“A JOURNEY IS BEST MEASURED IN
FRIENDS RATHER THAN IN MILES”
– Tom Cahill
Sagicor Financial Corporation
Vision
To be a great Caribbean Company
committed to improving the lives of the people
in the communities in which we operate.
2
Sagicor Financial Corporation
Contents
Board of Directors
Financial Highlights
Directors’ Report
Chairman’s Report
Management Discussion and Analysis
Actuary’s Report
Auditors’ Report
Consolidated Balance Sheet
Consolidated Income Statement
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Index of Notes to the Financial Statements
Notes to the Consolidated Financial Statements
Senior Management
Advisors & Bankers
Offi ces
Notice of Annual Meeting
Management Proxy Circular
Shareholder Proxy
4
9
12
16
19
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34
35
36
37
38
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123
131
132
136
139
143
3
Sagicor Financial Corporation
Mr. J. Arthur L. Bethell
Chairman
Mr. J. Arthur L. Bethell is our non-executive
Chairman. He retired as President and Chief
Executive Offi cer of The Mutual Group, now Sagicor,
on June 30, 2002, having been appointed to that
offi ce in 1995. He joined The Mutual as a sales
representative in 1965 and has held the positions
of Superintendent of Agencies, Sales Manager,
Vice President, Marketing, and Chief Executive
Offi cer of Capital Life Insurance Company Limited
(Bahamas). Mr. Bethell was elected a director of
The Mutual, now Sagicor Life Inc, in 1994 and is
presently chairman of the subsidiary, Life of Jamaica
Limited.
Mr. Terrence A. Martins
Vice Chairman
Mr. Terrence Martins is our Deputy Chairman, with
over forty years’ experience in the fi nancial services
industry. His areas of expertise include banking,
fi nance, administration, corporate governance and
risk management. Mr. Martins, the former Group
Chief Executive Offi cer of RBTT Financial Holdings
Limited, is currently the Deputy Chairman of the
DFL Caribbean Group and Chairman of the Label
House Group of Companies. Mr. Martins has
previously held several directorships within the
RBTT Financial Holdings Group, in and outside of
Trinidad and Tobago and is also a member of the
Integrity Commission of Trinidad and Tobago.
Mr. David W. Allan
Mr. David W. Allan is a former President and Chief
Executive Offi cer of The Mutual Group, now Sagicor,
a position he held for 23 years. He joined the Group
in 1956 and was elected director of The Mutual, now
Sagicor Life Inc, in 1986. He also serves as director
of various Group subsidiaries and is a director of
Barbados registered exempt insurance companies.
Mr. Allan is a former Barbados and West Indies
cricketer.
Board of Directors
4
Sagicor Financial Corporation
Mr. Andrew Aleong
Mr. Andrew Aleong is currently the Director, Sales
and Marketing, of the Albrosco Group of Trinidad
and Tobago and a director of several companies
within the Albrosco Group. He has spent all of
his professional career in various management
positions within that group. Mr. Aleong is a past
president of the Trinidad and Tobago Manufacturers’
Association. He holds an MBA from the Richard Ivey
School of Business, University of Western Ontario,
Canada.
Prof. Hilary McD. Beckles
Mrs. Marjorie Chevannes-Campbell
Professor Hilary Beckles earned his PhD from Hull
University, United Kingdom, in 1980, and received
an Honorary Doctorate of Letters from the same
university in 2003. He has served as the Head of
the History Department and Dean of the Faculty
of the Humanities, University of the West Indies.
In 1998, he was appointed Pro-Vice-Chancellor for
Undergraduate Studies, and, in 2002, the Principal
of Cave Hill Campus. Professor Beckles has
published widely on Caribbean economic history,
cricket history and culture and higher education and
serves on the editorial boards of several academic
journals. He has lectured in Africa, Asia, Europe and
the Americas.
Mrs. Marjorie Chevannes-Campbell holds an MSc
in Accounting from the University of the West
Indies and is a member of the Institute of Chartered
Accountants of Jamaica and of the Hospitality,
Financial and Technology Professionals. She is
General Manager of the Urban Development
Corporation (the UDC Group), Jamaica, which is
a large property owning company that manages
a variety of several entities. Prior to assuming
this position she worked
in other positions
within the UDC Group. She is a director of Life of
Jamaica Limited, a subsidiary of Sagicor Financial
Corporation, and also of several other private and
public sector companies in Jamaica.
5
Sagicor Financial Corporation
Mr. Christopher D. deCaires
Mrs. Vivian-Anne L. Gittens
Mr. Christopher deCaires is a Chartered Accountant
and holds an MBA from Henley Management
College, United Kingdom. He has over 25 years’
professional
consulting
and management
experience in Barbados and the wider Caribbean,
United Kingdom and Brazil. He is currently the
principal of deCaires Associates, and his areas of
expertise include corporate fi nance, international
taxation, fi nancial management, mergers and
acquisitions, information systems, organisational
design and business planning. He is Chairman
of the Barbados Tourism Investment Inc. and
World Cup Barbados. Mr. deCaires is a former
partner of Price Waterhouse, Barbados, where he
was responsible for corporate fi nance, business
advisory, corporate secretarial and trust services.
Mrs. Vivian-Anne L. Gittens, BSc (Eng), MBA, CMA,
FCA, became a Director of The Mutual, now Sagicor
Life Inc, in 1989. She is a Director and CEO Designate
of The Nation Publishing Co. Ltd., a newspaper
publishing company in Barbados. She is a former
Deputy Chairman of the Fair Trading Commission in
Barbados and also chaired its precursor, the Public
Utilities Board, from 1994. Mrs. Gittens earned
a BSc in Engineering from the University of the
West Indies and an MBA from the University of
Ohio, United States.
Mr. Stephen D.R. McNamara
Mr. Stephen D.R. McNamara is Senior Partner of
McNamara & Company, Attorneys-at-Law of St.
Lucia. He was elected to the board of The Mutual,
now Sagicor Life Inc, in 1997. He is a former
Chairman of the St. Lucia Tourist Board and is
currently a Director of various subsidiaries in the
Group.
Board of Directors
6
Sagicor Financial Corporation
Dr. Oscar W. Jordan G.C.M.
Dr. Oscar W. Jordan, G.C.M., MB, ChB, FRCPE,
is Consultant Physician,
DCH, Diabetologist,
Department of Medicine of the Queen Elizabeth
Hospital, Barbados. He
is Chairman of the
Diabetes Foundation of Barbados and Director of
Clinical Medicine in Barbados for the University
of St. Georges, Grenada. A widely published and
well respected physician, he is President of the
Caribbean Golf Association. He became a Director
of The Mutual, now Sagicor Life Inc, in 1990.
Mr. William P. Lucie-Smith
Mr. Dodridge D. Miller
Mr. William P. Lucie-Smith earned an MA degree
from Oxford University and
is a Chartered
Accountant. He is a retired senior partner of
PricewaterhouseCoopers, Trinidad and Tobago,
where he headed the Corporate Finance and
Recoveries Divisions. Mr. Lucie-Smith has been
a Special Advisor to the Trinidad and Tobago
Government and Central Bank on divestment. He
also served on the Rampersad Committee to review
the Reorganisation and Rationalisation of State
Enterprises of Trinidad and Tobago and the Daly
Committee on Corporate Insolvency and Company
Law with special reference to severance pay.
Mr. Lucie-Smith is an independent consultant.
Mr. Dodridge D. Miller, FCCA, MBA, LLM, with over
25 years’ experience in the fi nancial services industry,
was appointed President and Chief Executive Offi cer
of The Mutual Group of Companies, now Sagicor,
on July 1, 2002. He joined the Group in 1989 and held
the positions of Treasurer and Vice President, Finance
and Investments, Deputy Chief Executive Offi cer and
Chief Operating Offi cer. He was elected a Director of
the Group in 2001. He also chairs and is a Director
of other subsidiaries. He is a Chartered Certifi ed
Accountant with an MBA from the University of Wales
and Manchester Business School, United Kingdom
and gained his LLM in Corporate and Commercial
Law from the University of the West Indies.
7
“LET YOUR HOOK ALWAYS BE CAST…
WHERE YOU LEAST EXPECT IT,
WILL BE A FISH”
– Ovid
Sagicor Financial Corporation
Financial Highlights
SHAREHOLDER RETURNS
Earnings per common share
Dividends per common share:
Interim
Final
Total
Book value per common share at December 31
Market value per common share at December 31
2005
2004
52 cents
26 cents
6 cents
6 cents
12 cents
$2.82
$4.30
4 cents
6 cents
10 cents
$2.67
$4.35
Net income attributable to shareholders
$136.6 million
$67.7 million
Total shareholder book value at December 31
$ 747.5 million
$693.3 million
Total shareholder market value at December 31
$1,141.9 million
$1,131.1 million
GROUP PERFORMANCE
Net premium revenue
Net investment income
Benefi ts
Administrative and commission expenses
Premium and corporation taxes
Net income
2005
$ millions
2004
$ millions
639.2
415.4
(595.6)
(309.5)
(39.4)
199.6
537.5
242.9
(481.2)
(239.7)
(18.6)
73.0
9
Sagicor Financial Corporation
Financial Highlights
10
Sagicor Financial Corporation
Financial Highlights
11
Sagicor Financial Corporation
Directors’ Report
DIRECTORS’ INTEREST
Particulars of Directors’ shareholdings in the issued capital of the Company are as follows:
Director
J Arthur L Bethell
Terrence A Martins
Andrew Aleong
David W Allan
Professor Hilary McD Beckles
Marjorie M Chevannes-Campbell
Christopher D de Caires
Vivian-Anne L Gittens
Dr Oscar W Jordan, GCM
William P Lucie-Smith
Stephen D R McNamara
Dodridge D Miller
SHAREHOLDING
As at December 31, 2005
As at May 12, 2006
Benefi cial
Non Benefi cial
Benefi cial
Non Benefi cial
30,000
70,000
251,833
1,705
9,579
1,087
2,378
21,295
18,381
5,000
2,011
17,612
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
30,000
70,000
252,833
1,705
9,579
1,087
2,378
21,295
18,381
5,000
2,011
500,281
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
No shareholder owns more than 5% of the capital of the Company.
During 2005, 5,523,000 Series A Common Shares were issued pursuant to the acquisition by the Company’s subsidiary, Life of
Jamaica Limited, of the business of Pan Caribbean Financial Services Limited and EBA Limited. This brought the total shares
in issue as at December 31, 2005 to 265,552,748.
At a special meeting held on December 19, 2005, Shareholders approved the establishment of a Long-Term Incentive Plan
(“LTI”) for Executives and an Employee Share Ownership Plan (“ESOP”) for Employees and Advisors (“Sales Agents”) and
for this purpose reserved 10% of Series A Common Shares outstanding or 26,555,274 Shares. Both Plans took effect on
December 31, 2005. No shares were issued pursuant to the LTI or the ESOP as at December 31, 2005. Subsequent to year-end
the Company issued 1,342,027 shares under the LTI.
ANALYSIS OF SHAREHOLDING
SHAREHOLDERS BY SIZE OF HOLDINGS AS AT DECEMBER 31, 2005
Number of
Shareholders
Percentage of
Shareholders
Size of Holding
1 -
1,001 -
2,501 -
5,001 -
10,001 -
1,000
2,500
5,000
10,000
25,000
25,001 -
100,000
100,001 - 1,000,000
1,000,001
and above
Total
12
5,781
17,107
8,177
4,570
3,302
670
180
15
39,802
14.52
42.98
20.54
11.48
8.31
1.68
0.45
0.04
Total
Shares Held
3,888,250
28,439,332
27,872,247
32,747,364
47,433,618
31,913,138
46,507,000
46,751,799
Percentage
Shares Held
1.46
10.71
10.50
12.33
17.86
12.02
17.51
17.61
100.00
265,552,748
100.00
Sagicor Financial Corporation
Directors’ Report
NUMBER OF SHAREHOLDERS BY COUNTRY OF RESIDENCE AND BY TYPE AS AT DECEMBER 31, 2005
Country
Directors, Management,
Staff, Agents
Companies
Individuals
Total
Shareholders
%
Shareholders
%
Shareholders
%
Shareholders
%
Trinidad and Tobago
Barbados
Eastern Caribbean
Other Caribbean
Other
Total
44
25.44
120
69.36
5
3
1
2.89
1.73
0.58
623
172
35
38
2
71.61
19.77
4.02
4.37
0.23
16,856
43.49
17,523
44.03
12,903
33.29
13,195
33.15
7,926
20.45
7,966
20.01
230
844
0.59
2.18
271
847
0.68
2.13
173 100.00
870 100.00
38,759 100.00
39,802 100.00
NUMBER OF SHARE HELD BY COUNTRY OF RESIDENCE AND BY TYPE AS AT DECEMBER 31, 2005
Country
Directors, Management,
Staff, Agents
Companies
Individuals
Total
Shares
%
Shares
%
Shares
%
Shares
%
Trinidad and Tobago
733,507
46.44
53,457,787
75.63
100,936,494
52.22
155,127,788
58.42
Barbados
677,608
42.90
13,528,254
19.14
64,657,075
33.45
78,862,937
29.70
Eastern Caribbean
7,173
0.45
462,374
Other Caribbean
160,187
10.14
3,230,899
1,000
0.07
2,107
0.65
4.57
0.01
22,617,225
11.70
23,086,772
1,499,388
3,581,670
0.78
1.85
4,890,474
3,584,777
8.69
1.84
1.35
1,579,475 100.00
70,681,421 100.00
193,291,852 100.00
265,552,748 100.00
Other
Total
DIVIDENDS
A fi nal dividend of BDS 6 cents per Share, payable on May 17, 2006, was approved for the year ended December 31, 2005 to
the holders of Common Shares whose names were registered on the books of the Company at the close of business on May
12, 2006.
An interim dividend of BDS 6 cents per Share approved for the half year ended June 30, 2005 was paid on October 17, 2005
to the holders of Common Shares whose names were registered on the books of the Company at the close of business on
October 3, 2005.
The total dividend for the 2005 fi nancial year amounted to BDS 12 cents per Common Share.
SHARE RESTRICTIONS
Shareholders have no pre-emptive rights in respect of the issue of shares.
The Articles of the Company provide that, at any time during the 5-year period immediately following the date of incorporation
of the Company, no person may hold, or be benefi cially entitled to, or control, or have any other interest, directly or indirectly, in
any shares (whether in one or more classes of shares in the capital of the Company) that represent more than 5% of any class
in the capital of the Company. The Articles provide further that, at any time after such 5-year period, no person may hold, or be
benefi cially entitled to, or control, or have any other interest, directly or indirectly, in any shares (whether in one or more classes
of shares in the capital of the Company) that represent more than 20% of any class in the capital of the Company unless:
(i)
not less than two-thirds of the directors then in offi ce approve of the same; and
(ii)
(iii)
there is an agreement between the Company and such person restricting the transfer of such shares;
the Supervisor of Insurance of Barbados (or the Supervisor’s successor regulatory authority) is satisfi ed that
such shareholder is a fi t and proper person.
13
Sagicor Financial Corporation
Directors’ Report
The Trinidad and Tobago Securities and Exchange Commission has issued Guidelines (“the Guidelines”) relating to the listing
on the Trinidad and Tobago Stock Exchange (“the Exchange”) of demutualised companies with constrained share ownership
provisions limiting any single shareholder to owning a maximum of 5% of outstanding shares. Under the Guidelines, it is
recommended that within two years of listing, such a company seek the approval of shareholders for the retention of its
constrained share ownership provisions. The company may retain these provisions for a maximum period of fi ve years after
listing. At the expiration of the fi ve-year period, the entity may retain its listing with constrained share ownership provisions
only if it seeks and obtains the approval of shareholders and the Exchange. These approvals may only be granted for a further
period not exceeding two years. Thereafter the entity may only continue to be listed if it removes the provisions completely.
CORPORATE GOVERNANCE STATEMENT
The Company’s Articles and By-Laws provide for a minimum of seven and a maximum of twelve Directors, of which only two
are permitted to be Executives. Nine of the twelve Directors are considered independent of Management, while two are ex-
CEO’s and one is the incumbent CEO. The By-Laws require that one-third of the Board retires annually and that the Board has
the following composition:
•
•
it must be controlled by Barbadians; and
there must be at least one representative each from Trinidad & Tobago, Jamaica and the
Eastern Caribbean region.
The Board of Directors is mandated to develop the strategic direction and objectives, risk tolerances and policies and
procedures of the Group. Specifi cally, these include:
•
developing a competitive human resource strategy to attract and retain competent people, and to
implement a code of conduct of ethical behaviour;
developing an internal control environment to be applied throughout the Group, and to operate the
•
member companies in a safe and sound manner; and
•
developing a reporting process to provide the board and stakeholders more effi ciently and accurately
with information about the Group’s business activities, risks, fi nancial condition and performance.
Management is responsible for the day-to-day operations of Group.
The Chairman of the Board of Directors is Mr. J. Arthur L. Bethell and the Vice-Chairman is Mr. Terrence A. Martins. The Audit
and Corporate Governance Committees have been established in accordance with the By-Laws. In addition, there are other
Board committees which enable the Board to review in greater depth particular areas of its mandate.
The Governance Committee is independent of Management. Its members are Mr. Terrence A. Martins, Chairman,
Dr. Oscar W. Jordan, G.C.M., and Mr. Stephen D.R. McNamara. The Committee’s mandate is to monitor best practices for
governance worldwide, and review the Group’s governance practices to ensure they comply with the highest standards of
corporate governance in areas such as the composition and size of the Board, the frequency of Board meetings, appointments
to subsidiary Boards and Board committees, code of conduct and succession planning.
The purpose of the Audit Committee is to assist with Board oversight of the integrity of the Group’s fi nancial reporting, the
Group’s compliance with legal and regulatory requirements, the Independent Auditor’s qualifi cations and independence and
the systems of internal controls, including the internal audit functions and the audit process. The Committee is independent
of Management and its members are Mrs. Vivian-Anne L. Gittens, Chairman, Mr. David W. Allan and Mr. William P. Lucie-
Smith. The role of the Human Resource Committee is to approve, review and exercise oversight responsibility over Sagicor’s
Human Resource principles, policies and practices, including recruitment, compensation, benefi ts and incentive and equity-
based plans. The Committee comprises Mr. Terrence A. Martins, Chairman, Mrs. Vivian-Anne L. Gittens and Mr. Christopher
D. deCaires.
The mandate of the Investment Committee is to oversee the investing of excess funds and clients’ investment funds that
will provide both short and long-term returns that meet the reasonable investment expectations of policyholders, clients,
pensioners and other investors while maintaining portfolio risks within acceptable limits. The Committee members are
Mr. Terrence A. Martins, Chairman, Messrs. David W. Allan, J. Arthur L. Bethell, William P. Lucie-Smith, Stephen
D.R. McNamara, Dodridge D. Miller and Dr. M. Patricia Downes-Grant.
14
Sagicor Financial Corporation
Directors’ Report
During 2005, Directors’ record of attendance was as follows:
Director
Arthur Bethell
Terrence Martins
Andrew Aleong
David Allan
Professor Hilary Beckles
Marjorie Chevannes-Campbell
Christopher deCaires
Vivian-Anne Gittens
Dr Oscar Jordan, GCM
William Lucie-Smith
Stephen McNamara
Dodridge Miller
Board
Meetings
Attended
10 of 10
9 of 10
3 of 4
9 of 10
3 of 4
4 of 4
3 of 4
9 of 10
9 of 10
4 of 4
9 of 10
9 of 10
Audit
Committee
Meetings
Attended
Corporate
Governance
Committee
Meetings
Attended
Human
Resource
Committee
Meetings
Attended
Investments
Committee
Meetings
Attended
N/A
4 of 4
N/A
N/A
N/A
N/A
2 of 3
6 of 7
N/A
3 of 3
N/A
N/A
N/A
1 of 1
N/A
N/A
N/A
N/A
N/A
N/A
4 of 4
N/A
4 of 4
N/A
3 of 3
3 of 3
N/A
3 of 3
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1 of 1
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
0 of 1
1 of 1
Notes on changes to Board and Board Committees during the year:
1 Mr. Aleong, Professor Beckles, Mrs. Chevannes-Campbell, Mr. deCaires and Mr. Lucie Smith were elected Directors
on June 24, 2005.
2 Mr. Martins ceased to be a member of the Audit Committee on August 24, 2005.
3 Messrs. deCaires and Lucie-Smith were appointed to the Audit Committee on August 24, 2005.
4 Mr. Martins was appointed a member of the Corporate Governance Committee on August 24, 2005.
5 Mr. deCaires ceased to be a member of the Audit Committee on October 26, 2005.
6 Mrs. Gittens and Mr. deCaires were appointed members of the Human Resource Committee on October 26, 2005.
7 Messrs. Allan, Bethell and Lucie-Smith were appointed members of the Investment Committee on October 26, 2005.
8 Mr. Allan was appointed a member of the Audit Committee on November 23, 2005.
AUDITORS
The incumbent Auditors, PricewaterhouseCoopers, offer themselves for re-appointment for the ensuing year.
By Order of the Board of Directors
Sandra Osborne
Corporate Secretary
May 15, 2006.
15
Sagicor Financial Corporation
Chairman’s Report
Mr. J. Arthur L. Bethell
Chairman
Dear Shareholders,
I have the distinct pleasure of reporting to you for the fi rst time in your
Annual Report as your Chairman of the Sagicor Group of Companies.
You may recall that in my review of our fi nancial results for the nine
months ended September 30, 2005, I indicated that 2005 was already
proving to be an historic year in terms of our fi nancial performance. I
am pleased to confi rm that the Sagicor Group of Companies enjoyed
an exceptional year and recorded its highest profi t ever. Net Income for the year, Bds $199.6 million,
was an increase of 173% over Bds $73.0 million for 2004.
The Group’s Total Revenue for the year, Bds $1.2 billion, was increased by 40.6% over that of 2004.
Our Revenue benefi ted from an unusual gain arising from the dilution of our equity interest in
Life of Jamaica Limited on the acquisition of Pan Caribbean Financial Services Limited. Prior to
that acquisition, our interest amounted to 78%, while it amounted to 60% after the acquisition.
The unusual gain fl owed directly through to Net Income for the year and contributed to our good
performance.
Your Board of Directors has approved a fi nal dividend of Bds 6 cents per share, bringing the total
dividend payable for the 2005 fi nancial year to Bds 12 cents per share.
Once again, A.M. Best has affi rmed the fi nancial strength rating of “A” (Excellent) and issuer credit
rating (ICR) of “A” for Sagicor Life Inc, and its wholly-owned subsidiary, Sagicor Capital Life Insurance
Company Limited (Bahamas). Following the acquisition in September of American Founders Life
Insurance Company, now Sagicor Life Insurance Company, that company’s rating was increased by
A.M. Best to “B++” (Very Good) and we expect that this rating will continue to improve.
For the fi rst time, A.M. Best has assigned a fi nancial strength rating of “A” (Excellent) and an ICR of
“A” to Life of Jamaica Limited (Jamaica), a majority-owned subsidiary of Sagicor Life Inc.
After the end of this fi nancial year, our Group applied to Standard and Poor’s (S&P) for a fi nancial
strength rating. We are pleased to report that S&P gave Sagicor Life Inc, our principal operating
company, a fi nancial strength rating of “BBB+”. This is an excellent rating and demonstrates the
fi nancial strength and operating capability of the Sagicor Group.
Concurrently, Standard and Poor’s has assigned a debt rating of “BBB” for up to USD150 million
of senior unsecured notes issued by Sagicor Finance Limited, a subsidiary of Sagicor Financial
Corporation.
16
Sagicor Financial Corporation
Chairman’s Report
We continue to execute on our business strategy of streamlining our existing operations, expanding
into new geographic markets and into new product markets, and we believe that this strategy continues
to drive our exceptional results. During the year, our Group made fi ve acquisitions. These included
a majority interest in Pan Caribbean Financial Services Limited and certain insurance businesses of
First Life Insurance Company, both of which are in Jamaica. These acquisitions are strategic to the
Group’s operation in Jamaica, and are expected to contribute signifi cantly to the future performance
of the Sagicor Group. The more important aspect of these acquisitions is that they are in keeping
with our strategy to expand globally by seeking opportunities for further consolidation within the
region.
While these acquisitions are indeed signifi cant, on September 30, 2005 our Group made an historic
entry into the US fi nancial services market through the acquisition of 100% of Laurel Life Insurance
Company and its wholly owned subsidiary American Founders Life Insurance Company (AFL), now
re-branded Sagicor Life Insurance Company. Through this acquisition, Sagicor now has licences to
operate in 41 states and the District of Columbia. In addition, Sagicor Life Insurance has licences
to operate as a Reinsurer and as a Third Party Administrator. We are confi dent that this strategic
acquisition will facilitate the growth and development of Sagicor in the USA. We also acquired a
controlling interest in Cayman General Insurance Company Limited. At the end of the fi nancial year we
acquired a 20% interest in FamGuard Corporation Limited, the parent company of leading Bahamian
insurance provider Family Guardian Insurance Company Limited. This acquisition is in keeping with
our strategy of geographic expansion, and gives the Sagicor Group a stronger position in the lucrative
Bahamian fi nancial services market.
As a consequence, Sagicor will be one step closer to becoming a truly borderless company. By
borderless, I mean that while we view ourselves as originating in the Caribbean, with the vision to
becoming a great Caribbean company, we are at the same time committed to building a Company
that is global in scope and operations.
For us at Sagicor, a company is acquired because it offers us an opportunity to achieve our stated
objectives in fulfi lment of our Vision. This is achieved through a careful blending of people, systems
and procedures with those already existing within our Group. The intention is not to dominate, but
to create a larger more focused group of talented individuals with the skills, systems and resources
to move our Sagicor family forward. Again and again we have demonstrated this with the many
companies that have joined our Group over the years, and we, like them, have benefi ted from this
approach. Using this philosophy over the years, our acquisitions have brought us closer to achieving
our goal of a company that is global in scope and operations and at the same time, spurred our
company’s diversity, capabilities and growth.
Even as we consciously set out to build a world-class organisation that is global in scope and operation,
we recognise that Sagicor is now part of a new fi nancial services environment which demands a
market driven approach to business. We will therefore continue our commitment to creating value
for our Shareholders, Policyholders, Customers, Employees and Advisors.
We will continue to measure that value when a shareholder continues to receive increasing dividends
over the years; when a family can achieve their fi nancial goals; when a couple can enjoy retirement
free of fi nancial worry; when our Employees and Financial Advisors experience the highest quality of
work life throughout our entire organisation.
