Apr 2008 Financial News

SFC Releases Year End Results

Apr 08, 2008

Sagicor Financial Corporation
Results for the Year Ended December 31, 2007

All figures quoted in United States Dollars unless otherwise stated

Earnings Per Share
For the Year Ended December 31, 2007, Sagicor Financial Corporation (SFC) reported Earnings Per Share (EPS) of 32.3 cents, up a significant 27.2 per cent or 6.9 cents on the comparable EPS of 25.4 cents in fiscal 2006. This commendable growth, however, included a one off gain of $26.4 million, of which $23.7 million is attributable to shareholders’ interest, in relation to the acquisition of the Sagicor at Lloyd’s insurance syndicate. In addition the Group made adjustments to the carrying value of certain intangible assets recorded during previous acquisitions in the amount of $3.7 million. The net position of these adjustments was a positive impact to Net Income of $22.7million. Thus, if we exclude the acquisition adjustments, the Group’s EPS was down 3.2 per cent, year on year, from 25.4 cents (FY06) to 24.6 cents (FY07).

Financial Highlights (YE07 on YE06):
• Net Premium Revenue, up 14.0 per cent or $52.8 million to $430.4 million
• Net Investment Income, up 9.6 per cent or $22.8 million to $261.2 million
• Total Revenue, up 16.7 per cent or $110.6 million to $773.0 million. Excluding the gain, Total Revenue was up 12.7 per cent or $84.3 million to $746.6 million
• Benefits Paid and Expenses, up 14.7 per cent or $82.6 million to $644.4 million. Excluding the adjustments, Benefits Paid and Expenses was up 14.0 per cent or $78.9 million to $640.7 million.
• Benefits, up 11.2 per cent or $38.7 million to $384.6 million
• Expenses, up 20.4 per cent or $43.9 million to $259.8 million
• Group Net Income, up 25.5 per cent or $22.1 million to $108.7 million
• Net Income Attributable to Shareholders, up 27.5 per cent or $18.6 million to $86.3 million. Excluding the acquisition adjustments, down 3.0 per cent or $2.0 million from $67.7 million to $65.7 million.

Chairman’s Comments
According to the Chairman, the Group’s US insurance subsidiary, Sagicor Life Insurance Company, fell short of its revenue targets for fiscal 2007 as the process of filing new products and establishing additional distribution took longer than anticipated. This impacted the Group’s revenue targets for the year while the full cost of operations was borne during the year. The Group remains confident that this subsidiary will be an important contributor to the Group’s future performance

Sagicor General, the Group’s Caribbean property and casualty insurance subsidiary also encountered some operational challenges during fiscal 2007, particularly in its Trinidad & Tobago operations. As a result, this subsidiary while continuing to be profitable did not achieve its profit target for the year.

All other significant subsidiaries within the Group met or exceeded expectations.

Dividends
The Board of Directors has approved a final dividend of Bds 8 cents per share bringing the total dividend for 2007 to Bds 14 cents (2006: Bds 13 cents).

Recommendation
For FY08, we have forecasted an EPS of TT$1.90, which at the current price of TT$17.03 translates to a price to earnings multiple of approximately 9 times. At the forecasted EPS and a multiple of 10 times, this share has an expected return of approximately 12 per cent on the current price or a target price of TT$19.00. We continue to recommend a BUY on this share.

Nancy Chen
WISE Equity Research Team