁽¹⁾ was $280.3 million, an increase of 2% Q/Q largely driven by $9.0 million in new business CSM. Organic CSM⁽¹⁾ had a $3.4 million benefit from insurance experience gains due to favourable persistency on universal life.

Sagicor Life

• Sagicor Life saw growth in insurance earnings over the prior quarter and a decreasing trend in onerous contracts and insurance experience losses which benefitted from adjusting product offerings and repricing initiatives.
• Core earnings to shareholders⁽¹⁾ of $8.2 million benefitted from stable long-term insurance business as well as above budget experience in short term businesses, which was partially offset by lower income in non-insurance businesses.
• Net income to shareholders was $2.2 million for the quarter. This result, when compared to core earnings to shareholders,⁽¹⁾ was impacted by market experience losses from the change in interest rates. The segment benefitted from a one time gain resulting in the disposition of the Curacao operations which was excluded from core earnings.
• Total net CSM⁽¹⁾ was $232.4 million, which was flat Q/Q largely a result of inorganic CSM movement resulting from the disposition in Curacao. Organic CSM⁽¹⁾ grew by $7.8 million driven primarily by new business CSM⁽¹⁾ of $10.0 million.

Head Office, Other and Adjustments

• Core loss to shareholders⁽¹⁾ was $26.0 million which was mainly comprised of finance costs and head office expenses.
• Net loss to shareholders was $45.4 million for the quarter, which reflects non-core losses resulting from accelerated amortization of term loan deferred financing costs, startup and development costs in early stage initiatives in Barbados, and other non-core expense items.

Dividends

On August 13, 2024, the Board of Directors of Sagicor Financial Company Ltd. approved and declared a quarterly dividend of US$0.06 per common share. This quarterly dividend will be paid on September 17, 2024, to shareholders of record at the close of business on August 27, 2024. This will be the nineteenth consecutive dividend payment Sagicor will pay to its shareholders since becoming a publicly listed company on the Toronto Stock Exchange.

Appointment of Andre Mousseau as President and Chief Executive Officer of ivari

Effective July 31, 2024, Sagicor Financial Company Ltd. President and Chief Executive Officer Andre Mousseau was also named President and Chief Executive Officer of ivari, Sagicor's operating company in Canada. In this role Mr. Mousseau will oversee all elements of operations of Sagicor in North America, including efforts to drive collaboration between Sagicor Canada and Sagicor USA.

Investment Grade Credit Ratings

During the second quarter, as previously announced, Sagicor received an Issuer Rating and a Senior Debt Rating of BBB (low) with a stable trend from global credit rating agency DBRS Limited (Morningstar DBRS). In assigning these ratings, DBRS cited Sagicor's diversified business, its long history and dominant position in the Caribbean and its growing presence in the U.S. and Canada, its high-quality investment portfolio, and its strong track record. In addition, DBRS assigned an A (low) Financial Strength Rating with a stable trend to Sagicor's U.S. operating subsidiary, Sagicor Life Insurance Company, and also to Sagicor's Canadian operating subsidiary, ivari.

Inaugural Canadian Notes Offering

On June 20, 2024, Sagicor closed a private placement offering (the "Offering") of C$250 million aggregate principal amount of 6.359% Series 2024-1 Senior Unsecured Notes due June 20, 2029 (the "Notes"). Sagicor used the net proceeds of the Offering to repay amounts owing under the Company's term loan facility (which was incurred to fund a portion of the purchase price for the acquisition of ivari), which resulted in significant interest savings of approximately US$7 million on an annual run rate basis.

Revolving Credit Facility

On June 28, 2024, Sagicor increased the aggregate principal amount that can be drawn to US$175 million from US$125 million and reduced the pricing on the facility. The revolving credit facility was initially established on August 2, 2023.

Supplemental Information Package

Sagicor has published a Supplemental Information Package which provides more detail on the company and its financial results. Please visit the company's website at  www.sagicor.com under the tab "Investor Relations" to access this.

Normal Course Issuer Bid

Sagicor repurchased 357,386 shares which were cancelled in Q2 2024 for a total cost of approximately US$1.8 million. The number of issued and outstanding common shares as at June 30, 2024 was 141,067,814.

