Mon | Feb 17, 2020

Asset sale gives Sagicor cash infusion of J$973m

Published:Friday | August 20, 2010 | 12:00 AM
Richard Byles, president and chief executive officer of Sagicor Life Jamaica Limited. - File

Sagicor Life Jamaica's sale of its general insurance business poured just under a billion dollars of cash into the company at the second quarter, offering the closest valuation to date of the deal struck with Bahamas First Holdings Limited at the top of the year.

The disposal of the 75.25 per cent shares in Sagicor General Insurance Cayman Limited, though dated January 1, was finalised and booked by Sagicor Jamaica in June.

The company's second-quarter results reflect a J$972.8-million cash inflow from sale of subsidiary, with no other business other than the Cayman operation known to have been sold in the period.

Sagicor Jamaica also wiped J$306 million of equity from its balance sheet as a result of the sale of Sagicor General, but still ended the period with a stronger capital base ofJ$23 billion due to retained profits and other equity.

Assets also posted a near J$1.5-billion gain to J$136.93 billion despite a drop in cash holdings by more than J$3 billion year to date, from J$11.7 billion at December 31 to J$8.3 billion at June 30.

The cash erosion was linked to an unexplained J$6.74-billion deficit under 'items not impacting cash and changes to policyholders' funds.

A request for clarification of the deficit was unanswered at press time.

The company's forecast that the recession would eventually stall business growth was manifested in the April-June quarter, when net premium revenue underperformed the 2009 quarter by J$1 billion, dropping from J$5.35 billion to J$4.34 billion.

Net revenue fell from J$8.25 billion to J$6.15 billion in the quarter, with just under a third of the decline linked to the discontinued Cayman General business.

The company brought in, annually, revenue of J$2.5 million to the Sagicor group.

Key metrics

Still the New Kingston-based operation is projecting positivity.

"Key business metrics of revenue, new business, conservation, claims and administration expense ratios are all performing better than expected," said Chairman Danny Williams and President Richard Byles in a co-signed statement to shareholders.

"We are confident that the strategies being pursued are effective and will deliver favourable financial results, amid the challenges and opportunities presented by the changing economic environment in which we operate."

Byles had said previously that the fallout in jobs lost to the recession, including bauxite, would have resulted in the company losing business. There are now signs that the bauxite sector is ramping up production after a year of dormancy, including the largest player UC Rusal, which is putting its Windalco plant back on line.

Sagicor reported trimmed expenses ofJ$900 million in the six months to June, from J$11 billion in 2009 to J$10.1 billion. But the improvement was due to the one-off event, the disposal of loss-making Cayman General, whose costs in the six months were zeroed from J$1.07 billion of benefits and expenses last year. Annually, the general insurer paid out benefits of J$2.8 billion.

The insurance company posted lower half-year net profit of J$2.19 billion, down from J$3.13 billion, on the back of reduced revenues which dropped from J$14.66 billion to J$12.77 billion - a decline of 13 per cent.

"Two significant macroeconomic develop-ments negatively impacted current-year results of the group, namely, lower interest rates as a consequence of the Jamaica Debt Exchange programme in February and the strengthening of the Jamaica dollar by four per cent since January, which led to substantial unrealised foreign-exchange losses being recorded," said Sagicor.

When Cayman General is excluded, the revenue decline was six per cent, mostly comprising a more than J$700-million decline in 'fees, commission and other revenue' largely in foreign-exchange translation losses.

Total revenue was also impacted by aJ$660-million decline in net premium revenue to J$8.3 billion in the half-year.