17
Sagicor Financial Corporation
Chairman’s Report
One of the hallmarks of Sagicor is the many wise sayings and quotations, which form part of our new
brand. In keeping with this tradition I wish to quote some famous lines from Shakespeare’s Julius
Caesar.
“There is a tide in the affairs of men, which taken at the fl ood, leads on to fortune. On such a full sea we
are now afl oat, and we must take the current when it serves, or lose our ventures”.
This quotation appropriately describes where we are at this stage of our journey to becoming a great
Caribbean company. I also see it as a challenge to all of us to celebrate our achievements to date
and at the same time, continue to maximise every opportunity to propel the Sagicor Group into the
premiere position in the fi nancial services industry in the Caribbean and a world class organisation
in the global arena.
I would like to thank my fellow Board members for the unstinting support and cooperation they have
given during the start of my tenure as Chairman.
On their behalf and that of the Executive Management, Staff and Advisors, I would like to place on
record our thanks to Mr. Colin Goddard, former Chairman, and Mr. Krishna Narinesingh, former Vice
Chairman, for their sterling service to the Sagicor Group. It was under their incumbency that we
made the momentous change from a mutual to a publicly held company and thus the foundation for
our new company, Sagicor, was laid.
Mrs. Anne Gittens has advised the Board that, due to work commitments, she will not be seeking re-
election at the forthcoming Annual Meeting. I wish to place on record the Board’s and Management’s
appreciation of Mrs. Gittens’ service to our organisation over the last 17 years. She was the fi rst
female to serve as a director of Sagicor Life Inc and joined the Board at an important time when, as a
mutual company, policyholders were demanding wider representation at the board level. Mrs. Gittens
has given of her fi nancial expertise and has seen the Group through its conversion from a mutual
company to a publicly listed company. She has passionately shared in the vision for Sagicor’s growth
and expansion. I extend our sincere thanks to her for her role at this critical time in our history, and
wish her well.
I also wish to place on record the Board’s thanks to the Executive Management, Staff and Advisors
who have all contributed to making 2005 the most profi table year of our organisation. And special
thanks are also due to our Shareholders, Policyholders and Customers for their contribution to the
continued development of our Company. We remain confi dent about the future.
J. Arthur L. Bethell
Chairman
18
Sagicor Financial Corporation
Management Discussion & Analysis
Mr. Dodridge D. Miller
President and Chief Executive Offi cer
OVERVIEW
Sagicor has evolved into one of the leading publicly-listed fi nancial
services companies in the Caribbean, with core markets in Barbados,
Eastern Caribbean, Jamaica and Trinidad.
2005 was the most successful year in our 165-year history, with net
earnings of Bds $199.6 million being recorded. This represents our
best result and highest profi t ever, and compared to Bds $73.0 million
for 2004, an increase of 173%. Return on Shareholder’s Equity was 19.0% and Earnings per Share
amounted to 52 cents, compared to 26 cents for the previous year. This Net Income is allocated
Bds $136.6 million to Shareholders, Bds $25.5 million to Participating Policyholders and Bds $37.5
million to Minority Interest.
Total Revenue of the Group for the year was Bds $1.2 billion, compared to Bds $835 million, an
increase of 40.6% over 2004. We benefi ted from an unusual gain arising from the dilution of our
equity interest in Life of Jamaica Limited (LOJ) on the acquisition of Pan Caribbean Financial Services
Limited (PCFS). Prior to that acquisition, we held 78% of LOJ, and after the acquisition, our interest
was reduced to 60%. This unusual gain fl owed directly through to Net Income for the year and
contributed to our good performance.
Benefi ts amounted to Bds $595.6 million compared to Bds $481.2 million, while Total Group
Expenses moved from Bds $273.9 million to Bds $354.7 million. Both our Revenue and Expenses
were signifi cantly infl uenced by our acquisitions during the year. Net Income from Ordinary Activities
amounted to Bds $223.6 million and, after deducting Income Taxes of Bds $24.0 million, produced
Net Income of Bds $199.6 million.
Total Assets of the Group stood at Bds $6.4 billion, compared to Bds $3.1 billion at the end of 2004.
This represents an increase of 105%, again refl ecting the impact of the acquisitions made during the
year. Total Equity stood at Bds $993.6 million compared to Bds $759.8 million at the end of 2004, of
which Bds $747.5 million represented Total Shareholders Equity (Bds $693.3 in 2004).
STRATEGY
In 2005 we continued to execute on our business strategy of:
Expanding internationally and in the Caribbean;
•
• Diversifying our product offerings and cross-selling our products;-
•
• Continuing to improve the effi ciency of our operations.
Effectively using our balance sheet; and
19
Sagicor Financial Corporation
Management Discussion & Analysis
We intend to maintain our current market position, while building on our competitive strengths
to expand our operations, improve our fi nancial performance and maximise shareholder value. We
attribute our position and performance to the following competitive strengths:
• Dominant market position in major markets;
•
•
•
•
Effi cient and effective distribution network of dedicated advisors;
Strong operating performance;
Strong capitalisation and conservative risk profi le and policies; and
The signifi cant experience of our management team in the insurance business.
ACQUISITIONS
Following our corporate reorganisation through demutualisation and raising additional capital
from our initial public offering in December 2002, we now enjoy favorable liquidity and fi nancial
resources to support our new opportunities beyond our core Caribbean markets. Operating in a
number of Caribbean markets for over 160 years, our strong market presence and historically
profi table operations have fueled our growth and enabled us to maintain our favorable capitalisation.
In addition, we offer a broad portfolio of products which reduce a reliance on any one business
segment. Our range of products and services includes life and health insurance, annuities and
pensions, property and casualty insurance, asset management, investment and merchant banking,
securities brokerage, mutual funds and real estate development. We operate our insurance business
primarily through Sagicor Life Inc, which has insurance operations in Barbados, Trinidad and Tobago
and the Eastern Caribbean countries, and through LOJ, majority-owned by Sagicor, with the public
owning the remainder. Our merchant banking business is operated primarily out of Jamaica through
PCFS, which is also majority-owned, with the public owning the remainder.
Since there is limited organic growth potential in the mature markets in which we operate, we continue
to seek new growth opportunities through acquisitions and expanding presence in new geographic
regions. The most signifi cant factors infl uencing our 2005 results were the fi ve acquisitions the Group
made during the year. These acquisitions require effi cient integration.
On September 30, 2005, we acquired for US $58.8 million (Bds $117.6 million) a 100% interest in
Laurel Life Insurance Company and its wholly owned subsidiary, American Founders Life Insurance
Company, now the rebranded Sagicor Life Insurance Company (SLIC). This acquisition was fi nanced
by a US dollar denominated bank loan. The results of operations from Laurel Life and SLIC since
the acquisition have been included in our 2005 fi nancial statements. When we acquired SLIC on
September 30, 2005, it had approximately US $2.0 billion (face value) of life and annuity products in
force and approximately US $559.4 million in fi nancial investments.
Laurel Life and SLIC are life insurance entities operating in the United States. With its insurance
licenses in forty-one states and in the District of Columbia, SLIC will be the platform for the growth
and development of our operations in the United States. SLIC’s business has been driven primarily
by the acquisitions of closed blocks of life insurance policies and, to a lesser extent, by marketing
and distributing its fi xed annuity products. Life insurance products are sold through marketing fi rms,
fi nancial institutions and 400 independent agents located throughout 41 states and the District of
Columbia.
In January, 2005, LOJ acquired for J $3.3 billion (Bds $108.1 million) a 42.2% interest in PCFS,
thereby increasing its total ownership interest in PCFS to 49%. On May 6, 2005, Sagicor Financial
Corporation and LOJ acquired for J $2.5 billion (Bds $79.0 million) a further 37% interest in PCFS.
Currently, Sagicor has an equity interest of 66% in PCFS. PCFS is a publicly-listed company on the
20
Sagicor Financial Corporation
Management Discussion & Analysis
Jamaica Stock Exchange. For the year ended December 31, 2005, PCFS’s net income was J $1.0 billion
(Bds $33.2 million) and total assets stood at J$39.9 billion (Bds $1.2 billion).
PCFS is a diversifi ed fi nancial services group, with its operations based in Jamaica. It has fi ve principal
lines of business. These include (i) investment and cash management services, (ii) foreign exchange
and fi xed income trading, (iii) corporate credit, merchant banking and investment banking, (iv) asset
management, mutual fund management, stock brokerage and equities trading, and (v) trust and
custody services.
On April 1, 2005, LOJ also purchased from its joint venture partner, First Life Insurance Company
Limited, the remaining 50% interest in EBA Limited, a joint venture which managed employee benefi ts
insurance business in Jamaica. LOJ also purchased the remaining insurance business of First Life.
On November 30, 2005 Sagicor Life of the Cayman Islands Limited, a wholly owned subsidiary of
LOJ, acquired for US $10.0 million (Bds $20.0 million) a 51% interest in Cayman General Insurance
Company Limited (CGI). CGI markets group health, as well as property and casualty insurance. At
that date, Cayman General had total assets of US $44.7 million (Bds $89.5 million).
Finally, on December 28, 2005, we acquired a 20% interest in FamGuard Corporation Limited, the
parent company of a leading Bahamian insurance provider, Family Guardian Insurance Company
Limited. This acquisition is in keeping with our strategy of geographic expansion, and gives the
Sagicor Group a stronger position in the lucrative Bahamian fi nancial services market.
ECONOMIC CONDITIONS
Seventy-nine percent of our operations in terms of revenue for the year ended December 31, 2005
were in Barbados, Jamaica and Trinidad and Tobago. As a result, our business, results of operations,
fi nancial condition and prospects are materially dependent upon economic, political and other
conditions and developments in those countries. Our future fi nancial performance will be linked to
economic conditions in these countries. Key to the economic conditions in each of these countries
are interest rates, infl ation, foreign direct investment and general economic stability.
Barbados
The Barbados economy expanded at 4.1% in 2005 following the rate of 4.8% recorded in 2004. The
manufacturing sector and construction industry grew by 2.8% and 17.6%, respectively. However, the
tourism sector as a whole fell by 4.2%, in 2005, compared to 2004, due to decreases in long-stay and
cruise ship arrivals. Infl ation for 2005 is likely to exceed 4.0%, up from 1.4% in 2004. This increase
resulted from rising energy prices. Interest rates have closely followed the pattern of interest rate
movement in the United States over the past three years and have been trending up moderately in
2005 and 2006.
Jamaica
In recent years, Jamaica’s economy has experienced some expansion after several years of negative
or minimal growth. Exchange rate and fi nancial sector liberalisation in the early 1990’s and a fi nancial
crisis in the mid to late 1990’s have had a negative impact on Jamaica’s GDP growth. Total external
debt was US $5.3 billion in 2005 (US $5.1 billion in 2004). Falling infl ation, lower interest rates and the
ability to access international markets have strengthened the country’s net international reserves, and
improving fi scal discipline has led to higher levels of confi dence. The economy has been in transition
away from manufacturing and agriculture, into areas where the country can compete more effectively.
Areas of expansion have been in tourism, services, transportation, mining and telecommunications.
GDP growth is estimated at 1.5% for 2005, compared to 1.2% in 2004. The infl ation rate for 2005 was
21
Sagicor Financial Corporation
Management Discussion & Analysis
12.9%, compared to 13.7% in 2004. The currency exchange rate of Jamaican dollars and United States
dollars at April 28, 2006 was at J $65.51 per US$1.00 or Bds $2.00.
Trinidad and Tobago
In 2005, Trinidad and Tobago registered estimated GDP growth of 7.0%, principally due to the oil
and gas industries production. The percentage contribution of agriculture, industry, and services to
the GDP was approximately 0.7%, 57.0% and 42.3%, respectively. In 2005, the energy sector grew by
approximately 11.0% and the non-energy sector grew by approximately 4.0%. GDP growth was 6.5%
in 2004. During 2005, infl ation increased by an estimated 6.8%, mainly because of an increase in
food prices, compared to 3.7% in 2004. For the last four years, the value of the Trinidad and Tobago
dollar has been relatively stable.
RESULTS OF OPERATIONS
Geographic Segments
We have signifi cant concentrations of our business in Barbados, Jamaica and Trinidad and Tobago,
where our operations are primarily managed by a subsidiary or branch. Geographic segments are
defi ned accordingly. The following table presents, for the periods indicated, the total revenues for
signifi cant segments as a percentage of total revenue:
Year Ended December 31 (in millions of Bds $, except percentages)
Barbados
Jamaica
Trinidad and Tobago
United States
OECS and Other Caribbean
Not allocated to segments
Total
Bds $220.8
513.9
191.6
46.0
160.9
40.8
Bds $1,174.0
2005
18.8%
43.8
16.3
3.9
13.7
3.5
100.0%
Bds $214.3
292.3
160.8
24.3
143.0
0.3
Bds $835.0
2004
25.7%
35.0
19.3
2.9
17.1
0
100.0%
Total revenue from our Barbados operations increased by 3.0% in 2005 from 2004, primarily as a
result of organic growth of our insurance operations. The total revenue from our Jamaican operations
increased by 75.8% in 2005 from 2004, primarily as a result of our acquisition of PCFS, together
with organic growth of our existing business. The total revenue from our Trinidad and Tobago
operations increased by 19.2% in 2005 from 2004, primarily as a result of a signifi cant increase
in investment income refl ecting the gains from the sale of equities as we sought to rebalance our
equities investment. The total revenue from our United States operations increased by 89.3% in
2005 from 2004, primarily as a result of our acquisition of SLIC. The total revenue from our other
Caribbean operations increased by 12.5% in 2005 from 2004, primarily as a result of the expansion of
our existing business operations. For 2005, amounts not allocated to segments include gains from
business combinations and acquisitions of Bds $38.9 million.
Product Segments
Our business segments are defi ned by the grouping of products and services of a similar nature.
The following table presents, for the periods indicated, the total revenues for signifi cant product
segments as a percentage of total revenue:
22
Sagicor Financial Corporation
Management Discussion & Analysis
Year Ended December 31 (in millions of Bds $)
2005
Life insurance, health insurance and annuities issued to individuals Bds $609.4
279.1
Life insurance, health insurance and annuities issued to groups
47.0
Property and casualty insurance
197.7
Banking and other fi nancial services
40.8
Not allocated to segments
Bds $1,174.0
Total
2004
Bds $533.2
240.4
32.3
28.8
0.3
Bds $835.0
The growth in 2005 in our life insurance, health insurance and annuities issued to individuals and to
groups is mostly attributable to the acquisition of the remaining 50% of EBA in Jamaica. The property
and casualty insurance growth in 2005 is mainly driven by the expansion of this product segment in
Trinidad and Tobago. The growth in 2005 in banking and other fi nancial services largely refl ects our
acquisition of PCFS.
Revenue
Total revenue is composed of net premium revenue, net investment income, our share of operating
income from our associated companies, fees and other revenue, and gains on business combinations
and acquisitions. The following table shows revenue information for the years ended December 31,
2005 and December 31, 2004:
Year Ended December 31 (in millions of Bds $)
Net premium revenue
Net investment income
Share of operating income of associated companies
Fees and other revenue
Gains on business combinations and acquisitions
Total revenue
2005
Bds $639.2
415.4
3.5
77.0
38.9
Bds $1,174.0
2004
Bds $537.5
242.9
9.3
45.3
–
Bds $835.0
Our total revenue grew in 2005 compared to 2004, primarily as a result of increases in net investment
income, net premium revenue and fees and other revenue, as explained below. This increase was
partially offset by a decrease in share of operating income of associated companies, as further
explained below.
Net Premium Revenue
The following table shows information on our net premium for the years ended December 31, 2005
and December 31, 2004:
Year Ended December 31 (in millions of Bds $)
Life insurance
Health insurance
Property and casualty insurance
Annuities and pensions
Premiums and contributions
Reinsurance premiums
Net premium revenue
2005
Bds $392.3
197.0
74.1
85.3
748.7
(109.5)
Bds $639.2
2004
Bds $324.5
159.1
56.3
81.7
621.6
(84.1)
Bds $537.5
23
Sagicor Financial Corporation
Management Discussion & Analysis
Net premium revenue increased by 18.9 % in 2005 compared to 2004. Our net premium revenue
derived from life insurance grew in 2005 compared to 2004 mainly as a result of growth in the
number of policies. Our net premium revenue derived from health insurance grew in 2005 compared
to 2004 mainly as a result of the purchase by LOJ of the remaining 50% of EBA. Our net premium
revenue derived from property and casualty insurance grew in 2005 compared to 2004 mainly by
our expansion in the Trinidad and Tobago market and rate increases in, and the acquisition in the
Cayman Islands. Reinsurance premiums increased in 2005 compared to 2004 primarily as a result
of a general increase in our insurance businesses and the increase in the amount of reinsurance that
we purchased.
Net Investment Income
Net investment income increased 71.0% to Bds $415.4 million in 2005 from Bds $242.9 million in
2004. The signifi cant increase in net investment income was primarily a result of the acquisitions
and recognised gains on sales of securities resulting from our strategy to rebalance our investment
portfolio. These gains were somewhat offset by allowances for impairment losses. Our return on
invested assets in 2005 was 11.9% compared to 10.9% in 2004.
Share of Operating Income from Associated Companies
In 2005, the share of operating income from associated companies decreased 62.5% to Bds $3.5
million compared to Bds $9.3 million in 2004. This decrease resulted from the disposition of our
credit card operation, CariCard, which generated a gain on the disposal in 2004. This gain was
recorded in operating income from associated companies in the amount of Bds $5.2 million, but no
similar event occurred in 2005.
Fees and Other Revenue
Fees and other revenue increased 70.1% in 2005 to Bds $77.0 million from Bds $45.3 million,
primarily as a result of the acquisition of PCFS, which generated signifi cant fee income through its
asset management operations.
Gains on Business Combinations and Acquisitions
Gains on business combinations and acquisitions were Bds $38.9 million in 2005. This mainly
refl ects the reduction in interest in LOJ, from 78.0% to 60.0%, and the amount by which the value of
our share of net identifi able assets acquired exceeded the consideration we paid for the acquisition
of a 37.0% interest in PCFS.
Benefi ts
The following table shows information on benefi ts expensed for the years ended December 31, 2005
and December 31, 2004:
Year Ended December 31 (in millions of Bds $)
Net policy benefi ts
Net increase in actuarial liabilities
Interest expense
Total benefi ts
2005
Bds $389.0
58.7
147.9
Bds $595.6
2004
Bds $333.1
109.1
39.0
Bds $481.2
Total benefi ts increased in 2005, mainly as a result of the large increase in interest expense and
the increase in net policy benefi ts. However, offsetting these increases was the decline in actuarial
24
Sagicor Financial Corporation
Management Discussion & Analysis
liabilities refl ecting the change in interest rate assumptions to refl ect interest rate increases, a reduction
in unit maintenance expenses, changes in lapse rate assumptions and an improvement in mortality
assumptions. The increase in interest expense was mainly as a result of acquired liabilities on other
funding instruments, such as customer deposits, repurchase liabilities of our PCFS operation and
SLIC’s obligations under the Federal Home Loan Bank of Dallas (FHLB) loan program. The increase
in net policy benefi ts paid in 2005 refl ects the growth in the number of policies.
Expenses
The following table shows information for our expenses for the years ended December 31, 2005 and
2004:
Year Ended December 31 (in millions of Bds $)
Administrative
Commissions and related compensation
Premium taxes
Finance costs
Depreciation and Amortisation
Total
2005
Bds $214.5
95.0
15.3
4.4
25.5
Bds $354.7
2004
Bds $154.3
85.4
11.7
0.7
21.8
Bds $273.9
Expenses increased in 2005, primarily driven by increased headcount of approximately 300 new
employees as a result of the acquisition of PCFS and SLIC.
Commission and related compensation increased in 2005, mainly as a result of the increase in the
variable compensation of our advisors and brokers, which refl ects the growth of our business and the
addition of SLIC brokers and general agents. The increase in fi nance costs refl ects interest expense of
the loans used to fi nance our acquisitions.
Income taxes
We are taxed in the countries in which our operations are carried out. Taxes are based on income in
each country according to the tax regulations of that country. Our income tax expense is composed
of current taxes, deferred taxes, plus our share of the taxes of associated companies. Income taxes
increased 248.0% to Bds $24.0 million in 2005 from Bds $6.9 million in 2004. This was primarily a
result of an increase in income from new businesses, most signifi cantly PCFS.
Net Income
Our net income totaled Bds $199.6 million in 2005, an increase of 173% from Bds $73.0 million in
2004. This increase was primarily driven by the growth of our existing business and the acquisition
of PCFS.
Year Ended December 31 (in millions of Bds $)
Net income (loss) attributable to:
Shareholders
Participating policyholders
Minority interest
Total net income
2005
2004
Bds $136.6
25.5
37.5
Bds $199.6
Bds $67.7
(2.0)
7.3
Bds $73.0
The net income attributed to participating policyholders is infl uenced by the underlying performance
of the assets allocated to such policyholders, while the net income attributable to minority interest
refl ects the allocation of net income to other shareholders in our non-wholly owned consolidated
25
Sagicor Financial Corporation
Management Discussion & Analysis
subsidiaries. Participating policyholders’ amount in 2004 was a net loss because the cost related to
new participating policies was higher than the related premium income. In 2005, the participating
policyholder amount was positive because, with the amalgamation of Life of Barbados Limited’s
participating policies, the participating business generated enough profi tability to offset new
participating policy expenses. Our return on average equity in 2005 was 22.8% compared to 10.7%
in 2004.
Liquidity and Capital Resources
Cash Flow
In 2005, our net cash from operating activities was Bds $313.9 million, our net cash used in investing
activities was Bds $261.6 million, our net cash from fi nancing activities was Bds $109.6 million, and
our net cash decreased Bds $23.2 million from effects of exchange rates. These produced a net
increase in cash and cash equivalents of Bds $138.7 million for 2005. In 2004, our net cash from
operating activities was Bds $22.5 million, our net cash used in investing activities was Bds $14.6
million, and our net cash used in fi nancing activities was Bds $34.1 million.
Our principal liabilities include customer deposits, the FHLB program, debt for acquisitions,
repurchase agreements and insurance policies. The insurance policies we underwrite are mostly
long-term in nature. Our policy is to invest in assets to produce cash fl ows that are synchronised with
the timing and the amounts of payments that must be paid to policyholders, while also managing
reinvestment risks by reducing the need for reinvestment.
Debt Funding and Liquidity
Loans Payable
We had a Debt to Shareholders’ Equity ratio of 21.5% at December 31, 2005, compared to 2.3% at
December 31, 2004. Historically, we have not borrowed from banks or the capital markets for ongoing
operations. However, we have borrowed in connection with acquisitions. These borrowings have
typically been in US dollars and from local branches of international banks. At December 31, 2005,
we had Bds $160.7 million in borrowings compared to Bds $15.9 million at December 31, 2004. At
December 31, 2005, we had short-term liabilities of Bds $132.2 million, of which Bds $116.4 million was a
US dollar-denominated bank loan incurred in connection with the acquisition of Laurel Life.
Deposit and Security Liabilities
Deposit and security liabilities represent sources of funds for on-lending, leasing and portfolio
investments. These liabilities comprised other funding instruments, which as of December 31, 2005
and 2004, were Bds $296.2 million and Bds $1.5 million, respectively customer deposits, which as of
December 31, 2005 and 2004 were Bds $227.5 million and Bds $74.1 million, respectively securities
sold under agreements to repurchase, which as of December 31, 2005 and 2004 were Bds $908.0
million and nil respectively; and bank overdrafts, which as of December 31, 2005 and 2004 were Bds
$8.7 million and Bds $10.3 million, respectively. The increases in 2005, compared to 2004 in other
funding instruments, were primarily a result of our acquisition of SLIC and PCFS and the increase in
securities sold under agreements to repurchase was a result of our acquisition of PCFS.
Within other funding instruments is SLIC’s funding arrangement with FHLB, of which SLIC is a
member. This membership provides SLIC with the capability to take short-term advances from the
FHLB at rates linked to the Federal Funds rate or to take long-term advances. SLIC periodically
utilises the short-term capacity to fund modest operating cash needs, rather than sell securities
and incur transaction costs. In 2002, SLIC agreed with the Texas Department of Insurance (DOI) to
stop drawing on the long-term part of this facility as a result of Texas regulatory requirements. At
December 31, 2005, the aggregate outstanding amount was US $126.3 million (Bds $252.7 million).
26
Sagicor Financial Corporation
Management Discussion & Analysis
At December 31, 2005, there was capacity to borrow an additional US $2.1 million (Bds $4.2 million)
within the DOI limits. As of December 31, 2005, these loans were collateralised by an equity holding
in FHLB equal to Bds $12.0 million, and mortgages and mortgage-backed securities having a total
market value of Bds $255.6 million.
Capital Adequacy
We manage capital adequacy at the country level and operating company level. This capital adequacy
is calculated by our Appointed Actuaries and reviewed frequently by our Executive Management,
various operating subsidiaries’ audit committees on a quarterly basis and our Board of Directors
annually. In addition to such review, we have hired an external independent Actuary who also reviews
our capital adequacy. We seek to maintain internal capital adequacy at levels higher than the regulatory
requirements. To assist us in evaluating our current business and strategy opportunities, we utilise
a risk-based capital approach as one of our core measures of fi nancial performance. The risk-based
assessment measure, which we have adopted in all our operations other than the United States, is the
Canadian Minimum Continuing Surplus and Capital Requirement (MCCSR) standard. It should be
noted that many of the jurisdictions in which we operate have no capital adequacy requirements. In
2005, Sagicor’s MCCSR ratio was 256%, compared to 238% and 212% in 2004 and 2003 respectively.
The standard recommended by the Canadian regulators for Canadian companies is 150%.
In 2005, we also introduced a capital allocation model where capital is specifi cally applied to each
business through our Enterprise Risk Management function. This approach helps us to better measure
the relative profi tability of our component businesses, and to set clear performance targets across our
operations, so that we can quickly identify those operations that are contributing meaningfully and
those that are not. This approach also helps us to make specifi c investment management decisions.
Our Enterprise Risk Management is expected to develop a more sophisticated and structured
approach to risk-based capital during 2006. In this regard, we have recruited a senior executive to
spearhead this effort, together with a consultant, who would provide expertise in building a model for
fi nancial and operational risks across Sagicor and its group of subsidiaries. This model will be linked
to our corporate governance architecture and reporting philosophy.
