Sagicor Life reaps JDX benefits
Published:Friday | June 11, 2010 | 12:00 AM
While many companies continue to tally the investment income decline arising from the Government-imposed bond exchange, at least one listed company, Sagicor Life Jamaica, is highlighting accompanying positives it reaped on its 2009 financials from the Jamaica Debt Exchange (JDX) executed earlier this year. Sagicor Life's chief executive, Richard Byles, told shareholders this week that their company reaped a windfall on bond earnings for the year ended December 31, with significantly lower values being realised since the JDX.
"To the extent that the Government of Jamaica promised to redeem those bonds at par, we found that going up to the redemption date at February that those prices rose to par and, therefore, that loss that we were looking at disappeared and that was a benefit for us, which we took in 2009," Byles said.
Byles said the JDX had another positive effect in that the company now had a better batch of Jamaican dollar on the JDX's longer term bonds, which he said was better backing for the company's liabilities.
"So, we are better matched up today than we were prior to the JDX, and that is because we made representation to issue very long-term bonds." These bonds, he said, are used by insurance companies and some pension funds only. "By making that representation, we got a much better set of bonds and that improved our reserves," he said.
continued net profit
Byles was speaking against the backdrop of a continued net profit growth to $4.88 billion in 2009, from $4.54 billion in 2008. Investment banking through subsidiary PanCaribbean delivered good results which saw net profit growth of seven per cent in that segment to $1.48 billion, compared to $1.38 billion in 2008.
There was also new policies growth on its life insurance operations in Jamaica and Cayman with new business moving up to 50,378, compared to 45,720 in the previous year. This represented 55 per cent of total cases sold by the entire industry, Sagicor has said.
Byles added that the individual life division made a strong contribution to profits.
Total assets of the group ended 2009 at $135 billion compared to $117.79 billion in 2008. Stockholder's equity was $19.86 billion compared to $15.54 billion in 2008. The company has attributed much of this growth to retained earnings and improved value of available-for-sale securities held.
Sagicor's continuing growth spurt is expected to be tempered in the current year when the full impact of the JDX's lower investment yields will be felt on its financials. But already, the company has been feeling the effects.
"First of all, it resulted in narrow investment spreads," Byles said.
He also pointed out that the JDX also impacted negatively on its surplus assets.
"The investment income on those surplus assets, to the extent they are in Jamaican dollar assets, would have fallen and that would be a continuing negative impact on the company," he pointed out.
Actuarial reserves, which increased during the year, has also been impacted, the Sagicor Life president and CEO said.
Employee benefits took a hit with a 14 per cent less earnings amounting to $1.56 billion in 2009, down from the $1.81 billion posted in 2008.