Aug 2013 Financial News

Capable of managing Risks (Sagicor)

Aug 28, 2013

Sometimes, even conglomerates have to admit they have made a mistake.
In 2007, Sagicor and Lloyd’s, two formidable names in insurance and underwriting came together to form Sagicor at Lloyd’s (SAL).
The several unprecedented events happened: the global economic recession from 2008,and then in 2010, seven natural disasters including earthquakes and hurricanes that, according to group president and chief executive Dodridge Miller, under any actuarial model should only happen once in 150 years.
“Our difficulty was regarding the alignment of our shareholders being exposed to the risks in these markets including Chile, Japan and Europe (with some of that risk through SAL), so we took the position to withdraw from Europe. There are risks in the Caribbean regarding the performance of the economy but we believe we are capable of managing them,” Miller told reporters at a media briefing for the company’s half-year financial performance.
The meeting was held at Sagicor’s Port of Spain offices, but journalists in Barbados—Sagicor’s home base—participated via teleconferencing.
“International expansion is not without challenges. Once you’ve had a bloody nose and you think your strategy is a good one you just get up and fight. The Sagicor group will continue its programme of diversification and seek new opportunities in markets we believe will be good returns and risk acceptable to shareholders,” Miller added.
Last month, the company announced it had entered into an agreement to sell Sagicor Europe Ltd (SEL) and its subsidiaries, which include Sagicor at Lloyd’s Ltd (SAL), to AmTrust Financial Services, Inc for approximately £56 million, which is £15 million above SEL’s net asset value as of December 31, 2012, the company said.
The transaction is expected to be finalised in the last quarter of 2013.
But despite its European shortfalls, the company’s US market performance is very robust. For the first six months of the year, Miller said, the company has had 20 per cent growth, and is actually trying to slow down that growth until the issues with Europe are settled.
“We have been in the US since 2005. We have no issues competing in the US market, no issues attracting business. We are capable of competing in an international market—what happened in Europe was timing and events beyond our control,” Miller said.
Aside from its US and Caribbean operations, the compmay has a presence in 22 countries, including Trinidad and Tobago, the United Kingdom, the USA and Latin America. Its assets are in excess of US$5.5 billion.
The company is also listed on the stock exchanges of Barbados, Trinidad and Tobago and London.
Its share prices haven’t been doing all that greatly recently, though.
“When I looked a couple days ago, Sagicor was trading at five times the continuing earnings, and our nearest competitor was trading 15 times continuing earnings, so really I think it is a question of the market to respond to Sagicor because once we’ve cured Sagicor of Lloyd’s, our operations have shown good results and our share price will eventually reflect that,” Miller said.
In the Caribbean, especially, he said, the company operates in very thin markets where sometimes, the value of the share price does not reflect the underlying value of the company.
“We have shown some deterioration in our performance because of the Sagicor at Lloyd’s but we expect once that is cured and the few results of the core operations are visible to shareholders, we expect that the share prices (will improve). But we are in thin markets and very small trades impact the price of the share,” he said.
Miller said with the company, confidence in its performance was high, but the impact has been on the shareholders, and their external view of the company—which is often beyond management’s control.
“We know the value that is there... We can just deliver results and the results have been impacted the last four years with Sagicor Europe... after the first six months results are returning to strong profitability,” he said.
Excluding Trinidad and Tobago, which grew 13 per cent, and the US, which grew 20 per cent, the other Caribbean markets grew about five per cent, Miller said.
“This is growth in economies that are in recession. Once again we’ve demonstrated that Sagicor as an insurance company can continue to grow through difficult times. This is not the first recession in the region, but this one is deeper and longer lasting but we have the depth of products and breadth of capacity,” he said.
His outlook for the region was that recession conditions will continue for the next few years, and where there is growth, it will be slow. However, governments have recognised there are things that need to be done, and seem committed to making these changes.
“We are optimistic that in the medium term we will start seeing changes in these economies. We are feeling the impact of slow growth in the economies but we’ve been through this before and have not lost confidence. It’s been a difficult couple years for the global economy, not just the Caribbean. We have followed a strategy to become one of the leading financial services companies (in the region) and used that to diversify into the global market. The US has come very well, but Sagicor at Lloyd’s has been an unfortunate experience. The past is the past and has been an experience but we continue to look to the future for us and our shareholders,” he said.


Source:
Carla Bridglal
carla.bridglal@trinidadexpress.com
Trinidad Express
Wednesday August 28, 2013

http://www.trinidadexpress.com/business-magazine/Capable-of-managing-Risks-221422211.html