SFC Sagicor Financial Company Ltd

TORONTO and BARBADOS, March 28, 2024 /CNW/ - Sagicor Financial Company Ltd. (TSX: SFC), a leading financial services provider in the Caribbean and Canada, with a growing presence in the U.S., today announced its results for the fourth quarter and full year ended December 31, 2023. All figures are in US$ unless otherwise stated.

• Net income to shareholders of $532.1 million for 2023
• Net income to shareholders, excluding the ivari bargain purchase gain and transaction costs, of $99.1 million for 2023
• New business CSM⁽¹⁾ of $137.0⁽²⁾ million for 2023
• Shareholders' equity of $970.9 million, with book value per share of US$6.88 or C$9.10
• Shareholders' equity plus net CSM to shareholders⁽¹⁾ of $2.1 billion, or US$14.93 or C$19.74 per share
• Debt to capital ratio⁽¹⁾ of 26.6%
• MCCSR ratio⁽¹⁾ of 301%
• Total LICAT ratio⁽¹⁾ of 136%
• Increase of 7% in quarterly dividend to US$0.06 per common share to be paid during the second quarter of 2024 (US$0.24 annualised dividend)

"2023 was a monumental year for Sagicor. Our team worked tirelessly to complete the conversion to IFRS 17, bring ivari into our corporate structure, and regain our investment grade status while driving forward on other initiatives that will drive value in the years to come. I would like to express my gratitude and congratulations to all of our Sagicor team members for a fabulous year."

Mr. Mousseau continued, "We are pleased to set forth our more precise guidance for 2024 of $90 million to $105 million of core net income to shareholders⁽¹⁾. This is consistent with our prior guidance. The targeted 2024 ROE of approximately 10% is lower than previous guidance due to higher than projected book value at the end of 2023. This additional capital will give us flexibility to drive profitable growth in years to come.

"We are also pleased to announce an increase in our dividend to US$0.06 per quarter. We will continue to balance our meaningful growth opportunities with return of capital to our shareholders through this increasing dividend stream, as well as share buybacks through our normal course issuer bid program. Our new targeted dividend payout⁽¹⁾ guidance will give us a framework to examine possible further dividend increases in the future."

Sagicor's exceptional financial results for the year are the product of strong underlying contributions from its segments and the ivari acquisition. Net income to shareholders was $532.1 million which includes the $448.3 million gain on the ivari acquisition. Our North American operations had strong performance which included solid underlying results and market experience in Sagicor Canada (ivari) and robust production⁽¹⁾ and profitability in Sagicor Life USA, enabling contributions of $122.1 million and $41.1 million in net income to shareholders, respectively.  Sagicor Jamaica also produced another solid year and coupled with the North American performance, drove the $99.1 million in net income to shareholders which excludes the ivari bargain purchase gain and associated transaction costs.

In Q4 2023 Sagicor's financial results significantly benefited from the ivari acquisition and our subsidiaries' strong aggregate Q4 results. Net income to shareholders was $485.3 million, of which the bargain purchase gain on the ivari acquisition contributed $448.3 million. Net income to shareholders excluding this gain and associated transaction costs was $51.2 million, driven by the excellent profitability at Sagicor Canada and Sagicor Jamaica during the quarter, offset by charges taken by Sagicor Life and actuarial strengthening in Sagicor Life and Sagicor Life USA. New business production⁽¹⁾ in each of our segments was robust.

Sagicor significantly enhanced its capital position during Q4, more than doubling its shareholders' equity and net CSM to shareholders⁽¹⁾. During Q4, Sagicor increased its shareholders' equity by 119% Q/Q to $970.9 million driven by the bargain purchase gain on the ivari acquisition and also increased its net CSM to shareholders⁽¹⁾ by 103% Q/Q to $1,135.0 million due primarily to the consolidation of ivari's net CSM to shareholders⁽¹⁾. Sagicor remains well capitalized with an MCCSR ratio⁽¹⁾ for its insurance businesses of 301% and a debt to capital ratio⁽¹⁾ of 26.6%. For the first time we are disclosing consolidated Total LICAT Ratio⁽¹⁾ of 136%.