Management's Discussion and Analysis and Condensed Consolidated Financial Statements (Unaudited)

This press release, which was approved by the Company's Board of Directors and Audit Committee, should be read in conjunction with the Company's unaudited condensed consolidated financial statements and accompanying MD&A. The unaudited financial statements and MD&A are available on the Company's website at www.sagicor.com and will soon be filed on the System for Electronic Document Analysis and Retrieval Plus ("SEDAR+") at www.sedarplus.ca.

Conference Call

Sagicor Financial Company Ltd. will host a conference call for analysts and investors on Thursday, August 15, 2024, at 1:00 p.m. Eastern Daylight Time in Toronto (1:00 p.m. Atlantic Standard Time in Barbados and Trinidad and Tobago, 12:00 p.m. Eastern Standard Time in Jamaica). To listen to the call via live audio webcast, visit the Company's website at www.sagicor.com, under the tab "Investor Relations" or at https://app.webinar.net/mRgpVqzB6oP. The conference call is also available by dialing 1-416-764-8688 or 1-888-390-0546 (North American toll free) or 08006522435 (United Kingdom) or 1-866-290-2216 (Barbados) or 1-800-207-8221 (Trinidad). To join the conference call without operator assistance, you may register and enter your phone number at https://emportal.ink/3WFKvzt  to receive an automated call back. A replay will also be available until September 15, 2024, by dialing 1-416-764-8677 or 1-888-390-0541 (North American toll free), passcode 298937#. A transcript of the call will also be made available on www.sagicor.com.

About Sagicor Financial Company Ltd.

Sagicor Financial Company Ltd. (TSX: SFC) is a leading financial services provider with over 180 years of history in the Caribbean, over 90 years of history in Canada, and a growing presence in the United States with over 70 years of history. Sagicor offers a wide range of products and services, including life, health, and general insurance, banking, pensions, annuities, investment management, and real estate. Sagicor's registered office is located at Clarendon House, 2 Church Street, Hamilton, HM 11, Bermuda, with its principal office located at Cecil F De Caires Building, Wildey, St. Michael, Barbados.  Additional information about Sagicor can be obtained by visiting www.sagicor.com.

Forward-Looking Information

Certain information contained in this news release may be forward-looking statements.  Forward-looking statements are often, but not always, identified by the use of words such as "expect", "anticipate", "target", "believe", "foresee", "could", "estimate", "goal", "intend", "plan", "seek", "will", "may", "would" and "should" and similar expressions or words suggesting future outcomes. These forward-looking statements reflect material factors and expectations and assumptions of Sagicor. Sagicor's estimates, beliefs, assumptions and expectations contained herein are inherently subject to uncertainties and contingencies regarding future events, and as such, are subject to change. Risks and uncertainties not presently known to Sagicor or that it presently believes are not material could cause actual results or events to differ materially from those expressed in its forward-looking statements. Additional information on these and other factors that could affect events and results are included in other documents and reports that will be filed by Sagicor with applicable securities regulatory authorities and may be accessed through the SEDAR+ website (www.sedarplus.ca). Readers are cautioned not to place undue reliance on the financial information or forward-looking statements contained herein, which reflect Sagicor's estimates, beliefs, assumptions and expectations only as of the date of this document. Sagicor disclaims any obligation to update or revise any forward-looking statements contained herein, whether as a result of new information, new assumptions, future events or otherwise, except as expressly required by law.

Non-IFRS and Other Financial Measures

The Company reports certain non-IFRS measures and insurance industry metrics that are used to evaluate its performance. As non-IFRS measures generally do not have a standardized meaning, they may not be comparable to similar measures presented by other companies. Securities regulators require such measures to be clearly defined and reconciled with their most comparable IFRS measures. These measures are provided as additional information to complement IFRS measures by providing further understanding of the results of the operations of the Company from management's perspective. Accordingly, these measures should not be considered in isolation, nor as a substitute for analysis of the Company's financial information reported under IFRS. Non-IFRS measures used to analyze the performance of the Company's businesses are set out below. Please see the discussion below for an explanation or a reconciliation of certain non-IFRS measures.

