SAGICOR FINANCIAL COMPANY LTD. SAGICOR FINANCIAL COMPANY LTD.
MANAGEMENT DISCUSSION & ANALYSIS
For the three-month periods ended March 31, 2024 and March 31, 2023
MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2024 |
About Sagicor
Established in 1840 as The Barbados Mutual Life Assurance Society, Sagicor is one of the oldest providers of insurance in the Americas. Sagicor offers a wide range of products and services including life and health insurance, annuities, pension investment and administration, property and casualty insurance, and a suite of ancillary non-insurance financial products and services, including banking and investment management, which are provided to two client segments, individuals and groups/corporations. Sagicor operates across 20 countries across the Caribbean, the United States of America ("USA"), and Canada.
TABLE OF CONTENTS
5. | Results by Segment | 14 |
6. | Financial Position | 28 |
7. | Financial Investments | 35 |
9. | Risk Management | 39 |
10. | Additional Information | 42 |
11. | Non-IFRS And Other Financial Measures | 50 |
12. | Cautionary Statement Regarding Forward-looking Information | 52 |
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MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2024 |
ACRONYMS
Certain acronyms have been used throughout the management discussion and analysis to substitute phrases. The more frequent acronyms and associated phrases are set out below.
Acronym | Phrase |
AA | Appointed Actuary |
AC | Amortised Cost |
CSM | Contractual Service Margin |
FVTOCI | Fair Value Through Other Comprehensive Income |
FVTPL | Fair Value Through Profit and Loss |
IAS | International Accounting Standards |
IFRS | |
Accounting | Standards issued by the International Accounting Standards Board |
Standards | |
LIC | Liability for Incurred Claims |
LICAT | Life Insurance Capital Adequacy Test |
LRC | Liability for Remaining Coverage |
MCCSR | Minimum Continuing Capital and Surplus Requirement |
OCI | Other Comprehensive Income |
PAA | Premium Allocation Approach |
SOFR | Secured Overnight Financing Rate |
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MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2024 |
1. HIGHLIGHTS
Sagicor recorded net income of US $29.6 million for the three-month period ended March 31, 2024, compared to US $9.2 million for the corresponding period in 2023. Net income attributable to common shareholders was US $26.2 million compared to US $1.4 million for the same period in the prior year.
Reported earnings were significantly higher than the prior year primarily due to higher profitability in Sagicor Life USA and Sagicor Life, as well as the inclusion of the results of Sagicor Canada which was acquired in the fourth quarter of 2023. Sagicor Life USA and Sagicor Life benefited from positive market experience. This was offset by lower earnings in Sagicor Jamaica due to negative market experience. The Return on Shareholders' Equity1 (annualised) for the quarter ended March 31, 2024, was 12.2%, compared to 1.3% for the corresponding period in 2023.
Sagicor intends to disclose a drivers of earnings analysis and adopt a core earnings measure as a key performance indicator in future quarters. Sagicor believes this will support users' understanding of the underlying financial performance and the long-term performance and valuation of the business.
Total assets of US$ 22,231.4 million at March 31, 2024 declined slightly from US$ 22,384.9 million at December 31, 2023 primarily due to the impact of increased interest rates on the value of bonds and debentures in Sagicor Canada. The Group's book value per share1 closed at US$ 6.84 per share, compared to US$ 6.88 per share at December 31, 2023.
Sagicor's capital remains strong, with the Group closing the period with a Minimum Continuing Capital and Surplus Requirement (MCCSR)1 of 303%, compared to 301% at December 31, 2023, well above our target capital standards. As of March 31, 2024, Sagicor's LICAT1 ratio was 136%, which remained stable to the prior quarter.
1 Represents a non-IFRS or other financial measure: refer to Section 11 - Non-IFRS and Other Financial Measures in this document for relevant information about such measures.