SLIC
In order to enhance the regulation of insurer solvency, a risk-based capital (RBC) formula and model
were adopted by the National Association of Insurance Commissioners (NAIC) of the U.S. RBC is
designed to assess minimum capital requirements and raise the level of protection that statutory
surplus provides for policyholder obligations. The RBC formula for life insurance companies measures
four major areas of risk: (i) underwriting, which encompasses the risk of adverse loss developments
and property and casualty insurance product mix; (ii) declines in asset values arising from credit risk;
(iii) declines in asset values arising from investment risks, including concentrations; and (iv) off-
balance sheet risk arising from adverse experience from non-controlled assets such as reinsurance
guarantees for affi liates or other contingent liabilities and reserve and premium growth. If an insurer’s
statutory surplus is lower than required by the RBC calculation, it will be subject to varying degrees
of regulatory action, depending on the level of capital inadequacy.
The RBC methodology provides for four levels of regulatory action. The extent of regulatory
intervention and action increases as the ratio of surplus to RBC falls. The “Company Action Level”
(as defi ned by the NAIC) requires an insurer to submit a plan of corrective actions to the regulator
if surplus falls below 200% of the RBC amount. The “Regulatory Action Level” (as defi ned by the
NAIC) requires an insurer to submit a plan containing corrective actions and permits the relevant
insurance commissioner to perform an examination or other analysis and issue a corrective order
if surplus falls below 150% of the RBC amount. The “Authorised Control Level” (as defi ned by the
NAIC) allows the relevant insurance commissioner to rehabilitate or liquidate an insurer in addition
to the aforementioned actions if surplus falls below 100% of the RBC amount. The “Mandatory
27
Sagicor Financial Corporation
Management Discussion & Analysis
Control Level” (as defi ned by the NAIC) requires the relevant insurance commissioner to rehabilitate
or liquidate the insurer if surplus falls below 70% of the RBC amount.
SLIC looks to maintain at least 250% of the Company Action Level, allowing it fl exibility in its asset
and product mix. The following table presents the RBC ratios for the past three years for SLIC:
% of Company Action Level
2005
438%
2004
320%
2003
361%
The decrease between 2003 and 2004 is a result of SLIC’s decision to put excess capital to work
through the acquisition of a block of business. The increase between 2004 and 2005 is attributable
principally to additional capital contributed to SLIC of US $10.5 million by Sagicor shortly after the
acquisition.
PCFS
Under the Bank of Jamaica (BOJ) and the Financial Services Commission (FSC) regulations, PCFS
and its wholly owned subsidiary, Pan Caribbean Merchant Bank Limited (PCMB), are both required
to separately maintain qualifying capital of at least 10% of their respective risk-weighted assets.
The FSC’s early warning benchmark is 14%, while the BOJ’s trigger is 12%. Therefore, if PCFS’ risk
adjusted ratio of capital to asset falls below 14%, then the FSC would inspect and warn the company.
BOJ would intervene if the ratio fell below 12%. We currently have capital substantially above the
minimum capital adequacy requirements. Compliance is calculated based upon the unconsolidated
fi nancial statements of each regulated entity.
The following table presents the capital adequacy ratios (defi ned as qualifying capital divided by risk
weighted assets) for the last three years:
PCFS
PCMB
SUBSEQUENT EVENT
Bond Offering
2005
62%
27%
2004
114%
31%
2003
58%
68%
Subsequent to year-end, on May 12, 2006, Sagicor Finance Limited, a special purpose vehicle
incorporated in the Cayman Islands, and a wholly owned subsidiary of Sagicor Financial Corporation,
issued Senior Notes bearing interest at the rate of 7.5% due 2016 with an aggregate maturity value of
US $150.0 million. The Notes were unconditionally guaranteed by Sagicor Financial Corporation and
Sagicor Life Inc. The Notes were fully underwritten by Morgan Stanley & Co Incorporated and were
oversubscribed. Application is to be made to list the Notes on the Luxembourg Stock Exchange and
to trade on the Euro MTF Market, the alternative market of the Luxembourg Stock Exchange. Out of
the net proceeds of the Notes, we refi nanced bank loans totalling Bds $150.7 million.
RATINGS
Sagicor Life Inc, along with its wholly-owned life insurance subsidiaries, has consistently maintained
its “A” (Excellent) rating originally received in 1999. This rating was affi rmed in May 2006, and LOJ
received an “A” (Excellent) rating for the fi rst time. Our property and casualty insurance subsidiary,
Sagicor General Life Insurance Company, has a rating of “A-” (Excellent) and SLIC, has a rating of
“B++” (Very Good). These ratings are fi nancial strength ratings awarded by A.M. Best Company.
28
Sagicor Financial Corporation
Management Discussion & Analysis
Subsequent to year-end, our Group applied to Standard and Poor’s (S&P) for a fi nancial strength
rating. We are pleased to report that S&P gave Sagicor Life Inc, our principal operating company,
a fi nancial strength rating of “BBB+”. This is an excellent rating, and demonstrates the fi nancial
strength and operating capability of the Sagicor Group.
HUMAN RESOURCES
Our human resource strategy focuses on the development of a strong customer service culture, fi rmly
supported by systems that recognise and reward performance. We will continue to work towards
achieving the international benchmarks as an employer of choice in the Caribbean and elsewhere,
working to improve employee morale, productivity and retention. In both 2004 and 2005, LOJ was
listed among the 20 most admired companies in the inaugural Jamaica Employers Federation-
Employer of Choice Awards.
In 2005, Sagicor Life Inc and Sagicor Capital Life Insurance Company Limited initiated a job evaluation
initiative that adjusted compensation to be competitive with the market. We also introduced
a performance management programme and training programmes, with the goal of building a
performance-based culture.
As of December 31, 2005, we had a total workforce of 2,337 people, which number includes our
advisors. The following table shows the breakdown of our workforce by geographic segment as of
December 31, 2005:
Workforce
% of Sagicor Workforce
Barbados
Employees
Advisors
Jamaica
Employees
Advisors
Trinidad and Tobago
Employees
Advisors
Eastern Caribbean
Employees
Advisors
Other Caribbean
Employees
Advisors
United States
Employees
Advisors
Total
464
114
689
367
170
144
79
70
71
66
103
—
2,337
19.9%
4.9
29.4
15.7
7.3
6.2
3.4
3.0
3.0
2.8
4.4
—
100%
29
Sagicor Financial Corporation
Management Discussion & Analysis
Training and Development
We provide structured industry training for all staff, and they are encouraged to achieve professional
insurance designations. Considerable support is offered to students pursuing professional
designations in Accounting, Actuarial Science, Investments and Information Technology through
grants, loans, study-leave programmes and facilitating attendance at the annual Life Offi ce
Management Association (LOMA) and The Life Insurance Marketing and Research Association
(LIMRA) conferences, where attendees benefi t from presentations and discussions on a number of
insurance industry issues.
Share Incentive Plans
On December 19, 2005, we obtained shareholder approval to implement an executive long-term
incentive plan (LTI Plan) and a share ownership plan for employees and advisors (ESOP). Both
these plans became effective on December 31, 2005. A total of 26,555,274 common shares, which
represents 10% of the common shares outstanding at December 31, 2005, have been reserved for the
plans and are expected to be suffi cient for the ten-year duration of both plans.
Both the LTI and ESOP Plans are stock-based incentives for Employees and Advisors of Sagicor
Financial Corporation, Sagicor Life Inc and Sagicor Capital Life Insurance Company Limited to
acquire a proprietary interest in our growth and performance and to have an increased incentive
in contributing to our future success and prosperity. The LTI Plan was developed after taking into
consideration international and regional best practices and comprises share options and restricted
share grants.
The ESOP provides for an annual allocation of a portion of our profi t to acquire shares to be held for
ESOP participants, who are at the level of Assistant Vice President and below, and Advisors. The
ESOP has been established as a discretionary trust and is administered by trustees appointed by the
Board.
CONCLUSION
The year 2005 was a watershed year for us in many respects, both in terms of our expansion and
our decision to establish a footprint in the international capital markets. We intend to build on this
foundation and continue our prudent management of our business.
I welcome the management and staff of PCFS and Sagicor USA Groups to the Sagicor family, and
extend my personal thanks to the entire management team, staff and advisors across the Group for
an excellent performance.
Dodridge D. Miller
President and Chief Executive Offi cer
30
“CHERISH YOUR VISION AND YOUR DREAMS,
AS THEY ARE THE CHILDREN OF YOUR SOUL;
THE BLUEPRINTS OF YOUR ULTIMATE ACHIEVEMENTS”
– Napoleon Hill
Sagicor Financial Corporation
CONSOLIDATED BALANCE SHEET
As of December 31, 2005
Amounts expressed in Barbados $000
Notes
2005
2004
ASSETS
Investment property
Property, plant and equipment
Investment in associated companies
Intangible assets
Financial investments
Reinsurance assets
Income tax assets
Miscellaneous assets and receivables
Cash resources
Total assets
LIABILITIES
Policy liabilities
Actuarial liabilities
Deposit administration liabilities
Other policy liabilities
Other liabilities
Loans payable
Deposit and security liabilities
Provisions
Income tax liabilities
Accounts payable and accrued liabilities
Total liabilities
EQUITY
Share capital
Reserves
Retained earnings
Total shareholders’ equity
Participating accounts
Minority interest in subsidiaries
Total equity
Total equity and liabilities
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
181,586
148,248
50,251
250,505
4,732,425
696,188
35,711
203,416
118,863
6,417,193
2,777,231
346,229
364,331
3,487,791
160,728
1,440,445
32,360
30,958
271,304
5,423,586
458,451
100,794
188,304
747,549
34,647
211,411
993,607
179,015
131,562
24,276
103,345
2,311,519
109,200
20,596
139,237
119,137
3,137,887
1,485,042
305,464
333,367
2,123,873
15,912
85,838
28,147
18,073
106,256
2,378,099
432,495
167,694
93,079
693,268
1,388
65,132
759,788
6,417,193
3,137,887
These financial statements have been approved for issue by the Board of Directors on April 27, 2006.
Director
Director
34
Sagicor Financial Corporation
CONSOLIDATED INCOME STATEMENT
Year ended December 31, 2005
Amounts expressed in Barbados $000
Notes
2005
2004
REVENUE
Premium revenue
Reinsurance premium expense
Net premium revenue
Net investment income
Share of operating income of associated companies
Fees and other revenue
Gains arising on business combinations and aquisitions
Total revenue
BENEFITS
Policy benefits incurred
Policy benefits reinsured
Net policy benefits incurred
Net increase in actuarial liabilities
Interest expense
Total benefits
EXPENSES
Administrative expenses
Commissions and related compensation
Premium taxes
Finance costs
Depreciation and amortisation
Total expenses
INCOME FROM ORDINARY ACTIVITIES
Income taxes
NET INCOME FOR THE YEAR
NET INCOME ATTRIBUTABLE TO:
Shareholders
Participating policyholders
Minority interest
Earnings per common share – basic and diluted
27
28
9
29
38
30
16
31
33
35
748,707
(109,511)
639,196
415,415
3,473
76,951
38,946
1,173,981
432,380
(43,340)
389,040
58,680
147,869
595,589
214,544
94,961
15,308
4,426
25,498
354,737
223,655
(24,046)
199,609
136,562
25,522
37,525
199,609
52 cents
621,669
(84,131)
537,538
242,928
9,269
45,237
-
834,972
501,053
(167,965)
333,088
109,115
39,006
481,209
154,262
85,405
11,653
743
21,801
273,864
79,899
(6,916)
72,983
67,690
(1,983)
7,276
72,983
26 cents
35
Sagicor Financial Corporation
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended December 31, 2005
Amounts expressed in Barbados $000
Balance, beginning of year
As previously reported
Prior year adjustments
(note 2.1 (a) (v))
As restated
Net gains / (losses) recognised
directly in equity
Net income for the year
Total recognised gains and
income for the year
Issue of shares
Dividends declared (note 35)
Acquisition of subsidiary and
insurance business
Transfers
Year ended December 31, 2005
Share
capital
Note 24
Reserves
Note 25
Retained Participating
accounts
earnings
Note 26
Minority
interest
Total
432,495
181,513
89,049
1,388
67,858
772,303
-
-
-
-
-
-
-
432,495
25,956
25,956
(13,819)
167,694
4,030
93,079
-
1,388
(2,726)
65,132
(12,515)
759,788
(69,135)
-
(69,135)
-
-
-
2,235
(66,900)
-
136,562
136,562
-
(31,600)
-
(9,737)
95,225
235
25,522
25,757
-
-
-
7,502
33,259
(23,469)
37,525
14,056
88,200
(9,026)
53,049
-
146,279
(92,369)
199,609
107,240
114,156
(40,626)
53,049
-
233,819
Balance, end of year
458,451
100,794
188,304
34,647
211,411
993,607
Balance, beginning of year
As previously reported
Prior year adjustments
(note 2.1 (a) (v))
As restated
Net gains / (losses) recognised
directly in equity
Net income for the year
Total recognised gains and
income for the year
Dividends declared (note 35)
Transfers
Year ended December 31, 2004
Share
capital
Note 24
Reserves
Note 25
Retained Participating
accounts
earnings
Note 26
Minority
interest
Total
432,495
98,323
43,317
1,222
56,289
631,646
432,495
-
-
-
-
-
-
-
(20,743)
77,580
4,030
47,347
-
1,222
(4,654)
51,635
(21,367)
610,279
89,358
-
89,358
-
756
90,114
-
67,690
67,690
(18,202)
(3,756)
45,732
(851)
(1,983)
(2,834)
-
3,000
166
14,632
7,276
21,908
(8,411)
-
13,497
103,139
72,983
176,122
(26,613)
-
149,509
Balance, end of year
432,495
167,694
93,079
1,388
65,132
759,788
36
Sagicor Financial Corporation
CONSOLIDATED CASH FLOW STATEMENT
Year ended December 31, 2005
Amounts expressed in Barbados $000
Notes
2005
2004
Cash flows from operating activities
Income from ordinary activities
Adjustments for non-cash items, interest and dividends
Interest and dividends received
Interest paid
Income taxes paid
Changes in operating assets
Changes in operating liabilities
Net cash from operating activities
Cash flows from investing activities
Property, plant and equipment
Investment in associated companies, net
Intangible assets
Acquisition of subsidiaries and insurance businesses, net of
cash and cash equivalents
Net cash used in investing activities
Cash flows from financing activities
Dividends paid to shareholders
Shares issued to minority interest
Dividends paid to minority interest
Loans payable
Net cash from / (used in) financing activities
Effects of exchange rate changes
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
36
36
36
36
36
36
223,655
(206,466)
296,905
(151,634)
(29,690)
214,384
(33,210)
313,944
(18,295)
(22,232)
(6,117)
(214,939)
(261,583)
(31,435)
5,554
(8,542)
143,994
109,571
(23,198)
138,734
135,608
274,342
79,899
(71,116)
170,590
(40,874)
(10,330)
(238,278)
132,598
22,489
(20,629)
6,481
(466)
-
(14,614)
(18,202)
2,170
(8,411)
(9,633)
(34,076)
13
(26,188)
161,796
135,608
37
Sagicor Financial Corporation
INDEX TO THE NOTES TO THE FINANCIAL STATEMENTS
INCORPORATION AND PRINCIPAL ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ACCOUNTING POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
RISK MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
STATUTORY RESTRICTIONS ON ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SEGMENTED INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
INVESTMENT PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
PROPERTY, PLANT AND EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
INVESTMENT IN ASSOCIATED COMPANIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
INTANGIBLE ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
FINANCIAL INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
REINSURANCE ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
INCOME TAX ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
MISCELLANEOUS ASSETS AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
CASH RESOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
ACTUARIAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
DEPOSIT ADMINISTRATION LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
OTHER POLICYHOLDER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
LOANS PAYABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
DEPOSIT AND SECURITY LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
INCOME TAX LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
SHARE CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
RESERVES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
PARTICIPATING ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
NET PREMIUM REVENUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
FEES AND OTHER REVENUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
NET POLICY BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
INTEREST EXPENSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
EARNINGS AND DIVIDENDS PER COMMON SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
CASH FLOWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
ASSETS AND LIABILITIES BY CURRENCY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
ACQUISITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
COMMITMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
CONTINGENT LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
RELATED PARTY TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
SUBSEQUENT EVENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
1.
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18.
19.
20.
21.
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36.
37.
38.
39.
40.
41.
42.
38
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
1.
INCORPORATION AND PRINCIPAL ACTIVITIES
Sagicor Financial Corporation was incorporated on December 6, 2002 under the Companies Act of Barbados as a
public limited liability holding company. On December 6, 2002, Sagicor Life Inc was formed following its conversion
from The Barbados Mutual Life Assurance Society (The Society). On December 30, 2002, Sagicor Financial
Corporation allotted common shares to the eligible policyholders of The Society and became the holding company
of Sagicor Life Inc.
The principal activities of the Sagicor Group are as follows:
•
Insurance
• Annuities
• Pensions
• Pension fund management
• Mutual fund management
• Corporate trust services
• Securities dealing
• Currency dealing
• Merchant banking
• Loan finance and deposit taking
The Group operates across the Caribbean and in the United States of America (USA).
The table below identifies the principal operating subsidiaries in the Group, their principal activities, their country of
incorporation and the effective equity interest held by the shareholders of Sagicor.
Subsidiary Companies
Principal Activities
Sagicor Life Inc
Life of Barbados Limited (1)
Life of Jamaica Limited
American Founders Life Insurance Company (3)
Sagicor Capital Life Insurance Company Limited
Capital Life Insurance Company Bahamas Limited
Capital de Seguros, SA
Life and health insurance,
annuities and pensions
Life and health insurance,
annuities and pensions
Life and health insurance,
annuities and pensions
Life insurance, annuities and
pensions
Life and health insurance,
annuities and pensions
Life and health insurance,
annuities and pensions
Life and health insurance
Nationwide Insurance Company Limited
Life insurance
Country of
Incorporation
Effective
Shareholders’
Interest
Barbados
Barbados
100%
100%
Jamaica
60%(2)
Texas, USA
100%
The Bahamas
100%
The Bahamas
Panama
Trinidad &
Tobago
100%
100%
100%
39
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
1.
INCORPORATION AND PRINCIPAL ACTIVITIES (continued)
Subsidiary Companies
Principal Activities
Country of
Incorporation
Effective
Shareholders’
Interest
Sagicor Life of the Cayman Islands Limited
Life insurance
Laurel Life Insurance Company (3)
Life insurance
Sagicor Allnation Insurance Company
Health insurance
Cayman General Insurance Company Limited (4)
Property, casualty, health and
life insurance
The Cayman
Islands
Texas, USA
Delaware,
USA
The Cayman
Islands
Sagicor General Insurance Inc
Property and casualty insurance
Barbados
Sagicor Re Insurance Limited
Property and casualty insurance
LOJ Holdings Limited
Sagicor USA Inc
LTE Limited (5)
Pan Caribbean Financial Services Limited (6)
Pan Caribbean Merchant Bank Limited (6)
Insurance holding company
Insurance holding company
Holding company
Development banking,
investment and fund
management services
Merchant banking
Sagicor Merchant Limited (8)
Merchant banking
GlobE Finance Inc
Loan and lease financing, and
deposit taking
Sagicor Finance Inc (formerly The Mutual Finance
Inc)
Loan and lease financing, and
deposit taking
The Cayman
Islands
Jamaica
Delaware,
USA
Barbados
Jamaica
Jamaica
Trinidad &
Tobago
Barbados
St. Lucia
60%(2)
100%
100%
31%
53%
60%(2)
100%
100%
100%
66%(7)
66%(7)
73%
51%
70%
Pan Caribbean Asset Management Limited (6)
Sagicor Asset Management Inc
The Mutual Financial Services Inc
Sagicor Funds Incorporated
LOJ Pooled Investment Funds Limited
LOJ Property Management Limited
Sagicor International Management Services,
Inc (formerly Capital International Management
Services, Inc)
Investment and fund
management
Investment management and
advisory services
Financial services holding
company
Mutual fund holding company
Pension fund management
Property management
Management and business
development services
Jamaica
66%(7)
Barbados
100%
Barbados
Barbados
Jamaica
Jamaica
73%
100%
60%(2)
60%(2)
Florida, USA
100%
Cayman National Insurance Managers Limited (4)
Captive insurance management
services
The Cayman
Islands
31%
40
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
1.
INCORPORATION AND PRINCIPAL ACTIVITIES (continued)
(1) Amalgamated with Sagicor Life Inc on February 1, 2005.
(2) An equity interest of 78% until April 1, 2005.
(3) Acquired September 30, 2005.
(4) Acquired by Life of Jamaica Limited on November 30, 2005. Through control of Life of Jamaica Limited, the
(5)
Group has a 51% voting interest in Cayman General Insurance Company Limited.
Incorporated as a special purpose vehicle to temporarily hold the Company’s direct 34% interest in Pan
Caribbean Financial Services Limited.
(6) Acquired January 7, 2005.
(7) An equity interest of 38% from January 7, 2005 to May 5, 2005. Between May 6 and September 1, interests
totalling 28% were acquired. Through control of Life of Jamaica Limited, the Group held a 49% voting interest
from January 7 to May 5, which increased to 87% effective September 1.
Incorporated on August 11, 2005 and commenced trading October 13, 2005.
(8)
The associated companies of the Group are as follows:
Associated Companies
Principal Activities
Country of
Incorporation
Effective
Shareholders’
Interest
RGM Limited
Caribbean CariCard Services Inc (9)
Manufacturers Credit and Information Services
Limited (6)
Property ownership and
management
Bank card processing, ATM and
point-of-sale handling services
Trinidad &
Tobago
Barbados
33%
37%
Provision of fleet advance cards
Jamaica
16%(10)
FamGuard Corporation Limited (11)
Investment holding company
Bahamas
Family Guardian Insurance Company Limited (11)
Life and health insurance and
annuities
Bahamas
FG General Insurance Agency Limited (11)
General insurance brokerage
Bahamas
BahamaHealth Insurance Brokers and Benefit
Consultants Limited (11)
Insurance brokers and benefit
consultants
Bahamas
20%
20%
20%
20%
(9) Caribbean CariCard Services Inc sold its operations effective July 31, 2004.
(10) A fully owned subsidiary of Pan Caribbean Financial Services Limited (PCFS) until May 31, when 75% of its
interest was disposed. Through PCFS, the Group has a 25% voting interest in Manufacturers Credit and
Information Services Limited.
(11) Acquired December 28, 2005.
For ease of reference, when the term “insurer” is used in the following notes, it refers to either one or more Group
subsidiaries that engage in insurance.
41
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
2.
ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out
below. These policies have been consistently applied to the years presented, unless otherwise stated.
2.1 Basis of preparation
These consolidated financial statements are prepared in accordance with and comply with International
Financial Reporting Standards (IFRS).
The Group had adopted accounting policies for the computation of actuarial liabilities on life insurance and
annuity contracts which comply with the Canadian Asset Liability Method (CALM). As no specific guidance is
provided by IFRS for computing actuarial liabilities, management has judged that CALM should continue to
be applied. The adoption of IFRS 4 – insurance contracts, permits the Group to continue with this accounting
policy, with the modification required by IFRS 4 that rights under reinsurance contracts are measured separately.
The consolidated financial statements are prepared under the historical cost convention except as modified by
the revaluation of investment property, owner-occupied property, available for sale investment securities and
financial assets held at fair value through income.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its judgement in the process of applying the Company’s
accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions
and estimates are significant to the consolidated financial statements, are disclosed in Note 3.
All amounts in these financial statements are shown in thousands of Barbados dollars, unless otherwise
stated.
(a) Changes in IFRS
The introduction of new IFRSs and revisions to IASs affects the Group from the 2005 reporting year. These
changes affect how items are presented in the financial statements, the disclosures made in the notes to the
financial statements, and how certain items are accounted.
The new standards introduced are:
IFRS 2 Share-based Payment
IFRS 3 Business Combinations
IFRS 4 Insurance Contracts
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
42
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
2.
ACCOUNTING POLICIES (continued)
2.1 Basis of preparation (continued)
The standards revised are as follows:
Inventories
IAS 1 Presentation of Financial Statements
IAS 2
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
IAS 10 Events after the Balance Sheet Date
IAS 16 Property, Plant and Equipment
IAS 17 Leases
IAS 19 Employee Benefits
IAS 21 The Effects of Changes in Foreign Exchange Rates
IAS 24 Related Party Disclosures
IAS 27 Consolidated and Separate Financial Statements
IAS 28 Investments in Associates
IAS 31 Interests in Joint Ventures
IAS 32 Financial Instruments: Disclosure and Presentation
IAS 33 Earnings per Share
IAS 36 Impairment of Assets
IAS 38 Intangible Assets
IAS 39 Financial Instruments: Recognition and Measurement
IAS 40 Investment Property
These and other changes have resulted in several overall changes in presentation and in the consequential
restatement of 2004 comparative amounts.
A summary of the changes significantly affecting the Group is set out below.
(i) IFRS 3 – Business Combinations, IAS 36 – Impairment of Assets, and IAS 38 – Intangible assets
The changes introduced affect the quantification of assets and liabilities acquired in a business combination,
and affect the subsequent accounting for goodwill and other intangible assets.
The definition of intangible assets, other than goodwill, has been amended with the result that such assets are
more readily recognised in a business combination. The impact of the change is that the recognition of separate
intangible assets reduce the amount of goodwill that would hitherto have been recognised. Intangible assets
are subject to either amortisation or to an annual impairment test.
Contingent liabilities are included in liabilities acquired. The impact of this change, is that the recognition of
contingent liabilities will increase the amount of goodwill that would hitherto have been recognised.
Once a business combination has occurred, any subsequent increases in ownership are accounted for as a
purchase of minority interest, and the excess of the consideration over the book value of the share of net assets
acquired is recorded as goodwill.
Goodwill is allocated to cash generating units of the Group expected to benefit from that goodwill, it is not
amortised, and it is tested annually for impairment. The impact of the change is that there is no goodwill
amortisation expense in the income statement, but there is potentially an impairment expense.
43
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
2.
ACCOUNTING POLICIES (continued)
2.1 Basis of preparation (continued)
(ii)
Introduction of IFRS 4 – Insurance Contracts
The changes introduced by IFRS 4 affected the Group’s financial statement presentation, disclosure and
measurement in the following ways:
•
The effect of reinsurance on all insurance assets, insurance liabilities, insurance income and insurance
benefits are either presented separately or disclosed in the notes to the financial statements. Up to
December 2004, the Group did not present separately or disclose effects of reinsurance on actuarial
liabilities, on the benefit for the increase in actuarial liabilities, and on the provision for unearned premiums.
