Sagicor records solid first half for 2008

Published: Monday September 1, 2008

Sagicor Financial Corporation Limited

As Sagicor Financial Corporation (SFC) continues to grow its operations, the Group reported an EPS of US$0.121 or TT$0.76 for the half year ended June 30, 2008. This compares favourably to the EPS of US$0.095 or TT$0.60 reported for the corresponding period of 2007, and represents a 27.4 per cent improvement. The directors have decided on an interim dividend of US$0.03 or TT$0.189 per share to be paid on October 15, 2008. This dividend represents a payout ratio of 25 per cent of earnings.

The Insurance units of the Company which comprise the Group's core business activities reported 47.9 per cent growth in Net Premium Revenue from US$193.3M to US$285.8M. This growth was contributed to substantially by the recently acquired Sagicor at Lloyd's business.

Exhibit 1 below is a graphical summary of some of the key items in SFC's Income Statement.

Net Investment and Other Income, the more unpredictable Revenue source also contributed to the Group's Total Revenue over the half year period as this item grew by 17.5 per cent from US$145.8M to US$171.3M. Gains on acquisitions recorded on the Income Statement have become part and parcel of the Group's operations as a result of SFC's acquisition strategy. With the acquisition of Barbados Farms Limited during the first quarter of the year, SFC recorded a gain on acquisition of US$4.6M for the first half of 2008 which added to this period's top line growth. Overall, Total Revenue moved up from US$339.1M to US$461.7M, representing a 36.2 per cent improvement.

The Sagicor at Lloyd's business also influenced the increase in Total Benefits and Expenses. Net Benefits increased by 33.3 per cent to US$242.2M while simultaneously Expenses grew by 44.6 per cent to US$164.5M. The net effect of this was a significant 37.7 per cent increase in Total Benefits and Expenses from US$295.4M to US$406.7M.

Nevertheless, Income from Ordinary Activities improved from US$43.7M to US$55M, a 26 per cent increase. A relatively unchanged effective taxation rate resulted in a 25.4 per cent enhancement to Net Profit for the period from US$36.2M to US$45.4M.

SFC has maintained a busy agenda over the first half of the 2008 financial year. After acquiring Barbados Farms Limited in February of this year, in June 2008 a subsidiary of the Group previously involved in Merchant Banking, Pan Caribbean, was re-launched in Jamaica as a commercial bank under the name PanCaribbeanBank Limited.

Additionally, the Life of Jamaica Group in Jamaica was re-branded to Sagicor Life Jamaica Group. Another re-branding exercise on July 1, 2008 resulted in the former Bryne & Stacey Underwriting Limited being now known as Sagicor Underwriting Limited.

On course to yet another acquisition, SFC announced on July 25 that it has entered into an agreement to acquire the group health insurance portfolio of Blue Cross Jamaica Limited. This transaction however is still subject to regulatory approval. The chairman stated in his report that the successful conclusion of this business deal could enhance Sagicor Life Jamaica's market position as the leading provider of employee benefits.

At a time when uncertainty has bombarded the regional and international financial services sector, SFC has maintained its footing in the market. Double digit earnings growth year on year at a time of slowing economic growth is a creditable achievement. However, the chairman has expressed SFC's continued efforts at monitoring and carefully managing the Group's affairs while seeking out prudent business opportunities.

At the current price of $19.00, shares of SFC are trading at a forward P/E multiple of around 10.4 times on projected earnings. With typically stronger second half earnings for SFC, BOURSE maintains its BUY recommendation.

ANSA Merchant Bank Limited

For the first half year ended June 30, 2008 ANSA Merchant Bank Limited (AMBL) reported a decline in earnings of 4.5 per cent to $0.85 from $0.89 in the first half of 2007. The directors have agreed to pay an interim dividend of $0.15 per share, equivalent to the comparable period of last year.

Total Income experienced a marginal 3.8 per cent improvement year on year from $290.4M to $301.4M. From the figures quoted in the table below, AMBL's Insurance Operations comprise a larger percentage of Total Income. For the first half of 2008the Banking and Insurance segments contributed 45.5 per cent and 54.6 per cent respectively towards Total Income. However year on year, the Banking Operation's contribution to Total Income increased by 24.2 per cent while the Insurance Operations' contribution declined by 8.7 per cent.

Total Expenses suffered an 8.5 per cent increase from $199.4M to $216.3M. With Expenses increasing by a larger proportion than Total Income, Operating profit experienced a 6.4 per cent year on year reduction to $85.2M as seen in the table below.

Profit Attributable to Shareholders for the first half of the year consequently suffered a 4.2 per cent decline from $74.6M to $71.5M.

The Insurance Companies of AMBL hold international investment portfolios. As stated by the chairman in his statement, these portfolios have not been spared from the turbulence in the international financial markets. On the other hand, during the first half of the year buoyant conditions on the local equity markets would have boosted the returns on the local component of the overall investment portfolio.

The second half of the year is expected to be just as challenging if not more so. The local equity market has begun to flatten out with little of the anticipated demand coming to fruition. The dampened state of the international equity and bond markets is expected to persist into the rest of the year. With such a large percentage of Total Income originating from these Insurance Operations in the past, the second half of the financial year will continue to present a challenge for AMBL.

As such, at the current price of $36.59, a forward P/E multiple of 17.7 times and a 57 per cent share price run up year to date, BOURSE revises its recommendation to a SELL.


Source: Trinidad Express Newspapers
http://www.trinidadexpress.com/index.pl/article_business?id=161370646