Christopher Zacca President & CEO Sagicor Group Jamaica Limited (SGJ or the Group) has released the following report on the performance of the Group of companies for the nine-months ended September 2022.

Overview
Sagicor Group Jamaica remains committed to the vision of improving the lives of people in the communities in which it operates. This continues to guide how the company does business while navigating the economic challenges of a high-inflation
environment, fuelled in part by the ongoing war in Ukraine along with continued supply chain disruptions of critical commodities.

To moderate these effects, Central Banks across the world, inclusive of the Bank of Jamaica, are actively raising their policy rates with the corollary impact of reducing liquidity. These aggressive actions, while necessary, have a deleterious impact on the financial sector’s profitability and its capacity to contribute to economic expansion.

The Group, for the nine-months period, achieved net profit attributable to stockholders of $10.15 billion, a 22% reduction over the prior year.

The Individual Life insurance segment continues to lead the Group’s revenue generation, accounting for $5.42 billion in reported net profit. The Commercial Banking and the Employee Benefits segments were also major contributors, with $2.34 billion and $2.55 billion respectively in net profit attributable to stockholders.

Earnings per share ended at $2.60 (September 2021: $3.34). The stock price closed at $52.40 at the quarter end, resulting in a market capitalization of $204.66 billion.

Financial Performance
Sagicor Group amassed total revenues of $70.76 billion year to date, a 3% decline over prior year. The Group recognized fair value losses of $3.92 billion (September 2021: $5.33 billion in gains); a result of the fall-off in market prices for fixed income and equity securities. Notwithstanding the aforementioned; core revenue streams being net premium income, net investment income and fee income improved year over year. Net premium income improved over prior year by 8% to contribute $41.21 billion, a result of strong new business and policy retention.

Net investment income grew by 12% over prior year amounting to $16.04 billion, emanating from growth in the Group’s interest-earning asset base. Fees and other income recorded better results over prior year by 6% to close the quarter at $13.2 billion, mainly from growth in commercial banking activities.

Total benefits and expenses for the Group increased year over year by 2%, ending at a total of $57.33 billion. Net insurance benefits incurred and administrative expenses increased by $3.41 billion and $3.15 billion respectively year over year. This was partially offset by a favourable net movement in actuarial liabilities of $6.60 billion, stemming in the main from an upward movement in prevailing market interest rates.

The Group’s statement of financial position was impacted by the softening of asset prices, with Total Assets and Shareholders Equity declining to $504.38 billion and $106.03 billion respectively, largely due to fair value losses. Additionally, the decline in total assets was influenced by the sale of the Group’s remaining shares in the Sagicor Real Estate X Fund.

The Group’s Funds under Management of $413.82 billion grew nominally year on year, contributing to the Total assets under Management of $918.20 billion.

Sagicor Group’s annualized return on equity was 12% (down from 16% in the corresponding period in 2021).

Individual Insurance
The Individual Life segment ended the period with $5.42 billion in net profit, a 20% decline over prior year, primarily due to less favourable changes in actuarial liabilities when compared to 2021. Nevertheless, net premium income grew year over year by $1.29 billion when combined across Jamaica and Cayman, a product of new business sales growth and policy retention.

Employee Benefits
The Employee Benefits segment produced profits of $2.55 billion, in-line with the prior year. Net group health premium income of $9.21 billion increased by 11% over the prior year, largely on new business written during the period. Net insurance benefits incurred increased by $2.4 billion, as medical inflation continues to trend upward. However, this was offset by a reduction in actuarial liabilities for the period.

Commercial Banking
The Commercial Banking segment produced a net profit of $2.34 billion, 10% higher than the prior year. The segment was aided by a 13% increase in total revenues, primarily due to increases in banking activities through credit card and point of sale transactions. This translated to 27.68% or $1.22 billion higher fee and other income year over year.

Total assets of $186.31 billion grew 7% over December 2021. This growth was driven by a $9.93 billion increase in loan assets which ended the period at $102.95 billion. Customer deposits increased by $6.01 billion against the prior year end to total $142.41 billion as at September 2022.

Investment Banking
The Investment Banking segment’s net profit outturn was $1.18 billion, a decline of 42% against prior year. The prevailing macroeconomic conditions have precipitated a significant reduction in business transactions, adversely affecting performance. Nevertheless, higher interest rates contributed to a 22% increase in net investment income over the prior year.

Liquidity And Solvency
Cash and Cash Equivalents at the end of September 2022 were $39.26 billion, down from $51.88 billion as at December 2021. The Group’s cash flows period to date included $33.74 billion allocated to the investment portfolio. Regulatory capital requirements continue to be exceeded across all operating entities.

Outlook
The threat of unsustainable levels of inflation has resulted in continued tightening of rates in most major economies. Central Banks have voiced their commitment to price stability and indicated their willingness to continue these actions until inflation returns to manageable levels, suggesting that rates will rise further before any meaningful reductions are made. This policy direction is predicted to result in recession in most major economies, an outcome acknowledged by the policy makers as likely but less damaging to economic and social order in the medium-term.

In the domestic economy, the Bank of Jamaica (BOJ) reported an inflation rate of 9.3% in September 2022, a reduction over August’s outturn but still well above the Bank’s target range of 4-6%. BOJ’s current policy rate of 6.5% is expected to rise in line with indications from the US Federal Reserve of a 50-75 basis point increase following its latest meeting. These rises will continue to have a negative cumulative effect on business activity, as private borrowing becomes less attractive, which in turn could threaten economic expansion and employment, the latter currently at record levels. It is a problem with no easy solution and our view is that it will protract given the structural issues of geopolitical instability and a recovering supply chain.

Sagicor Group Jamaica remains vigilant in monitoring these developments and continues to focus on maintaining its strong liquidity position while working with its customers to minimise disruption to their businesses. Our goal is to emerge from this difficult period as a more agile company, with a view to take advantage of growth opportunities that tend to present after down economic cycles.

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