Durrant Pate/Contributor

Sagicor Group Jamaica has overcome a very challenging 2024, in which it suffered heavy credit and goodwill impairment losses as well as declining shareholders’ profit.

The financial group was hit by an increase in credit impairment losses on one corporate banking arrangement, which was not detailed in its just-released 2024 performance report. In addition, the Chris Zacca-led group recorded goodwill impairment of $ 700 million on Alliance Financial Services (AFS), which it bought two years ago.

AFS’s core revenue growth and margins trend below initial projections, resulting in the goodwill impairment. The Group ended the year with earnings per share (EPS) of $2.37 (2023: $3.67) and Return on Equity of 9% (2023: 16%). While these results fell short of expectations, they reflect extraordinary circumstances rather than fundamental weaknesses in the current business model. 

Abnormally high insurance expenses

The news was also bad for insurance expenses, due to a one-off adjustment to the actuarial models, which increased the loss component in the first quarter of 2024. “This took insurance expenses to an abnormal high of $15.33 billion (2023: $11.22 billion). This adjustment is not expected to recur in future years,” Sagicor explained in its 2024 performance report. 

Expenses increased broadly in line with inflation, as Sagicor continued to fund significant capital investments in digital platforms and data security. Despite these challenges, Sagicor maintained its strategic focus on building for the future, continuing to make targeted investments that strengthen its competitive position and long-term growth prospects. 

Sagicor reports, “This commitment remains steadfast, as we believe our efforts will drive sustainable value creation for our stakeholders when market conditions normalize. In line with that outlook, we undertook a number of significant projects in the period.” These include:

• Sagicor and other key partners signed the $12 billion financing agreement for the Rio Cobre Water Treatment Plant, a transformative public-private partnership that will add 30% to the National Water Commission’s capacity to supply the Kingston Metropolitan Area, thereby alleviating the current water shortages. 
• Unveiling our upgraded eInvest platform, which allows investors to evaluate and participate in local initial public offerings totally online. 
• Broke ground on the Portmore Promenade and officially opened New Brunswick Village in Spanish Town, both being mixed-use, multi-billion-dollar developments. 

Financial highlights

Shareholders’ profit closed on $9.24 billion, down from $14.37 billion a year ago. Despite several one-off items that contributed to the decline in full-year profits, Sagicor remained focused on improving service levels for our clients while driving internal efficiencies. This approach resulted in meaningful growth in the Group’s insurance revenues and net interest income relative to the prior year. 

The Group saw 16% growth in its insurance revenues with a year-over-year increase of $7.72 billion; both long-term and short-term insurance lines continue to experience strong new business sales. Net investment income increased by 5% over the previous year with net interest income growing by 10% supplemented by growth in realised and unrealised capital gains of 4% and 7%, respectively. 

Total assets grew by 7% to end at $597.79 billion (December 2023: $560.65 billion) due primarily to a $14.10 billion increase in the Commercial Bank’s loan portfolio. The growth in assets was funded by increased deposit and security liabilities of $22.75 billion and increased insurance liabilities of $15.36 billion. 

Cash and Cash Equivalents at the end of the period were $54.01 billion (2023: $45.35 billion). The Group’s net cash used in operating activities was $4.15 billion (2023: $2.43 billion). Regulatory capital requirements continue to be exceeded across all operating entities. 

Commercial and Investment Banking 

The commercial banking segment produced net profit of $3.81 billion (2023: $3.58 billion), recording a 9% increase in net investment income supported by greater transaction volumes on its card payments portfolios and growth in net interest income. In spite of the increase in the provision for credit losses in our corporate banking facilities, loan portfolios continue to grow with new loans written of $41.05 billion (2023: $36.16 billion), contributing to a $1.80 billion increase in net interest income. 

Deposit and other funding liabilities grew by $14.35 billion (2023 growth: $3.17 billion) during the year. In the meantime, the Investment Banking segment recorded net profit of $0.89 billion compared to the prior year’s profit of $0.76 billion. 

Net investment income of $3.03 billion increased by 34% (2023: $2.26 billion), mainly due to higher interest income and a meaningful improvement in market experience gains from securities trading. Short-term funding rates remained high and contributed to an increase in the segment’s funding costs. The segment’s Cayman operation continues to grow its funding base, but its margins remain challenged by high interest rates.