May 2006 Financial News

S&P assigns Sagicor BBB+ rating

May 05, 2006

The largest and leading insurance firm in Barbados and the Caribbean has received its credit and financial rating from the world's leading sovereign credit rating firm on Wall Street, Standard and Poor's, and it speaks of nothing but positive reviews. With the rating only being published on Tuesday, S&P has placed a BBB+ counterparty credit and financial strength ratings to Sagicor Life Inc.

Describing the outlook as stable for the Barbados- based Sagicor Life, S&P also assigned its BBB rating for Sagicor Finance Ltd for its long-term senior unsecured debt rating to the issue of up to US$150 million of senior unsecured obligations, with up to ten years maturity. Based in the Cayman Islands, Sagicor Finance Ltd is a subsidiary of Sagicor Life and has also been described as performing well. According to S&P analysts, both companies can irrevocably, unconditionally and jointly guarantee these notes.

In the view of S&P authorities, "the counter- party credit and financial strength ratings reflect Sagicor's dominant market position as the leading life insurer in the Caribbean".

In recent press release on the S&P, analysts explained that Sagicor has consistently maintained strong capitalisation levels, supported by strong operating performance. Management has a clear focus on profitability and it was highlighted that a successful track record is also a factor behind the ratings.

An S&P official noted, "These positive factors are partially offset by a relatively high concentration of assets (about 30% of the total assets) in Jamaica (B/Stable/B), which Sagicor mitigates by holding capital against such assets, as well as potential negative rating actions on sovereign ratings for Barbados (A-/Negative/A-2) and Jamaica."

For S&P analysts, the rating on the issue reflects the subordination of the notes to the debt and other obligations owed to policyholders and creditors of Sagicor's subsidiaries. The proceeds will be used to refinance in full the principal and any accrued interest outstanding on the US dollar-denominated loan, advanced by First Caribbean International Bank to facilitate the funding of the acquisition of Laurel Life Insurance in the US, to refinance other US dollar-denominated short-term debt with Scotia Bank, for general corporate purposes and possible future acquisitions.

Sagicor has leading positions in the life, pensions, health and asset accumulation insurance markets of Barbados, Jamaica, and Trinidad and Tobago. In analysing the expansion operations of the company, S&P analysts explained that there is limited organic growth potential in these mature markets in which the insurer operates. Management plans to streamline its operation to seek new growth opportunities through acquisitions and strategic partnerships and to expand Sagicors presence in new geographic regions, while maintaining current market positions.

Sagicor has recently diversified its business into the US through the acquisition of Laurel Life Insurance and its wholly owned subsidiary, American Founders Life, which has since been renamed as Sagicor Life Insurance Co.

S&P analysts stated that Sagicor has consistently maintained strong capital adequacy ratios based on Standard & Poors model and it is expected to remain strong as the positive trend regarding the generation of core earnings persists.

The stable outlook given by S&P incorporates the expectation that Sagicor will maintain its excellent leading life insurance market position in the Caribbean and gradually expand its business in the US market, achieving a larger geographic diversification.

According to S&P analysts, capitalisation levels are expected to remain strong as Sagicor maintains its positive trend regarding the generation of core earnings. Offsetting these strengths, negative rating actions on sovereign ratings for Barbados or Jamaica will likely cause Standard & Poor's to lower the ratings.

The Barbados Advocate
Thursday, 4th May, 2006
http://www.barbadosadvocate.com/NewViewNewsleft.cfm?Record=25739