Sagicor intends to disclose a drivers of earnings analysis and adopt a non-IFRS core net income to shareholders⁽¹⁾ measure in future quarters. Sagicor believes this will support users' understanding of the underlying financial performance and the long-term performance and valuation of the business.

Sagicor is updating its previous guidance on key measures:

• Core net income to shareholders⁽³⁾ for 2024 is expected to be $90 million to $105 million;
• New business CSM⁽³⁾ for 2024 is targeted at $180 million to $200 million;
• 2025 target for core net income to shareholders⁽³⁾ growth of over 10% above 2024;
• Targeted core return on shareholders' equity (ROE)⁽³⁾ over the medium-term of 13%+; and,
• Targeted dividend payout ratio⁽³⁾ based on core net income to shareholders⁽³⁾ over the medium-term of 30% to 40%.

Dividend Increase

On March 26, 2024, the Board of Directors of Sagicor approved and declared a quarterly dividend of US$0.06 per common share, an increase of 7%. This quarterly dividend will be paid on April 30, 2024, to shareholders of record at the close of business on April 10, 2024. This will be the seventeenth consecutive dividend payment Sagicor paid to its shareholders since becoming listed on the Toronto Stock Exchange.

Sagicor has four main reporting operating segments: Sagicor Canada (ivari), Sagicor Life USA, Sagicor Jamaica (of which the Company owns 49.1% and which is consolidated by the Company), and Sagicor Life (includes southern Caribbean).

• Sagicor Canada had solid production in universal life and excellent investment experience reflecting the decreasing risk-free rate since Q3 2023.
• Net income to shareholders of $122.1 million for the quarter driven by pre-tax positive market experience of $141.3 million and negative impact of actuarial model refinements of $1.5 million.
• Total net CSM⁽²⁾ was $563.7 million.

• Sagicor Life USA's new business production⁽¹⁾ of $167.2 million for the quarter managed to achieve its annual production target.
• Net income to shareholders was $41.1 million for the year.
• Net loss to shareholders was $23.0 million for the quarter, driven by an actuarial assumption and methodology change that offset refinements that had a positive impact earlier in the year.
• Total net CSM⁽¹⁾ was $202.9 million, an increase of 14% Q/Q as new business CSM⁽¹⁾ of $5.9 million was bolstered by changes in estimates that increased CSM by $19.2 million.

• Sagicor Jamaica's insurance revenue from both short and long-term insurance products continued to show growth with strong new business production⁽¹⁾. The commercial banking business saw improved profits, while the investment banking division continued to be negatively impacted by the high interest rate environment.
• Sagicor's share of Sagicor Jamaica's net income to shareholders was $49.6 million for the year.
• Sagicor's share of Sagicor Jamaica's net income to shareholders was $17.3 million for the quarter.
• Total net CSM⁽¹⁾ was $281.9 million, an increase of 3% Q/Q.

• Sagicor Life's insurance revenue increased as a function of strong growth in the individual life and annuities lines of business and was offset by an increase in total insurance expenses due to changes in actuarial assumptions.
• Net loss to shareholders was $13.3 million for the year.
• Net loss to shareholders was $30.7 million for the quarter driven by a pre-tax goodwill impairment of $29.3 million and a strengthening of actuarial reserves of $17.0 million.
• Total net CSM⁽¹⁾ was $229.9 million, a decrease of 6% Q/Q as new business CSM⁽¹⁾ of $10.5 million during the quarter was offset by amortization of CSM into profit and changes in estimates that adjust the CSM.

• Net income to shareholders was $399.6 million for the quarter, which was mainly comprised of the bargain purchase gain on the ivari acquisition of $448.3 million, partly offset by head office expenses and other adjustments.

Sagicor repurchased 1,040,559 shares which were cancelled in Q4 2023 for a total cost of approximately US$4.4 million. The number of issued and outstanding common shares as at December 31, 2023 was 141,065,216.

This press release, which was approved by the Company's Board of Directors and Audit Committee, should be read in conjunction with the Company's audited consolidated financial statements and accompanying MD&A. The audited financial statements and MD&A are available on the Company's website at www.sagicor.com and will soon be filed on the System for Electronic Document Analysis and Retrieval Plus ("SEDAR+") at www.sedarplus.ca.