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MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2024 |
2. | FINANCIAL SUMMARY | ||||||||
Three months ended | |||||||||
March 31 | |||||||||
(in millions of US $, unless otherwise noted) | 2024 | 2023 | Change | ||||||
Profitability | |||||||||
Group net income/(loss) | 29.6 | 9.2 | >100% | ||||||
Net income/ (loss) attributable to common shareholders | 26.2 | 1.4 | >100% | ||||||
Earnings per share: | |||||||||
Basic earnings | $0.19 | $0.01 | >100% | ||||||
Fully diluted | $0.18 | $0.01 | >100% | ||||||
Return on shareholders' equity (annualised)2 | 12.2% | 1.3% | 10.9 pts | ||||||
Net Insurance and Investment Result | |||||||||
Sagicor Life | 22.5 | 15.6 | 44% | ||||||
Sagicor Jamaica | 48.1 | 49.9 | (4%) | ||||||
Sagicor Life USA | 58.9 | 21.2 | >100% | ||||||
Sagicor Canada | 25.6 | - | - | ||||||
Head office, Other and adjustments | (4.0) | 1.5 | (<100%) | ||||||
Total net insurance and investment result | 151.1 | 88.2 | 71% | ||||||
Financial Position | |||||||||
Total assets | 22,231.4 | 10,775.0 | >100% | ||||||
Operating liabilities | 19,977.1 | 9,388.6 | >100% | ||||||
Notes and loans payable | 944.8 | 648.2 | 46% | ||||||
Book value per common share 2 | $6.84 | $3.00 | >100% | ||||||
Financial Strength | |||||||||
Debt to capital ratio 2 | 26.7% | 31.2% | 4.5 pts | ||||||
Dividends declared per common share | 0.06000 | 0.05625 | 7% | ||||||
Total capital 2 | 3,539.8 | 2,076.7 | 70% | ||||||
CSM balance growth - net 2 | 2.2% | 9.4% | (7.2 pts) | ||||||
Average common shares outstanding (000's) | 140,969 | 142,736 | (1%) | ||||||
Outstanding shares, at end of period (000's) | 140,900 | 142,703 | (1%) | ||||||
303% | 308% | (5.0 pts) | |||||||
LICAT 2 at end of period | 136% | N/A | - | ||||||
2 Represents a non-IFRS or other financial measure: refer to Section 11 - Non-IFRS and Other Financial Measures in this document for relevant information about such measures.
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MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2024 |
3. GENERAL INFORMATION
A. Introduction and Notice
This Management's Discussion and Analysis ("MD&A") contains important information about Sagicor's business and its performance for the three-month period ended March 31, 2024 with comparative analysis for the corresponding period ended March 31, 2023. This MD&A should be read in conjunction with the Company's quarterly condensed consolidated financial statements, prepared in compliance with International Accounting Standard ("IAS") 34 - Interim Financial Reporting, in effect on the date of such information.
The following discussion is based on the financial condition and results of operations of Sagicor, unless otherwise specified or indicated. Financial information is presented in millions of United States (US) dollars, unless otherwise indicated. Amounts for subtotals, totals and percentage variances included in tables in this MD&A may not sum or calculate using the numbers as they appear in the tables due to rounding.
B. General Information
Sagicor Financial Company Ltd. (TSX: SFC) is a leading financial services provider with over 180 years of history which operates across the Caribbean, in the USA, and Canada. Sagicor's registered office is located at Clarendon House, 2 Church Street, Hamilton, HM 11, Bermuda, with its principal office located at Cecil F De Caires Building, Wildey, St. Michael, Barbados. Details of Sagicor's holdings and operations are set out in note 4 to the 2023 annual consolidated financial statements.
Sagicor currently operates in 20 countries and maintains a strong market position in most of the markets where it operates. Sagicor has four reporting operating segments, namely Sagicor Life, Sagicor Jamaica, Sagicor Life USA and Sagicor Canada.
The principal activities of the Sagicor Group are as follows:
Life and health insurance,
Annuities and pension administration services,
Banking and investment management services.
and its principal operating companies are as follows:
Sagicor Life Inc. (Barbados and Trinidad and Tobago), Sagicor Life Jamaica Limited (Jamaica),
Sagicor Bank Jamaica Limited (Jamaica),
Sagicor Life Insurance Company (USA). ivari (Canada)
The Group also underwrites property and casualty insurance in the Caribbean.
Sagicor's objective is to be a leading insurance and financial services provider of world class products and services to better serve its customers and other stakeholders in its markets. Sagicor is focused on growing our business and actively supporting the communities in the markets in which we operate.
