However, higher policyholder claims and increases in actuarial reserves negatively impacted profitability

Sagicor Jamaica is reporting higher profits and revenues for the June quarter, which has seen the continued rebounding of the insurance-led financial conglomerate.

Net Profit Attributable to Shareholders is up 11 per cent to $4.85 billion earnings per share of $1.24 (June 2020- $1.12). Sagicor has seen steady performance in its individual life insurance, commercial banking and investment banking business lines and continues to experience strong sales of its insurance products.

Total revenues generated were $48.20 billion, which is up $9.35 billion or 24 per cent higher than the prior period and consolidated net profit attributable to stockholders was $4.85 billion, compared to $4.36 billion in prior year. Prior year’s revenues were adversely impacted by COVID-19, characterised by large unrealised fair value losses and high Expected Credit Losses (ECL), which is a direct result of the slowdown influenced by the pandemic.

Negative impact on profitability

The current period has seen some reversal of these factors resulting in improved revenues but benefits and expenses, outcomes of higher policyholder claims and increases in actuarial reserves have negatively impacted profitability. Rising medical costs in its Employee Benefits Division (EBD) and increases in death claims contributed to an increase of four per cent in net benefits, a direct result of the pandemic’s effect on health security.

In 2021, driven by continued strong performance in new business sales, net premium income showed a four per cent improvement over the first quarter of 2021 and ended one per cent higher than the prior year. Net investment income increased by three per cent over prior year, as the Sagicor Group recorded an increase of $6.7 billion in unrealised capital gains over the comparative period reflecting the price recovery in its marketable securities.

Substantially lower ECLs were in part due to recoveries of outstanding loans and credit card accruals in the commercial banking segment. Fee and other income of $7.91 billion increased by approximately $1 billion compared to prior year as the Group benefited from increases in managed fund values as well as realised and unrealised foreign currency gains.

The Group maintained a strong liquidity position, increasing its cash holdings by $10.44 billion and growing its total asset base by seven per cent when compared to the prior year.

Individual Insurance segment

The Individual Life segment posted net profits of $1.71 billion, 11 per cent lower than 2020. This was driven by increases in actuarial liabilities in the current year.

The segment continues to write exceptional levels of new business in Jamaica and Cayman, being 38 per cent ahead of prior year and seeing six per cent growth in its portfolio of policies. Net revenue showed significant growth over the comparative 2020 period.

Employee Benefits Segment

The Employee Benefits segment produced profits of $1.36 billion, significantly lower than 2020 ($2.60 billion). Net group insurance and annuity premiums earned of $9.66 billion, included 25 per cent growth in new annualized premium income.

However, rapidly rising medical costs and death claims led to a 20 per cent increase in benefits incurred compared to the prior year.

The joint venture in Costa Rica continued its strong performance and contributed $496 million (2020: $149 million) to net profit for the six-month period.

Commercial Banking segment

The commercial banking arm, Sagicor Bank contributed net profits of $987 million for the current period, a significant improvement over the $716 million in 2020. The results were positively influenced by $752 million net positive movement in its ECL account compared to 2020, due to significant recoveries on outstanding loans during the current period.

Fee based income of $2.73 billion was 9.3 per cent higher than prior year, driven by a 10.6 per cent increase in the credit card business, which yielded $1.13 billion in fee income. Total assets of $168.14 billion increased by 9.75 per cent against prior year and seven per cent since December 2020, driven mainly by increases in loans and advances, which ended the period at $89.22 billion.

This is an improvement over the prior year December 2020 position. Customer deposit liabilities of $127.43 billion also increased by $13 billion and $5 billion against prior year and December 2020 respectively.

Investment Banking segment

The Investment Banking segment contributed $1.22 billion to the Group’s net profit, a five per cent decrease over prior year. Total revenue grew by two per cent due to increases in unrealised foreign exchange gains and interest income, helped by a three per cent increase in interest earning assets.

Growth in fee income has been challenged due to lower levels of capital market transactions but we expect an uptick in future market activity, as signaled by our recently announced US$280-million financing transaction for New Fortress Energy Inc. The Group consolidated cash generated from investing activities was bolstered by $13.60 billion from the sale of the entire block of Playa shares in January 2021.

The liquidity of the Group has remained strong with Cash and Cash Equivalents at the end of June 2021 being $37.86 billion (June 2020: $25.69 billion). The Group has maintained its strong capital position and continues to exceed regulatory capital requirements across all entities.