Six months ago, Sagicor Life Jamaica president Richard Byles was preparing for a bad year, convinced that thousands of job cuts just months before and an economy falling deeper into recession spelled an erosion of revenue and with it his company's bottom line.

Or, worse-case scenario, the insurance giant was, as Byles put it, 'staring down the gun barrel of a disastrous year'.

He was wrong.

Not only has Sagicor Jamaica grown profit, it virtually doubled them in half a year ending June 2009 to $3.1 billion. The year before, its first-half profit was $1.8 billion, which puts the company on track to annualised profit of more than $6 billion in 2009, compared to $4.5 billion last year.

'Unusual transactions'

The company attributed the half-year results to "certain unusual transactions" and acquisitions that boosted top-line income by 59 per cent and profit by 72 per cent. Trimmed of the one-off gains, said Sagicor, earnings would have increased only by 32 per cent.

"Quarter two of the 2009 results benefited from continued strong new business, especially in the employee benefits line," said a joint statement by president and CEO Byles and chairman Dodridge Miller.

For the reporting period, the employee benefits segments more than doubled its performance, contributing approximately $1.4 billion to profits and surpassing banking and asset management which was the largest component for the similar quarter last year.

The company did pay out and/or accrue 53 per cent more in gross benefits to policyholders and other beneficiaries - wracking up a bill of $5.1 billion up to June - but even this Sagicor said was due to its enlargened portfolio from acquisition deals finalised late last year and in the first quarter.

"Despite these excellent results for the first half year, the macroeconomic environment remains challenging and management is keenly aware of the times in which we operate and will continue to manage operations prudently," the company said.

Sagicor Jamaica last December acquired the health insurance portfolio of Blue Cross of Jamaica for $1.7 billion, giving it command of more than 80 per cent of the health insurance market.

The company also bought up the portfolios of two separate outfits in the Cayman Islands - Industrial Alliance and Guardian Life.

Unexpected revenue

The acquisitions helped push Sagicor Jamaica's half-year revenue "ahead of expectations" to $14.7 billion - $1.97 billion from the Cayman operations - and up from $9.2 billion in the 2008 period. And its balance sheet grew 10 per cent in six months and 33 per cent in a year to $129.5 billion. Just under a sixth, $20 billion of those assets, are in Cayman, the rest in Jamaica.

Insurance, annuity and investment contracts have close to doubled in a year from $17 billion at June 2008 to $32 billion at June 2009.

"Recent acquisitions, portfolio growth, better-than-anticipated interest rate spreads, foreign-exchange translation gains and realised capital gains from sale of securities contributed to the revenue growth," said Sagicor Jamaica, a top contributor to Barbados parent, Sagicor Financial Corporation.

"Revenues from the primary lines of business were higher than the prior year and ahead of expectations."

Indeed, Byles' expectations were that business would have declined with the thousands of jobs that companies haemorrhaged in 2008 and at the start of 2009.

He also cited those concerns in the midst of a contentious internal fight to revise the company's salary policy to 'pay for performance' system for all, excluding top managers.

The company in March eliminated 75 jobs, cutting 10 managers and reshuffling other executives in the process. At the same time, the marketing function was merged with that of its highly profitable subsidiary, Pan Caribbean Financial Services.

It cost Sagicor $150 million to integrate portfolios and restructure its operation.

"We are coming off a good year, but last year is last year and now we are staring straight down the gun barrel of a disastrous year," Byles said back in mid-February.

"With the large numbers of redundancies now taking place, people are losing their health insurance. We have to be paying out pensions. Group life is going to be affected, so too is individual life."

Byles was expecting at the time that 7,000 to 8,000 of the 13,000 job cuts announced in January was business that his company would lose.

But instead: "The change in insurance and annuity liabilities of $1.67 billion to June 2009 reflects business growth during the current quarter," said the director's report, referring to the second quarter outcome.

Revenue rose from $4.6 billion to $8.2 billion in the quarter; but so did benefits and expenses, from $3.5 billion to $6.5 billion, leaving pre-tax earnings in the quarter of a hefty $1.76 billion, up from $1 billion in the June quarter of 2008.

All Sagicor's business segments grew in the period, with the most robust performance seen in employee benefits which doubled revenue from $4 billion to $8.5 billion.

business@gleanerjm.com