This change affects the reported amounts for assets and liabilities respectively.
The accounting policies for insurance contracts are more fully described in note 2.11. The Group has made
no significant change in the measurement of its issued insurance policies.
The insurance risks of the Group are more fully described in note 4.
The techniques used to value actuarial liabilities are more fully described in notes 3.4 and 16.2, the analysis
of components in the actuarial liabilities is provided in note 16, and sensitivity analysis on the actuarial
liabilities is provided in note 16.
•
•
•
(iii) Changes to IAS 1 – Presentation of Financial Statements and IAS 27 – Consolidated and Separate
Financial Statements
The revisions to these standards affected the Group’s financial statement presentation and disclosure in the
following ways:
• Minority interest on the balance sheet is presented within equity, and the income attributable to minority
interest in the income statement is presented as an allocation of net income.
A note entitled “critical accounting estimates and judgements” is included.
•
(iv) Changes to IAS 24 – Related party disclosures
The revisions to this standard have affected the identification of related parties, namely key management, and
consequently the disclosures made.
(v) Changes to IAS 39 – Financial Instruments: Recognition and Measurement
Up to December 2004, the Group classified certain investments as “originated loans” (carried at amortised
cost). The changes to IAS 39 have resulted in the Group reclassifying these investments as either “loans and
receivables” (carried at amortised cost) or as “available for sale financial assets” (carried at fair value).
In accordance with the IFRS, the change from amortised cost to fair value has been recorded retrospectively,
and its effects are disclosed in the statement of equity, resulting in a reduction in the carrying values and fair
value reserves at the beginning of the year of $12,515 (2004 - $21,367).
Arising from a change in the definition of “held to maturity investments”, most of the Group’s investments
which were in this category have been reclassified as “loans and receivables”. This reclassification has resulted
in no change in measurement of the affected investments.
44
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
2.
ACCOUNTING POLICIES (continued)
2.1 Basis of preparation (continued)
(vi)
IAS 38 – Intangible assets
The Group has reclassified software as an intangible asset. Formerly, software was included within property,
plant and equipment.
(vii) IAS 19 – Employee Benefits
An amendment to IAS 19 now allows the option of recognising actuarial gains and losses in full in the period
in which they occur, outside of the income statement, in the statement of equity. The Group does not intend
to adopt this option.
2.2. Basis of consolidation
(a) Subsidiaries
Subsidiaries are entities over which the Group has the power to govern the financial and operating policies
generally accompanying a majority voting interest. Subsidiaries are consolidated from the date on which control
is transferred to the Group, and are de-consolidated from the date on which control ceases.
All material intra-group balances, transactions and gains are eliminated on consolidation. Accounting policies
of subsidiaries have been changed where necessary to ensure consistency with the accounting policies adopted
by the Group.
Minority interest balances represent the interest of minority shareholders in subsidiaries not wholly owned by
the Group.
The Group uses the purchase method of accounting for the acquisitions of subsidiaries and insurance
businesses. The cost of an acquisition is measured as the fair value of the assets given, equity instruments
issued and liabilities incurred or assumed at the date of exchange, plus costs attributable to the acquisition.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date irrespective of the extent of any minority interest.
The excess of the cost of acquisition over the fair value of the Group’s share of the net assets acquired is
recorded as goodwill. If, after reassessment of the net assets acquired, the cost of the acquisition is less than
the Group’s share of net assets acquired, the difference is recognised in income.
45
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
2.
ACCOUNTING POLICIES (continued)
2.2. Basis of consolidation (continued)
(b) Investment in associated companies
The investments in associated companies, which are not majority owned or controlled but where significant
influence exists, are included in these consolidated financial statements under the equity method of
accounting. Investments are originally recorded at cost and may include goodwill identified on acquisition, less
any impairment loss.
The Group’s share of its associates’ post acquisition income and reserve movements are recognised in the
consolidated income statement and consolidated statement of changes in equity respectively.
Unrealised gains or losses on transactions between the Group and its associates are eliminated to the extent
of the Group’s interest in the associates.
Accounting policies of associates have been changed where necessary to ensure consistency with the accounting
policies adopted by the Group.
(c) Joint Ventures
Interests in the assets, liabilities and earnings of jointly controlled ventures are included in these consolidated
financial statements using the proportionate consolidation method, eliminating all material related party
balances.
(d) Divestitures
Realised gains on the disposal of subsidiaries, operations, associates and joint ventures are included in
revenue.
(e) Pension and investment funds
Insurers have issued deposit administration and unit linked contracts in which the full return of the assets
supporting these contracts accrue directly to the contract-holders. As these contracts are not operated under
legal trusts, they have been consolidated in these financial statements.
The Group manages a number of segregated pension funds and mutual funds. These funds are legally
segregated and investment returns on these funds accrue directly to unit-holders. Consequently the assets,
liabilities and activity of these funds are not included in these consolidated financial statements.
46
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
2.
ACCOUNTING POLICIES (continued)
2.3 Foreign currency translation
(a) Functional and presentational currency
Items included in the financial statements of each consolidated entity of the Group are measured using the
currency of the primary economic environment in which the entity operates (the functional currency). The
consolidated financial statements are presented in thousands of Barbados dollars, which is the Group’s
presentational currency.
(b) Group Entities
The results and financial position of all Group entities that have a functional currency other than the
presentational currency are translated into the presentational currency as follows:
(i)
Income statements, movements in equity and cash flows are translated at average exchange rates for the
year.
(ii) Balance sheets are translated at the exchange rates ruling on December 31.
(iii) Resulting exchange differences are recognised in the equity reserve for currency translation.
Currency exchange rates are determined by reference to the respective central banks. Currencies which are fixed
to the United States dollar are converted into Barbados dollars at the equivalent fixed rates. Currencies which
float are converted to the Barbados dollar by reference to the average of buying and selling rates quoted by the
respective central banks.
Exchange rates of the other principal operating currencies to the Barbados dollar were as follows:
December 2005
closing rate
2005
average rate
December 2004
closing rate
2004
average rate
Bahamas dollar
Belize dollar
Cayman Islands dollar
Eastern Caribbean dollar
Jamaica dollar
Netherlands Antillean guilder
Trinidad & Tobago dollar
United States dollar
0.50
1.00
0.4175
1.35
32.1903
0.90
3.1493
0.50
0.50
1.00
0.4175
1.35
31.1218
0.90
3.1332
0.50
0.50
1.00
0.4175
1.35
30.7250
0.90
3.1444
0.50
0.50
1.00
0.4175
1.35
30.5794
0.90
3.1373
0.50
On consolidation, exchange differences arising from the translation of the net investment in foreign entities are
taken to the equity reserve for currency translation. When a foreign entity is sold, such exchange differences are
recognised in the consolidated income statement as part of the gain or loss on sale.
Goodwill and other purchase accounting adjustments arising on the acquisition of a foreign entity are treated
as assets and liabilities of the foreign entity and are translated at the rate ruling on December 31.
47
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
2.
ACCOUNTING POLICIES (continued)
2.3 Foreign currency translation (continued)
(c) Transactions and balances
Foreign currency transactions are translated into the functional currency at the exchange rates prevailing at the
dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions
and from the translation of monetary assets and liabilities denominated in foreign currencies, are recognised
in the income statement.
Translation differences on debt securities and other monetary financial assets measured at fair value are
included in foreign exchange gains and losses. Translation differences on non-monetary items such as equities
held at fair value through income are reported as part of the fair value gain or loss. Translation differences on
non-monetary items such as equities held available for sale are included in the fair value reserve in equity.
2.4
Investment property
Investment property is recorded initially at cost. At subsequent balance sheet dates, investment property is
recorded at fair values determined by independent valuers, with the appreciation or depreciation in value being
taken to investment income. Investment property includes property held under partnership and joint venture
arrangements with third parties. These are accounted for under the proportionate consolidation method.
Transfers to or from investment property are recorded when there is a change in use of the property. Transfers
to owner-occupied property or to real estate developed for resale are recorded at the fair value at the date of
change in use. Transfers from owner-occupied property are recorded at their fair value and any difference with
carrying value at the date of change in use is dealt with in accordance with note 2.5.
Investment property may include property of which a portion is held for rental to third parties and another
portion is occupied by the Group for administrative purposes. This type of property is accounted for as an
investment property if the Group’s occupancy level is 25% or less of the total available occupancy. In other
instances, this type of property is accounted for as an owner-occupied property.
Rental income is recognised on an accruals basis.
48
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
2.
ACCOUNTING POLICIES (continued)
2.5 Property, plant and equipment
Property, plant and equipment are recorded initially at cost.
Owner-occupied property is re-valued at least every three years to its fair value as determined by independent
valuers. Movements in fair value are taken to the fair value reserve in equity, unless there is a net depreciation
in respect of an individual property, which is then recorded in the income statement. Any accumulated
depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset. On disposal
of owner-occupied property, the amount included in the reserve is transferred to retained earnings.
Any gain or loss on disposal included in income is determined by comparing proceeds to the asset’s carrying
value at the time of disposal.
The Group, as lessor, enters into operating leases with third parties to lease assets. Operating leases are leases
in which the Group maintains substantially the risks of ownership and the associated assets are recorded as
property, plant and equipment. Income from operating leases is recognised on the straight-line basis over the
term of the lease.
Depreciation is calculated on the straight-line method to write down the cost of assets to their residual values
over their estimated useful lives. The carrying amount of an asset is written down immediately through the
depreciation account if the carrying amount is greater than its estimated recoverable amount.
The estimated useful lives of property, plant and equipment are as follows:
Asset
Buildings
Furnishings and leasehold improvements
Computer and office equipment
Vehicles
Leased equipment and vehicles
Estimated useful life
20 to 50 years
10 years or lease term
3 to 10 years
5 to 6 years
3 to 6 years
2.6
Intangible assets
(a) Goodwill
Goodwill (defined in note 2.2(a)) arising from an acquisition of a subsidiary or insurance business is allocated
to appropriate cash generating units. A cash generating unit is determined to be the relevant subsidiary’s
operations in a geographical segment. Goodwill arising from an investment in an associate is included in the
carrying value of the investment in associate.
From 2005, goodwill is tested annually for impairment and is carried at cost less accumulated impairment. In
response to the change in accounting for goodwill, (in prior years goodwill was amortised over its estimated
useful life and only tested for impairment when there was evidence of impairment), the net carrying value of
goodwill at the end of 2004 is now deemed to be the cost.
49
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
2.
ACCOUNTING POLICIES (continued)
2.6
Intangible assets (continued)
(b) Other intangible assets
Other intangible assets arising on acquisitions occurring on or after March 31, 2004 are recognised only if
future economic benefits attributable to the asset will flow to the Group and if the fair value of the asset can be
measured reliably. In addition for the purposes of recognition, the intangible asset must be separable from the
business being acquired or must arise from contractual or legal rights. Intangible assets acquired in a business
combination are initially recognised at their fair value. Other intangible assets which have been acquired directly,
are recorded initially at cost. On acquisition the useful life of the asset is estimated. If the estimated useful life is
definite, then the cost of the asset is amortised over its life, and is tested for impairment when there is evidence
of same. If the estimated useful life is indefinite, the asset is tested annually for impairment.
The estimated useful lives of recognised intangible assets are as follows:
Asset
Customer relationships and contracts
Trade names
Software
Estimated useful life
2 – 20 years
4 years, indefinite
2 – 6 years
2.7 Financial assets
The Group classifies its financial assets into four categories:
• held to maturity financial assets;
• available for sale financial assets;
•
•
financial assets at fair value through income; and
loans and receivables.
Management determines the appropriate classification of these assets at initial recognition.
Financial assets with fixed maturities and for which management has both the intent and ability to hold
to maturity are classified as held to maturity. These assets are carried at amortised cost less provision for
impairment.
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active
market. These assets are carried at amortised cost less provision for impairment.
Financial assets in the category at fair value through income include held for trading securities. An asset is
classified in this category at inception if acquired principally for the purpose of selling in the short-term, if
it forms part of a portfolio of financial assets in which there is evidence of short-term profit taking or if so
designated by management. These investments are measured initially at cost and are subsequently re-measured
at their fair value based on quoted prices or internal valuation techniques. Realised and unrealised gains and
losses are recorded as investment income.
50
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
2.
ACCOUNTING POLICIES (continued)
2.7 Financial assets (continued)
Other financial assets are classified as available for sale. These assets are measured initially at cost and are
subsequently re-measured at their fair value based on quoted prices or internal valuation techniques. Unrealised
gains and losses, net of deferred income taxes, are recorded in the fair value reserve. Either on the disposal
of the asset or if the asset is determined to be impaired, the previously recorded unrealised gain or loss is
transferred to investment income. Discounts and premiums on available for sale securities are amortised using
the effective yield method.
Purchases and sales of these investments are recognised on the trade date. Cost of purchases includes
transaction costs. Interest income arising on investments is accrued using the effective yield method. Dividends
are recorded in revenue when due.
A financial asset is considered impaired if its carrying amount exceeds its estimated recoverable amount.
The impairment loss for assets carried at amortised cost is calculated as the difference between the carrying
amount and the present value of expected cash flows discounted at the original effective interest rate. The
recoverable amount for assets carried at fair value is the present value of expected future cash flows discounted
at the current market interest rate for a similar financial asset.
If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognised, the previously recognised impairment
loss is reversed, and the amount of the reversal is recognised in revenue.
(a) Securities purchased under agreements to resell
Securities purchased under agreements to resell are treated as collateralised financing transactions. The
difference between the purchase and resale price is treated as interest and is accrued over the life of the
agreements using the effective yield method.
(b) Finance leases
The Group, as lessor, enters into finance leases with third parties to lease assets. Finance leases are leases in
which the Group has transferred substantially the risks of ownership to the lessee. The finance lease, net of
unearned finance income, is recorded as a receivable and the finance income is recognised over the term of the
lease using the effective yield method.
(c) Derivative financial instruments
The Group holds certain bonds and preferred equity securities that contain options to convert into common
shares of the issuer. These options are considered embedded derivatives.
If the measurement of an embedded derivative can be separated from its host contract, the embedded
derivative is carried at current market value and is presented with its related host contract. Unrealised gains
and losses are recorded as investment income.
If the measurement of an embedded derivative cannot be separated from its host contract, the full contract is
accounted for as a held for trading security.
51
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
2.
ACCOUNTING POLICIES (continued)
2.7 Financial assets (continued)
(d) Financial assets held in trust under modified coinsurance arrangements
These assets are held in trust for the insurer and are in respect of policy liabilities ceded to reinsurers. These
assets are classified as available for sale.
2.8 Real estate developed or held for resale
Lands being made ready for resale along with the cost of infrastructural works are classified as real estate held
for resale and are valued at the lower of cost and net realisable value.
Real estate acquired through foreclosure is classified as real estate held for resale and is valued at the lower of
cost and net realisable value.
Gains and losses realised on the sale of real estate are included in revenue at the time of sale.
2.9
Impairment of assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment.
Assets that are subject to amortisation are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for
the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is
the higher of an asset’s fair value less costs to sell and value in use.
2.10 Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, call deposits,
other liquid balances with original maturities of ninety days or less, and bank overdrafts. Cash and cash
equivalents do not include balances principally of an investment nature or funds held to meet statutory
requirements.
52
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
2.
ACCOUNTING POLICIES (continued)
2.11 Insurance and investment contracts
(a) Classification
The Group issues contracts that transfer insurance risk, financial risk or both.
Insurance contracts transfer insurance risk and may also transfer financial risk. The Group defines insurance
risk if an insured event could cause an insurer to pay significant additional benefits in a scenario that has a
discernable effect on the economics of the transaction.
Investment contracts are those contracts that transfer financial risk and no insurance risk (as defined above).
A number of insurance contracts contain a discretionary participation feature. A discretionary participation
feature entitles the holder to receive, supplementary to the main benefit, additional benefits or bonuses:
that are likely to be a significant portion of the total contractual benefits;
•
• whose amount or timing is contractually at the discretion of management; and
•
that are contractually based on
º
º
º
the performance of a specified pool of contracts;
investment returns on a specified pool of assets held by the insurer; or
the profit or loss of a fund or insurer issuing the contract.
Policy bonuses and policy dividends constitute discretionary participation features which the Group classifies
as liabilities.
Residual gains in the participating accounts constitute discretionary participation features which the Group
classifies as equity.
53
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
2.
ACCOUNTING POLICIES (continued)
2.11 Insurance and investment contracts (continued)
(b) Recognition and measurement
The main insurance and investment contracts issued by the Group are summarised below.
(i) Property and casualty insurance contracts
Property and casualty insurance contracts are generally one year renewable contracts issued by the insurer
covering insurance risks over property, motor, accident and marine.
Premium revenue is recognised as earned on a pro-rated basis over the term of the respective policy coverage.
The provision for unearned premiums represents the portion of premiums written relating to the unexpired
terms of coverage.
Claims and loss adjustment expenses are recorded as incurred. Claim reserves represent estimates of future
payments of reported and unreported claims and related expenses with respect to insured events that have
occurred up to the balance sheet date. Reserving involves uncertainty and the use of informed estimates and
judgements. The Group does not discount its loss reserve. The claim reserve is included in policy benefits in
the course of settlement.
The Group obtains reinsurance coverage for its property and casualty insurance risks. The reinsurance ceded
premium is expensed on a pro-rata basis over the term of the respective policy coverage. Reinsurance claim
recoveries are established at the time of the recording of the claim liability. Profit sharing commission due to
the Group is recognised only when there is reasonable certainty of collectibility, at which time it is recorded as
commission income.
Commissions and premium taxes payable are recognised on the same basis as premiums written.
(ii) Health insurance contracts
Health insurance contracts are generally one year renewable contracts issued by the insurer covering insurance
risks for medical expenses of insured persons.
Premium revenue is recognised when due for contracts where the premium is billed monthly. For contracts
where the premium is billed annually or semi-annually, premium revenue is recognised as earned on a pro-
rated basis over the term of the respective policy coverage. The provision for unearned premiums represents
the portion of premiums written relating to the unexpired terms of coverage.
Claims are recorded on settlement. Reserves are recorded as described in note 2.12.
The Group may obtain reinsurance coverage for its health insurance risks. The reinsurance premium is
expensed over the coverage period of respective policies. Reinsurance claims recoveries are established at the
time of claim settlement.
Commissions and premium taxes payable are recognised on the same basis as earned premiums.
54
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
2.
ACCOUNTING POLICIES (continued)
2.11 Insurance and investment contracts (continued)
(iii) Long-term traditional insurance contracts
Long-term traditional insurance contracts are generally issued for fixed terms of five years or more, or for the
remaining life of the insured. Benefits are typically a death or critical illness benefit, a cash value on termination
and/or a monthly annuity. Annuities are generally payable until the death of the beneficiaries with a proviso for
a minimum number of payments. Some of these contracts have a discretionary participation feature in the form
of regular bonuses or dividends. Other benefits such as disability or waiver of premium on disability may also
be included in these contracts. Some contracts may allow for the advance of policy loans to the policyholder
and may also allow for dividend withdrawals by the policyholder during the life of the contract.
Premium revenue is recognised when due. Typically, premiums are fixed and are required to be paid within the
due period for payment. If premiums are unpaid, the contract will terminate unless an automatic premium loan
is available to settle the premium.
Policy benefits are recognised on notification of death, receipt of surrender request, on the maturity date of
endowment policies, on the declaration of a cash bonus or dividend or on the annuity payment date. Policy
loans advanced are recorded as loans and receivables in the balance sheet and are secured by the cash values
of the respective policies. Policy bonuses may be “non-cash” and utilised to purchase additional amounts of
insurance coverage. Accumulated cash bonuses and dividends are recorded as interest bearing policy funds on
deposit.
Reserves for future policy liabilities are recorded as described in note 2.12.
The Group may obtain reinsurance coverage for death benefit insurance risks. Typically, coverage is obtained
for individual coverage exceeding prescribed limits. The reinsurance premium is expensed when due, which
generally coincides with when the policy premium is due. Reinsurance claims recoveries are established at the
time of claim notification.
Commissions and premium taxes payable are recognised on the same basis as earned premiums.
55
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
2.
ACCOUNTING POLICIES (continued)
2.11 Insurance and investment contracts (continued)
(iv) Long-term – universal life and unit linked insurance contracts
Universal life and unit linked insurance contracts are generally issued for fixed terms or for the remaining life of
the insured. Benefits are typically a death or critical illness benefit, a cash value on termination and/or a monthly
annuity. Annuities are generally payable until the death of the beneficiaries with a proviso for a minimum
number of payments. Benefits may include amounts for disability or waiver of premium on disability.
Universal life and unit linked contracts have either an interest bearing investment account or unit linked
investment accounts. Either gross premiums or gross premiums net of allowances are deposited to the
investment accounts. Investment returns are credited to the investment accounts and expenses, not included
in the aforementioned allowances, are debited to the investment accounts. Allowances and expense charges
are in respect of applicable commissions, cost of insurance, administrative expenses and premium taxes. Fund
withdrawals may be permitted.
Premium revenue is recognised when received and consists of all monies received from the policyholders.
Typically, premiums are fixed at the inception of the contract or periodically thereafter but additional non-
recurring premiums may be paid.
Death benefits are recognised in policy benefits on notification. Fund withdrawals are recognised in policy
benefits on receipt of the withdrawal request. Reserves for future policy liabilities are recorded as described in
note 2.12.
The Group may obtain reinsurance coverage for death benefit insurance risks. Typically, coverage is obtained for
individual coverage exceeding prescribed limits. The reinsurance premium is expensed when due. Reinsurance
claims recoveries are established at the time of claim notification.
Commissions and premium taxes payable are generally recognised only on settlement of premiums.
(v) Reinsurance contracts assumed
Reinsurance contracts assumed by an insurer are accounted for in a similar manner as if the insurer has issued
the risk.
Reinsurance contracts assumed include blocks of life and annuity policies assumed from third party insurers.
In some instances, the Group also administers these policies.
56
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
2.
ACCOUNTING POLICIES (continued)
2.11 Insurance and investment contracts (continued)
(vi) Reinsurance contracts held
As noted in sections (i) to (iv) above, an insurer may obtain reinsurance coverage for insurance risks
underwritten. The Group cedes insurance premiums and risk in the normal course of business in order to limit
the potential for losses arising from its exposures. Reinsurance does not relieve the originating insurer of its
liability.
Reinsurance contracts held include blocks of life and annuity policies ceded to reinsurers on coinsurance or
modified coinsurance bases. The Group records as a receivable the reinsurer’s share of the actuarial liabilities
on these policies.
The benefits to which an insurer is entitled under its reinsurance contracts held are recognised as reinsurance
assets or receivables. Reinsurance assets and receivables are assessed for impairment. If there is evidence that
the asset or receivable is impaired, the impairment is recorded in the statement of income. The obligations of
an insurer under reinsurance contracts held are recognised as reinsurance liabilities or payables.
Reinsurance balances are measured consistently with the insurance liabilities to which they relate.
(vii) Investment contracts – deposit administration and other investor contracts
Deposit administration contracts are issued by an insurer to registered pension schemes which deposit the
pension plan assets with the insurer. The insurer is obligated to provide investment returns to the pension
scheme in the form of interest or in direct proportion to the investment returns on specified blocks of assets.
Deposit administration contributions are recorded directly as liabilities. Withdrawals are deducted directly from
the liability.
The interest or investment return provided is recorded as an interest expense.
In addition, the Group may provide pension administration services to the pension schemes. The Group earns
fee income for both pension administration and investment services.
Interest guarantees which may adversely affect the Group are recorded in actuarial liabilities.
Other investor contracts are valued at amortised cost and are otherwise accounted in a manner similar to
deposit administration contracts. The liability in respect of other investor contracts is included under policy
funds on deposit.
57
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
2.
ACCOUNTING POLICIES (continued)
2.11 Insurance and investment contracts (continued)
(viii) Investment contracts – securities sold under agreements to repurchase
Securities sold under agreements to repurchase are treated as collateralised financing transactions. The
difference between the sale and repurchase price is treated as interest and is accrued over the life of the
agreements using the effective yield method.
(ix) Investment contracts – deposit liabilities
Deposits are recognised initially at fair value and are subsequently stated at amortised cost using the effective
yield method.
(c) Liability adequacy tests
At balance sheet date, liability adequacy tests are performed to ensure the adequacy of insurance contract
liabilities, using current estimates of the related expected future cash flows. If a test indicates that the carrying
value of insurance contract liabilities is inadequate, then the liabilities are adjusted to correct the deficiency. The
deficiency is included in the income statement under benefits.
2.12 Actuarial liabilities
The Canadian Asset Liability Method (CALM) is used for the determination of actuarial liabilities of long-term
insurance contracts. These liabilities consist of amounts that, together with future premiums and investment income,
are required to provide for future policy benefits, expenses and taxes on insurance and annuity contracts.
The process of calculating life insurance and annuity actuarial liabilities for future policy benefits necessarily involves
the use of estimates concerning such factors as mortality and morbidity rates, future investment yields, future
expense levels and persistency, including reasonable margins for adverse deviations. As experience unfolds, these
provisions for adverse deviations will be included in future income to the extent they are no longer required to cover
adverse experience. Assumptions used to project benefits, expenses and taxes are based on company and industry
experience and are updated annually.
CALM is based on an explicit projection of cash flows using best estimate assumptions for each material cash
flow item and contingency. Investment returns are based on projected investment income using the current asset
portfolios and projected re-investment strategies. Each assumption is adjusted by a margin for adverse deviation.
Certain life insurance policies issued by the insurer contain equity linked policy side funds. The investment returns
on these unitised funds accrue directly to the policies with the insurer assuming no credit risk. Investments held in
these side funds are accounted for as financial assets at fair value through income and unit values of each fund are
determined by dividing the value of the assets in the fund at balance sheet date by the number of units in the fund.
The resulting liability is included in actuarial liabilities.
The actuarial liabilities of health insurance policies are estimated in respect of claims that have been incurred but not
yet reported and claims that have been reported but not yet paid, due to the time taken to process the claim.
58
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
2.
ACCOUNTING POLICIES (continued)
2.13 Participating Accounts
(a) “Closed” participating fund
For participating policies of Sagicor Life Inc in force at demutualisation, Sagicor Life Inc established a closed
participating fund in order to protect the guaranteed benefits and future policy dividends, bonuses and other
non-guaranteed benefits of the afore-mentioned policies. The rules of this fund require that premiums, benefits,
actuarial reserve movements, investment returns, expenses and taxes, attributable to the said policies, are
recorded in a ‘closed’ participating account. Policy dividends and bonuses of the said policies are paid from the
participating account on a basis substantially the same as prior to demutualisation. The fund also includes the
required provisions for adverse deviations as determined in the computation of actuarial liabilities of the said
policies. Changes in the provision for adverse deviations are not recorded in the participating account, but are
borne by the general operations of Sagicor Life Inc.
