This news release for |
Q2 Highlights
- Revenues(1) of
$312.9 million - Insurance revenue of
$165.9 million - Net insurance and investment result of
$156.6 million - Net income to shareholders of
$48.8 million - Estimated core earnings to shareholders(1) of
$13.0 million - Total comprehensive income to shareholders of
$43.4 million - New business CSM(1) of
$48.4 million - Total net CSM(1) of
$697.1 million - Shareholders' equity and net CSM to shareholders(1) of
$1,035.9 million - MCCSR ratio(1) of 286%
- Dividend of
US$0.05625 per common share to be paid during the third quarter of 2023 (US$0.225 annualised dividend)
"Sagicor had a strong second quarter. We delivered solid core results in each of our segments. We also benefited from refinements to the inputs to our discount rates on liabilities which reduced the negative mark to market accounting volatility we observed in the first quarter of 2023. We believe our estimated core earnings to shareholders(1) this quarter of
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1 Represents a non-IFRS measure. See the Non-IFRS Measures section in this document and in our MD&A for relevant information about such measures. |
Sagicor had Q2 2023 net income to shareholders of
Sagicor remains well capitalized with an MCCSR ratio(1) for its insurance businesses of 286% and a debt to capital ratio(1) of 30.4%. Total capital(2) of
Sagicor intends to disclose a drivers of earnings analysis and adopt a non-IFRS core earnings measure in future quarters. Sagicor believes this will support users' understanding of the underlying financial performance and the long-term performance and valuation of the business. We estimate core earnings to shareholders(1) under the currently proposed definition for Q2 2023 to be
Consolidated Highlights
Profitability (US$ millions) | Q2 2023 | Restated | Change | YTD | Restated | Change |
Net income to shareholders | 48.8 | (81.2) | n.m.(2) | 50.2 | (162.2) | n.m.(2) |
Annualised return on shareholders' equity(1) (%) | 43.9 % | n.m.(2) | n.m.(2) | 22.5 % | n.m.(2) | n.m.(2) |
New business CSM(1) | 48.4 | 51.2 | (5 %) | 76.6 | 93.0 | (18 %) |
Financial Strength (US$ millions) | Q2 2023 | Q1 2023 | Change | |||
Shareholders' equity | 462.5 | 428.3 | 8 % | |||
Net CSM to shareholders(1) | 573.4 | 566.6 | 1 % | |||
Shareholders' equity and net CSM to shareholders(1) | 1,035.9 | 994.9 | 4 % | |||
Total net CSM(1) | 697.1 | 690.5 | 1 % | |||
Book value per share(1) (US$ per share) | 3.24 | 3.00 | 8 % | |||
MCCSR ratio(1) (%) | 286 % | 308 % | (22 pts) | |||
Debt to capital ratio(1) (%) | 30.4 % | 31.2 % | (0.8 pts) | |||
Total capital(1) | 2,118.2 | 2,076.8 | 2 % |
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1 Represents a non-IFRS measure. See the Non-IFRS Measures section in this document and in our MD&A for relevant information about such measures. |
2 Not meaningful. |
ivari Update and Outlook
Sagicor is currently awaiting receipt of regulatory approvals required under the Canadian Insurance Companies Act with respect to the acquisition of ivari. All other conditions for closing, except those that are only capable of being satisfied on closing, have been satisfied. We continue to expect to receive regulatory approvals for the acquisition in Q3 2023 with closing occurring shortly thereafter.
Sagicor reiterates its preliminary guidance and pro-forma impacts of the ivari transaction as previously disclosed in the
- Sagicor's current Q2 2023 shareholders' equity of
$463 million would increase primarily by the bargain purchase gain (negative goodwill) created by the purchase price being lower than ivari's adjusted net assets acquired. Pro-forma we expect shareholders' equity will be approximately$650 to 725 million; - Sagicor's current Q2 2023 net CSM to shareholders(1) is
$573 million and pro-forma we expect net CSM to shareholders will be approximately$1.1 to 1.3 billion; - Sagicor's current Q2 2023 shareholders' equity and net CSM to shareholders capital is
$1,036 million and pro-forma we expect shareholders' equity and net CSM to shareholders capital will be approximately$1.8 to 2.0 billion; - Pro-forma 2024 return on shareholders' equity(1) will be approximately 14 to 16%;
- Beyond 2024 the pro-forma company will target high single-digit CSM to shareholders(1) growth and double-digit net income to shareholders growth;
- Sagicor expects ivari to be accretive on a book value and earnings basis and approximately neutral to return on equity (ROE)(1) upon closing of the transaction; and
- Upon the acquisition of ivari, the change in debt to capital (including CSM)(1) ratio is expected to be near neutral.
