(SFI.L) Sagicor Financial Corporation Buy/Sell

RNS Number : 2482Y Sagicor Financial Corporation 01 September 2009

1 September 2009

Sagicor Financial Corporation

Final results for the six months ended 30, June 2009

Financial Highlights

FINANCIAL HIGHLIGHTS 30-Jun-09 30-Jun-08
Group net income US$ 40.4m US$ 45.4m
Net income attributable to shareholders US$ 23.0m US$ 33.3m
Annualized return on shareholders' equity 10.10% 15.10%
Shareholders' equity US$ 483.4m US$ 461.5m
Revenue US$ 587.0m US$ 461.7m

Chairman's Statement

The Sagicor Group of companies recorded another commendable performance for the six months ended June 30th 2009. Group net income for the period amounted to US $40.4 million, compared to US $45.4 million for the corresponding period in 2008. Net income attributable to shareholders was US $23.0 million compared to US $33.3 million for 2008. Allowing for the acquisition gain on Barbados Farms of US $4.6 million, and the uplift in investment income from the sale of the RBTT shares of approximately US $5 million in 2008, the 2009 performance compares favorably with the previous year.

Earnings per share was 8.3 US cents (compared to 12.1 US cents in 2008), and the annualized return on shareholders' equity was 10.1%, against 15.1% for 2008.

Our Caribbean Operations including Jamaica and the Netherland Antilles recorded solid performances in an increasingly challenging environment. These operations generated net income to shareholders of US $38.9 million, level with same period in 2008 of US $39.8 million.

Our international division which includes our USA and UK operations and our Property & Casualty business generated an operating profit of US $5.3 million for the period. This was slightly ahead of expectation and better than 2008 by US $2.4 million. The USA operations contributed a small profit in line with expectation. However, consistent with many UK syndicates operating within the Lloyds markets, which write dollar denominated insurance business, Sagicor at Lloyds recorded a foreign exchange translation loss of US $9.4 million. This reduced the net operating income of the international division to a net loss of US $4.1 million. The translation loss is an accounting entry only, and has no cash flow or economic impact on the operating performance of the syndicate. These foreign exchange translation differences are expected to even themselves out over time as they result from non monetary assets and liabilities being recorded at historical rates, but related monetary assets and liabilities being translated at current rates.

Total revenue for the Sagicor Group for the six months amounted to US $587.0 million compared to US $461.7 million; an increase of 27%. Net premium revenue reached US $416.0 million, 46% above the amount for the same period in 2008. Strong new business growth from the USA and UK, together with the positive impact of the acquisition of the business of Blue Cross in Jamaica at the end of 2008 accounted for the significant growth in net premium revenue.

Net investment and other income at US $171.0 million was level with 2008, reflecting the lower investment yields consistent with the challenging investment environment.

Benefits and expenses for the period under review reached US $540.1 million, up by 33% from US $406.7 million in 2008. Benefits increased by 49% reflecting the increased business from the USA and UK operations and the acquisition of the business of Blue Cross in Jamaica. Expenses increased by 9% over 2008, reflecting the growth in the operating activity of the Group.

One significant feature of the period was the continuing reversal of mark-to-market losses on available for sale financial assets. For the six months under review there was an unrealized net increase in the fair value of investment assets of US $26.1 million. This is to be compared to unrealized fair value losses of US $27.7 million for the same period last year. These are positive signs that the financial markets are stabilizing as the effect of the financial crisis and the global recession begin to ease internationally. We continue to record foreign exchange translation losses on our Jamaica operations as the Jamaica dollar depreciated further against the US dollar. Total comprehensive net income for the period amounted to US $52.9 million compared to a comprehensive net loss of US $5.0 million for 2008.

Total assets reached US $4.2 billion, up from US $3.9 billion as at December 31st 2008, of which 69% are held in respect of our Caribbean operations and 31% held in respect of the USA and the UK. Total equity increased to US $624.1 million compared to US $581.6 million at the end of 2008.

During the period, the economic environment in the Caribbean became increasingly challenging as the region began to experience the impact of the global recession. Many regional Governments have signaled their intention to seek balance of payment support from the International Monetary Fund (IMF) as the fiscal positions across the region deteriorate. Both the Government of Jamaica and the Government of Barbados have had their international ratings downgraded by Standard & Poor's (S&P). Jamaica has suffered two downgrades during the period and now stands at CCC+, while Barbados has suffered a downgrade from BBB+ to BBB. Trinidad and Tobago, which remains the strongest economy in the region, has had its rating outlook changed to "negative". As a result of these Country rating changes, Sagicor, which operates in all of these teritories has had its rating changed from BBB+ to BBB in line with its sovereign Barbados. Our rating has been further impacted with an outlook change to negative following the further downgrade of Jamaica; this despite consistent profitable operating performance and continued strong capitalization.

As an insurance company operating in the Caribbean, Sagicor is required by law to invest substantially in the bonds and other instruments issued by the Governments of the countries in which we operate. This is not unexpected as the funds available for investments are seen as part of the national savings which should be available to fund the economic development of the country. However, this naturally exposes our Group to the vagaries of the economic performances of these countries. We continue to address this business risk through expansion and geographic diversification.

We expect the region to continue to be challenged by economic conditions for the remainder of 2009 and perhaps well into the next year. We remain committed to the development of the communities in which we operate while delivering competitive returns to our stakeholders. In this regard, we are also committed to the orderly development of our international operations, particularly in the USA and the UK. We believe that this will be to the long-term benefit of all of our stakeholders.

