JMMB DOUBLE WINDFALL
Published:Sunday | February 18, 2024 | 12:12 AMSteven Jackson - Senior Business Reporter
FINANCIAL CONGLOMERATE JMMB Group benefitted from a double windfall that resulted in the rocketing of its profit and capital.
JMMB made profit of $15.1 billion for its December 2023 third-quarter, or 278 per cent more than the $4 billion it made a year earlier, due to a one-off gain from the indirect acquisition of a Canada insurance firm.
Concurrently, JMMB capital jumped to $73 billion from $48 billion a year earlier on account of increased net profit and recovery on asset prices on investment revaluation reserves, the group stated.
Its capital now stands at about 10 per cent of its assets, up from 7.5 per cent which results in giving the group a wider buffer to withstand shocks.
The windfalls occurred as the group’s core earnings for the December quarter dipped 78 per cent year on year to $383 million in operating profit. The group’s performance, however, benefitted from its share of a bargain gain at $14.6 billion related to the acquisition of Canada-based insurance firm Ivari Holding by Sagicor Financial Corporation (SFC).
The JMMB Group operates in Jamaica, Trinidad & Tobago, and the Dominican Republic. It, however, holds a significant investment in regional insurance giant SFC, which overall forms part of its strategy to earn from different locations and revenue types, according to Patrick Ellis, chief financial officer at JMMB.
“The returns from our investment in SFC underscore the efficacy of our diversification strategy, even amidst challenging macro-economic conditions,” according to Ellis in a release on its profit performance.
JMMB owns 23.4 per cent of SFC, also an insurance entity on its books.
The one-off gain in Ivari was so hefty that it equated to 40 per cent of JMMB’s total value of its investment in SFC at $35 billion. JMMB initially acquired the stake in SFC in 2019 for US$250 million.
The Ivari bargain gain remains largely a non-cash transaction and consequently, JMMB’s cash flow remained flat year on year at $62 billion, compared to $64.5 billion a year earlier.
High-interest rates and its negative effect on capital markets continue to weigh on JMMB’s core performance despite having pockets of higher profit. For the nine-month period ended December 31, 2023, JMMB Group made a net profit of J$17 billion compared to a loss the year earlier.
Despite facing interest rate headwinds and market volatility, JMMB Group’s core earnings remained credible, albeit impacted by margin compression. Net interest income experienced a 24 per cent dip, attributed to higher interest rates and spread compression in investment business lines.
However, gains on securities trading saw a significant 43 per cent uptick, driven by geographic diversification and favourable monetary policies in markets such as the Dominican Republic and Trinidad & Tobago, the group stated.
The high interest rates, however, result in positive performance of the risk-averse insurance sector, which now earns high interest on its investment assets.
Looking closer at the Ivari deal, in October 2023, SFC fully acquired Ivari for a consideration of C$375 million (roughly US$278 million), but it was valued at much higher, resulting in a bargain purchase gain of US$434.7 million, JMMB explained in its notes. That resulted in the group of which 23.44 per cent or $14.6 billion accrued to JMMB Group.
“We remain confident in our strategy to navigate the environment and capitalise on emerging opportunities, as we accelerate initiatives focused on enhancing efficiency and driving revenue generation,” stated Keith Duncan, CEO, JMMB Group in the release.
Additionally, JMMB updated its core Moneyline app, which includes enhanced digital solutions.