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1 Represents a non-IFRS measure. See the Non-IFRS Measures section in this document and in our MD&A for relevant information about such measures. |
Business Segment Performance
Sagicor has three main reporting operating segments:
Performance(1) (US$ millions) | Q2 2023 | Restated | Change | YTD 2023 | Restated | Change |
Revenues(2) | ||||||
108.2 | 91.3 | 19 % | 217.3 | 183.0 | 19 % | |
Sagicor Jamaica | 154.6 | 75.5 | >100% | 311.5 | 170.8 | 82 % |
55.7 | (173.5) | >100% | 206.9 | (306.5) | >100% | |
Head office(3) | (5.7) | (38.1) | 85 % | (4.4) | (28.3) | 84 % |
Total | 312.9 | (44.8) | >100% | 731.3 | 19.0 | >100% |
Insurance Revenue | ||||||
73.7 | 71.1 | 4 % | 146.8 | 142.2 | 3 % | |
Sagicor Jamaica | 72.9 | 62.2 | 17 % | 144.9 | 124.3 | 17 % |
19.3 | 16.3 | 18 % | 40.5 | 32.0 | 27 % | |
Head office(3) | 0.0 | 0.2 | (100 %) | (0.1) | 0.1 | (>100%) |
Total | 165.9 | 149.8 | 11 % | 332.1 | 298.6 | 11 % |
Net Income / (Loss) to Shareholders | ||||||
8.7 | (0.4) | >100% | 13.7 | 1.2 | >100% | |
Sagicor Jamaica | 10.8 | 13.3 | (19 %) | 18.1 | 10.8 | 68 % |
54.6 | (35.5) | >100% | 59.0 | (110.8) | >100% | |
Head office(3) | (25.3) | (58.6) | 57 % | (40.6) | (63.4) | 36 % |
Total | 48.8 | (81.2) | >100% | 50.2 | (162.2) | >100% |
New Business CSM(2) | ||||||
14.0 | 11.4 | 23 % | 26.0 | 22.5 | 16 % | |
Sagicor Jamaica | 8.3 | 8.5 | (2 %) | 16.3 | 16.3 | 0 % |
26.1 | 31.3 | (17 %) | 34.3 | 54.2 | (37 %) | |
Head office(3) | - | - | - | - | - | - |
Total | 48.4 | 51.2 | (5 %) | 76.6 | 93.0 | (18 %) |
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1 Prior period amounts were restated to conform to current period presentation. |
2 Represents a non-IFRS measure. See the Non-IFRS Measures section in this document and in our MD&A for relevant information about such measures. |
3 Head office includes parent company financing costs, administrative expenses, the Company's interest in |
Business Segment - Quarterly Highlights
Sagicor Life posted solid new business production growing CSM. Consistent with recent quarters, Q2 saw some continued modest negative experience from the in-force book of business.- Net income to shareholders, which was impacted by negative market experience, was
$8.7 million . - Total net CSM(1) was
$245.8 million , an increase of 2% Q/Q largely due to new business CSM(1) of$14.0 million during the quarter. - During Q2 management made certain reorganizational changes that resulted in the
Sagicor General Insurance Inc. subsidiary now being reported within theSagicor Life segment rather than Head Office and Other. Prior period amounts were restated to conform to current period presentation.
Sagicor Jamaica
- Sagicor Jamaica continued to see strong life insurance production and improving results in its short-term insurance businesses. Commercial banking saw revenue growth due to greater card payment activity and increased net interest margins. The current capital markets environment in
Jamaica continues to negatively impact the investment banking division leading to lower than targeted net income. - Sagicor's share of Sagicor Jamaica's net income to shareholders was
$10.8 million . - Total net CSM(1) was
$243.1 million which was stable Q/Q due to new business CSM(1) of$8.3 million during the quarter which was mostly offset by amortization of CSM into profit.
Sagicor Life USA's new business production(1) of$443.7 million was excellent due to the favorable competitive and investment environment. This led to robust growth in new business CSM.- Net income to shareholders of
$54.6 million , which included a refinement in the discount rate which resulted in a positive impact to net income to shareholders. - Total net CSM(1) was
$208.3 million , an increase of 1% Q/Q as strong new business CSM(1) of$26.1 million from excellent production in the quarter was partly offset by changes in estimates that adjust CSM and amortization of CSM into profit.
Head Office, Other and Adjustments
- Net loss to shareholders of
$25.3 million .