C. Results of Operations
An understanding of Sagicor's financial condition and the results and related risks of Sagicor's operations for the periods discussed in this MD&A requires an understanding of Sagicor's business. Accordingly, the following discussion should be read in conjunction with the discussion of these and related matters that appear elsewhere in this MD&A, including under the following headings: (i) Key Factors Affecting Results; (ii) Critical Accounting Estimates and Judgements; and (iii) Risk Management.
D. Non-IFRS Financial Information
Sagicor reports its financial results and statements in accordance with IFRS. It also publishes certain financial measures that are not based on IFRS Accounting Standards ("non-IFRS"). A financial measure is considered a non-IFRS measure if it is presented other than in accordance with the generally accepted accounting principles used for the Group's audited financial statements. Sagicor believes these non-IFRS financial measures assist in understanding its ongoing operating results and provide readers with a better understanding of management's perspective on the Group's performance.
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MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2024 |
These measures enhance the comparability of the Group's financial performance from period to period, as well as measure relative contribution to shareholder value.
Since non-IFRS financial measures do not have standardised definitions and meanings, they may differ from the non- IFRS financial measures used by other institutions and should not be viewed as an alternative to measures of financial performance determined in accordance with IFRS. The Group strongly encourages investors to review its financial statements and other publicly filed reports in their entirety and not to rely on any single financial measure. Additional information concerning non-IFRS financial measures can be found in section 11 Non-IFRS financial measures.
E. Cautionary Statement Regarding Forward-looking Information
This MD&A includes "forward-looking information" and "forward-looking statements" (collectively "forward-looking information") and assumptions about, among other things, Sagicor's business, operations, and financial performance and condition, approved by the board of directors of Sagicor on the date of this MD&A. This forward-looking information and these assumptions include, but are not limited to, statements about the Group's objectives and strategies to achieve those objectives, and about its beliefs, plans, expectations, anticipations, estimates, or intentions. Additional information concerning forward-looking information as well as potential risk factors can be found in section 12 Cautionary Statement Regarding Forward-Looking Information
F. Additional Information
All documents related to the financial results of Sagicor Financial Company Ltd. are available on the Company's website at Sagicor.com, in the Investor Relations section. Additional information about Sagicor may be found on the SEDAR website at sedar.com, as well as the Company's Annual Information Form, which may be found on the Company's website or the SEDAR website.
The Management's Discussion and Analysis is dated May 14, 2024.
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MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2024 |
4. CONSOLIDATED GROUP RESULTS
A. Profitability
Group net income/(loss | Three months ended | |||
March 31 | ||||
(in millions of US $) | 2024 | 2023 | Change | |
Net income/(loss) is attributable to: | ||||
Common shareholders | 1.4 | >100% | ||
26.2 | ||||
Non-controlling interest | 7.8 | (56%) | ||
3.4 | ||||
Group net income/(loss) | 9.2 | >100% | ||
29.6 | ||||
Net income/(loss) attributable to Common shareholders by operating | ||||
segment | ||||
Sagicor Life | 9.8 | 5.0 | 96% | |
(56%) | ||||
Sagicor Jamaica | 3.2 | 7.3 | ||
Sagicor Life USA | 37.1 | 4.4 | >100% | |
Sagicor Canada | 5.2 | - | - | |
Head office, Other and adjustments | (29.1) | (15.3) | (90%) | |
Net income / (loss) | 26.2 | 1.4 | >100% | |
Earnings per common share (EPS): | ||||
Basic earnings | $0.19 | $0.01 | >100% | |
Fully diluted | $0.18 | $0.01 | >100% | |
Return on shareholders' equity (ROE)3 | 12.2% | 1.3% | 10.9 pts | |
For the three-month period ended March 31, 2024, the Group reported net income of US $29.6 million compared to US $9.2 million for the corresponding period in 2023, an increase of US $20.4 million. Net income attributable to common shareholders totaled US $26.2 million compared to US $1.4 million for the corresponding period in 2023, an improvement of US $24.8 million. The Return on Shareholders' equity3 (annualised), for the quarter was 12.2%, compared to 1.3% (annualised) for the same period in 2023.
