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Financial News

May 2007 Financial News

Life of Jamaica aims to grow return on equity by 20 per cent

May 11, 2007

Richard Byles, president and chief executive officer of Life of Jamaica (LOJ), informed shareholders that while 2006 was a successful year for the financial services company, the success was not, "a flash in the pan".

LOJ's annual general meeting was held at their New Kingston headquarters and showcased the company's growth under the stewardship of Byles and parent company, Barbados-based insurance conglomerate, Sagicor.

Dodrige Miller (left), president and CEO of Sagicor Financial Corporation; Maurice Facey (centre), chairman of PanJam Group of Companies; and Richard Byles, president and CEO of Life of Jamaica.

Financial strength
Total revenues grew by 28 per cent for the year ended December 31, 2006 to $14.769 billion from the $12.125 billion booked in the same period in 2005. Byles told shareholders that compared to the $4.039 billion earned in 2002, the company experienced a four-year growth rate of 38 per cent. Byles stated that over the period 2002 to 2006, LOJ's overall net profits have grown by 31 per cent.

For the financial year 2006, net profit climbed marginally to $2.572 billion from the $2.445 billion booked in the corresponding period in 2005.

Individual life net premiums were up by 20 per cent in the financial year 2006 compared to 2005, but during the period of 2002 to 2006, this figure jumped by 33 per cent. Group insurance net premiums grew by 44 per cent, from $3.62 billion in the financial year of 2005 to $5.231 million in 2006, but over the four-year period beginning 2002, growth was 38 per cent. Annuities and pensions revenue was up 22 per cent between 2005 and 2006, but from 2002, this revenue stream grew by 35 per cent. Over the four-year period under review, shareholders' equity grew by 81 per cent and the dividend payout grew by 36 per cent for the period under review.

Dominating the insurance marketplace
These growth patterns underscored LOJ's leading position in the marketplace. In the Group Health segment, LOJ controls 55 per cent of the market followed by credit union umbrella organisation, Cuna, with 31 per cent and Guardian Life with 17 per cent. In the Creditor Life segment, LOJ leads with 43 per cent of the market followed closely by Scotia Life with 35 per cent.

Cuna Mutual comes in third with 20 per cent of the market and Guardian Life holding 2 per cent. LOJ is once again the leader in the Pensions arena with 32 per cent of the market followed by the National Commercial Bank's WITCO coming in close with 31 per cent of the market. In the Individual Life, LOJ controls 41 per cent of the market with Guardian Life in second place with 23 per cent and NCB Insurance and Scotia Life rounding out the contenders.

Since acquiring majority shareholding in LOJ in November 2002, Sagicor has led an aggressive acquisition and merger campaign. In 2003, the operations of Island Life and LOJ were amalgamated and in 2005, LOJ acquired the life insurance and employee benefits business of First Life Insurance Company as well as controlling interest in Cayman General Insurance Limited. That company was rebranded as Sagicor General Insurance (Cayman). LOJ also acquired controlling interest in banking entity, PanCaribbean Financial Services (PCFS) in 2005.

Growth in Subsidiaries
Byles updated shareholders on the performance of these major subsidiaries. "PanCaribbean Financial Services (PCFS) is a major investment for us. We have seen a 43 per cent compounded growth over the last five years." Net profits for PCFS moved from $285 million in 2002 to $1.202 billion by the end of its financial year in 2006. A shareholder questioned the LOJ executive team about the impact of alternative investment schemes on PCFS. Dodridge Miller, LOJ chairman answered. "These schemes are obviously competition but we are following a prudent strategy that is here for the long term. We believe we can compete vigorously."

Doing very well with real estate projects
Byles then informed shareholders about the progress of the real estate projects that LOJ has undertaken. The residential section of Winchester Estate, which straddles New Kingston and Half Way Tree, is sold out. The adjoining Winchester Business Centre is, according to Byles, "nearly complete. We have sold 75 per cent of the units and will be delivering half of them by the end of May." As Winchester comes to a close, Byles told shareholders that LOJ would next be marketing the Llandovery development on the North Coast. The development will feature villas and apartments and be priced, "so that everyone in this room will be able to buy one."

Looking forward
Byles told shareholders that the board of directors had set three short-term targets for the management team to achieve. "We have been mandated to grow our return on equity by 20 per cent - that is Sagicor's hurdle rate for Jamaica. The dividend payout must reach 40 per cent of net profits and our earnings per share must grow by 12 per cent. And if we surpass these goals, I don't think the board of directors will be unhappy."

Source:
Dennise Williams
The Jamaica Observer
Friday, May 11, 2007

http://www.jamaicaobserver.com/magazines/Business/html/20070510T230000-0500_122853_OBS_LIFE_OF_JAMAICA_AIMS_TO_GROW_RETURN_ON_EQUITY_BY____PER_CENT_.asp