Dividends
On
Subsequent Event
On
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1 Represents a non-IFRS measure. See the Non-IFRS Measures section in this document and in our MD&A for relevant information about such measures. |
Normal Course Issuer Bid
Sagicor repurchased 486,424 shares which were cancelled in Q2 2023 for a total cost of approximately
Management's Discussion and Analysis and Consolidated Financial Statements (Unaudited)
This press release, which was approved by the Company's Board of Directors and Audit Committee, should be read in conjunction with the Company's unaudited consolidated financial statements and accompanying MD&A. The unaudited financial statements and MD&A are available on the Company's website at www.sagicor.com and will soon be filed on the System for Electronic Document Analysis and Retrieval Plus ("SEDAR+") at www.sedarplus.ca.
Conference Call
About
Certain information contained in this news release may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "expect", "anticipate", "target", "believe", "foresee", "could", "estimate", "goal", "intend", "plan", "seek", "will", "may", "would" and "should" and similar expressions or words suggesting future outcomes. These forward-looking statements reflect material factors and expectations and assumptions of
The Company reports certain non-IFRS measures and insurance industry metrics that are used to evaluate its performance. As non-IFRS measures generally do not have a standardized meaning, they may not be comparable to similar measures presented by other companies. Securities regulators require such measures to be clearly defined and reconciled with their most comparable IFRS measures. These measures are provided as additional information to complement IFRS measures by providing further understanding of the results of the operations of the Company from management's perspective. Accordingly, these measures should not be considered in isolation, nor as a substitute for analysis of the Company's financial information reported under IFRS. Non-IFRS measures used to analyze the performance of the Company's businesses include but are not limited to CSM, ROE, book value, MCCSR Ratio, Debt to Capital Ratio, Total Capital, Core Earnings, and New Business Production. Please see the "Non-IFRS financial measures" section below for a reconciliation of these non-IFRS measures.
Contractual service margin (CSM): The CSM represents an estimate of unearned future profits. This is a new component of insurance contract liabilities under IFRS 17, which was not required under IFRS 4. For new business issued under IFRS 4, the estimated profit or loss over the term of the contract is recognized in income at the date of issue. Expected future profits on new business under IFRS 17 are deferred and recorded in the CSM and amortized into income as insurance services are provided over the term of the contract. Under IFRS 17, expected losses on new business are recognized at the date of issue. Net CSM is net of reinsurance CSM.
Return on Equity (ROE): IFRS does not prescribe the calculation of return on shareholders' equity and therefore a comparable measure under IFRS is not available. To determine this measure, reported net income/(loss) attributable to shareholders is divided by the total weighted average shareholders' equity for the period. The quarterly return on shareholders' equity is annualized. The ROE provides an indication of overall profitability of the Company.
Book value per share: To determine the book value per share, shareholders' equity is divided by the number of shares outstanding at the period end, net of any treasury shares. All components of this measure are IFRS measures.
Revenues: Revenues is the sum of three IFRS measures: insurance revenue, net investment income, and fees and other income.
Debt to capital ratio: The debt to capital ratio is the ratio of notes and loans payable (refer to note 11 of the Company's first quarter unaudited consolidated financial statements) to total capital (excluding participating accounts), where capital is defined as the sum of notes and loans payable and total equity including total net CSM and excluding participating accounts. This ratio measures the proportion of debt a company uses to finance its operations as compared with its capital.
Total capital: This measure provides an indicator for evaluating the Company's performance. Total capital (
New business CSM: This measure is the amount of the contractual service margin added from contracts initially recognised in the period.
New Business Production: This measure is equal to the amount of annuities and life insurance new business paid premium.
Total net CSM: This measure is the balance of the direct contractual service margin net of reinsurance contractual service margin.
Net CSM to shareholders: This measure is the amount of the total net CSM attributable to shareholders.
Shareholders' equity and net CSM to shareholders: This measure is the sum of total shareholders' equity and net CSM to shareholders. It is an important measure for monitoring growth and measuring insurance businesses' value.
In addition, as discussed above, in future quarters, Sagicor is expected to report core earnings, an estimate of which for Q2 2023 is included above. Core earnings is intended to remove from reported earnings or loss the impacts of the following items that create volatility in Sagicor's results under IFRS, or that are not representative of its underlying operating performance. Each of these items is classified as a supplementary financial measure and has no directly comparable IFRS financial measure disclosed in Sagicor's financial statements to which the measure relates, nor are reconciliations available, including among others unexpected market-related impacts, changes in assumptions, management actions, certain acquisition or disposition related amounts and others such as one-time costs, amortization of intangibles, and tax effects of the aforementioned items. The estimated core earnings to shareholders for Q2 2023 can be reconciled to net income to shareholders as follows:
Reported Earnings and Estimated Core Earnings Reconciliation (US$ millions) | |
Net income to shareholders | 48.8 |
Market experience gains and losses | (52.7) |
Changes in actuarial methods and assumptions | 0.4 |
Other (includes tax effects, one-time costs, amortization of intangibles) | 16.6 |
Estimated core earnings to shareholders | 13.0 |
SOURCE
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