Reported earnings were significantly higher than the prior year primarily due to higher profitability in Sagicor Life USA and Sagicor Life, as well as the inclusion of the results of Sagicor Canada which was acquired in the fourth quarter of 2023. Sagicor Life USA and Sagicor Life benefited from positive market experience. This was offset by lower earnings in Sagicor Jamaica due to negative market experience.
The Earnings per Share (EPS - basic) for the year ended March 31, 2024, was US $0.19 per share, compared to US $0.01 per share for the corresponding period in 2023.
Refer to Section 5: Results by Segment of this Management's Discussion and Analysis for additional information on the Company's profitability for the period ended March 31, 2024.
3 Represents a non-IFRS or other financial measure: refer to Section 11 - Non-IFRS and Other Financial Measures in this document for relevant information about such measures.
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MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2024 |
B. Business Growth
Net insurance and investment result | Three months ended | |||
March 31 | ||||
(in millions of US $) | 2024 | 2023 | Change | |
Insurance revenue | 355.2 | 166.2 | >100% | |
Insurance service expenses | (288.6) | (136.7) | >100% | |
Net expenses from reinsurance contracts held | (36.9) | (27.2) | (36%) | |
INSURANCE SERVICE RESULT | 29.7 | 2.3 | >100% | |
NET INVESTMENT INCOME/(EXPENSES) | 249.4 | 219.6 | 14% | |
Net insurance finance income/(expenses) | (128.0) | (133.7) | 4% | |
Net insurance and investment result | 151.1 | 88.2 | 71% | |
Total Net insurance and investment result by Operating | ||||
Segment | ||||
Sagicor Life | 22.5 | 15.6 | 43% | |
Sagicor Jamaica | 48.1 | 49.9 | (4%) | |
Sagicor Life USA | 58.9 | 21.2 | >100% | |
Sagicor Canada | 25.6 | - | - | |
Head office, Other and Adjustments | (4.0) | 1.5 | (<100%) | |
Net insurance and investment result | 151.1 | 88.2 | 71% | |
Net insurance and investment result totalled US $151.1 million for the three-month period ended March 31, 2024, an increase of US $62.9 million, compared to US $88.2 million reported for the same period in 2023. The results for the three-month period ended March 2024 include results of the recently established Sagicor Canada segment (US $25.6 million), and business growth across all business segments.
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MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2024 |
B. Business Growth, continued
NET INSURANCE AND INVESTMENT RESULT
An analysis of insurance service result for the three-month period ended March 31, 2024, and 2023, is included in the following tables.
Insurance service result | Three months ended | |||||
March 31 | ||||||
(in millions of US $) | 2024 | 2023 | Change | |||
Insurance revenue | ||||||
Contracts not measured under the PAA | ||||||
Amounts relating to the changes in the LRC: | ||||||
Expected incurred claims and other directly attributable | 160.1 | 38.6 | >100% | |||
expenses after loss component allocation | ||||||
Change in the risk adjustment for non-financial risk for the risk | ||||||
24.3 | 6.8 | >100% | ||||
expired after loss component allocation | ||||||
CSM recognised in net income for the services provided | 59.2 | 23.5 | >100% | |||
Insurance acquisition cash flows recovery | 10.1 | 4.8 | >100% | |||
Insurance revenue for contracts not measured under the PAA | 253.7 | 73.7 | >100% | |||
Insurance revenue from contracts measured under the PAA | 101.5 | 92.5 | 10% | |||
Total insurance revenue | 355.2 | 166.2 | >100% | |||
Insurance service expenses | ||||||
Incurred claims and other directly attributable expenses | (238.8) | (109.1) | (<100%) | |||
Losses on onerous contracts and reversal of those losses | (25.2) | (9.9) | (<100%) | |||
Insurance acquisition cash flows amortisation | (24.6) | (17.7) | (39%) | |||
Total insurance service expenses | (288.6) | (136.7) | (<100%) | |||
Total net expense from reinsurance contracts held | (36.9) | (27.2) | (36%) | |||
Total insurance service result | 29.7 | 2.3 | >100% | |||
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Sagicor Financial Company Ltd. published this content on 15 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 May 2024 12:41:43 UTC.
