Pandemic profit recovery at Sagicor

Financial conglomerate Sagicor Group Jamaica is reporting significant earnings for 2021 – the second year of the COVID-19 pandemic – with $17.6 billion in net profit for the year, $17.4 billion of which is attributable to shareholders. That’s 26 per cent more than the $13.78 billion reported in 2020.

The results are a major recovery of the group’s overall financials that saw net profit plummeting to just below $4.5 billion in 2020, a year that saw reversals in Sagicor’s major performance metrics.

It also sees Sagicor, whose flagship business is life insurance, racking up another year of record profit, further solidifying its second-place slot among profit makers.

More notably, however, the results put Sagicor Group Jamaica within striking distance of banking conglomerate NCB Financial Group, which has maintained pole position for years, and still does, but during the pandemic has seen profits fall back to $20 billion as of last year.

Sagicor Group President and CEO Christopher Zacca said on Thursday that the profit out-turn bettered the last pre-pandemic results of $15.65 billion in 2019 and reflected the strength of the group’s diversified operations, with some business lines making up for the areas that underperformed.

The strong group performance was helped by nearly $9 billion in net profit on the group’s individual life insurance portfolio, despite having to pay out more death claims during the year, a trend that continued from 2020.

There was also a 21 per cent overall revenue boost to $102.56 billion, the bulk of which ($92.6 billion) was earned on Sagicor’s large Jamaica operations. Revenue recovered from its nine per cent slide to $84.57 billion in 2020.

“The team really stepped up in 2021, coming off the heels of what was one of the most challenging years in our lifetime,” Zacca said on a conference call on Thursday.

Driven by new business

The individual life segment’s impressive $8.95-billion net profit reflected a 13 per cent improvement over 2020, with Sagicor reporting that the segment result was driven mainly by new business in Jamaica and the Cayman Islands, which grew by eight per cent and 15 per cent, respectively. The new business grew revenue by 34 per cent, or $9.4 billion, over the previous year. This is despite the individual life insurance portfolio having been impacted, Sagicor said, by a $1.5-billion increase in death claims and total policyholder payout of more than $15 billion, which was four per cent higher than in 2020.

The employee benefits segment that covers Sagicor’s group life and health business for private-sector and government workers, weakened in the reporting period with a 13 per cent net profit decline to $3.67 billion. This was attributed to increased cost of medical services and a 12 per cent increase in group health benefits payout over 2020, although Sagicor said this was partially offset by robust new business sales of annuity, group life and group health products, which sold 30 per cent more than in 2020.

The new business helped to grow net premium revenue to $14.62 billion, with the Costa Rica joint venture contributing $600 million, doubling last year’s sales in the Central American country.

Despite increased Bank of Jamaica policy interest rate increases since last September, Sagicor also did better banking business last year, with its commercial bank operations contributing $3.27 billion to net profit, 32 per cent more than in 2020.

BOJ increased rates from 0.5 per cent to 2.5 per cent as of December, and then to 4.0 per cent in February.

Zacca said Sagicor Bank Jamaica had not yet passed on the new rates to its depositors or borrowers. Increased transaction volumes, inclusive of an 11 per cent deposit growth to $136.4 billion; greater demand for credit cards; and big loan-loss recovery, resulting in lower credit losses and loan provisions were said to have contributed to better results for the bank.

“The loan portfolio results are reflective of improvements in the credit quality. The segment’s operating efficiency improved to 67 per cent for December 2021,” the financial group said in its audited year-end results released this week.

Its investment banking business also increased profit by 20 per cent to $3.34 billion.

“Sagicor Investments Jamaica maintained its status as one of the premier investment brokers in Jamaica, with over 25 per cent of the trading value on the market,” the group said.

In a strategy, which Zacca said reflected a decision to spend more on investments in an improving economic climate in 2021, compared to 2020, the group’s net cash from operating activities at December 2021 was just above $3 billion, or half of the $6 billion reported the previous year. In 2020, cash preservation was a primary objective of financial holding companies as a safeguard against market fallouts under the pandemic.

Sagicor Group ended 2021 with $51.88 billion in cash, compared to $37.23 billion in 2020. Its total assets climbed to $528 billion, up from $490.6 billion in 2020 and $400 billion in 2019.

Funds under management rose to $936.3 billion from $905.28 billion in 2020 and 928.17 billion in 2019. Most of the funds under management relate to pension management services, an area in which Sagicor Life Insurance is market leader.

huntley.medley@gleanerjm.com