Business
JAM | May 30, 2023

Massive turnaround in fortunes at Sagicor Group Jamaica 

/ Our Today

administrator
Reading Time: 3 minutes

However, Group was negatively impacted by large restated unrealised mark-to-market losses of J$7billion

Chris Zacca, president and chief executive officer, Sagicor Group

Durrant Pate/Contributor

Insurance led financial group, Sagicor Jamaica managed to undertake a dramatic turn-around in fortune during the March 2023 quarter in which it reversed the J$770 million losses incurred last year to post a profit attributable to shareholders of J$2.18 billion for the review quarter.

This represents a swing of 383 per cent even with the harsh business climate in Jamaica. The stand-out segment performers were Insurance Service, which went up by 25 per cent year-over-year to end the quarter at J$1.28 billion, up from J$1.02 billion in March 2022 while the Contractual Service Margin (CSM), went up 20 per cent moving from J$1.03 billion in March 2022 to J$1.23 billion in March 2023. 

Insurance revenues recorded an outturn of J$10.98 billion, a 14 per cent increase over the prior year. Net Insurance results from Long Term insurance and Short-Term insurance were J$1.23 billion and J$0.05 billion respectively. 

In 2023, an improving market environment contributed to better results with reduced volatility in both insurance liabilities and supporting investment securities, when compared to the same period in 2022. Sagicor Group earned J$2.57 billion in net investment income and J$4.16 billion in fee and other income from non-insurance segments.

Disaggregated segment results

Sagicor Jamaica offices

In its latest quarterly financial statements, the management reports “During the March quarter, the Long-Term Insurance segment reported net profits of J$2.37 billion, a significant increase over the prior year loss of J$1.26 billion, which, on restatement, was negatively impacted by large unrealised mark-to-market losses ($7.00 billion), a result of the unfavourable investment conditions that pertained during that period, only partially offset by reductions in the value of insurance liabilities (J$3.15 billion). The comparable impact of these two items was significantly muted in 2023 (-J$0.56 billion) due to an improving market environment.” 

The Long-Term Insurance 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. Unlike IFRS 4, the new standard requires that the net present value of future policy cash flows in this segment be taken to the Balance Sheet in the liability account known as the Contractual Service Margin (CSM) and released to the Profit & Loss statement, as they are earned over time (see the insert for a more detailed treatment of this account). 

The segment recorded CSM releases of J$1.24 billion (2022, $1.03 billion) and generated new business CSM of J$1.2 billion (2022, J$1.2 billion) while continuing to show favourable experience variances in both claims and expenses. The segment’s liabilities include CSM of J$37.07 billion (2022 J$31.95 billion). 

In terms of Short-Term Insurance, this segment includes products whose contract boundaries are less than one year and are measured using the Premium Allocation Approach (PAA) under IFRS 17. The segment reported profits of $122.07 million, an increase over the prior period’s loss of $105.55 million. 

Big 114% improvement in insurance service

Sagicor Group Jamaica CEO, Christopher Zacca. (Photo: Contributed)

Insurance service results of $50.01 million was a 114 per cent improvement over the prior year, driven by increased insurance premium rates. New business sales of J$185.18 million were recorded for Group health and life products along with improving loss ratios for major product lines compared to the prior year due to a sharp focus on premium and benefits management.

Total balance sheet assets and shareholders’ equity ended the March quarter at J$526.72 billion and J$83.53 billion, respectively. The Group’s Funds Under Management of J$459.90 billion grew nominally year on year, contributing to the total assets under management of J$986.62 billion, an increase over prior year-end (December 2022: J$956.30 billion).

In September 2022, the Group sold its shares in Sagicor Real Estate X-Fund and correspondingly, the J$1.76 billion of hotel revenue recorded in fee and other income and the associated hotel expenses of J$1.19 billion, were not present in the current year’s results. However, the Group’s combined efficiency ratio of 43 per cent remains unchanged over the restated prior year. 

The Group’s statement of financial position was significantly impacted by the sale of X-Fund, the change in asset prices and the effects of interest rate movements on insurance liabilities. 

Comments

What To Read Next