Sun | Apr 23, 2017

Sagicor makes $8.5b profit despite hit on RBC acquisition

Published:Wednesday | March 18, 2015 | 3:00 AM

Sagicor Jamaica's profits have been on the rise for some time, but its current performance has positioned it alongside the big banks, which have ruled as the kings of profits.

Sagicor Group Jamaica is still number three in the line-up of top profit-makers listed on the Jamaica Stock Exchange, but the financial conglomerate primarily in the business of insurance completed the year with $8.56 billion in profit at yearend December 2014 - a level only known to have been accomplished so far by Scotia Group Jamaica and National Commercial Bank Jamaica.

The company made $6.45

billion in 2013.

Still, the 2014 results were both buffeted by costs associated with the acquisition of its commercial banking asset, RBC Bank Jamaica, and bolstered by a number of one-off occurrences.

Profit rose by 33 per cent in the year, but were the negative goodwill and non-recurring items to be excluded, Sagicor said its bottom line would only have grown by seven per cent.

The non-recurring events were largely booked in the fourth quarter, pushing profit for that period up 82 per cent to $4.72 billion.

"The Q4 2014 results include the negative goodwill, certain non-recurring charges and actuarial reserves gains from expense efficiencies and mortality experience," said President Richard Byles and Chairman R. Danny Williams in a statement to shareholders.

43 per cent growth

The group also reflected 43 per cent growth in assets that were largely linked to its $9.5 billion acquisition of RBC Bank Jamaica. Total assets rose from $198 billion to $284 billion, with RBC contributing $62.6 billion. In May 2014, Sagicor Group also acquired the 14.55 per cent of minority shares in Sagicor Investments Jamaica Limited in a share swap for group shares. Sagicor Investments was subsequently taken delisted from the stock exchange.

Sagicor said RBC Jamaica, which is being merged with Sagicor Bank Jamaica, contributed to the eight per cent rise in group revenue to $45.6 billion, but it also reported that post acquisition losses of $558 million, including rebranding and restructuring costs, weighed on profits.

The main contributors to profit were employee benefits, $3.9

billion, individual insurance line, $2.4 billion, and investment banking at $911 million. The commercial banking operation as a whole made losses of $467 million, compared to a profit of $320 profit a year ago before the acquisition and merger. There were also increased provisions for credit losses, plus new operating costs associated with the bank's new Hope Road branch which was opened in December 2013.

Sagicor said it expected a better outcome for Sagicor Bank

in 2015. In a statement to shareholders from President Richard Byles and Chairman R. Danny Williams, the directors said with the corporate reorganisation and acquisition of RBC Jamaica completed, it has "embarked on an ambitious programme to reorganise the commercial and investment banking operations, upgrade technology and entrench a customer-centric and sales-oriented culture".

The group closed the year with a large $22 billion, up from $5 billion.

"This heavy cash position results principally from the expansion of our retail banking operations," Byles and Williams said.

Total assets under management, as at December 2014, including pension funds assets managed on behalf of clients and unit trusts, amounted to $461.29 billion, up from $329.51 billion as at December 2013.

During the year, Sagicor paid total dividends of $2.41 billion or 63 cents per share, up from $1.5 billion or 40 cents per share in 2013.

avia.collinder@gleanerjm.com

neville.graham@gleanerjm.com