May 2006 Financial News

SFC Releases Successful Year End Results

May 03, 2006

All figures quoted in Barbados Dollars

Sagicor Financial Corporation reported Earnings Per Share of 52 cents for the year ended December 31, 2005 with 12.1 cents (23.27 per cent) earned in the fourth quarter alone. The Earnings Per Share of 52 cents represents a 100.00 per cent increase in Earnings Per Share from 26 cents earned for the year ended December 31, 2004.

This phenomenal increase was driven by a 40.60 per cent increase in Revenue from $834.972 million to $1.174 billion fostered by a 71.00 per cent increase in Net Investment Income which in turn was fuelled by an exceptional gain of $ 27.1 million. This exceptional gain arose out of the accounting treatment by the Group of a “deemed disposal” of Life of Jamaica (LOJ) resulting from LOJ’s increase in issued share capital from 2.5 billion to 3.5 billion shares. Net premium revenue was up 18.91 per cent to $639.196 million while fees and other revenue rose 70.11 per cent to $76.951 million. The Company also enjoyed gains of $38.946 million arising from business acquisitions.

Expenses increased by 29.53 percent mainly due to a 39.08 per cent increase in Administrative Expenses which made up 60.48 per cent of the total expenses. The Company’s effective tax rate increased from 8.66 per cent to 10.75 per cent. Net Income for the year was ultimately up 173.50 per cent to $199.609 million.

Using a BDS:TT exchange rate of 3.125, this year’s earnings per share translates into TT$1.61. At the current price of TT$12.50, Sagicor is currently trading at a price/earnings ratio of 7.76. A price/earnings trading band of 10 to 12 would suggest that Sagicor has the potential to trade between TT$16.10 to TT$19.32. Using a projected level of growth of 15 per cent for this year (approximately BDS$0.60 or TT$1.87), this would put Sagicor at a targeted price of TT$18.70 at a price/earnings ratio of 10. Hence, at the current market price, we recommend Sagicor as a BUY.

Sreshtha Tewari
WISE Research Team