(b) “Open” participating fund
Sagicor Life Inc also established an open participating fund for participating policies it issues after
demutualisation. The rules of this fund require that premiums, benefits, actuarial reserve movements,
investment returns, expenses and taxes, attributable to the said policies are recorded in an ‘open’ participating
account. The open participating fund was established at demutualisation. In 2003 and 2004, transfers were
made from retained earnings to the fund as initial seed capital to support the issue of new participating
policies.
On February 1, 2005, Sagicor Life Inc amalgamated with Life of Barbados Limited, and participating policies
of the latter were transferred to the open participating fund. Accordingly, the liabilities of these participating
policies and matching assets were transferred to the open participating fund. The liabilities transferred included
provisions for adverse deviations on the transferred policies, which are accounted for in the same way as the
corresponding provisions in the closed participating fund. Additional assets to support the profit distribution
to shareholders (see below) were also transferred into the fund.
Effective June 30, 2005, on the recommendation of the Appointed Actuary of Sagicor Life Inc, the open
participating fund had reached a size at which capital self sufficiency had been attained, and the seed capital
was returned to retained earnings. A return on the seed capital, as determined by the Appointed Actuary, has
been charged to the participating account.
Distributable profits of the open participating account are shared between participating polices and
shareholders in a ratio of 90:10. Profits are distributed to the participating policies in the form of declared
bonuses and dividends. Profits which are distributed to shareholders are included in the allocation of Group
net income to shareholders. Undistributed profits remain in the participating account.
59
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
2.
ACCOUNTING POLICIES (continued)
2.13 Participating Accounts (continued)
(c) Financial statement presentation
The assets and liabilities of the participating funds are not presented separately in the financial statements.
The revenues, benefits and expenses of the participating accounts are also not presented separately in the
financial statements. However, the overall surplus of assets held in the participating funds over the associated
liabilities is presented in equity as the participating accounts. The overall Group net income that is attributable
to the participating funds is disclosed as an allocation of net income. Movements in reserves attributable to the
participating funds are presented in equity under the participating accounts.
The allocation of additional assets to the participating funds is recognised in equity as a transfer from retained
earnings to the participating accounts.
2.14 Borrowings
Borrowings are recognised initially at fair value, being their issue proceeds, net of transaction costs incurred.
Subsequently, borrowings are stated at amortised cost and any difference between net proceeds and the
redemption value is recognised in the income statement over the period of the borrowings using the investment
yield method.
Borrowings undertaken for the purposes of Group expansion are classified as loans payable and the associated
cost is classified as finance cost. Borrowings undertaken for the purposes of providing funds for on-lending,
leasing or portfolio investments are classified as other funding instruments and are included in deposit and
security liabilities and the associated cost is included in interest expense.
2.15 Provisions
Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, if it
is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the
amount can be made.
2.16 Interest income and expenses
Interest income and expenses are recognised in the income statement for all interest bearing instruments on
an accrual basis using the effective yield method based on the actual purchase price. Interest income includes
coupons earned on fixed income investment securities, loans and deposits and accrued discount and premium
on discounted instruments.
2.17 Fees and other revenue
Fees and other revenue are recognised on an accrual basis when the related service has been provided.
60
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
2.
ACCOUNTING POLICIES (continued)
2.18 Employee benefits
(a) Pension benefits
Group companies have various pension schemes in place for their employees. Some schemes are defined
benefit plans and others are defined contribution plans.
The liability in respect of defined benefit plans is the present value of the defined benefit obligation at December
31 minus the fair value of plan assets, together with adjustments for unrecognised actuarial gains or losses
and past service costs. The defined benefit obligation is computed using the projected unit credit method.
The present value of the defined benefit obligation is determined by the estimated future cash outflows using
appropriate interest rates for the maturity dates and location of the related liability.
Actuarial gains and losses arising from experience adjustments, changes in actuarial assumptions, and
amendments to pension plans are charged or credited to the income statement over the average service lives of
the related employees. Past service costs are charged to the income statement on a straight line basis over the
average period until the benefits become vested. Past service costs are recognised immediately if the benefits
vest immediately.
For defined contribution plans, the Group pays contributions to the pension schemes on a mandatory or
contractual basis. Once paid, the Group has no further payment obligations. The regular contributions
constitute net periodic costs for the year in which they are due and as such are included in expenses in the
income statement.
(b) Other retirement benefits
Certain Group subsidiaries provide supplementary health, dental and life insurance benefits to qualifying
employees upon retirement. The entitlement to these benefits is usually based on the employee remaining in
service up to retirement age and the completion of a minimum service period. The expected costs of these
benefits are accrued over the period of employment, using an accounting methodology similar to that for
defined benefit pension plans.
(c) Profit sharing and bonus plans
The Group recognises a liability and an expense for bonuses and profit sharing, based on various profit and
other objectives of the Group as a whole or of individual subsidiaries. A provision is recognised where there are
contractual obligations or where past practice has created a constructive obligation.
61
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
2.
ACCOUNTING POLICIES (continued)
2.18 Employee benefits (continued)
(d) Equity compensation benefits
The Company and certain Group subsidiaries have in place equity-settled share-based compensation plans for
their administrative, sales and managerial staff.
For equity-settled share-based compensation plans, the fair value of the employee services received in exchange
for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting
period is determined by reference to the fair value of the options granted, excluding the impact of any non-
market vesting conditions (for example, net profit growth target). Non-market vesting conditions are included in
assumptions about the number of options that are expected to become exercisable. At each balance sheet date,
the Group revises its estimates of the number of options that are expected to become exercisable. It recognises
the impact of the revision of original estimates, if any, in the statement of income, and a corresponding
adjustment to equity over the remaining vesting period.
The proceeds received net of any directly attributable transaction costs are credited to share capital or minority
interests when the options are exercised.
A subsidiary has in place a share purchase plan which enables its administrative and sales staff to purchase new
shares of that subsidiary at a discount.
(e) Termination benefits
Termination benefits are payable whenever an employee’s employment is terminated before the normal
retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The
Group recognises termination benefits when it is demonstrably committed to either terminate the employment
of current employees according to a detailed formal plan without the possibility of withdrawal or to provide
termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more
than twelve (12) months after the balance sheet date are discounted to present value.
2.19 Deferred income taxes
The Group uses the balance sheet liability method of accounting for income tax. Deferred tax assets and
liabilities resulting from temporary differences are computed at tax rates that are expected to apply to the period
when the asset is realised or the liability settled. Deferred tax assets are only recognised when it is probable
that taxable profits will be available against which the asset may be utilised. Provision for taxes, which could
arise on the remittance of retained earnings from subsidiaries, is only made where there is a current intention
to remit such earnings.
2.20 Dividend distributions
Dividend distributions on the Company’s common shares are recorded in the period during which the dividend
declaration has been approved by the directors.
62
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
2.
ACCOUNTING POLICIES (continued)
2.21 Statutory reserves
Statutory reserves are established when regulatory accounting requirements result in lower distributable profits
or when an appropriation of retained earnings is required or permitted by law to protect policyholders, insureds
or depositors.
3.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The development of estimates and the exercise of judgment in applying accounting polices may have a material
impact on the Group’s reported assets, liabilities, revenues, benefits and expenses. The items which may have the
most effect on the Group’s financial statements are set out below.
3.1
Impairment of financial assets
An available for sale debt security, a loan or a receivable is considered impaired when management determines
that it is probable that all amounts due according to the original contract terms will not be collected. This
determination is made after considering the payment history of the borrower, the discounted value of collateral
and guarantees, and the financial condition and financial viability of the borrower.
An available for sale equity investment is considered impaired when there is a significant or prolonged decline in
the fair value below cost. Determination of what is significant or prolonged requires judgement which includes
consideration of the volatility of the fair value, and the financial condition and viability of the investee.
The determination of impairment may either be considered by individual asset or by a grouping of assets with
similar relevant characteristics.
3.2 Recognition and measurement of intangible assets
The recognition and measurement of intangible assets, other than goodwill, in a business combination involve
the utilisation of valuation techniques which may be very sensitive to the underlying assumptions utilised. These
intangibles may be marketing related, consumer related, contract based or technology based.
For significant amounts of intangibles arising from a business combination, the Group utilises independent
professional advisors to assist management in determining the recognition and measurement of these assets.
3.3
Impairment of intangible assets
(a) Goodwill
The assessment of goodwill impairment involves the determination of the fair value of the cash generating
business units to which the goodwill has been allocated. Determination of fair value involves the estimation of
future net income of these business units and the expected returns to providers of capital to the business units
and / or to the Group as a whole.
The Group updates its business unit financial projections annually and applies discounted cash flow models on
these projections to determine if there is any impairment of goodwill.
63
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
3.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
3.3
Impairment of intangible assets (continued)
(b) Other intangible assets
The assessment of impairment of other intangible assets involves the determination of the intangible’s fair value
or value in use. In the absence of an active market for an intangible, its fair value may need to be estimated. In
determining an intangible’s value in use, estimates are required of future cash flows generated as a result of
holding the asset.
3.4 Actuarial liabilities
(a) Canadian asset liability method (CALM)
The objective of the valuation of policy liabilities is to determine the amount of the insurer’s assets that, in
the opinion of the Appointed Actuary (AA) and taking into account the other pertinent items on the balance
sheet, will be sufficient without being excessive to provide for the policy liabilities over their respective terms.
The amounts set aside for future benefits are dependent on the asset and liability cash flows, as well as any
mismatch during the valuation period.
The actuarial liabilities are determined by the amount of assets required to ensure that sufficient monies are
available to meet the policy liabilities as they become due, even under adverse economic circumstances.
The AA identifies the current economic scenario and the existing investment portfolio as at the date of the
actuarial valuation. The investments required to support the policy liabilities are then determined under a
variety of future interest rate environments using scenario testing. The total policy liability is determined as the
amount of assets required in order that sufficient monies are available to meet the liabilities as they become
due under the “worst case” economic scenario, that is, the scenario that produces the highest investment
requirement.
The CALM methodology produces the total reserve requirement for each CALM fund. In general, the CALM
methodology is used to determine the net overall actuarial liabilities required by the insurer. Policy premium
method (PPM) equivalents are used to determine the amount of reinsurance balances in the reserve, the
distribution of the total reserve by country (for statutory reporting), and the distribution of the reserve by policy
(for MCCSR negative reserves). PPM equivalents and other approximations to CALM have also been used in
calculating certain components in the actuarial liabilities.
64
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
3.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
3.4 Actuarial liabilities (continued)
(b) Best estimate reserve assumptions & provisions for adverse deviations
Actuarial liabilities include two major components: a best estimate reserve and a provision for adverse
deviations. This latter provision is established in recognition of the uncertainty in computing best estimate
reserves, to allow for possible deterioration in experience and to provide greater comfort that reserves are
adequate to pay future benefits.
For the respective reserve assumptions for mortality and morbidity, lapse, future investment yields, operating
expenses and taxes, best estimate reserve assumptions are determined where appropriate for each major
geographical segment, namely Barbados, Jamaica, Trinidad & Tobago, USA and other Caribbean.
Provisions for adverse deviations are established in accordance with the risk profiles of the business, and are,
as far as is practicable, standardized across the major geographical segments. Provisions are determined within
a specific range established by the Canadian Standards of Practice.
4.
RISK MANAGEMENT
The Group’s activities are related principally to the use of financial instruments and insurance contracts. As
such, the Group is exposed to financial and insurance risks and the principles utilised by management in
dealing with these risks are set out below.
4.1 Credit risk
The Group takes on exposure to credit risk which is the risk that a counterparty will be unable to pay amounts in
full when due. Credit risks are primarily associated with financial investments and reinsurance contracts held.
Credit risk from financial investments is minimised through holding a diversified portfolio of investments,
purchasing securities and advancing loans only after careful assessment of the borrower, and placing deposits
with financial institutions with a strong capital base. Limits may be placed on the amount of risk accepted
in relation to one borrower. Exposure to credit risk is also managed in part by obtaining collateral and
guarantees.
Significant concentrations of credit risk associated with financial investments are set out in notes 11.3 and 15.
The risks associated with reinsurance contracts held are set out in note 4.9.
65
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
4.
RISK MANAGEMENT (continued)
4.2 Foreign exchange risk
The Group is exposed to foreign exchange risk as a result of fluctuations in exchange rates since its financial
assets and liabilities are denominated in a number of different currencies.
In order to manage the risk associated with movements in currency exchange rates, the Group seeks to maintain
investments and cash in each operating currency, which are sufficient to match liabilities denominated in the
same currency. Exceptions are made to invest limited proportions in United States dollar assets which are held to
back liabilities in operating currencies. Management considers that these assets diversify the range of investments
available, and in the long-term are likely to either maintain capital value and/or provide satisfactory returns.
Assets and liabilities by currency are set out in note 37.
4.3
Interest rate risk
The Group is exposed to interest rate risk, which arises when the returns earned from invested assets are
insufficient either to maintain returns or to fulfil the minimum returns within insurance and investment contract
liabilities.
The return on investments may be variable, fixed for a term or fixed to maturity. On reinvestment of a matured
investment, the returns available on the new investment may be significantly different from the returns formerly
achieved. Guaranteed minimum returns exist within cash values of long term traditional insurance contracts,
long term universal life insurance contracts, annuity options, deposit administration liabilities and policy funds
on deposit. For other investment contract liabilities, returns are usually contractual. The Group is therefore
exposed to the effects of fluctuations in the prevailing levels of market interest rates on its financial position and
cash flows. Interest margins may increase or decrease as a result of such changes. Interest rate changes may
also result in losses if asset and liability cash flows are not closely matched with respect to timing and amount.
The Group is exposed to risk under embedded derivatives contained in a host insurance contract. These risks
include exposures to investment returns which may produce losses to the insurer arising from the following
contract features:
• minimum annuity rates which are guaranteed to be applied at some future date;
• minimum guaranteed death benefits which are applicable when the performance of an interest bearing or
unit linked fund falls below expectations;
• minimum guaranteed returns in respect of cash values and universal life investment accounts.
The Group manages its interest rate risk by a number of measures, including where feasible the selection
of assets which best match the maturity of liabilities, the offering of investment contracts which match the
maturity profile of assets, the re-pricing of interest rates on loans receivable, insurance contracts and investment
contracts in response to market changes. In the Caribbean region, where availability of suitable investments is
often a challenge, the Group holds many of its fixed rate debt securities to maturity and therefore mitigates the
transient interest rate changes in the markets.
The effective interest rates of the Group’s financial assets and financial liabilities are set out in the notes 11,
18, 19 and 20.
66
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
4.
RISK MANAGEMENT (continued)
4.4 Liquidity risk
In order to manage liquidity risks, management seeks to maintain levels of cash and short-term deposits in each
of its operating currencies, which are sufficient to meet reasonable expectations of its short-term obligations.
The Group is exposed to daily calls on its available cash resources for policy benefits and withdrawals, operating
expenses and taxes, loan draw-downs, repayment of borrowings, maturing deposit liabilities and other security
obligations. The Group does not maintain cash resources to meet all these needs as experience shows that a
minimum level of revenue flows and maturing investments can be predicted with a high level of certainty.
Certain investment portfolios within the Group contain securities which can only be disposed of over a period of
time. In such instances, the Group generally maintains higher levels of short-term instruments to compensate
for the relative illiquidity of the aforementioned securities.
The maturity profiles of the Group’s financial assets and liabilities are disclosed in notes 11, 18, 19 and 20.
4.5 Fair values of financial assets and financial liabilities
Fair value amounts represent estimates of the consideration that would currently be agreed upon between
knowledgeable, willing parties who are under no compulsion to act and is best evidenced by a quoted market
value, if one exists.
The estimated fair values of financial assets and financial liabilities are based on market values of quoted
securities as at December 31 where available. In assessing the fair value of non-traded financial assets and
financial liabilities, the Group uses a variety of methods including obtaining dealer quotes for specific or similar
instruments and the use of internally developed pricing models.
The Group’s financial assets and financial liabilities as disclosed in the balance sheet approximate their fair
value, except as disclosed in notes 11 and 20.
4.6
Insurance risk - short term insurance contracts
Short-term contracts are typically for one year’s coverage, with an option to renew under terms that may
be amended by the insurer. In determining the premium payable under the contract, the insurer considers
the nature and amount of the risk assumed, and recent experience and industry statistics of the benefits
payable. This is the process of underwriting, which establishes appropriate pricing guidelines, and may include
specific tests and enquiries which determine the insurer’s assessment of the risk. Insurers may also establish
deductibles to limit amounts of potential losses incurred.
Policy benefits payable under short-term contracts are generally triggered by an insurable event, i.e a property
or casualty claim, a medical expense or a death claim. Settlement of these benefits is expected generally within
six months. However, some benefits are settled over a longer duration.
For the Group’s property and casualty insurance contracts, significant risk exposures arise from low frequency
high severity events such as hurricanes. Single events, such as major fires and accidents may also generate
significant claims.
For the Group’s health insurance contracts, significant risk exposures arise from mortality and morbidity
experience.
67
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
4.
RISK MANAGEMENT (continued)
4.7
Insurance risks - long-term insurance contracts
Long-term contracts are typically for a minimum period of 5 years and a maximum period which is determined by
the remaining life of the insured. In addition to the estimated benefits which may be payable under the contract,
the insurer has to assess the cash flows which may be attributable to the contract. The process of underwriting
may also be undertaken and may include specific medical tests and other enquiries which affect the insurer’s
assessment of the risk. The insurer assesses the likely benefits and cash flows both in establishing the amount
of premium payable under the contract and in estimating the balance sheet liability arising from the contract.
For long-term contracts inforce, the Group has adopted a policy of investing in assets with cash flow
characteristics that closely match the cash flow characteristics of its policy liabilities. The primary purpose of
this matching is to ensure that cash flows from these assets are synchronised with the timing and the amounts
of payments that must be paid to policyholders.
Policy benefits payable under long-term contracts may be triggered:
• by an insurable event, i.e. a death, disability or critical illness claim;
• at a specified time, i.e. an annuity settlement or a policy maturity; and
• on the exercise of a surrender or withdrawal request by the policyholder.
Settlement of these benefits is therefore expected over a wide time span, extending over the remaining lives of
the insureds and annuitants. Industry and Group experience do suggest that settlement will in fact occur over this
time period, but does not remove the uncertainty which exists over the timing of future benefit cash outflows.
Significant risks arise from mortality and morbidity experience. Worsening mortality and morbidity will increase
the incidence of death and disability claims. Improving mortality will lengthen the payout period of annuities.
4.8 Concentrations of insurance risk
The Group carries significant insurance risks concentrated in certain countries within the Caribbean. In these
countries, the Group carries a notable proportion of the insured population (life, annuity health) or insured
assets or casualty risk (property and casualty) of the country as a whole.
Significant concentration of life insurance, annuity, and health risks occurs in Antigua, Barbados, Cayman
Islands, Jamaica, Netherland Antilles, St Lucia and Trinidad and Tobago. Significant concentration of property
and casualty risks occurs in Barbados and Cayman Islands.
Total insurance coverage on insurance policies quantify some of the risk exposures. Typically, claims arising
in any one year are a very small proportion in relation to the total insurance coverage provided. The total
sums assured at December 31, 2005, gross and net of reinsurance on life and property and casualty risks are
summarised below.
Contracts issued to individuals – life insurance
Contracts issued to groups – life insurance
Property and casualty
Gross
24,110,493
8,548,240
7,893,760
Net
19,631,953
7,127,969
3,268,676
68
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
4.
RISK MANAGEMENT (continued)
4.9 Reinsurance risk
To limit its exposure of potential loss on an insurance policy, the insurer may cede certain levels of risk to
a reinsurer. The Group selects reinsurers which have well established capability to meet their contractual
obligations and which generally have high credit ratings. The credit ratings of reinsurers are monitored.
Retention limits represent the level of risk retained by the insurer. Coverage in excess of these limits is ceded to
reinsurers. The retention programs used by insurers are summarised below:
Type of insurance contract
Property and casualty insurance
Retention by insurers
Property risks
• maximum retention of $20,000 for a single event;
• maximum retention of $10,000 for a catastrophic event;
•
quota share retention to maximum of 60% in respect of the
treaty limits;
quota share retention is further reduced to a maximum of $1,000
per event.
•
Motor and liability risks
Miscellaneous accident risks
• maximum retention of $1,000 for a single event;
•
treaty limits apply.
• maximum retention of $180 for a single event;
•
treaty limits apply.
Engineering business risks
• maximum retention of $300
•
treaty limits apply for material damage and for liability claims.
Marine risks
• maximum retention of $150 for a single event;
•
treaty limits apply.
Property, motor, liability, and
engineering risk
•
•
catastrophic excess of loss reinsurance cover is available per
event for amounts in excess of treaty limits;
treaty limits apply to catastrophic excess of loss coverage.
Health insurance contracts with
individuals
Health insurance contracts with
groups
Life insurance contracts with
individuals
Retention per individual to a maximum of $785
Retention per individual to a maximum of $200
Retention per individual life to a maximum of $700
Life insurance contracts with groups Retention per individual life to a maximum of $200
Life insurance and annuity blocks of
contracts
0% to 37.5% retention on policy liabilities
69
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
4.
RISK MANAGEMENT (continued)
4.9 Reinsurance risk (continued)
Certain insurers of the Group have ceded to a re-insurer further amounts representing 50% of the retentions
for individual life contracts.
Insurers may also have catastrophic reinsurance coverage in place whereby reinsurance coverage is obtained for
multiple claims arising from one event or occurring within a specified time period.
Reinsurance ceded does not discharge the insurer’s liability and failure by a reinsurer to honour its commitments
could result in losses to the Group.
Reinsurance balances and the effects of reinsurance ceded on income are disclosed in the notes 12, 16, 18, 27
and 30.
4.10 Fiduciary activities
The Group provides investment management, administration and corporate trust services to pension and
mutual funds and other corporate entities which involve the Group making allocation, purchase and sale
decisions in relation to a wide range of investments. Those assets are held in a fiduciary capacity and are not
included in these financial statements. These services give rise to fiduciary risk that may expose the Group to
claims for mal-administration or under-performance of these funds. As of December 31, the Group administered
approximately $2.4 billion (2004 - $1.5 billion) in assets on behalf of these funds.
5.
STATUTORY RESTRICTIONS ON ASSETS
Insurers are registered to conduct insurance business under legislation in place in each relevant jurisdiction. This
legislation may prescribe a number of requirements with respect to deposits, investment of funds and solvency for
the protection of policyholders.
Banking subsidiaries may also be required to hold deposits with Central Banks which regulate the conduct of banking
operations.
To satisfy the above requirements, invested assets and cash totalling $1,271 million (2004 - $1,076 million) have been
deposited with or are held in trust to the order of the insurance regulators.
In some countries where the Group operates, there are exchange control or other restrictions on the remittance of
funds out of those countries.
70
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
6.
SEGMENTED INFORMATION
6.1 Geographical Segments
The Group’s operations are primarily segregated by the location of the subsidiary or branch initiating the
business.
Barbados
Jamaica
Trinidad & Tobago
USA
Other Caribbean
Not allocated to segments
Barbados
Jamaica
Trinidad & Tobago
USA
Other Caribbean
Not allocated to segments
Year ended December 31, 2005
Total
assets
Total
liabilities
Total
revenue
Income from
ordinary
activities
Total cash
flows
1,169,324
2,001,138
734,358
1,782,293
729,676
404
6,417,193
1,011,566
1,561,793
536,615
1,646,972
490,947
175,693
5,423,586
220,830
513,850
191,558
46,012
160,892
40,839
1,173,981
18,610
92,408
64,341
(9,970)
40,939
17,327
223,655
(9,114)
71,340
25,104
5,588
54,998
(9,182)
138,734
Year ended December 31, 2004
Total
assets
Total
liabilities
Total
revenue
Income from
ordinary
activities
Total cash
flows
1,113,345
523,925
712,922
21,784
620,959
144,952
3,137,887
934,325
399,133
490,424
15,740
515,570
22,907
2,378,099
214,313
292,267
160,750
24,341
142,993
308
834,972
28,929
46,627
58,202
(3,607)
(34,676)
(15,576)
79,899
(33,986)
13,517
5,049
(2,012)
13,115
(21,871)
(26,188)
Items not allocated to segments include balances relating to goodwill (in 2004 only), loans received to finance
acquisitions and gains arising on business combinations.
71
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
6.
SEGMENTED INFORMATION (continued)
6.1 Geographical Segments (continued)
Significant non-cash expenses charged to income from ordinary activities comprise:
Year ended Dec. 31,2005
Depreciation
and
Amortisation
Increase in Depreciation
actuarial
and
liabilities Amortisation
Year ended Dec.31,2004
Increase in
actuarial
liabilities
Barbados
Jamaica
Trinidad & Tobago
USA
Other Caribbean
Not allocated to segments
Other significant cash expenditures comprise:
Barbados
Jamaica
Trinidad & Tobago
USA
Other Caribbean
Not allocated to segments
10,041
12,334
1,106
608
1,409
-
25,498
24,713
7,807
38,575
(1,972)
(10,443)
-
58,680
8,530
2,006
1,256
966
466
8,577
21,801
20,516
16,722
28,758
25,504
17,615
-
109,115
Year ended Dec. 31, 2005
Year ended Dec. 31, 2004
Property,
plant and
equipment
Intangible
assets
Property,
plant and
equipment
Intangible
assets
17,002
3,819
666
668
1,710
-
23,865
2,539
3,578
-
-
-
-
6,117
16,348
3,636
7,011
-
1,918
-
28,913
420
46
-
-
-
-
466
Included in the first two tables above are amounts relating to associated companies which each conduct
business primarily in one geographical segment. Total assets and income for the associates consolidated in
these financial statements are as follows:
Year ended Dec. 31, 2005
Income from
ordinary
activities
Total
assets
Year ended Dec. 31, 2004
Income from
ordinary
activities
Total
assets
253
507
24,775
24,716
50,251
40
68
3,365
-
3,473
2,113
133
22,030
-
24,276
5,525
-
3,744
-
9,269
Barbados
Jamaica
Trinidad & Tobago
Other Caribbean
72
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
6.