Sagicor Financial Company Ltd. will host a conference call for analysts and investors on Wednesday, April 3, 2024, at 11:00 a.m. Eastern Daylight Time in Toronto (11:00 a.m. Atlantic Standard Time in Barbados and Trinidad and Tobago, 10:00 a.m. Eastern Standard Time in Jamaica). To listen to the call via live audio webcast, visit the Company's website at www.sagicor.com, under the tab "Investor Relations." The conference call is also available by dialing 1-416-764-8688 or 1-888-390-0546 (North American toll free) or 08006522435 (United Kingdom) or 1-866-290-2216 (Barbados) or 1-800-207-8221 (Trinidad). To join the conference call without operator assistance, you may register and enter your phone number at https://emportal.ink/3VagN6M to receive an automated call back. A replay will also be available until May 3, 2024, by dialing 1-416-764-8677 or 1-888-390-0541 (North American toll free), passcode 865801#. A transcript of the call will also be made available on www.sagicor.com.

Sagicor Financial Company Ltd. (TSX: SFC) is a leading financial services provider with over 180 years of history in the Caribbean, over 90 years of history in Canada, and a growing presence in the United States with over 70 years of history. Sagicor offers a wide range of products and services, including life, health, and general insurance, banking, pensions, annuities, investment management, and real estate. Sagicor's registered office is located at Clarendon House, 2 Church Street, Hamilton, HM 11, Bermuda, with its principal office located at Cecil F De Caires Building, Wildey, St. Michael, Barbados.  Additional information about Sagicor can be obtained by visiting www.sagicor.com.

Certain information contained in this news release may be forward-looking statements.  Forward-looking statements are often, but not always, identified by the use of words such as "expect", "anticipate", "target", "believe", "foresee", "could", "estimate", "goal", "intend", "plan", "seek", "will", "may", "would" and "should" and similar expressions or words suggesting future outcomes. These forward-looking statements reflect material factors and expectations and assumptions of Sagicor. Sagicor's estimates, beliefs, assumptions and expectations contained herein are inherently subject to uncertainties and contingencies regarding future events and the impact of IFRS 17 on the presentation of Sagicor's financial statements, and as such, are subject to change. Risks and uncertainties not presently known to Sagicor or that it presently believes are not material could cause actual results or events to differ materially from those expressed in its forward-looking statements. Additional information on these and other factors that could affect events and results are included in other documents and reports that will be filed by Sagicor with applicable securities regulatory authorities and may be accessed through the SEDAR+ website (www.sedarplus.ca). Readers are cautioned not to place undue reliance on the financial information or forward-looking statements contained herein, which reflect Sagicor's estimates, beliefs, assumptions and expectations (including with respect to the impact of IFRS 17) only as of the date of this document. In formulating the forward-looking statements contained herein, Sagicor has assumed that business, regulatory and economic conditions affecting Sagicor and its businesses will remain substantially similar to those in the current environment and reflecting Sagicor's strategy. Sagicor disclaims any obligation to update or revise any forward-looking statements contained herein, whether as a result of new information, new assumptions, future events or otherwise, except as expressly required by law.

The Company reports certain non-IFRS measures and insurance industry metrics that are used to evaluate its performance. As non-IFRS measures generally do not have a standardized meaning, they may not be comparable to similar measures presented by other companies. Securities regulators require such measures to be clearly defined and reconciled with their most comparable IFRS measures. These measures are provided as additional information to complement IFRS measures by providing further understanding of the results of the operations of the Company from management's perspective. Accordingly, these measures should not be considered in isolation, nor as a substitute for analysis of the Company's financial information reported under IFRS. Non-IFRS measures used to analyze the performance of the Company's businesses are set out below. Please see the discussion below for an explanation or a reconciliation of certain non-IFRS measures.

Contractual service margin ("CSM"): The CSM represents an estimate of unearned future profits. This is a new component of insurance contract liabilities under IFRS 17, which was not required under IFRS 4. For new business issued under IFRS 4, the estimated profit or loss over the term of the contract is recognized in income at the date of issue. Expected future profits on new business under IFRS 17 are deferred and recorded in the CSM and amortized into income as insurance services are provided over the term of the contract. Under IFRS 17, expected losses on new business are recognized at the date of issue. Net CSM is net of reinsurance CSM.

