Published: Friday July 11, 2008
Sagicor, the Caribbean financial services conglo-merate that has spent an estimated US$100 million to build out a life insurance arm in the United States (US), appa-rently has no plan to retreat in the face of the global economic storm that has made the word, recession, among the most widely used in the American lexicon.
The company's defiance comes in the face of near total erosion of its earnings last year.
The US operation made a net loss of US$1.5 million, which parent Sagicor Group said was due to "Longer than anticipated product approvals ... and slower build out of our distribution network".
Correct strategy
Ken Marshall, the man charged with overseeing Sagicor's foray into America, apparently feels that expansion is the correct strategy for his company in the current environment.
It is like hedging all round.
"The slowdown in the global economy will have a ripple effect, so expanding our reach will help us to weather it more effectively," Marshall said in a Financial Gleaner interview.
Sagicor, which started life as the Barbados Mutual Life Insurance company, has grown with a series of acquisitions across the Caribbean and elsewhere.
Custom-made products
It got a toe-hold in the US three years ago, in 2005, with the US$58 million acquisition of 50-year-old company American Founders Life, which was renamed under the Sagicor brand.
Sagicor Life USA, headquartered in Scottsdale, Arizona, is now licenced to operate in 44 states (up from 41 at acquisition), as well as the District of Columbia, is a registered reinsurer in 45 states, and a third-party administrator in all 50.
The plan, says Marshall, is to target Caribbean, African-Ameri-can, Hispanic and so-called Middle America households with a series of products to fit their needs.
The aim this year is to write approximately US$100 million in premium income, against US$12.1 million dollars in 2007, when the company was busy putting its structures in place.
Officials also expect to better the US$111,000 of operating income contributed to group profits in 2007, which was well below the US$6.9 million of the previous year.
Realistic targets
Company bosses do not think these targets are unrealistic, although they acknowledge the tendency of people "to either postpone the purchase or actually abandon life insurance contracts" during tough economic times.
Last year's performance, they suggest, was an aberration, reflecting the development stage of the company at the time.
"During the year, the company was focused on developing its marketing and sales function, developing and registering products in the various states of America, and these development costs essentially ate into the profits," said Philip Obsorne, chief financial officer for the Sagicor Group, the parent organisation, at its recent listing on the Jamaican Stock Exchange.
"But as we develop, we expect to see the returns in the coming year," said Osborne.
Already, Sagicor Life USA administers over US$2.2 billion of 'in force' insurance business and manages US$475 million in assets.
There is a platform, its managers say, on which to build, in a country of nearly 300 million, two-thirds of which should be actively in the market for insurance products.
Active sales of insurance products started in late 2007, using 588 independent and managing general agents to distribute its products.
Defined path to growth
The company is currently recruiting agents and hopes to have between 50 and 100 career field staff by the end of the year and between 1,500-2,000 independent agents across the US over next three years.
Indeed, Marshall is confident that he has a clearly defined path to growth and, ultimately, health profits.
"Although Sagicor Life Insurance Company (SLIC) is virtually a start-up organisation in the US market, it has a clearly defined strategy and a detailed marketing plan carefully crafted to ensure its combined growth and profitability," he said in a company statement.
"The business growth will be built via middle income con-sumers, as well as small businesses," Sagicor believes. "The quickest growth will come initially from consumers."
Sagicor USA currently has offices in Tampa, Florida, and Scottsdale, Arizona, with plans to expand throughout Florida and Georgia.
Source:
Sabrina Gordon
Jamaica Gleaner
http://www.jamaica-gleaner.com/gleaner/20080711/business/business5.html
sabrina.gordon@gleanerjm.com
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