Aug 2006 Financial News

Sagicor Releases Half Year Results

Aug 28, 2006

All figures quoted in Barbados Dollars unless otherwise stated

For the Half Year ended June 30, 2006 Sagicor Financial Corporation (SFC) reported Earnings Per Share (EPS) of $0.182. While this represents a fall of 48.44 % or $0.171 on the comparable EPS of $0.353 in 2005, it should be noted that there were exceptional gains in the first half of 2005. These exceptional gains came about as a result of, higher than anticipated gains in the equity portfolio in addition to exceptional gains arising from business combinations and acquisitions during the period. Excluding exceptional gains arising from business combinations and acquisitions, the comparative EPS would be $0.204. Thus, the current EPS would have fallen by a fairer amount of 10.78%.

Net Premium Revenue for the period amounted to $361.40 million, an increase of 19.13% on the comparative period in 2005. However, Net Investment and Other Income declined by 17.07% to $260.69 million. The Chairman attributed this decline to the impact of the unusual income in 2005 rather than any underlying trends in the equity markets across the region.

Benefits, which include, policy benefits, changes in reserves for policy benefits and interest on customer and other funds, totalled $332.44 million. This represents a small increase of 4.94% on the prior comparable Half Year. While Expenses, which consist of administrative expenses, commissions, premium taxes, finance costs, depreciation and amortization, amounted to $203.61 million, a substantial increase of 23.36% over 2005.

The Increase in Total Revenue was a marginal 0.71%, while Total Benefits and Expenses increased by 11.25%. Thus, Income from Ordinary Activities fell by 36.68% to $86.03 million. The Chairman has stated that acquisitions completed in April and September of 2005 have contributed to the growth in the respective amounts for Revenue, Benefits and Expenses and consequently to the Group’s overall profitability.

The Effective Tax Rate for the period under review was 15.47%, while for the same period in 2005 it was 7.93%. Net Income for the period amounted to $72.72 million, down 41.86% on the comparable period in 2005.

Assets as of June 30, 2006 totalled $6.58 billion, while Liabilities stood at $5.58 billion. The Chairman has advised that the net proceeds, from the successfully floated debt securities in May of this year, have been used to repay bank loans and that the remainder is included in financial investments.

As a result of a net decline in the carrying value of equities and other available for sale financial investments, the total reserves in Shareholders Equity have been negatively impacted. Thus, Total Shareholder’s Equity amounted to $737.43 million, down by 1.35% or $10.12 million on the December 31, 2005 figure.

In light of the current results, we have revised our Forecasted EPS toTT$1.35. At the current market price of TT$13.50 and our revised Forecasted EPS of TT$1.35; the shares of Sagicor are trading at an attractive P/E multiple of 10 times. This multiple is not only attractive for the sector and even the market in general, but also for Sagicor- which usually trades in the range of 10 to 13 times. Thus, we continue to recommend a BUY on this share.


Gia Singh
WISE Research Team