Jul 2015 Financial News

Gradual improvement for Sagicor

Jul 29, 2015

New York-based Standard & Poor’s Rating Services (S&P) last Thursday assigned its ‘B’ issue-level rating to Sagicor Finance Ltd’s proposed US$320 million senior notes (bonds).

That is five notches into junk.

“We expect that Sagicor will use the proceeds from the new debt to pay down its outstanding US$150 million senior unsecured notes due 2016, its US$120 million convertible preferred notes, and its US$43.36 million notes due 2015,” S&P said.

“We also affirmed our ‘BB-’ issuer credit and financial strength ratings on Sagicor Life Inc (Sagicor). At the same time, we affirmed our ‘B’ issue-level rating on Sagicor Finance’s existing US$150 million, ten-year senior unsecured notes. The outlook remains negative,” S&P said.

S&P’s view is that Sagicor has a “fair” business risk profile and “less than adequate” financial risk profile.

“Our assessments are based on the company’s strong presence in the Caribbean, its well-known brand across that region, sound market position, capitalisation levels in line with our ‘BBB’ benchmark, and our expectation that its operating performance will continue to improve gradually,” S&P said.

S&P sees as Sagicor’s major weakness the bulk of its operations are “in countries that we consider to have high industry and country risks. Our ratings consider Sagicor’s significant exposure to Jamaica (B/Stable/B) because the company’s 35.1 per cent of investment portfolio is located there, as of December 2014, and to Barbados’ (B/Negative/B), the insurer’s domicile country.”

Sagicor passed S&P’s sovereign default stress and transfer and convertibility tests for both Jamaica and Barbados and so ratings on the company are above the sovereign ratings of these two countries. However, the ratings on Sagicor are two notches below the potential rating of ‘BB+’ because the rating on Barbados limits the rating on the insurer to ‘BB-’. A life insurer rating is capped at two notches above the sovereign rating of its country of domicile because of S&P’s view that these entities have a high sensitivity to country risk and the critical role of regulations for these entities.

“Considering that the company will replace its existing $120 million convertible preferred notes with debt, we expect the company’s capitalisation ratios to weaken after 2016. On the other hand, although we are revising our capital and earnings score to ‘upper adequate’ from ‘moderately strong’, our view of Sagicor’s overall financial risk profile remains at ‘less than adequate’,” S&P stated.

Source:
By Aleem Khan
Trinidad Express
Wednesday July 29, 2015

http://www.trinidadexpress.com/20150728/business/gradual-improvement-for-sagicor