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Unstable market conditions experienced throughout 2022 have ameliorated

Durrant Pate/ Contributor

Sagicor Group delivered a strong June second-quarter growth with net profit attributable to shareholders climbing to J$5.6 billion, representing a 65 per cent increase against the comparative period’s restated profit of J$3.39 billion. 

The insurance segment results improved by 35 per cent and the investment income net of insurance finance charges showed growth of 27 per cent compared to June 2022. The prior year’s restated results now include the impact of increases in interest rates and volatility of securities prices through the profit or loss upon the adoption of IFRS 17. 

The group’s insurance sales continue to show growth along the majority of its product offerings and the Group has continued to experience growth in its banking loan portfolios. Unstable market conditions experienced throughout 2022 have ameliorated somewhat in the current period but continue to provide challenges, particularly to its investment banking businesses, as net interest margin continues to be challenged by higher interest rates on customer funds. 

Sagicor ended the June 2023 quarter with earnings per share of J$1.43 (2022: J$0.87) and an improved Return on Equity of 13.2 per cent (2022: 8.4%). 

Financial Performance

Sagicor continued to see strong growth in its core operating revenues with year-over-year growth in net insurance service results, net interest income and fee income. Both long-term and short-term insurance lines continue to experience strong new business sales and improving claims ratios. 

Net investment income of J$12.11 billion improved significantly over the prior year due to the growth in interest-earning assets. A 4 per cent increase in fee income resulted primarily from growth in commercial banking activities. 

Shareholders’ equity grew by 5 per cent in the current period ending at J$87.23 billion (December 2022: J$83.01 billion). Total assets grew by 4 per cent to end at J$536.67 billion (December 2022: J$515.94 billion) largely driven by a J$13.08 billion increase in financial investments and J$7.01 billion growth in the banking segment loan portfolio. 

The growth in assets was largely funded by increased deposit and security liabilities of J$10.39 billion and growth in insurance liabilities of J$6.33 billion. 

Long-term insurance 

The segment includes products whose contract boundaries exceed one year in duration and is measured using the General Measurement Model and Variable Fee Approach under IFRS 17. The segment continues to report strong core insurance results; through the release of Contractual Service Margin of J$2.50 billion (2022: J$2.07 billion) and by generating new business CSM of J$2.49 billion (2022: J$2.52 billion). 

The segment also experienced an improvement in investment income net of finance expenses. Net profit for the segment was negatively impacted by exchange rate fluctuations, recording unrealised foreign currency translation losses of J$0.37 billion compared to gains of J$0.27 billion in the prior year. 

Short-term Insurance 

This segment includes products whose contract boundaries are less than one year and are measured using the Premium Allocation Approach under IFRS 17. The segment reported a profit of J$0.05 billion, an improvement over the prior period’s loss of J$0.29 billion. 

The increase over the prior year is due primarily to improved loss ratios within the health insurance portfolios. The segment continues to show growth with new business sales of J$0.27 billion for group health and life offerings.

Commercial banking 

The commercial banking segment produced a net profit of J$1.22 billion (2022: J$1.21 billion). The segment recorded a 12% increase in revenues, due to greater activity on its card payments portfolios and growth in net interest margins by 13%. 

Loan portfolios continue to exhibit growth with new loans written of J$17.02 billion (2022: J$16.75 billion), contributing a J$1.35 billion increase in interest income. The loan portfolio quality continues to improve year over year with the provision coverage ratio ending at 2.22% (2022: 2.3%). 

Funding liabilities grew by J$8.6 billion (2022: $2.0 billion) during the six-month period. This growth along with increases in the cost of funds resulted in an 84% increase in interest expense. 

Investment banking 

The Investment Banking segment recorded net profit of $0.34 billion (2022: $0.83 billion). The increases in interest rates over the past 15 months have fuelled a significant increase in funding costs, leading to a decline in net interest margins for the Jamaican operations. 

The segment’s Cayman operation has continued its growth trajectory, recording year-over-year increases in revenue and net profit. The group also garnered $9.28 billion from customer deposits and securities liabilities, which aided in funding increases in the bank’s loan portfolio. 

Regulatory capital requirements continue to be exceeded across all operating entities.