Terrence A Martins Chairman

August 24, 2009

Enquiries:

Sagicor +1 (246) 467 7500
Dodridge Miller, President and CEO

Melba Smith, Vice President Corporate Communications
Numis +44 (0) 20 7260 1000
Charles Farquhar

College Hill +44 (0) 20 7457 2020
Richard Pearson
Tony Friend

Consolidated statement of financial position

Amounts expressed in US $000 30-Jun 31-Dec

(unaudited) (audited)

Financial investments 3,015,094 2,879,466
Other investments and assets 1,227,280 1,099,850
Total assets 4,242,374 3,979,316

Policy liabilities 2,287,296 2,103,247
Other liabilities 1,330,957 1,294,422
Total liabilities 3,618,253 3,397,669

Shareholders' equity 483,383 447,751
Participating accounts 13,842 12,499
Minority interest 126,896 121,397
Total equity 624,121 581,647
Total liabilities and equity 4,242,374 3,979,316

Consolidated income statement

Amounts expressed in US $000 Six months ended Three months ended
June 30 June 30 June 30 June 30

(unaudited) (unaudited) (unaudited) (unaudited)

Net premium revenue 415,972 285,803 249,788 146,864
Net investment and other 171,002 171,281 87,231 89,896

income
Net gains arising on - 4,645 - (459)

acquisitions
Total revenue 586,974 461,729 337,019 236,301

Benefits 360,013 242,194 225,598 124,134
Expenses 180,078 164,502 86,037 81,514
Total benefits and expenses 540,091 406,696 311,635 205,648
INCOME FROM ORDINARY 46,883 55,033 25,384 30,653

Income taxes (6,480) (9,584) (2,746) (5,225)
NET INCOME FOR THE PERIOD 40,403 45,449 22,638 25,428

NET INCOME ATTRIBUTABLE TO:
Shareholders 23,041 33,291 12,503 19,792
Participating policyholders 1,601 (411) 2,422 (678)
Minority interest 15,761 12,569 7,713 6,314
40,403 45,449 22,638 25,428

Net income attributed to shareholders - EPS
Basic earnings per common 8.3 cents 12.1 cents 4.5 cents 7.1 cents

share
Fully diluted earnings per 8.3 cents 12.0 cents 4.5 cents 7.1 cents

common share

Consolidated statement of comprehensive income

Amounts expressed in US $000 Six months ended Three months ended
June 30 June 30

(unaudited) (unaudited) (unaudited) (unaudited)
NET INCOME FOR THE PERIOD 40,403 45,449 22,638 25,428

Changes in fair value reserves:
Owner occupied property - 891 - -213
Available for sale financial 22,195 (48,743) 35,032 (20,472)

assets
Cash flow hedges 234 - -10 -
22,429 (47,852) 35,022 (20,685)
Retranslation of foreign (9,910) (2,617) 9,451 (803)

currency operations
Other items - (3) - (3)
OTHER COMPREHENSIVE INCOME FOR 12,519 (50,472) 44,473 (21,491)

TOTAL COMPREHENSIVE INCOME FOR 52,922 (5,023) 67,111 3,937

ATTRIBUTABLE TO:
Shareholders 41,194 (7,027) 51,455 2
Participating policyholders 1,474 (441) 2,419 (697)
Minority interest 10,254 2,445 13,237 4,632
52,922 (5,023) 67,111 3,937

Consolidated statement of changes in equity

Amounts expressed in US $000
Six months ended June 30, 2009 (unaudited)
Share Retained Participating Minority
Capital Reserves Earnings Accounts Interest Total
Balance, beginning of period 258,153 (85,272) 274,870 12,499 121,397 581,647
Total comprehensive income for - 18,153 23,041 1,474 10,254 52,922

the period
Issue of shares - - - - 383 383
Dividends declared - - (5,553) - (5,138) (10,691)
Other movements - (35) 26 (131) 0 (140)
Balance, end of period 258,153 (67,154) 292,384 13,842 126,896 624,121
Six months ended June 30, 2008 (unaudited)
Share Retained Participating Minority
Capital Reserves Earnings Accounts Interest Total
Balance, beginning of period 231,695 21,735 201,744 9,396 122,137 586,707
Total comprehensive income / - (40,315) 33,288 (441) 2,445 (5,023)

loss for the period
Issue of shares 25,800 - - - 1,222 27,022
Minority interest acquired - - - - 13,484 13,484
Purchase of treasury shares (2,624) - - - - (2,624)
Dividends declared - - (11,087) - (6,005) (17,092)
Other movements - 757 529 (131) (1,620) (465)
Balance, end of period 254,871 (17,823) 224,474 8,824 131,663 602,009

Consolidated statement of cash flows

Amounts expressed in US $000 Six months ended
30 June

(unaudited) (unaudited)

Operating activities 96,123 30,366
Investing activities (6,643) (4,856)
Financing activities (2,617) (603)
Effects of exchange rate changes 6,962 971
Net change in cash and cash equivalents 93,825 25,878
Cash and cash equivalents, beginning of period 226,852 113,492
Cash and cash equivalents, end of period 320,677 139,370

Note to the financial statement

1. Basis of preparation

These condensed interim financial statements have been prepared in accordance with the accounting policies set out in note 2 of the December 31, 2008 audited financial statements.

This information is provided by RNS The company news service from the London Stock Exchange

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