SEGMENTED INFORMATION (continued)
6.2 Business segments
The Group’s business segments are defined by the grouping of products and services of a similar nature. Total
assets and total revenue for the principal business segments are as follows:
Life insurance, health insurance and annuities business from
contracts issued to individuals
Life insurance, health insurance and pensions business from
contracts issued to groups
Property and casualty insurance
Banking and other financial services
Not allocated to segments
Life insurance, health insurance and annuities business from
contracts issued to individuals
Life insurance, health insurance and pensions business from
contracts issued to groups
Property and casualty insurance
Banking and other financial services
Not allocated to segments
Year ended December 31, 2005
Total
revenue
Total
assets
4,009,674
609,367
787,811
198,343
1,420,961
404
6,417,193
279,147
46,963
197,665
40,839
1,173,981
Year ended December 31, 2004
Total
revenue
Total
assets
2,097,416
533,182
556,164
195,109
144,246
144,952
3,137,887
240,369
32,344
28,769
308
834,972
73
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
7.
INVESTMENT PROPERTY
The movement in investment property for the year is as follows:
Balance, beginning of year
Additions at cost
Transfer to real estate developed for resale
Transfer from property, plant & equipment
Disposals
Appreciation in fair values
Effects of exchange rate changes
Balance, end of year
2005
2004
179,015
8,873
(5,849)
-
(336)
1,710
(1,827)
181,586
151,523
15,605
-
7,258
(1,824)
6,892
(439)
179,015
Investment property includes $43,552 (2004 - $43,977) which represents the Group’s proportionate interest in the
partnerships and joint ventures set out below.
Description of property
Barbados:
Land at Fort George Heights, Upton, St Michael
Land at Plum Tree, St Thomas
Trident House Properties, Lower Broad Street, Bridgetown
Financial Services Centre, Bishop’s Court Hill, St Michael
United Nations House, Marine Gardens, Christ Church
BET Building, Wildey, St Michael
Belize:
Belize Insurance Centre, North Front Street, Belize City
Grenada:
The Mutual/Trans-Nemwil Office Complex, The Villa, St George’s
Trinidad & Tobago:
Ernst & Young Building, Sweet Briar Road, Port-of-Spain
Percentage owned
by the Group
50%
50%
33%
50%
25%
10%
50%
50%
60%
Pension Funds managed by the Group own a 50% interest in Fort George Heights and Plum Tree respectively, a 33%
interest in Trident House Properties and a 25% interest in United Nations House.
Other balances included in the financial statements in respect of the above partnerships and joint ventures are as follows:
Cash, miscellaneous assets and receivables
Other funding instruments, accounts payable and accrued liabilities
Revenue
Expenses
74
2005
4,830
553
3,588
221
2004
5,304
1,647
4,737
1,586
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
8.
PROPERTY, PLANT AND EQUIPMENT
Net book value, beginning of year
Additions at cost
Additions arising from acquisitions
Disposals
Appreciation in fair values
Depreciation charge
Effects of exchange rate changes
Net book value, end of year
Represented by:
Cost or valuation
Accumulated depreciation
Net book value, beginning of year
Additions at cost
Additions arising from acquisitions
Disposals
Appreciation in fair values
Depreciation charge
Effects of exchange rate changes
Net book value, end of year
Represented by:
Cost or valuation
Accumulated depreciation
Year ended December 31, 2005
Owner-
Furnishings
occupied & leasehold
properties improvements
Computer
& Office
equipment
Total assets
for
internal use
Vehicles
88,270
539
-
(819)
4,896
(1,380)
(243)
91,263
91,980
(717)
91,263
6,939
5,333
2,113
(2,349)
-
(1,886)
(114)
10,036
15,688
6,339
7,216
(191)
-
(5,413)
(553)
23,086
4,576
1,332
281
(270)
-
(1,749)
(32)
4,138
115,473
13,543
9,610
(3,629)
4,896
(10,428)
(942)
128,523
31,629
(21,593)
10,036
67,914
(44,828)
23,086
9,347
(5,209)
4,138
200,870
(72,347)
128,523
Year ended December 31, 2005
Leased
vehicles &
equipment
Total assets
for
internal use
Total
16,089
10,322
-
(2,094)
-
(4,592)
-
19,725
115,473
13,543
9,610
(3,629)
4,896
(10,428)
(942)
128,523
131,562
23,865
9,610
(5,723)
4,896
(15,020)
(942)
148,248
28,318
(8,593)
19,725
200,870
(72,347)
128,523
229,188
(80,940)
148,248
75
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
8.
PROPERTY, PLANT AND EQUIPMENT (continued)
Year ended December 31, 2004
Owner-
Furnishings
occupied & leasehold
properties improvements
Computer
& Office
equipment
Total assets
for
internal use
Vehicles
89,574
7,167
(5,758)
-
6,492
(7,258)
(1,688)
(259)
88,270
89,254
(984)
88,270
7,359
1,373
(8)
(10)
-
-
(1,693)
(82)
6,939
12,333
7,635
(179)
(12)
269
-
(4,351)
(7)
15,688
3,972
2,179
(113)
-
-
-
(1,449)
(13)
4,576
113, 238
18,354
(6,058)
(22)
6,761
(7,258)
(9,181)
(361)
115,473
26,163
(19,224)
6,939
52,250
(36,562)
15,688
8,796
(4,220)
4,576
176,463
(60,990)
115,473
Year ended December 31, 2004
Leased
vehicles &
equipment
Total assets
for
internal use
Total
10,482
10,559
(1,532)
-
-
-
(3,420)
-
16,089
113,238
18,354
(6,058)
(22)
6,761
(7,258)
(9,181)
(361)
115,473
123,720
28,913
(7,590)
(22)
6,761
(7,258)
(12,601)
(361)
131,562
21,644
(5,555)
16,089
176,463
(60,990)
115,473
198,107
(66,545)
131,562
Net book value, beginning of year
Additions at cost
Disposals
Disposals arising from divestitures
Appreciation in fair values
Transfer to investment properties
Depreciation charge
Effects of exchange rate changes
Net book value, end of year
Represented by:
Cost or valuation
Accumulated depreciation
Net book value, beginning of year
Additions at cost
Disposals
Disposals arising from divestitures
Appreciation in fair values
Transfer to investment properties
Depreciation charge
Effects of exchange rate changes
Net book value, end of year
Represented by:
Cost or valuation
Accumulated depreciation
76
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
9.
INVESTMENT IN ASSOCIATED COMPANIES
Investment, beginning of year
Additions
Operating income (see below)
Income taxes
Dividends paid
Effects of exchange rate changes
Investment, end of year
2005
24,276
25,702
3,473
(16)
(3,102)
(82)
50,251
2004
21,414
-
9,269
159
(6,481)
(85)
24,276
The Group’s associated company, Caribbean CariCard Services Inc (CariCard) sold its operations effective July 31,
2004. The net assets sold, consideration received and gain are as follows:
Net assets sold
Consideration received
Total gain on sale
Gain included in operating income above
$1,404 of the above gain is attributable to the minority interest.
2004
2,547
12,947
10,400
5,200
The aggregate balances and results in respect of associated companies for the period are set out below. For associates
acquired during 2005, the full year’s revenue and net income are included.
Total assets
Total liabilities
Total revenue
Net income for the year
2005
2004
447,823
284,502
34,099
10,321
145,638
108,246
47,972
22,580
77
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
Year ended December 31, 2005
Customer
relationships
Trade
names
Software
Goodwill
100,124
-
5,814
12,770
-
1,965
1,478
-
-
(1,801)
120,350
-
-
63,798
37,418
3,856
724
9,394
-
(4,625)
(3,673)
106,892
Total
103,345
834
84,824
50,294
3,856
2,689
15,215
6,117
(10,478)
(6,191)
250,505
3,221
834
-
106
-
-
2,250
6,117
(2,050)
(264)
10,214
-
-
15,212
-
-
-
2,093
-
(3,803)
(453)
13,049
16,726
(3,677)
13,049
Year ended December 31, 2004
Goodwill
Software
Total
109,259
-
(8,554)
(581)
100,124
3,428
466
(645)
(28)
3,221
112,687
466
(9,199)
(609)
103,345
170,521
(70,397)
100,124
5,007
(1,786)
3,221
175,528
(72,183)
103,345
120,350
-
120,350
111,366
(4,474)
106,892
15,041
(4,827)
10,214
263,483
(12,978)
250,505
10.
INTANGIBLE ASSETS
Net book value,
beginning of year
Assumed on acquisitions
Additions:
PCFS (note 38.1)
EBA (note 38.2)
First Life (note 38.3)
Laurel Life (note 38.4)
Cayman General (note 38.5)
Other
Amortisation charge
Effects of exchange rate changes
Net book value, end of year
Represented by:
Cost:
Accumulated amortisation
Net book value, beginning of year
Additions
Amortisation charge
Effects of exchange rate changes
Net book value, end of year
Represented by:
Cost:
Accumulated amortisation
78
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
10.
INTANGIBLE ASSETS (continued)
Goodwill has been allocated to the following geographical segments.
Barbados
Jamaica
Trinidad & Tobago
USA
Other Caribbean
Goodwill
Allocation,
beginning
of year
Effects of
exchange
rate changes
Balance,
end of year
Additions
45,266
23,355
9,840
-
21,663
100,124
-
18,584
-
1,965
1,478
22,027
-
(1,704)
-
-
(97)
(1,801)
45,266
40,235
9,840
1,965
23,044
120,350
The recoverable amount of a cash generating unit is based on its value in use. These calculations use income
projections prepared by management for the next three years. Projections beyond three years are extrapolated using
the estimated discount factors and growth rates set out below.
Barbados
Jamaica
Trinidad & Tobago
USA
Other Caribbean
2005
Discount
factor
Residual
growth rate
12.00%
21.00%
12.00%
8.91%
6.00%
8.00%
6.00%
5.00%
10.00%, 12.00% 4.00%, 6.00%
79
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
11. FINANCIAL INVESTMENTS
11.1 Analysis of financial investments
Held to maturity securities:
Debt securities
Available for sale securities:
Debt securities
Equity securities
Securities at fair value through income:
Debt securities
Equity securities
Loans and receivables:
Debt securities
Mortgage loans
Policy loans
Finance loans and finance leases
Securities purchased under agreements to resell
Deposits
2005
Carrying
Value
2005
Fair
Value
2004
Carrying
Value
2004
Fair
Value
43,260
47,215
50,080
50,221
2,308,667
396,752
2,705,419
2,308,667
396,752
2,705,419
150,884
43,261
194,145
150,884
43,261
194,145
293,292
453,456
746,748
130,380
38,922
169,302
637,886
420,600
254,993
235,133
69,029
171,960
1,789,601
668,822
419,406
254,993
235,133
69,029
171,960
1,819,343
582,946
355,050
143,639
61,549
30,179
172,026
1,345,389
293,292
453,456
746,748
130,380
38,922
169,302
584,983
355,050
143,639
61,549
30,179
172,026
1,347,426
Total financial investments
4,732,425
4,766,122
2,311,519
2,313,697
Debt securities comprise:
Government debt securities
Corporate debt securities
Collateralised mortgage obligations
Other securities
2005
1,943,775
612,692
475,636
108,594
3,140,697
2004
841,893
200,662
-
14,143
1,056,698
Debt securities include $12,733 (2004 - $8,285) that contain options to convert to common shares of the issuer.
Corporate debt securities include:
(i) convertible loans totalling $1,548 (2004 - $1,718) issued to the Group by an associated company. These
loans can be converted into equity or bonds issued by the associated company.
(ii) $25,598 (2004 - $21,884) in bonds issued by an associated company.
Equity securities include $12,526 (2004 - $11,834) in mutual funds managed by the Group.
Policy loans include $89,900 (2004 – nil) in assets held as reinsurers’ share of actuarial liabilities. The Group
earns no income on these assets.
80
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
11. FINANCIAL INVESTMENTS (continued)
11.2 Pledged assets
Debt securities include $82,330 (2004 – nil) held in trust supporting reinsurance liabilities assumed. The Group
manages these investments and bears the investment risk.
Debt and equity securities include $55,749 (2004 - $45,875) as collateral for loans payable.
The collateral for other funding instruments – loans for mortgage funding – from the Federal Home Loan Bank
(FHLB), consists of an equity holding in the FHLB (market value $12,026), and mortgages and mortgage backed
securities having a total market value of $255,554.
Debt securities are pledged as collateral under repurchase agreements with customers and other financial
institutions and for security relating to overdraft and other facilities with other financial institutions. As of
December 31, 2005, these pledged assets totalled $904,302 (2004 - $309). Of these assets pledged as security
$394,706 (2004 – nil) represent collateral for securities sold under agreements to repurchase in instances when
the transferee has the right by contract or by custom to sell or re-pledge the collateral.
11.3 Significant concentrations
Debt securities:
Government of Jamaica
Federal government of USA and its agencies
Government of Barbados
Government of Trinidad & Tobago
Equity securities:
RBTT Financial Holdings Limited
Securities purchased under agreements to resell:
Government of Jamaica
11.4 Effective interest rates
Debt securities
Mortgage loans
Policy loans
Finance loans and finance leases
Securities purchased under agreements to resell
Deposits
2005
2004
1,322,041
576,354
208,154
86,086
351,707
5,864
161,241
125,022
42,081
122,336
68,863
30,127
2005
8.7%
7.1%
11.0%
12.9%
7.3%
7.2%
2004
11.5%
8.9%
10.2%
11.9%
10.9%
5.3%
81
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
11. FINANCIAL INVESTMENTS (continued)
11.5 Maturity profiles
Debt securities
Mortgage loans
Finance loans and finance leases
Securities purchased under agreements to resell
Deposits
Debt securities
Mortgage loans
Finance loans and finance leases
Securities purchased under
agreements to resell
Deposits
December 31, 2005
Repayable
between
one and
five years
Repayable
after
five years
479,804
36,115
94,870
-
11,067
621,856
2,425,118
376,520
59,100
-
26,567
2,887,305
December 31, 2004
Repayable
between
one and
five years
Repayable
after
five years
247,280
44,004
43,118
-
17,123
351,525
659,803
296,057
13,467
-
2,055
971,382
Repayable
within
one year
235,775
7,965
81,163
69,029
134,326
528,258
Repayable
within
one year
149,615
14,989
4,964
30,179
152,848
352,595
Total
3,140,697
420,600
235,133
69,029
171,960
4,037,419
Total
1,056,698
355,050
61,549
30,179
172,026
1,675,502
Policy loans are repayable either at the discretion of the policyholder or on termination of the policy.
11.6 Returns accruing to the benefit of contract-holders
Financial investments include the following amounts for which the full income and capital returns accrue to the
holders of unit linked contracts, certain deposit administration contracts and “closed” participating policies.
Debt securities
Equity securities
Mortgage loans
Securities purchased under agreements to resell
Deposits
82
2005
2004
393,382
35,520
224,806
6,706
45,660
706,074
149,234
29,579
82,074
7,003
959
268,849
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
11. FINANCIAL INVESTMENTS (continued)
11.7 Allowances for impairment losses
Mortgage loans
Debt securities
Finance loans and finance leases
2005
2004
5,222
14,826
5,710
25,758
7,839
8,530
3,009
19,378
Interest of $3,645 (2004 - $3,481) has been accrued on impaired financial investments.
12. REINSURANCE ASSETS
Reinsurers’ share of actuarial liabilities (note 16.1)
Claim recoveries from reinsurers (note 18.2)
Unearned premiums ceded to reinsurers (note 18.3)
Other
2005
605,995
44,396
33,289
12,508
696,188
2004
2,889
92,912
13,399
-
109,200
The reinsurers’ share of actuarial liabilities represent balances which are long term in nature, and for which, most
are expected to be settled after one year.
Reinsurers’ share of actuarial liabilities and claim
recoveries from reinsurers include the following
significant balances:
Scottish Re (U.S.) Inc (rated A-Excellent by A.M. Best)
Washington National Insurance Company
(rated B++ Very Good by A.M. Best)
AON Re
13.
INCOME TAX ASSETS
Deferred income tax assets (note 34)
Income and withholding taxes recoverable
2005
2004
366,900
-
211,532
6,783
-
74,265
2005
8,226
27,485
35,711
2004
8,037
12,559
20,596
83
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
14. MISCELLANEOUS ASSETS AND RECEIVABLES
Pension plan assets (note 32.2)
Real estate developed or held for resale
Premiums in the course of collection
Amounts due from managed funds
Other accounts receivable
2005
2,723
23,498
52,517
10,722
113,956
203,416
2004
2,191
15,293
32,770
1,680
87,303
139,237
Real estate developed for resale includes $8,611 which is expected to be realised after one year.
Real estate developed for resale includes $4,628 (2004 - $8,268) which represents the Group’s proportionate interest
in the joint ventures set out below.
Description of property
Barbados:
Land at Fort George Heights, Upton, St Michael
Rolling Hills Development, Byde Mill, St George
15. CASH RESOURCES
Percentage
owned by
the Group
50%
81%
Significant concentrations of cash resources at December 31 are as follows:
FirstCaribbean International Bank
2005
72,440
2004
45,209
84
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
16. ACTUARIAL LIABILITIES
16.1 Analysis of actuarial liabilities
(a) Contracts issued to individuals:
Life - participating policies
Life and annuity - non-participating policies
Health
Unit linked funds
Reinsurance contracts held
(b) Contracts issued to groups:
Life
Annuities
Health
Total actuarial liabilities
The following notes are in respect of the above:
2005
2004
539,382
1,673,880
7,192
169,151
18,910
2,408,515
450,120
675,174
5,988
174,102
9,451
1,314,835
54,704
282,565
31,447
368,716
8,383
139,200
22,624
170,207
2,777,231
1,485,042
• Life includes insurance coverage for disability and critical illness.
• Actuarial liabilities include $368,271 (2004 - $6,472) in assumed reinsurance.
• Liabilities for reinsurance contracts held occur because the reinsurance premium costs exceed the
mortality costs assumed in determining the gross liability of the policy.
The above liabilities include the following amounts which are recoverable from reinsurers:
(a) Contracts issued to individuals:
Life - participating policies
Life and annuity - non-participating policies
Health
(b) Contracts issued to groups:
Life
Annuities
Health
Total reinsurers’ share of actuarial liabilities (note 12)
2005
2004
6,302
483,188
2,666
492,156
7,157
106,428
254
113,839
605,995
-
-
344
344
2,138
-
407
2,545
2,889
85
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
16. ACTUARIAL LIABILITIES (continued)
16.2 Assumptions
(a) Process used to set actuarial assumptions and margins for adverse deviations
At each date for valuation of actuarial liabilities, the Appointed Actuary (AA) of each insurer reviews the
assumptions made at the last valuation date. The AA tests the validity of each assumption by reference to
current data, and where appropriate, changes the assumptions for the current valuation.
A similar process of review and assessment is conducted in the determination of margins for adverse
deviations.
Recent changes in actuarial standards and practice are also incorporated in the current valuation.
(b) Assumptions for mortality and morbidity
For the 2005 valuation, insurers (with the exception of American Founders Life Insurance Company) conducted
studies of their own recent mortality experience. Studies were conducted by combining data in some
geographic segments to create a credible mortality table. The combined experience was measured against an
industry standard (CIA 86-92) and the combined experience resulted in a modification of the probabilities of
death by policy duration. Appropriate modification factors were selected and applied to underwritten and non-
underwritten business respectively in the actuarial valuation. Annuitant mortality was determined by reference
to established scales.
American Founders Life Insurance Company has relied upon industry studies and other sources to develop its
mortality assumptions for its life insurance and annuity contracts.
Assumptions for morbidity are determined after taking into account insurer and industry experience.
(c) Assumptions for lapse
Lapse studies were performed by insurers for the 2005 valuation, to determine the most recent experience of
persistency. Appropriate rates of termination by policy duration were determined and applied in the actuarial
valuation.
86
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
16. ACTUARIAL LIABILITIES (continued)
16.2 Assumptions (continued)
(d) Assumptions for investment yields
Returns on existing variable rate securities, shares, investment property and policy loans are linked to the
current economic scenario. Yields on reinvested assets are also tied to the current economic scenario. Returns
are however assumed to decrease and it is assumed that at the end of twenty years from valuation date, all
investments, except policy loans, are reinvested in long-term, default free government bonds. In accordance
with revisions in actuarial practice standards, for the 2005 valuation, policy loans are assumed to be held
beyond twenty years, as long as the current level of policy loans is in line with investment strategy.
The ultimate rate of return (URR) is the assumed rate that will ultimately be earned on government bonds and
is as follows:
Geographical segment
Barbados
Jamaica
Trinidad & Tobago
USA
Other Caribbean
URR
4.75%
7.00%
5.75%
4.00 – 4.25%
4.75 - 5.25%
(e) Assumptions for operating expenses and taxes
New business and maintenance expense costs for long-term business are measured and monitored by each
insurer. These costs were updated for the 2005 valuation, were computed on a per policy basis, and were
reflected in the actuarial valuation after adjusting for expected inflation.
(f) Asset defaults
The AA of each insurer includes a provision for asset default in the modelling of the cash flows. The provision
is based on industry and Group experience and includes a specific margin for equity securities and a combined
margin for debt securities, mortgage loans and deposits.
(g) Margins for adverse deviations
Margins for adverse deviations are determined for the assumptions in the actuarial valuation. The application
of these margins resulted in the following provisions for adverse deviations being included in the actuarial
liabilities:
Provisions for adverse deviations
Mortality and morbidity
Lapse
Investment yields and asset default
Operating expenses and taxes
2005
48,536
34,406
136,517
25,969
245,428
2004
37,927
24,021
41,627
18,955
122,530
87
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
16. ACTUARIAL LIABILITIES (continued)
16.2 Assumptions (continued)
(h) Supplemental benefits
Further harmonisation between insurers in the valuation of supplemental benefits has been effected in 2005.
The valuation is based on the specific cash flows associated with these benefits.
(i) Health insurance
The outstanding liabilities for health insurance claims incurred but not yet reported and for claims reported but
not yet paid are determined by statistical methods using expected loss ratios which have been derived from
recent historical data. No material claim settlements are anticipated after one year of balance sheet date.
16.3 Movement in actuarial liabilities and changes in assumptions
The movement in actuarial liabilities for the year is as follows:
Balance, beginning of year
Liabilities assumed on acquisitions
Changes in net inforce, assumptions and actuarial modelling
Changes in provisions for adverse deviations
Effect of exchange rate changes
Balance, end of year
2005
1,485,042
1,254,825
(57,472)
109,885
(15,049)
2,777,231
2004
1,380,741
-
88,103
21,360
(5,162)
1,485,042
The movement in actuarial liabilities includes the following amounts which are recoverable from reinsurers:
Balance, beginning of year
Liabilities assumed on acquisitions
Change during the year
Balance, end of year (note 12)
The net increase in actuarial liabilities charged to income is as follows:
Changes in net inforce, assumptions and actuarial modelling
Change in reinsurance recoverable
Changes in provisions for adverse deviations
2005
2,889
609,373
(6,267)
605,995
2005
(57,472)
6,267
109,885
58,680
2004
2,541
-
348
2,889
2004
88,103
(348)
21,360
109,115
88
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
16. ACTUARIAL LIABILITIES (continued)
16.3 Movement in actuarial liabilities and changes in assumptions (continued)
Components of the net increase in actuarial liabilities have been estimated using Policy Premium Method
equivalents. Because the process of changes in assumptions is applied to all affected insurance contracts,
changes in assumptions and in actuarial modelling may have a significant effect in the period in which they are
recorded. The introduction of a margin on equity securities and real estate supporting policy liabilities was the
only change in assumptions and actuarial modelling which represented more than 5% of actuarial liabilities at
the beginning of the year. The impact of this change on the actuarial liabilities was an approximate increase of
$76,400 but was offset by other changes in assumptions and actuarial modelling. In summary, the components
of the net change in actuarial liabilities are as follows:
2005
141,223
(82,543)
58,680
Normal increase in liabilities
Effect of changes in assumptions and actuarial modelling
16.4 Sensitivity analysis
(a) Sensitivity arising from the valuation of actuarial liabilities
The valuation of actuarial liabilities is sensitive to:
• the economic scenario used in CALM;
• the investments allocated to back the liabilities;
• the underlying assumptions used; and
• the margins for adverse deviations.
Under the CALM methodology, the AA is required to test the actuarial liability under 7 economic scenarios.
These tests have been done and the results of the valuation provide adequately for liabilities derived from the
worst of these different scenarios.
The assumption for future investment yields has a significant impact on actuarial liabilities. The different
scenarios tested under CALM reflect the impact of different yields.
The other assumptions which are most sensitive in determining the actuarial liabilities of the Group, are in
descending order of impact:
• Operating expenses and taxes
• Lapse
• Mortality and morbidity
89
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
16. ACTUARIAL LIABILITIES (continued)
16.4 Sensitivity analysis (continued)
(b) Dynamic capital adequacy testing (DCAT)
DCAT is a technique used by the Group to assess the adequacy of the insurer’s financial position and financial
condition in the light of different future economic and policy experience scenarios. DCAT assesses the impact
over the next 5 years on the insurer’s financial position and financial condition under specific scenarios.
The financial position of an insurer is reflected by the amounts of assets, liabilities and equity in the balance
sheet at a given date.
The financial condition of an insurer at a particular date is its prospective ability at that date to meet its future
obligations, especially obligations to policyholders, those to whom it owes benefits and to its shareholders.
The purpose of the DCAT is:
• to develop an understanding of the sensitivity of the total equity of the insurer and future financial
condition to changes in various experience factors and management policies;
• to alert management to material, plausible and imminent threats to the insurer’s solvency;
• and to describe possible courses of action to address these threats.
Specific scenarios tested and the resulting impact on insurers are as follows.
(i) Worsening rate of lapse. For products which produce higher valuation reserves with an increase in lapse
rates, the scenario lapse rates were increased. For products which produce higher valuation reserves with
a decrease in lapse rates, the scenario lapse rates were reduced. Overall, this scenario produces adverse
results.
(ii) High interest rate. An assumed increase in portfolio rate of 1% per year for 5 years (LOJ - 0.5% per year for
ten years) was tested in this scenario. Overall, this scenario produces favourable results.
(iii) Low interest rate. An assumed decrease in portfolio rate of 0.25% for 5 years (LOJ -1% per year for 5 years)
was tested in this scenario. Overall, this scenario produces adverse results.
(iv) Worsening mortality and morbidity. To test this scenario, mortality and morbidity rates were increased for
insurance and critical illness products and decreased for annuity products. For insurance and critical illness
products, rates were increased by 3% of the base rate per year for 5 years. For annuity products, rates were
decreased by 3% of the base rate for 5 years. Overall, this scenario produces adverse results.
