Sagicor insurance revenue stalls, but profit resilient
Published:Friday | March 11, 2011 | 12:00 AM
Stripped of a loss-making subsidiary that Sagicor Life sold last year, Jamaica's top insurance company cleared an additional six per cent of net profit as payouts to policyholders eased.
A J$2-billion decline in annual premium revenue was partly linked to the disposal of the 75.25 per cent stake in Sagicor General Insurance Cayman Limited, which was churning revenue of J$2.47 billion a year for Sagicor Life Jamaica at its sale to Bahamas First Holdings.
The disposal, which was finalised in June, freed parent Sagicor Jamaica of J$2.8 billion of benefit expenses, and annual losses of about J$200-300 million.
Benefits and expenses for the year totalled J$20 billion, down 9.8 per cent from J$22.4 billion in 2009, offsetting the decline in top line income. Consequently, at yearend December 2010, Sagicor Jamaica posted net profit of J$4.67 billion, up from J$4.39 billion in the previous year.
Net insurance benefits expenses fell to J$8.5 billion, a direct consequence of the divestment of the Cayman subsidiary, the company said.
"The 2009 net insurance benefits amount of J$9.8 billion includes net property and casualty claims, and net health claims relating to Sagicor General Cayman," said Ivan Carter, chief financial officer at Sagicor Life.
"Were these excluded, the 2010 amount of J$8.5 billion would reflect a 1.3 per cent increase over the prior year," he said.
Sagicor broke down the major payouts this way: J$4.4 billion in health benefits, J$1.8 billion in death and critical illness benefits, and J$1.3 billion in annuity payments.
Total revenue fell from J$27.9 billion to J$25.7 billion, with the net premium component declining by 12 per cent to J$16 billion.
As revenue stalls, Sagicor is getting more customer-focussed.
President and CEO Richard Byles said in a statement that a new contact centre was rolled out near the close of 2010, and has tasked his team with "creating an environment where the customer feels well served".
The contact centre has been set targets of improving call-handling rates to 98 per cent, and immediate service to 80 per cent of callers.
"It's not good enough for us to simply answer the calls, we are challenging the team to meet our clients' information needs on the first call," Byles said.
Sagicor is also promoting its electronic platforms for premium payments and claims settlement, to deliver services faster to its policyholders and clients, but the move should also translate into savings in-house.
More than half of claims processing last year was health-related. To speed up settlement, Sagicor has also introduced an electronic payment service, 'Sagicor Direct', which Byles said would cut processing time for health claims from 10 to five days.
"We aim to have more of our clients served at their own convenience, either through web portals where they can access information on policies, claims and pension benefits, or by way of the contact centre," said Byles.
"Improved service levels is hinged on improved communication. We want to hear from our customers, whether they had a good experience, a bad experience or a suggestion for us - we have opened an additional channel for our customers to share, using MyExperience@sagicor.com, a new email address which I will personally monitor."
A positive for Sagicor in the past year is that, while impacted bylower interest rates, net investment income has proven resilient, rising to J$7.9 billion, from J$6.7 billion in 2009.
"Net investment income in the current year was affected by lower interest rates ... and unrealised foreign exchange losses depressed the category fees, commissions and other revenues," said the company.
Fees, commissions and other revenues amounted to J$1.8 billion, down from J$2.9 billion for the corresponding period last year.
During the year, Sagicor, which manages J$130 billion of pension and investment fund pools, reshaped its portfolio to lengthen the maturity profile.
"The net cash outflow of J$5.6 billion for the year is due principally to the company making a strategic decision to invest its fund in longer term securities to protect itself and its policyholders against a falling interest rate environment," Sagicor said.
The company began the year with operating cash of J$6.54 billion but closed with a deficit of J$3.7 billion. Net cash of J$11.7 billion depleted to J$5.9 billion.
The company's balance sheet assets grew, however, to J$143 billion, up by J$8 billion in a year.
With declining interest rates and less-than-robust revenue growth, Sagicor is now seeking new markets in which to expand its insurance business. Its first foray beyond home territory was a joint-venture agreement with Capital and Advice Limited, an investment services company based in Costa Rica.
This, the company said, will be the vehicle used to explore insurance business in the Central American region.
We have opened an additional channel for our customers to share, using myexperience@sagicor.com , a new email address which I will personally monitor
- Byles