May 2011 Financial News

Sagicor posts profits of J$1.28 billion in first quarter

May 13, 2011

Sagicor is reporting a net profit of $1.28 billion for the quarter ended March 31, 2011, 24 per cent more than that recorded for the coressponding quarter for the last financial year.

The performance comes in the wake of improved results for all business lines in the Sagicor Group, including an unprecedented half billion quarterly profit from subsidiary PanCaribbean at the end of its March quarter.

Richard Byles, CEO, Sagicor said strong insurance results, new business and conservation efforts helped to drive performance in the quarter.

"All in all I think it was a very creditable performance. It looks particularly strong because the first quarter of 2010 was a little weaker than the other quarters in 2010," Byles told Caribbean Business Report (CBR) yesterday. He however noted that even with a comparatively weaker quarter, the results for March 2011 were "particularly good" given the improvements in all segments.

The Individual Life segment recorded results of $281.7 million for the quarter, up 71 per cent over the corresponding period of 2010. Employee benefits, with results of $442.6 million, improved 80 per cent, while the Banking and Asset Management segment, of which PanCaribbean is a part, showed a 28 per cent improvement year to date.

Sagicor also saw total revenues increase three per cent over prior year, ending the quarter at $6.8 billion as net premium revenue and fees and commissions revenue climbed five per cent and 23 per cent respectively. The increase in fees and commissions revenues was partly attributed to the unrealised foreign exchange gains versus losses in the prior year's quarter.

Net investment income declined five per cent to $2.1 billion as the effects of the Jamaica Debt Exchange (JDX) continue to show up on earnings statements.

"The prior year amount included two months of returns with high interest rates but rates were reduced by the JDX programme at the end of February 2010 and continued on a downward trend," Byles said in its statement to shareholders. The decline was not enough to impact total revenue for the period however. He told Caribbean Business Report that the JDX, despite its impact on Net Interest Income, has proved beneficial to the Group as the improved performance indicate that the company has not relied on the high interest rates that were typical pre-JDX to drive its business. He said the results indicate "good strong signs that the company is growing" in spite of the JDX.

"It means that the business itself is producing. The profitability is not because we are investing in high interest government paper," Byles said.

Smaller fair value reserves on longer term bonds impacted the Group's total comprehensive income at the end of the quarter, again due to interest rate changes and its impact on the movements of reserves held in Equity. However, Byles said the value of the reserves had not themselves declined, but the gains had been 'realised'.

Total benefits and expenses declined by $170 million as all other expense lines decreased with the exception of administration and commissions and related expenses. Administration expenses grew 10 per cent to $1.4 billion, while commissions and related expenses increased 2.3 per cent to $695.4 million.

"The increased expenses were accounted for by higher compensation expenses, including retirement benefit costs, higher occupancy costs and the effect of higher GCT rates," Byles noted.

Despite its impressive results for the quarter, Sagicor had negative results in generating cash from its day to day operating activities as investment purchases of $7 billion in the quarter offset interest gains of $3.6 billion. After an additional $47 million was used in investing activities, the cash position of the Group ended at $4.7 billion, $10 billion less than the cash at the end of the corresponding quarter of March 2010.

Byles said the company invested in long term investments out of its cash flow so as to ensure continuity of its operations and of customers' interest.

"If we thought that interest rates were going to go back up then we would invest in short term securities. The fact is that we do not believe that rates will go up in the future so we are doing longer term investments and locking it in," Byles said. "Our business is a long term business. We have to put our investments into instruments that are as long as our commitment to you," declared Byles .

Sagicor continues to perform well on the regulatory front. Caribbean Information and Credit Rating services Limited (CariCRIS) has re-assigned a jmAAA credit rating, the highest for a Jamaican company, following its review of the Group at the end of March 2011. In addition, the Group's solvency continues to meet the Minimum Continuing Capital and Solvency Requirement (MCCSR) with a 180 per cent weighting at the end of the period under review whereas the benchmark stipulated by the Financial Services Commission is 150 per cent. The Group's customer contact centre has also achieved improved call handling rates up to the international benchmark of 98 per cent. Byles told CBR that customer satisfaction is a strategic priority going forward.

"What we want to do is to make customer experience become the centre of our growth strategy for the future," he said.


Source:
By Alicia Roache roachea@jamaicaobserver.com
Jamaica Observer
Friday May 13, 2011

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