(v) Higher expenses. Higher unit maintenance expenses were tested by setting the unit expense rate for each
projection year 5% greater than the unit expense rate assumed in the base scenario. Overall, this scenario
produces adverse results.
90
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
16. ACTUARIAL LIABILITIES (continued)
16.4 Sensitivity analysis (continued)
The DCAT conducted has not tested any correlation that may exist between assumptions. The use of differing
sensitivity rates by insurers reflects differences in the insurers’ environment.
Certain insurers in the Group conducted DCAT as of December 31, 2005. In each instance, the AA concluded
that the financial condition of the insurer is satisfactory under the DCAT procedures. The insurers were as
follows:
• Sagicor Life Inc;
• Life of Jamaica Limited;
• Sagicor Capital Life Insurance Company Limited;
• Capital Life Insurance Company Bahamas Limited;
• Nationwide Insurance Company Limited.
These insurers have net actuarial liabilities totalling $1,520,235 or 70% of the Group total.
The following table represents the estimated sensitivity of each of the above scenarios to net actuarial liabilities
one year from balance sheet date.
(i)
(ii)
(iii)
(iv)
(v)
Scenario
Worsening
rate of lapse
High interest
rate
Low interest
rate
Worsening
mortality /
morbidity
Higher
expenses
(Increase) / decrease in
liability
(38,033)
328,625
(176,423)
(63,408)
(54,397)
17. DEPOSIT ADMINISTRATION LIABILITIES
The movement in deposit administration liabilities for the year is as follows:
Balance, beginning of year
Liabilities assumed on acquisition
Contributions received
Interest expense
Payments and withdrawals
Expenses
Effects of exchange rate changes
Balance, end of year
2005
305,464
25,458
28,376
24,617
(32,541)
(2,014)
(3,131)
346,229
2004
292,217
-
28,904
22,569
(35,369)
(2,232)
(625)
305,464
Deposit administration liabilities represent balances which are long term in nature and for which, most are expected
to be settled after one year.
91
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
The effective interest rate and contractual maturity profile of policy funds on deposit are as follows:
18. OTHER POLICYHOLDER LIABILITIES
Policy funds on deposit
Policy benefits in the course of settlement
Provision for unearned premiums
Unearned reinsurance commissions
18.1 Policy funds on deposit
Policy funds on deposit comprise:
Investment contracts
Dividends on deposit – participating policies
Other policy balances
Effective interest rate
Contractual maturity profile:
Repayable on demand or within one year
Repayable between one and five years
Repayable after five years
18.2 Policy benefits in the course of settlement
(a) Analysis of policy benefits in the course of settlement
Policy benefits in the course of settlement comprise:
Death and disability claims
Maturities
Health claims
Property and casualty claims
Other
92
2005
202,231
102,547
56,967
2,586
364,331
2004
153,645
144,086
35,636
-
333,367
2005
85,546
108,283
8,402
202,231
2005
5.3%
163,047
20,201
18,983
202,231
2004
61,127
85,427
7,091
153,645
2004
8.0%
132,414
18,461
2,770
153,645
2005
52,137
8,258
1,140
36,581
4,431
102,547
2004
40,483
7,290
1,683
91,066
3,564
144,086
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
18. OTHER POLICYHOLDER LIABILITIES (continued)
18.2 Policy benefits in the course of settlement (continued)
Health claims include $315 (2004 – $922) in provisions for claims incurred but not yet reported.
Property and casualty claims include $1,695 (2004 – $1,984) in provisions for claims incurred but not yet
reported.
The associated reinsurance recoveries from benefits in the course of settlement are in respect of:
Death and disability claims
Health claims
Property and casualty claims
Other
Total (note 12)
2005
20,283
851
23,168
94
44,396
2004
16,451
640
75,821
-
92,912
(b) Movement in policy benefits in the course of settlement
The movement in policy benefits in the course of settlement for the year is as follows:
Balance, beginning of year
Balance assumed on acquisitions
Policy benefits incurred
Policy benefits paid
Effect of exchange rate changes
Balance, end of year
2005
144,086
33,022
432,380
(505,028)
(1,913)
102,547
2004
58,972
-
492,219
(406,760)
(345)
144,086
The movement in policy benefits in the course of settlement includes the following amounts which are
recoverable from reinsurers.
Balance, beginning of year
Balance assumed on acquisitions
Policy benefits reinsured
Reinsurance claim recoveries
Effect of exchange rate changes
Balance, end of year (note 12)
2005
92,912
10,263
43,340
(101,238)
(881)
44,396
2004
26,894
-
167,965
(101,909)
(38)
92,912
93
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
18. OTHER POLICYHOLDER LIABILITIES (continued)
18.3 Provision for unearned premiums
(a) Analysis of provision for unearned premiums
The provision for unearned premiums arises from:
Property and casualty insurance
Health insurance
The associated unearned premiums ceded to reinsurers are in respect of:
Property and casualty insurance
Total (note 12)
(b) Movement in provision for unearned premiums
The movement in the provision for unearned premium for the year is as follows:
Balance, beginning of year
Balance assumed on acquisitions
Premiums written
Premium revenue
Effect of exchange rate changes
Balance, end of year
The movement in unearned premiums ceded to reinsurers is as follows:
Balance, beginning of year
Balance assumed on acquisitions
Reinsurance on premiums written
Reinsurance premium expense
Effect of exchange rate changes
Balance, end of year (note 12)
2005
53,857
3,110
56,967
2005
33,289
33,289
2005
35,636
21,131
99,869
(97,931)
(1,738)
56,967
2005
13,399
15,003
38,207
(33,147)
(173)
33,289
2004
25,940
9,696
35,636
2004
13,399
13,399
2004
28,246
-
90,028
(82,620)
(18)
35,636
2004
10,699
-
31,248
(28,548)
-
13,399
94
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
19. LOANS PAYABLE
US$ bank loan secured by shares in certain subsidiaries and
by the guarantee of another subsidiary, repayable 2006
US$ bank loan secured by portfolio of investment securities
(note 11.2), repayable 2006 – 2010
US$ bank loan secured by portfolio of investment securities
(note 11.2), repayable 2006 and bears interest at 6%
US$ bank loan secured by bankers’ guarantee, repayable 2004 – 2005
US$ bank loan secured by portfolio of investment securities,
repayable 2004 – 2005
2005
2004
116,427
34,268
10,000
-
33
160,728
-
-
-
10,714
5,198
15,912
Unless stated above, the interest rates on the above loans float based on either the 3 month or the 6 month
LIBOR. The carrying value of these loans therefore approximates their fair value. The effective interest rate and
maturity profile of loans payable are as follows:
Effective interest rate
Maturity profile:
Repayable within one year
Repayable between one and five years
20. DEPOSIT AND SECURITY LIABILITIES
2005
4.9%
132,168
28,560
160,728
Deposit and security liabilities represent sources of funds for on-lending, leasing and portfolio investments.
Other funding instruments:
Loans for mortgage financing (market value $250,792)
Loans for development financing (market value $31,042)
Loans from commercial banks (market value $12,496)
Deposits:
Customer deposits
Securities:
Securities sold under agreements to repurchase
Bank overdrafts
Total deposit and security liabilities
The loans for mortgage financing have been obtained from the Federal Home Loan Bank (FHLB).
95
2004
3.4%
9,496
6,416
15,912
2004
-
-
1,475
2005
252,704
31,042
12,496
227,504
74,064
907,987
8,712
1,440,445
-
10,299
85,838
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
20. DEPOSIT AND SECURITY LIABILITIES (continued)
The collateral for loans for mortgage financing and securities sold under agreements to resell is set out in note
11.2.
Un-disbursed facilities in respect of other funding instruments and bank overdrafts total approximately $6,054
(2004 – nil).
(a) Effective interest rates
Other funding instruments
Deposits
Securities
(b) Maturity profiles
Other funding instruments
Deposits
Securities
Bank overdrafts
Other funding instruments
Deposits
Bank overdrafts
2005
5.9%
7.3%
10.0%
2004
8.9%
5.8%
-
2005
Repayable
Repayable between one
within one year and five years
Repayable
after five
years
154,103
163,665
907,880
8,712
1,234,360
100,253
15,887
-
-
116,140
41,886
47,952
107
-
89,945
2004
Repayable
Repayable between one
within one year and five years
Repayable
after five
years
163
37,926
10,299
48,388
1,045
36,106
-
37,151
267
32
-
299
Total
296,242
227,504
907,987
8,712
1,440,445
Total
1,475
74,064
10,299
85,838
96
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
21. PROVISIONS
Pension plans and other retirement benefits (note 32.2)
Other
22.
INCOME TAX LIABILITIES
Deferred income tax liabilities (note 34)
Income taxes payable
23. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Amounts due to policyholders
Amounts due to reinsurers
Amounts due to managed funds
Other accounts payable and accrued liabilities
24. SHARE CAPITAL
2005
28,994
3,366
32,360
2005
10,938
20,020
30,958
2004
26,261
1,886
28,147
2004
3,852
14,221
18,073
2005
2,331
139,046
11,956
117,971
271,304
2004
4,692
42,970
6,242
52,352
106,256
The Company is authorised to issue an unlimited number of common shares issuable in series, and an unlimited
number of preference shares issuable in series.
Series A Common Shares have been issued and movements are summarised in the following table.
Balance, beginning of year
Allotment (note 38)
Balance, end of year
2005
2004
Number of
shares
260,029,748
5,523,000
265,552,748
Consideration
(Barbados
$000)
432,495
25,956
458,451
Number of
shares
260,029,748
-
260,029,748
Consideration
(Barbados
$000)
432,495
-
432,495
At a special general meeting of shareholders held on December 19, 2005, approval was granted for the establishment
of an executive long-term incentive plan (LTI) and an employee share ownership plan (ESOP). 26,555,274 Series A
Common Shares have been reserved for these plans which become effective from December 31, 2005.
97
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
25. RESERVES
Fair value reserve – available for sale investment securities:
Balance, beginning of year as previously reported
Prior year adjustments
Balance, beginning of year as restated
Unrealised gains arising on revaluation
Gains transferred to income on disposal and impairment
Balance, end of year
Fair value reserve – owner occupied property:
Balance, beginning of year
Unrealised gains arising on revaluation
Gains transferred to retained earnings on disposal
Balance, end of year
Currency translation:
Balance, beginning of year
Restatement of foreign branch operations
Retranslation of foreign operations
Balance, end of year
Statutory reserves:
Balance, beginning of year
Net change for the year
Balance, end of year
Total reserves, end of year
2005
2004
186,739
(13,819)
172,920
4,967
(65,874)
112,013
12,971
4,896
(96)
17,771
(25,486)
-
(13,124)
(38,610)
110,127
(20,743)
89,384
130,140
(46,604)
172,920
6,033
7,578
(640)
12,971
(23,730)
(310)
(1,446)
(25,486)
7,289
2,331
9,620
5,893
1,396
7,289
100,794
167,694
98
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
26. PARTICIPATING ACCOUNTS
26.1 ‘Closed’ participating fund
The movement in the closed participating account during the year was as follows:
Balance, beginning of year
Net unrealised gains / (losses) arising on available for sale investment securities
Net income for the year
Balance, end of year
2005
779
235
12,950
13,964
The amounts in the financial statements relating to closed participating funds are as follows:
Assets
Liabilities
Revenues
Benefits
Expenses
Income taxes
26.2 ‘Open’ participating fund
The movement in the open participating account during the year was as follows:
Balance, beginning of year
Transfer from retained earnings to support the profit distribution to shareholders
Return of transfer to support profit distribution to shareholders
Transfer of seed capital from retained earnings
Return of seed capital to retained earnings
Net income / (loss) for the year
Balance, end of year
2005
182,074
168,110
21,059
3,911
3,595
603
2005
609
13,500
(498)
-
(5,500)
12,572
20,683
The amounts in the financial statements relating to open participating funds are as follows:
Assets
Liabilities
Revenues
Benefits
Expenses
Income taxes
26.3 Total participating accounts
Total participating accounts, end of year
2004
1,047
(851)
583
779
2004
170,449
169,670
22,040
18,004
2,924
529
2004
175
-
-
3,000
-
(2,566)
609
2004
896
287
3,745
(494)
6,805
-
2005
418,686
398,003
69,784
33,974
21,813
1,425
2005
34,647
2004
1,388
99
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
27. NET PREMIUM REVENUE
Life insurance
Health insurance
Property and casualty insurance
Annuities and pensions
Year ended December 31, 2005
Reinsurance
2004
Premium
revenue
premium Net premium Net premium
revenue
revenue
expense
392,303
197,039
74,063
85,302
748,707
(57,726)
(8,452)
(43,211)
(122)
(109,511)
334,577
188,587
30,852
85,180
639,196
281,300
151,650
22,892
81,696
537,538
Premium revenue includes $24,640 (2004 - $13,340) in reinsurance assumed.
28. NET INVESTMENT INCOME
Income:
Rental income from investment property
Interest income:
Debt securities
Mortgage loans
Policy loans
Finance loans and finance leases
Securities purchased under agreements to resell
Deposits
Other balances
Dividend income
Net gains on financial investments
Net fair value gains on investment property
Foreign exchange translation and trading
Other investment income
Expenses
Direct operating expenses of investment property
Allowances for impairment losses
Other direct investment expenses
2005
2004
11,179
11,176
242,360
28,071
14,184
25,431
10,735
8,619
509
12,432
78,189
1,710
4,461
1,825
439,705
2,430
15,608
6,252
24,290
108,767
29,284
13,459
6,398
2,883
8,168
263
11,047
63,748
6,892
3,140
-
265,225
2,101
14,243
5,953
22,297
Net investment income
415,415
242,928
Interest from debt securities includes $2,881 (2004 - $2,463) from an associated company.
100
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
29. FEES AND OTHER REVENUE
Fee income - assets under administration
Fee income - deposit administration and policy funds
Commission income on insurance ceded to reinsurers
Other fees and commission income
Miscellaneous income
30. NET POLICY BENEFITS
2005
2004
19,792
5,762
16,687
17,038
17,672
76,951
13,976
6,653
13,740
1,544
9,324
45,237
Year ended December 31, 2005
Net policy
benefits
incurred
Policy
benefits
reinsured
Policy
benefits
incurred
Death and disability
Maturities
Surrenders and withdrawals
Annuities and pensions
Policy dividends and bonuses
Health insurance
Property and casualty insurance
Other benefits
64,853
18,809
111,533
58,676
15,204
134,128
19,788
9,389
432,380
(17,988)
(52)
(8,946)
(2,634)
(144)
(8,782)
(4,682)
(112)
(43,340)
Policy benefits incurred include $23,085 (2004 - $5,782) in reinsurance assumed.
31.
INTEREST EXPENSE
Deposit administration and employee pension plan liabilities
Policy funds on deposit
Other funding instruments
Deposits
Securities
Other Items
46,865
18,757
102,587
56,042
15,060
125,346
15,106
9,277
389,040
2005
26,338
11,829
5,801
14,598
87,418
1,885
147,869
2004
Net policy
benefits
incurred
33,937
32,337
69,086
46,373
14,007
97,720
27,217
12,411
333,088
2004
23,894
11,375
-
3,737
-
-
39,006
101
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
32. EMPLOYEE BENEFITS
Included in administrative expenses, commissions and related compensation are the following:
Administrative staff salaries, directors’ fees and other short-term benefits
Employer contributions to social security schemes
Equity compensation benefits
Employer contribution to defined contribution pension schemes
Costs – defined benefit pension schemes
Costs – other retirement benefits
2005
91,272
7,082
6,773
1,026
4,672
1,403
112,228
2004
65,360
4,987
-
686
3,061
1,429
75,523
The total number of administrative staff at December 31 was 1,627 persons (2004 – 1,251 persons).
32.1 Equity compensation benefits
(a) The Company
Effective December 31, 2005, the Company authorised compensation of $5,809 under the executive long-term
incentive plan. The compensation awarded may, at the option of the recipient, be settled in cash, or shares
issued by the Company, or by a combination of cash and shares.
(b) Life of Jamaica Limited (LOJ)
Share options in LOJ shares are granted to key management of LOJ who have completed the minimum eligibility
period of one year. Options are granted at a 25% discount of the last sale price on the Jamaica Stock Exchange
on the trading day prior to the grant date and are exercisable at that price. Options are exercisable beginning
one year from the date of grant and have a contractual term of five years.
The movement in share options was as follows:
Balance, beginning of year
Options granted
Balance, end of year
Exercisable at the end of the year
2005
2004
Number of
options
‘000
14,959
4,086
19,045
3,739
Weighted
average
exercise
price
J$ 5.13
J$ 9.86
J$ 6.14
J$ 9.86
Number of
options
‘000
11,665
3,294
14,959
2,916
Weighted
average
exercise
price
J$ 3.39
J$11.30
J$ 5.13
J$11.30
The proceeds from shares issued under the share purchase plan totalled $4,754 (2004 - $2,181)
102
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
32. EMPLOYEE BENEFITS (continued)
32.1 Equity compensation benefits (continued)
(c) Pan Caribbean Financial Services Limited (PCFS)
The directors of PCFS have granted options in PCFS shares as follows:
(i)
450,000 share options on February 7, 2002. These expire on December 31, 2006. The shares in respect
of these options have been issued by the company and are held in an Employee Share Option Trust. The
exercise price for these options is J$4.55.
(ii) 17,220,000 share options on March 8, 2004. The exercise price for these options is J$10. The options vest
by December 31, 2006. 6,600,000 shares were allotted in the prior year. A further 900,000 vested options
were exercised during the year.
(iii) 816,800 share options on March 8, 2004. The exercise price for the options is J$10 less a 20% discount.
These options vested and were fully exercised in March 2005.
(iv) 1,200,000 share options on March 1, 2005. These options expire on December 31, 2008. The exercise price
for the options is J$36.50. The options vest over four years – 25% on each anniversary date of the grant.
The movement in share options was as follows:
Assumed on acquisition
Options granted
Options exercised
Options lapsed
Balance, end of year
Exercisable at the end of the year
2005
Number of
options
‘000
11,887
1,200
(1,817)
(60)
11,210
7,510
Weighted
average
exercise
price
J$9.80
J$36.50
J$10.00
J$4.55
J$12.70
J$10.20
For options outstanding at the end of the year, exercise prices range from J$4.55 to J$36.50. The weighted
average remaining contractual term is two years.
The weighted average share price at the date of exercise for options exercised during the year was
J$37.20.
J$20,420 (Barbados $656) was expensed during the year in respect of these share options.
103
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
32. EMPLOYEE BENEFITS (continued)
32.2 Employee retirement benefits
Retirement benefits recognised in the balance sheet are as follows:
Defined benefit pension schemes
Other retirement benefits
Net liability
(a) Defined benefit pension schemes
2005
(19,983)
(6,288)
(26,271)
2004
(18,921)
(5,149)
(24,070)
Certain Group subsidiaries have contributory defined benefit pension schemes in place for eligible administrative
staff.
The amounts recognised in the balance sheet are determined as follows:
Fair value of pension plan assets
Present value of pension obligations
Unrecognised actuarial gains
Amounts recognised in the balance sheet
Represented by:
Asset balances
Liability balances
2005
2004
122,392
(137,745)
(15,353)
(4,630)
(19,983)
104,550
(118,942)
(14,392)
(4,529)
(18,921)
2,723
(22,706)
(19,983)
2,191
(21,112)
(18,921)
Included in liability balances are interest bearing deposit administration fund balances totalling $25,536 (2004
- $23,383), representing employee pension plan funds on deposit with the Group.
The amounts recognised in the income statement are determined as follows:
Current service cost
Interest cost
Net actuarial losses recognised during the year
Past service cost
Expected return on pension plan assets
Pension cost
The actual return on plan assets was $10,573 (2004 – $28,240)
2005
2004
5,322
10,519
123
696
(11,988)
4,672
2,864
7,865
86
-
(7,754)
3,061
104
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
32. EMPLOYEE BENEFITS (continued)
32.2 Employee retirement benefits (continued)
The movement in the amounts recognised in the balance sheet is as follows:
Amounts recognised, beginning of year
Amounts recognised on subsidiaries acquired
Pension cost
Contributions made
Effects of exchange rate changes
Amounts recognised, end of year
The principal actuarial assumptions used were as follows:
2005
2004
(18,921)
452
(4,672)
3,045
113
(19,983)
(19,604)
-
(3,061)
3,675
69
(18,921)
Discount rate
Expected return on plan assets
Future salary increases
Future pension increases
Portion of employees opting for early retirement
Future changes in National Insurance Scheme Ceilings
Trinidad &
Tobago
Barbados &
other
countries
6.0% - 7.0%
7.0%
7.0%
6.0% - 7.0%
5.5% 2.25% - 5.80%
0.0% - 2.5%
1.5%
0.0%
0.0%
2.5% - 4.0%
2.5%
Jamaica
12.5%
12.5%
10.0%
3.5%
0.0%
0.0%
105
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
32. EMPLOYEE BENEFITS (continued)
32.2 Employee retirement benefits (continued)
(b) Other retirement benefits
Certain Group subsidiaries offer retiree medical and life insurance benefits that contribute to the health care
and life insurance coverage of retirees and beneficiaries.
The liability recognised in the balance sheet is determined as follows:
Present value of obligations
Unrecognised actuarial losses
Liability recognised in the balance sheet
The amounts recognised in the income statement are determined as follows:
Current service cost
Interest cost
Net actuarial / (gains) losses recognised during the year
Total cost
The movement in the liability recognised in the balance sheet is as follows:
Liability recognised, beginning of year
Amounts recognised on subsidiaries acquired
Total cost
Contributions made
Effects of exchange rate changes
Liability recognised, end of year
The principal actuarial assumptions used were as follows:
Discount rate
Expected return on plan assets
Long term increase in health costs
2005
2004
(9,117)
2,829
(6,288)
(5,534)
385
(5,149)
355
948
126
1,429
(4,030)
-
(1,429)
243
67
(5,149)
734
670
(1)
1,403
(5,149)
(110)
(1,403)
154
220
(6,288)
Jamaica
12.5%
12.5%
10.5%
106
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
33.
INCOME TAXES
The Group is subject to taxation in the jurisdictions in which business operations are conducted. Rates of taxation in
the principal jurisdictions for income year 2005 are as follows:
Taxes on premium revenue:
Barbados
Jamaica
Trinidad and Tobago
United States of America
Taxes on income:
Barbados
Jamaica
Trinidad and Tobago
United States of America
Life insurance,
non-registered
annuities
Registered
annuities
Health, property
and casualty
insurance
3% - 5%
3%
Nil
0.75% - 3.5%
Life insurance,
non-registered
annuities
5% of
gross investment
income
15% of
investment
income
15% of
investment
income
Nil
Nil
Nil
Nil
3.75%
Nil
6%
Nil
Registered
annuities
All other lines
of business
Nil
15% of
investment
income
30% of
net income
331/3 % of
net income
Nil
25% - 35% of
net income
34%/35% of
net income
34%/35% of
net income
34%/35% of
net income
The income tax expense is comprised of:
Current tax
Deferred tax
Share of tax of associated companies
In summary, income tax is levied on the following sources of income:
Investment income subject to direct taxation
Income from ordinary activities subject to direct taxation
Total income subject to taxation
2005
17,514
6,516
16
24,046
2005
66,083
9,804
75,887
2004
9,776
(2,701)
(159)
6,916
2004
61,334
(16,793)
44,541
107
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
33.
INCOME TAXES (continued)
The income tax on the total income subject to taxation differs from the theoretical amount that would arise using the
applicable tax rates as set out below:
Income subject to tax
Tax calculated at the applicable rates on income subject to tax
Adjustments to current tax for items not subject to tax or not allowed for tax
Other current tax adjustments
Adjustments for current tax of prior periods
Movement in unrecognised deferred tax asset
Deferred tax expense / (income) relating to the origination /
(reversal) of temporary differences
Deferred tax expense / (income) relating to changes in
tax rates and the imposition of new taxes
Deferred tax expense / (income) that arises from the write down /
(reversal of a write down) of a deferred tax asset
Tax on distribution of profits from policyholder funds
Other taxes
34. DEFERRED INCOME TAXES
Deferred income tax assets and liabilities are attributable to the following items:
Deferred income tax assets:
Pensions and other retirement benefits
Unused tax losses
Other items
Total (Note 13)
Deferred income tax liabilities:
Accelerated tax depreciation
Policy reserves taxable in the future
Pensions and other retirement benefits
Accrued Interest
Available for sale investments
Other items
Total (Note 22)
108
2005
75,887
11,864
(637)
(689)
(13)
8,418
161
969
(158)
3,526
605
24,046
2004
44,541
(28)
647
410
(721)
3,719
1,372
14
195
137
1,171
6,916
2005
2004
1,322
8,454
(1,550)
8,226
2,049
7,287
(1,299)
8,037
2005
2004
2,192
372
65
809
5,884
1,616
10,938
2,069
372
(9)
314
-
1,106
3,852
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
34. DEFERRED INCOME TAXES (continued)
These balances include the following
Deferred income tax assets to be settled after one year
Deferred income tax liabilities to be settled after one year
2005
3,060
8,368
2004
2,323
1,545
The Group has not recognised potential deferred income tax assets of $26,209 (2004 – $7,660) arising from
unrecognised tax losses of $82,370 (2004 - $24,924).
Deferred income taxes have not been provided for income taxes that would be payable on the distribution of
retained earnings of certain subsidiaries because there is no intention to distribute those earnings. These retained
earnings totalled $52,855 at December 31, 2005 (2004 - $63,758)
35. EARNINGS AND DIVIDENDS PER COMMON SHARE
35.1 Earnings per common share
Basic earnings per common share is calculated by dividing the net income for the year attributable to
shareholders by the weighted average number of common shares in issue during the year.
Net income for the year attributable to shareholders
Weighted average number of shares in issue (in thousands)
Basic and diluted earnings per common share
35.2 Dividends per common share
2005
136,562
263,937
52 cents
2004
67,690
260,030
26 cents
In 2005, the Company declared dividends per common share of 12 cents, of which 6 cents was the final dividend
for 2004 and 6 cents was the interim dividend for 2005.
In 2004, the Company declared dividends per common share of 7 cents, of which 3 cents was the final dividend
for 2003 and 4 cents was the interim dividend for 2004.
On April 27, 2006, the Company declared a final dividend for 2005 of 6 cents per common share which will be
recorded in the 2006 financial statements.