Return on Equity ("ROE"): IFRS does not prescribe the calculation of return on shareholders' equity and therefore a comparable measure under IFRS is not available.  To determine this measure, reported net income/(loss) attributable to shareholders is divided by the total weighted average shareholders' equity for the period. The quarterly return on shareholders' equity is annualized. The ROE provides an indication of overall profitability of the Company.

Book value per share: To determine the book value per share, shareholders' equity is divided by the number of shares outstanding at the period end, net of any treasury shares. All components of this measure are IFRS measures.

Minimum Continuing Capital and Surplus Requirements ("MCCSR"): Sagicor voluntarily adopted the Canadian Minimum Continuing Capital and Surplus Requirement (MCCSR) standard as its risk-based assessment measure to provide a consolidated view of capital adequacy. The MCCSR was a standard used by Canadian regulators from 1992 until 2017, when it was superseded by the Life Insurance Capital Adequacy Test (LICAT). When it was in place, the minimum standard recommended by the Canadian regulators was an MCCSR of 150.0%. Canadian practices for calculation of the MCCSR evolved and changed from inception through its replacement. In jurisdictions where the MCCSR is currently prescribed, such as Trinidad and Tobago, the MCCSR guidance is not consistent with the most recent Canadian MCCSR guidelines or with current Canadian capital standards under LICAT. Sagicor has made certain interpretations in our calculation of the MCCSR, in consultation with our appointed actuary, which we believe appropriately reflect the risk-based assessment of our capital position, including accounting for CSM in MCCSR. As the MCCSR is no longer prescribed by Canadian regulators and is interpreted in different ways by our local regulators, there can be no assurance that Sagicor's MCCSR figures are comparable to current reporting by Canadian life insurers or that of Canadian life insurers at any single point in time since the implementation of the MCCSR. IFRS does not prescribe the calculation for the MCCSR, therefore a comparable measure under IFRS is not available.

Life Insurance Capital Adequacy Test ("LICAT") ratio: Sagicor voluntarily adopted the Canadian Life Insurance Capital Adequacy Test (LICAT) standard as its risk-based assessment measure to provide a consolidated view of capital adequacy.

Revenues: Revenues is the sum of three IFRS measures: insurance revenue, net investment income, and fees and other income.

Debt to capital ratio: The debt to capital ratio is the ratio of notes and loans payable (refer to note 17 of the Company's year-end audited consolidated financial statements) to total capital (excluding participating accounts), where capital is defined as the sum of notes and loans payable and total equity including total net CSM and excluding participating accounts. This ratio measures the proportion of debt a company uses to finance its operations as compared with its capital.

Total capital: This measure provides an indicator for evaluating the Company's performance. Total capital ($3.6 billion as at Q4 2023) is the sum of shareholders' equity ($971 million), notes and loans payable ($946 million), non-controlling interest ($358 million) and total net CSM ($1.3 billion). This measure is the sum of several IFRS measures.

New business CSM: This measure is the amount of the contractual service margin added from contracts initially recognised in the period.

New business production: This measure is equal to the amount of annuities and life insurance new business paid premium.

Total net CSM: This measure is the balance of the direct contractual service margin net of reinsurance contractual service margin.

Net CSM to shareholders: This measure is the amount of the total net CSM attributable to shareholders.

Shareholders' equity plus net CSM to shareholders: This measure is the sum of total shareholders' equity and net CSM to shareholders. It is an important measure for monitoring growth and measuring insurance businesses' value.

Dividend payout ratio: This measure is the ratio of the total amount of dividends paid out to shareholders relative to net income to shareholders for a given period.

In addition, as discussed above, in future quarters, Sagicor is expected to report core net income to shareholders. Core net income to shareholders is intended to remove from reported earnings or loss the impacts of the following items that create volatility in Sagicor's results under IFRS, or that are not representative of its underlying operating performance. Each of these items is classified as a supplementary financial measure and has no directly comparable IFRS financial measure disclosed in Sagicor's financial statements to which the measure relates, nor are reconciliations available, including among others unexpected market-related impacts, changes in assumptions, management actions, certain acquisition or disposition related amounts and others such as one-time costs, amortization of intangibles, and tax effects of the aforementioned items. 

SOURCE Sagicor Financial Company Ltd.