Friday, April 25, 2008

Sagicor still growing

Published: Friday April 25, 2008

One of the largest financial firms in the Caribbean, Barbadian-based Sagicor Financial Corporation Limited (SFC), recently released results for the financial year ended 2007. For the twelve months ended December 31, 2007, SFC produced EPS growth of 27 per cent from US$0.254 to US$0.323. The board of directors has approved a final dividend of Bds$0.08 per share, which would bring the total dividend for 2007 to Bds$0.14, an eight per cent increase over the 2006 dividend per share of Bds$0.13.

This significant earnings growth was fuelled by two adjustments. Firstly, the group recorded a US$26.4 million gain on the acquisition of Sagicor at Lloyd's Insurance Syndicate which was effected in September of 2007. Secondly, adjustments were made to the carrying value of certain intangible assets recorded during previous acquisitions to the sum of US$3.7 million. The overall impact of these two items was a positive addition to net income of US$22.7 million.

At the top line, net premium revenue and net investment income experienced year on year increases of 14 per cent and 9.6 per cent respectively. This ultimately led to a 16.7 per cent boost in total revenue from US$662.3 million to US$773 million. Excluding the previously mentioned gain, total revenue increased to $746.6 million.

'Total Policy Benefits and Expenses' underwent a 14.7 per cent increase from US$561.8 million to US$644.4 million. However, when the adjustments are excluded, this component experienced a somewhat smaller increase to US$640.7 million.

It can be observed that the group succeeded in reducing its ratio of expenses & benefits to total revenue by approximately 1.7 per cent, from 84.8 per cent to 83.4 per cent over the year.

Income from ordinary activities saw a 27.9 per cent advance to US$128.6 million when compared to the US$100.5 million of 2006. An 11.6 per cent higher effective taxation rate resulted in an increase in bottom line profit of 25.5 per cent to US$108.7 million.

When a year-on-year comparison is made on Net income attributable to shareholders, a 27.5 per cent increase is revealed, from US$67.7 million to US$86.3 million.

The group was able to maintain a strong balance sheet as at the end of 2007 with assets totalling US$3.6 billion and total equity of US$586.7 million. At the end of the financial year, the Group's total debt financing was US$152.7 million with a debt to equity ratio of 26 per cent.

The chairman reported that its US insurance subsidiary, Sagicor Life Insurance Company, fell short of its revenue targets for 2007 as the group underestimated the length of time it would take to file new products and establish additional distribution.

However, the chairman relayed that revenue levels for the last quarter of 2007 and the first quarter of 2008 are on track with the group's expectations.

Sagicor General, the Caribbean property and casualty insurance subsidiary also experienced some operational challenges during 2007, particularly the T&T operations, which hindered it from reaching its profit target for the year. However, all other significant subsidiaries within the group met or exceeded expectations.

The financial year 2007 has been a year filled with expansions and growth with many acquisitions taking place over the year, from Gerling at Lloyd's Group, Byrne & Stacey
Underwriting Limited, and Barbados Farms Limited, to name a few. These acquisitions have confirmed SFC's drive and determination to become an international contender in the financial services industry.

In February of last year, SFC took a large step forward with its listing on the London Stock Exchange. Since its listing, trading has remained very light. Over first quarter of 2008, only 87,000 shares have traded with the last recorded price at $1.17.

The successful growth strategy adopted by SFC, projects a very optimistic and profitable outlook for the group in the 2008 financial year and by extension, the years to follow.

With the completion of the Neal & Massy Holdings Limited takeover of Barbados Shipping & Trading Company Limited (BS&T), SFC will be receiving an influx of cash during the new financial year in terms of gains on its shareholding, since the group holds a substantial interest of approximately 12 per cent of the total issued and outstanding shares of BS&T.

Jamaica Observer

No comments: