5 months ago
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The quarterly profit of Sagicor Group Jamaica Limited declined to $1 billion, or half of year-earlier levels, due to one-off expenses related to insurance contracts and reduced market values on certain investments, including Jamaica bonds.
Sagicor Group also spent $229 million during the quarter on its recent entry into the Panama market. It will utilise its joint-venture partner in Costa Rica to operationalise the new unit in Panama to provide insurance services.
Sagicor Group Jamaica President and CEO Christopher Zacca said the Panama operation was in its infancy, during a briefing on the company’s first-quarter performance on Wednesday.
During the quarter, the group’s long-term insurance business was hit with a one-time increase in the loss component of one of its product lines, Sagicor indicated. It resulted in an abnormally high insurance service expense. Management realised the loss after “refinements to the actuarial model” under the transition to new accounting rules related to contracts under IFRS 17.
Over the January-March quarter, Sagicor grew its revenue to $12.5 billion, compared to $11 billion in the year-prior period. Total assets of the group grew to $565 billion, up 7.0 per cent, and its capital also grew to $98 billion, up 8.5 per cent year-on-year.
The profit made in the quarter turned to a comprehensive loss of $396.5 million after adjusting for the market values of the bonds. In the comparative 2023 period, total comprehensive income was positive at $3.4 billion.
Despite Jamaica’s recent upgrade by international rating agencies, the prices of certain sovereign Jamaica bonds, termed JAMAN, declined in the quarter. And Sagicor Group is perplexed by the performance of the bonds, but thinks it’s linked to news regarding inflation in the United States.
“We are trying to understand how foreign entities are pricing those bonds and the risk that they are seeing, because in our view Jamaica is stronger than before,” said Sagicor Group’s Chief Financial Officer, Andre Ho Lung.
“We have had the rating upgrade, and the last thing we would have expected is that JAMAN would suddenly fall, because of the Federal Reserve and inflation. We are wondering how that translates to Jamaica risk,” he added.
Most of the bonds in question are held under Sagicor’s investment and retail banking segments.
At the operational level, the group witnessed growth in insurance revenues, with both long-term and short-term insurance lines experiencing strong new business sales.
The long-term insurance segment made a profit of $246 million in the quarter, compared to $2.3 billion a year earlier. Short-term insurance made a profit of $672 million, compared to $122 million a year earlier.
Sagicor’s commercial banking segment made net profit of $531 million, supported by increased transaction volumes and growth in net interest income, up from $497 million a year earlier. The investment banking segment made net profit of $116 million, compared to a $70-million net loss in the prior period, primarily driven by improved gains from securities trading.
Sagicor Group’s outlook on business remains positive. In relation to the underperforming bonds, executives indicated that the group expects an upswing in prices, eventually, and would be hanging on to the investments.
“We are optimistic about the rest of the year, because the core business is strong and we are gaining market share in most of the businesses we operate,” Zacca said.
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