Minimum Continuing Capital and Surplus Requirements ("MCCSR"): Sagicor voluntarily adopted the Canadian Minimum Continuing Capital and Surplus Requirement standard as its risk-based assessment measure to provide a consolidated view of capital adequacy. The MCCSR was a standard used by Canadian regulators from 1992 until 2018, when it was superseded by the Life Insurance Capital Adequacy Test (LICAT). When it was in place, the minimum standard recommended by the Canadian regulators was an MCCSR of 150.0%. Canadian practices for calculation of the MCCSR evolved and changed from inception through its replacement. In jurisdictions where the MCCSR is currently prescribed, such as Trinidad and Tobago, the MCCSR guidance is not consistent with the latest former Canadian MCCSR guidelines or with current Canadian capital standards under LICAT. Sagicor has made certain interpretations in our calculation of the MCCSR, in consultation with our appointed actuary, which we believe appropriately reflect the risk-based assessment of our capital position, including accounting for CSM in MCCSR's Total Capital calculation, as the MCCSR standard was not based on the IFRS 17 standard and this treatment of the CSM is consistent with the approach under LICAT (which does consider the IFRS 17 standard). As the MCCSR is no longer prescribed by Canadian regulators and is interpreted in different ways by our local regulators, there can be no assurance that Sagicor's MCCSR figures are comparable to reporting by Canadian life insurers at any single point in time since the implementation of the MCCSR. 

Group Life Insurance Capital Adequacy Test ("Group-LICAT"): The Group's goal is to maintain adequate levels, at sufficient margins above minimum regulatory capital requirements, to maintain consumer confidence as well as credit ratings with external rating agencies. Management engages the Board with regards to actions necessary to maintain appropriate capital levels. Sagicor has voluntarily elected to follow OSFI's LICAT Guideline, specifically the latest amendment which became effective January 1, 2024. The Group LICAT ratio is well above the regulatory minimum applicable to Canadian life insurance companies.

Return on Shareholders' Equity ("ROE"): IFRS does not prescribe the calculation of return on shareholders' equity and therefore a comparable measure under IFRS is not available. To determine this measure, reported net income/(loss) attributable to common shareholders is divided by the average of the opening and closing common shareholders' equity for the period. The quarterly return on shareholders' equity is annualised. This measure provides an indication of overall profitability of the Company.

Book value per share: To determine the book value per share, shareholders' equity is divided by the number of shares outstanding at the period end, net of any treasury shares. All components of this measure are IFRS measures.

Revenues: Revenues is the sum of three IFRS measures: insurance revenue, net investment income, and fees and other income.

Financial leverage ratio: The financial leverage ratio is the ratio of notes and loans payable (refer to note 7 of the condensed consolidated financial statements) to total capital, where total capital is defined as the sum of shareholder's equity, notes and loans payable, total net contractual service margin and non-controlling interest. This ratio measures the proportion of debt the Company uses to finance its operations as compared with its capital.

Total capital: This measure provides an indicator for evaluating the Company's performance. Total capital ($3.5 billion as at Q2 2024) is the sum of shareholders' equity ($898 million), notes and loans payable ($933 million), non-controlling interests ($347 million) and total net CSM ($1.3 billion). This measure is the sum of several IFRS measures and total net CSM which is a non-IFRS measure.

New business CSM: This measure is the amount of the contractual service margin added from contracts initially recognized in the period.

New business production: This measure is equal to the amount of annuities and life insurance new business paid premium.

Total net CSM: This measure is the balance of the direct contractual service margin net of reinsurance contractual service margin.

Net CSM to shareholders: This measure is the amount of the total net CSM attributable to shareholders.

Shareholders' equity plus net CSM to shareholders: This measure is the sum of total shareholders' equity and Net CSM to shareholders. It is an important measure for monitoring growth and measuring insurance businesses' value.

Core earnings: Core earnings is intended to remove from reported earnings or loss the impacts of the following items that create volatility in Sagicor's results under IFRS, or that are considered to be not representative of its underlying operating performance including among others unexpected market-related impacts, changes in assumptions, management actions, certain acquisition or disposition related amounts and others such as one-time costs, amortization of intangibles, and tax effects of the aforementioned items. Each of these items is classified as a supplementary financial measure and has no directly comparable IFRS financial measure disclosed in Sagicor's financial statements to which the measure relates, nor are reconciliations available. The core earnings to shareholders can be reconciled to net income to shareholders as follows:

SOURCE Sagicor Financial Company Ltd.