Profits up 25%, as Individual Life insurance segment continued its exceptional performance

Durrant Pate/Contributor

Notwithstanding the challenges faced in 2022, Sagicor Group Jamaica has delivered a commendable half-year performance, producing net profit attributable to stockholders of J$6.04 billion, a 25 per cent increase over the prior year.

The Individual Life insurance segment continued its exceptional performance and was supported by growth in the Employee Benefits and Commercial Banking segments. Sagicor Group Jamaica’s earning per share improved to J$1.55 (June 2021: J$1.24) with the share price and market capitalisation closing at J$55.49 billion and J$216.72 billion, respectively.

The Group’s results were generated from total revenues of J$46.88 billion, which included year-over-year growth in revenues from core operations, being net premium income, net investment income and fee income. Net premium income of J$26.66 billion grew by four per cent over the prior year, as a result of strong new business sales and policy retention.

Net investment income amounted to J$10.78 billion, a 15 per cent increase over the prior year, emanating from growth in the Group’s interest-earning asset base. Fees and other income were aided by an increase in corporate and domestic spending as well as other commercial banking activities, ending five per cent higher than the prior year.

Acquisition of Alliance Financial Services bearing fruit

The fall in market prices across both fixed income and equity securities, resulted in the Group recognising fair value losses of J$2.22 billion (June 2021: J$3.79 billion in gains). The Group’s recent acquisition, Alliance Financial Services Limited, has had a successful return to full operation and is showing encouraging revenue growth in its remittance and cambio segments.

Sagicor Group’s total benefits and expenses of J$38.40 billion decreased seven per cent against the prior year. The outcome was driven by a J$8.63 billion favorable net movement in actuarial liabilities, a result of strong new business growth and upward movements in market interest rates.

This was offset by J$2.14 billion and J$2.31 billion increases in net insurance benefits incurred and administrative expenses, respectively. The Group’s statement of financial position was impacted by the softening of asset prices with Total assets and shareholders’ equity declining to J$513.97 billion and $104.49 billion, respectively, largely a result of fair value losses.

Total assets under management ended at J$969.37 billion, boosted by a 12 per cent growth in funds under management over December 2021. Sagicor Group’s annualized return on equity was 11 per cent (down from 16 per cent in the corresponding period in 2021).

Segment results

The Individual Life segment doubled its prior year profit to end the quarter at J$3.53 billion. New business sales and in-force policy growth across both the Jamaica and Cayman territories resulted in a J$919.38 million growth in net premium income over the prior year.

The strong new business sales and increases in market interest rates resulted in favorable movements in actuarial liabilities. The Employee Benefits segment produced profits of J$1.67 billion, a 23 per cent increase over prior year.

Net group health premium income of J$5.40 billion increased by four per cent over the prior year, largely on new business won over the period. Net insurance benefits incurred increased by J$1.32 billion, as medical inflation continued to rise, but its impact was offset by a reduction in actuarial liabilities.

Commercial Banking

The Commercial Banking segment recorded a net profit of J$1.21 billion, 22 per cent higher than the prior year. The segment was aided by a 19 per cent increase in total revenues, primarily due to increases in consumer spending activities through credit card and point of sale transactions.

This translated to 39 per cent or J$1.03 billion higher fee and other income. The segment’s loan asset base grew by J$6.55 billion against the prior year, contributing to the 12 per cent increase in net investment income.

The commercial bank’s operating efficiency improved over the prior year. Total assets of J$178.38 billion, grew two per cent over December 2021. This growth was driven by a J$2.76 billion increase in loan assets net of ECL provisions which ended the quarter at J$95.78 billion.

Customer deposits and securities liabilities increased by J$1.68 billion and J$3.79 billion respectively against the prior year ended December 2021.

Investment Banking

The Investment Banking segment reported net profits of $853.88 million, a 30 per cent decrease against prior year. The segment continued to be hindered by adverse market conditions, which have curtailed trading activities.

Higher interest rates contributed to a 16 per cent increase in net investment income over the prior year. Fees and other income increased by six per cent year over year, due to growth in fee revenue from funds under management.

Cash and Cash Equivalents at the end of June 2022 were J$32.33 billion, down from J$51.88 billion as at December 2021. The Group’s cash flows period to date included J$25.72 billion allocated to investment securities and J$1.59 billion raised from the sale of shares held in Sagicor Real Estate X fund.

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