109
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
36. CASH FLOWS
The components of certain items in the cash flow statement are as follows:
OPERATING ACTIVITIES
2005
2004
Adjustments for non-cash items, interest and dividends
Increase / (decrease) in provision for unearned premiums
Interest income
Dividend income
Net gains on financial investments and investment property
Interest expense
Increase in provisions for impairment
Share of operating income of associated companies
Increase in actuarial liabilities
Movement in recognised employee retirement benefits
Depreciation
Loss / (gain) on disposal of property, plant and equipment
Amortisation of intangible assets
Gain on business combinations and acquisitions
Other items
Changes in operating assets
Investment property
Debt securities
Equity securities
Mortgage loans
Policy loans
Finance loans and finance leases
Securities purchased under agreements to resell
Deposits
Reinsurance assets
Other assets and receivables
3,006
(329,909)
(12,432)
(79,899)
153,140
17,557
(3,473)
58,680
3,030
15,020
154
10,478
(38,946)
(2,872)
(206,466)
(2,688)
(144,400)
78,181
(38,153)
(303)
(53,623)
272,529
42,623
(1,374)
61,592
214,384
4,708
(169,222)
(11,047)
(70,640)
40,734
14,243
(9,269)
109,115
815
12,601
(672)
9,199
-
(1,681)
(71,116)
(13,846)
(96,887)
47,431
(5,099)
(1,563)
(9,357)
(4,566)
(68,238)
-
(86,153)
(238,278)
110
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
36. CASH FLOWS (continued)
Investment property
Disbursements
Disposal proceeds
Debt securities
Purchases
Proceeds on maturities and disposals
Equity securities
Purchases
Disposal proceeds
Changes in operating liabilities
Deposit administration liabilities
Policy funds on deposit
Other funding instruments
Customer deposits
Securities sold under agreements to repurchase
Other benefits and payables
INVESTING ACTIVITIES
Property, plant and equipment
Purchases
Disposal proceeds
FINANCING ACTIVITIES
Loans payable
Proceeds
Repayments
CASH AND CASH EQUIVALENTS
For the purposes of the cash flow statement, cash and cash equivalents comprise:
Cash resources
Financial investments with an initial term to maturity of 90 days or less
Bank overdrafts
2005
2004
(8,873)
6,185
(2,688)
(15,605)
1,759
(13,846)
(675,475)
531,075
(144,400)
(309,246)
212,359
(96,887)
(171,860)
250,041
78,181
(45,772)
93,203
47,431
18,438
(14,578)
(4,977)
48,674
6,740
(87,507)
(33,210)
13,872
2,529
-
14,423
-
101,774
132,598
(23,865)
5,570
(18,295)
(28,913)
8,284
(20,629)
162,905
(18,911)
143,994
-
(9,633)
(9,633)
117,105
165,949
(8,712)
274,342
119,137
26,770
(10,299)
135,608
111
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
37. ASSETS AND LIABILITIES BY CURRENCY
Barbados
$
Balances denominated in
Trinidad
$
Jamaica
$
US
Other
$ currencies
2005
Total
ASSETS
Investment property
Property, plant and equipment
Investment in associated companies
Intangible assets
Financial investments
Reinsurance assets
Income tax assets
Miscellaneous assets and
receivables
Cash resources
Total assets
98,699
78,663
253
48,507
700,281
16,041
5,907
33,678
18,782
507
166,583
1,003,320
4,247
22,083
38,641
20,790
24,775
9,847
484,632
10,004
300
7,191
5,369
-
3,447
2,164,149
623,564
5,690
3,377
24,644
24,716
22,121
380,043
42,332
1,731
181,586
148,248
50,251
250,505
4,732,425
696,188
35,711
37,169
29,920
1,015,440
64,534
12,389
1,326,123
14,363
6,120
609,472
45,800
44,666
2,899,876
41,550
25,768
566,282
203,416
118,863
6,417,193
LIABILITIES
Policy liabilities
Actuarial liabilities
Deposit administration
liabilities
Other policy liabilities
Other liabilities
Loans payable
Deposit and security liabilities
Provisions
Income tax liabilities
Accounts payable and
accrued liabilities
Total liabilities
661,046
263,537
355,736
1,304,632
192,280
2,777,231
98,342
106,090
865,478
-
85,571
12,851
3,098
69,392
79,767
412,696
-
513,912
8,938
18,080
121,318
28,801
505,855
2,932
78,372
1,385,936
54,245
71,301
317,826
346,229
364,331
3,487,791
-
861
5,851
4,579
160,728
817,406
1,226
2,516
-
22,695
3,494
2,685
160,728
1,440,445
32,360
30,958
25,549
992,547
49,490
1,003,116
7,916
525,062
191,898
2,559,710
(3,549)
343,151
271,304
5,423,586
Net position
22,893
323,007
84,410
340,166
223,131
993,607
112
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
38. ACQUISITIONS
During the year, the Group acquired control of:
• The Pan Caribbean Financial Services Limited Group (PCFS);
• The employee benefits insurance business of First Life Insurance Company Limited, hereinafter referred to as
the EBA joint venture;
• The individual life insurance business of First Life Insurance Company Limited;
• Laurel Life Insurance Company (Laurel Life);
• Cayman General Insurance Company Limited (Cayman General).
In the acquisition of PCFS and EBA, the Company issued 5,523,000 new shares which were recorded at the prevailing
listed price on the Barbados Stock Exchange. In the same transaction, LOJ issued 919,227,731 shares to the vendor,
which were independently valued at J$3,493,065 for the purpose of the transaction. The prevailing listed price of
J$12.50 for LOJ shares on the Jamaica Stock Exchange was not utilised since, because of the thinness of the market,
this price was not an indicative fair value for a transaction of the size of shares involved. The independent valuation
was conducted using the maintainable earnings approach and verified by comparable company and comparable
transactions data.
As a consequence of part of the consideration for the PCFS and EBA acquisitions being shares issued by LOJ, the
Group reduced its interest in LOJ from 78% to 60% and recorded a gain of $26,769 arising from the difference
between the net assets of LOJ attributable to minority interests after the acquisition and the value of shares issued
by LOJ to the minority interests.
The Group also acquired interests in two associated companies, Manufacturers’ Credit and Information Services
(MCIS) and FamGuard Corporation Limited (Family Guardian).
The Group has accounted for the above acquisitions provisionally because data is being gathered to support some
of the underlying assumptions. Therefore, adjustments may result in the carrying amounts of the identifiable assets,
liabilities and contingent liabilities acquired in the 2006 financial year.
38.1 PCFS
(a) Details of acquisition
On January 7, 2005, Life of Jamaica Limited (LOJ) acquired a 43% interest in PCFS. Combined with its previous
6% effective interest, LOJ increased its interest to 49%. Because of certain related party shareholdings in
PCFS on January 7 and a definitive agreement to purchase a further 37% interest in the company, the Group
recognised it effectively had a controlling interest from this date.
Effective May 6, 2005, the Company and LOJ acquired a further 37% interest in PCFS. Between July 1 and
September 1, 2005, LOJ acquired further shareholdings totalling 1%.
PCFS is a listed company on the Jamaica Stock Exchange and is engaged in Jamaica in securities dealing,
merchant banking, foreign exchange dealing, corporate trust services and mutual fund management.
113
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
38. ACQUISITIONS (continued)
38.1 PCFS (continued)
The fair values of the net assets acquired, the purchase consideration and the goodwill arising on the January
7 acquisition are set out below.
Net assets acquired:
Property, plant and equipment
Intangible assets (note 10)
Financial investments
Income tax assets
Miscellaneous assets and receivables
Cash resources
Deposit and security liabilities
Income tax liabilities
Accounts payable and accrued liabilities
Total net assets
Share of net assets acquired by the Group
Purchase consideration and related costs
Cash
Goodwill arising on acquisition
Acquirees’
carrying
value
January
2005
2,920
25,227
1,237,064
5,069
17,086
24,898
(1,091,279)
(16,838)
(21,425)
182,722
Total fair
value
January
2005
2,920
79,844
1,237,064
5,069
17,086
24,898
(1,091,279)
(16,838)
(21,425)
237,339
116,249
118,160
1,911
The book values of the net assets acquired and the purchase consideration and gain arising on the May 6
acquisition are set out below.
Share of net assets acquired by the Group
Purchase consideration and related costs
Cash
Shares issued by the Company
Shares to be issued by the Company
Shares issued by LOJ
Total purchase consideration
Gain arising on the acquisition of minority interest
114
90,976
643
14,537
939
62,856
78,975
12,001
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
38. ACQUISITIONS (continued)
38.1 PCFS (continued)
The gain arising on acquisition of minority interest has been included in revenue and arose when the PCFS
interest was acquired in exchange for the issue of shares. The agreement to purchase these shares was
negotiated in 2003 and the gain arising on the acquisition of the minority interest is partly as a result of a change
in the relative values of the shares of the issuers and those of PCFS.
Other shareholdings in PCFS were acquired for cash consideration of $8,324 and generated additional goodwill
of $3,903.
The total goodwill arising on the PCFS acquisition is as follows:
Arising on acquisition of 49% interest
Arising on acquisition of 1% interest
Total goodwill arising (note 10)
1,911
3,903
5,814
In Jamaica, it is common for shares of listed financial services entities to trade above their related book
values. The intangible assets recognised in these transactions and the resulting goodwill are reflections of the
profitability of PCFS and the synergies and opportunities it brings to the Group.
b) Details of acquiree’s net income
Net income for the year per acquiree’s financial statements
Amortisation of identified intangible assets
Adjusted net income consolidated by the Group
2005
33,158
(7,028)
26,130
115
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
38. ACQUISITIONS (continued)
38.2 EBA joint venture
(a) Details of acquisition
Effective April 1, 2005, LOJ acquired the remaining 50% interest in the EBA joint venture. The Group previously
held the other 50% interest in the EBA joint venture.
Net assets acquired:
Property, plant and equipment
Intangible assets (note 10)
Financial investments
Reinsurance assets
Miscellaneous assets and receivables
Cash resources
Actuarial liabilities
Deposit administration liabilities
Other policy liabilities
Loans payable
Income tax liabilities
Accounts payable and accrued liabilities
Total net assets acquired
Purchase consideration and related costs
Shares issued by the Company
Shares to be issued by the Company
Shares issued by LOJ
Total purchase consideration
Goodwill arising on acquisition (note 10)
Total fair value
Acquirees’
carrying
value
167
-
63,065
338
9,297
4,713
(24,662)
(25,458)
(10,129)
(1,767)
(234)
(3,898)
11,432
167
37,524
63,065
338
9,297
4,713
(24,662)
(25,458)
(10,129)
(1,767)
(234)
(4,083)
48,771
11,419
739
49,383
61,541
12,770
In Jamaica, it is common for shares of listed financial services entities to trade above their related book values.
The employee benefits business was acquired from a listed Jamaica company. The intangible assets recognised
in these transactions and the resulting goodwill are therefore reflections of market conditions and the further
synergies which the acquisition brings to the Group.
116
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
38. ACQUISITIONS (continued)
38.2 EBA joint venture (continued)
(b) Details of acquirees’ net income
Net income for the year per acquiree’s financial statements
Amortisation of identified intangible assets
Adjusted net income consolidated by the Group
38.3 First Life individual life insurance business
(a) Details of acquisition
2005
12,708
(1,341)
11,367
Effective April 1, 2005, LOJ acquired the individual life insurance business of First Life Insurance Company
Limited.
Net assets acquired:
Intangible assets
Financial investments
Reinsurance assets
Income tax assets
Miscellaneous assets and receivables
Cash resources
Actuarial liabilities
Other policy liabilities
Accounts payable and accrued liabilities
Total net assets acquired
Purchase consideration and related costs
Cash
Goodwill arising on acquisition
(b) Details of acquirees’ net income
Total fair value
Acquirees’
carrying
value
-
11,813
40
47
1,355
508
(9,045)
(4,101)
(617)
-
3,856
11,813
40
47
1,355
508
(9,045)
(4,101)
(617)
3,856
3,856
-
The acquired individual life insurance business has been integrated into the Group’s operations, and it is not
possible to determine the net income arising from the acquired business.
117
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
38. ACQUISITIONS (continued)
38.4 Laurel Life
(a) Details of acquisition
On September 30, 2005, Sagicor USA Inc acquired a 100% interest in Laurel Life. American Founders Life
Insurance Company is the operating subsidiary of Laurel Life and provides life insurance and annuity products
in the USA.
The fair values of the net assets acquired and the purchase consideration are set out below.
Net assets acquired:
Property, plant and equipment
Intangible assets (note 10)
Financial investments
Reinsurance assets
Income tax assets
Miscellaneous assets and receivables
Cash resources
Actuarial liabilities
Other policy liabilities
Deposit and security liabilities
Income tax liabilities
Accounts payable and accrued liabilities
Total net assets acquired
Purchase consideration and related costs
Cash
Goodwill arising on acquisition (note 10)
Acquirees’
carrying
value
1,734
62,192
1,120,394
647,894
2,854
11,178
2,632
(1,367,380)
-
(242,916)
-
(223,706)
14,876
Total fair value
3,908
724
1,118,800
625,064
-
14,704
2,632
(1,221,118)
(45,978)
(248,362)
(2,902)
(131,880)
115,592
117,557
1,965
The acquirees’ carrying value is stated in accordance with generally accepted accounting practice in the United
States of America, since IFRS values were computed only in conjunction with the fair value restatement.
(b) Details of acquiree’s net income
Laurel Life’s net income from acquisition date to December 31, 2005 amounted to $2,734 which has been
consolidated by the Group. Prior to acquisition, Laurel Life did not prepare financial statements conforming to
IFRS and as a result its net income for 2005 is not available.
118
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
38. ACQUISITIONS (continued)
38.5 Cayman General
(a) Details of acquisition
On November 30, LOJ acquired a 51% interest in Cayman General. Cayman General is engaged in property,
casualty, group health and group life insurance in the Cayman Islands.
The fair values of the net assets acquired, the purchase consideration and the goodwill arising are set out
below.
Net assets acquired:
Property, plant and equipment
Intangible assets (note 10)
Financial investments
Reinsurance assets
Miscellaneous assets and receivables
Cash resources
Other policy liabilities
Accounts payable and accrued liabilities
Total net assets
Share of net assets acquired by the Group
Purchase consideration and related costs
Cash
Goodwill arising on acquisition (note 10)
(b) Details of acquiree’s net income
Acquirees’
carrying
value
2,622
-
103
33,489
16,254
23,291
(28,266)
(24,830)
22,663
Total fair value
2,622
13,737
103
33,489
16,254
23,291
(28,266)
(24,830)
36,400
18,565
20,043
1,478
Net income after acquisition and consolidated by the Group amounted to $692. In the opinion of management,
it is impractical to derive the acquiree’s net income for the year ended December 31, 2005, as the acquiree’s
year end is not coterminous with the Group and the information is not readily available.
119
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
38. ACQUISITIONS (continued)
38.6 MCIS
(a) Details of acquisition
MCIS was a wholly owned subsidiary of PCFS when the latter was acquired by the Group in January 2005.
Effective May 31, 2005, PCFS disposed of a 75% interest in MCIS with the result that MCIS became an
associated company. The gain realised by PCFS on the disposal amounted to $717. The net income of MCIS for
the five month period to June 1, 2005 amounted to $261 and has been included in the Group’s net income. On
May 31, 2005, the Group recorded its 25% interest in MCIS at a value of $368.
(b) Details of acquiree’s net income
The Group’s share of MCIS’s net income for the seven month period from May 31, 2005 to balance sheet date,
amounted to $68.
38.7 Family Guardian
(a) Details of acquisition
On December 28, 2005, Sagicor Life Inc acquired a 20% shareholding in Family Guardian. Family Guardian is a
listed company on the Bahamas International Securities Exchange and is engaged in life and health insurance
and annuities.
Group’s share of net assets acquired
Cash consideration
Goodwill
2005
13,618
24,716
11,098
The market value, as determined by the listed price of Family Guardian’s shares, of the Group’s shareholding
amounted to $24,200 at balance sheet date.
(b) Details of acquiree’s net income and fair value
The Group has not recognised any net income or loss between the acquisition date and the balance sheet date.
39. COMMITMENTS
Commitments entered into for which no provision has been made in these financial statements include the following:
Loan advances
Expenditure on real estate
Operating lease agreements and rental payments
Customer guarantees and letters of credit
2005
44,824
19,229
8,543
6,751
2004
30,182
-
1,716
-
There are equal and offsetting claims against customers in the event of a call on the above commitments for customer
guarantees and letters of credit.
120
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
40. CONTINGENT LIABILITIES
(a) Legal proceedings
During the normal course of business, the Group is subject to legal actions which may affect the reported amounts
of liabilities, benefits and expenses. Management considers that any liability from these actions, for which provision
has not been already made, will not be material.
(b) Tax assessments
The Group is also subject to tax assessments during the normal course of business. Adequate provision has been made
for all assessments received to date and for tax liabilities accruing in accordance with management’s understanding
of tax regulations. Potential tax assessments may be received by the Group which are in addition to accrued tax
liabilities. No provisions have been made in these financial statements for such potential tax assessments.
(c) Insurance contracts
The Group develops and markets insurance products under various types of insurance contracts. The design of these
products is consistent with international best practice and reflects the current thinking at the time of development.
The Group keeps its products under review to ensure that they meet both policyholder and company expectations.
One such insurance product is the universal life product which was developed and launched in 1987. The design
of this product is based on the assumption that the fund value built-up from premiums paid and from investment
earnings will be sufficient to cover future administrative costs and mortality charges. A review of the Group’s
universal life policy portfolio in Jamaica revealed that many of these policies were affected by fund values which were
insufficient to cover these costs through the life of the policies.
Once the problem was recognized, discussions were initiated with the Jamaica Regulators, the Financial Services
Commission (FSC), and affected policyholders. Affected policyholders were given the opportunity to reduce their
existing coverage under the policies or to increase the premiums. Approximately 90% of these policyholders have
agreed to adjustments to their policies. However, some affected policyholders, (less than 1%), have filed complaints
with the FSC. The Group believes that it has acted properly and in the best interest of the policyholders. The matter
is under review by the FSC.
The cost, if any, of resolving this issue cannot be quantified at this time and no provision has been made in these
financial statements.
121
Sagicor Financial Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31, 2005
Amounts expressed in Barbados $000
41. RELATED PARTY TRANSACTIONS
(a) Key management
Key management comprises directors and senior management of the Company and of Group subsidiaries. Key
management includes those persons at or above the level of Vice President or its equivalent. Compensation of and
loans to these individuals were as follows:
Compensation
Salaries, directors’ fees and other short-term benefits
Equity compensation benefits
Pension and other retirement benefits
Loans
Balance, beginning of year
Advances
Repayments
Balance, end of year
2005
17,702
6,773
401
24,876
Mortgage
loans
Other
loans
5,579
1,275
(589)
6,265
39
-
(15)
24
2004
11,447
-
297
11,744
Total
loans
5,618
1,275
(604)
6,289
The Company has not advanced any loans to key management. All loans have been advanced by Group subsidiaries.
Mortgage loans bear interest at rates from 5.5% to 11%. Other loans bear interest at rates from 9% to 10%.
(b) Employee pension plans
Certain Group subsidiaries have employee pension plans which are administered by the Group as segregated pension
plans. The assets of the segregated pension plans at December 31, 2005 amounted to $116,806 and are included in
the assets under administration referred to in note 4.10.
(c) First Jamaica Investment Limited (First Jamaica)
The Group acquired a 37% shareholding in PCFS and the remaining 50% interest EBA (see note 38), from First
Jamaica (formerly First Life Insurance Company Limited). As a result of these transactions, First Jamaica holds a 25%
interest in LOJ. Because of the size of this shareholding, First Jamaica is considered to be a related party.
Apart from the above-mentioned transactions during the year, other accounts receivable includes $7,856
(2004 - $ 3,301) and accounts payable includes $ 6,138 (2004 – nil) in balances with First Jamaica.
42. SUBSEQUENT EVENT
On March 30, 2006, Sagicor Finance Limited was incorporated in the Cayman Islands as a wholly owned subsidiary
of the Company for the purpose of raising finance for the Group.
122
Sagicor Financial Corporation
Senior Management
Executive Management
Mr. Dodridge D. Miller, FCCA, MBA, LLM
President & Chief Executive Offi cer, Sagicor Financial Corporation
Mr. Dodridge Miller was appointed President & Chief Executive Officer of the
Mutual Group, now Sagicor, on July 1, 2002, having held a number of senior
managerial positions in Sagicor. He previously held the positions of Treasurer and
Vice President, Finance and Investments and Deputy Chief Executive Officer and
Chief Operating Officer.
Mr. Miller is a U.K.-trained Chartered Certified Accountant and also holds an MBA
in Finance from the University of Wales and Manchester Business School, and an
LLM in Corporate and Commercial Law from the University of the West Indies.
He has more than 25 years’ experience in the insurance and financial services
industries, spanning auditing and accounting, banking, investments and insurance.
Prior to joining Sagicor in 1989, Mr. Miller worked as Director of Finance for Trust
House Forte Hotels Ltd. and Sandy Lane Hotel in Barbados for two years. Prior
to joining Trust House Forte Hotels, Mr. Miller was Chief Accountant at Barbados
National Bank for seven years.
Dr. M. Patricia Downes-Grant, BA, MA, MBA, DBA
Chief Operating Offi cer
Dr. Patricia Downes-Grant was appointed as COO on July 1, 2002, and is responsible
for our day-to-day operations. She joined Sagicor in 1991 and held several senior
positions, including those of Vice President (Investments), and Treasurer and
Executive Vice President (Finance and Investments) before being appointed COO.
She holds an MBA in Finance from St. John’s University, United States, an MA in
Economics from George Washington University, United States and a Doctorate
in Business Administration (Finance) from the University of Bradford, United
Kingdom.
Prior to joining Sagicor, Dr. Downes-Grant was a Senior Manager in the
Management, Business Consulting and Insolvency Division of Coopers & Lybrand
(now PricewaterhouseCoopers). Dr. Downes-Grant has also had significant work
experience in development banking. She is a Director of several companies within
Sagicor and within the private sector of Barbados.
Mr. Steve R. Stoute, SCM
Senior Executive Vice President
Mr. Steve Stoute, Senior Executive Vice President of Sagicor, has been responsible
for Barbados Operations since April 5, 2004. Mr. Stoute, who joined Sagicor in
1960, has had extensive experience as an Underwriting Executive in Industrial and
Group Life and Health insurance, and has held many senior positions in Sagicor
Life.
Mr. Stoute is active in several industry-related organisations and is a Director of the
Insurance Association of the Caribbean.
123
Sagicor Financial Corporation
Senior Management
Executive Management
Mr. Anthony Bowen, CLU, FLMI
Executive Vice President, Eastern Caribbean Operations
Mr. Anthony Bowen joined Sagicor Life Inc on February 1, 2005 as Executive Vice
President, Eastern Caribbean Operations. Mr. Bowen brings a wealth of industry
experience to this new position at Sagicor Life Inc, having previously worked with
the Barbados Mutual Life Assurance Society for several years as Assistant Vice
President, Sales, Barbados Branch, and Vice President, Barbados Operations. Prior
to joining Sagicor, Mr. Bowen managed his own insurance brokerage company,
Ultimate Insurance and Financial Solutions.
Mr. Richard Byles, BSc, MSc
President and Chief Executive Officer, LOJ
Mr. Richard Byles is the President and CEO of Life of Jamaica Ltd. Mr. Byles is the
Chairman of Pan Caribbean Financial Services Limited. During his tenure as CEO of
the Pan Jam Group, Mr. Byles was responsible for a number of mergers, acquisitions
and other strategic business initiatives which have had a profound and positive
impact on the performance of that Group.
Mr. Byles is a graduate of the University of the West Indies. He holds a BSc in
Economics and an MSc in National Development from the University of Bradford,
England. He is a Director of several companies within the public and private sector
of Jamaica.
Mr. George Estock, BSc, MBA
President, Sagicor International Management Services Limited
and President and CEO, Sagicor Allnation Insurance Company
In 1996, Mr. George Estock joined the Barbados Mutual Life Assurance Society as
President of the U.S.-based subsidiary, Sagicor International Management Services.
He also holds the position of President and CEO of Sagicor Allnation Insurance
Company. He has over 15 years’ experience in the Life Insurance and Property &
Casualty business.
Prior to joining Sagicor, Mr. Estock spent several years with CIGNA; the U.S.-based
multinational insurance carrier, working in their U.S. domestic personal lines and
Property & Casualty Division, and was Director of Planning and Control of CIGNA’s
International Reinsurance Division. He was then appointed President of CIGNA
Life and Health Operations for the United Kingdom and, on his return to the
U.S., he served as Regional Vice President-Americas, for CIGNA’s Life and Health
Operations for Canada, the Caribbean, and Latin America.
Mr. Estock has a Degree in Political Economics from the University of Delaware and
a Masters in Business Administration from Wilmington College.
124
Sagicor Financial Corporation
Senior Management
Executive Management
Mr. J. Andrew Gallagher, FSA, FCIA, G.B.
Chief Risk Offi cer
Mr. Andrew Gallagher joined Sagicor in August 1997 as Resident Actuary. He
holds a Bachelor of Mathematics degree from the University of Waterloo, and is
both a Fellow of the Canadian Institute of Actuaries and a Fellow of the Society of
Actuaries. Prior to joining Sagicor, Mr. Gallagher worked with Eckler Partners in
Toronto in their financial institutions practice. He has over 20 years of experience
in the industry.
Mr. Keston Howell, BSc
Executive Vice-President, Merchant Banking
Mr. Keston Howell joined Sagicor in July 2005, with responsibility for the
establishment of Sagicor Merchant Bank as well as the overall banking strategy
for the Group. He has worked in the banking industry for 17 years, the last seven
of which were at the senior executive level. He brings to Sagicor considerable
knowledge and experience in Corporate and Investment Banking.
Mr. Howell’s responsibilities over the years have included day-to-day banking
operations, building and fostering relationships with institutional investors in
the English and Dutch-speaking Caribbean. Other key areas in which he has had
responsibility are asset/liability management, and ensuring regulatory compliance
with securities laws in various jurisdictions. Mr. Howell holds a BSc (Hons) in
Management Studies from the University of the West Indies.
Mr. André Lafond, FSA, FCIA,
Executive Vice President and Sagicor Chief Actuary
Mr. André Lafond joined Life of Barbados as the Company’s Appointed Actuary and
Vice President, Actuarial in September 1997, prior to becoming the Sagicor Chief
Actuary in 2003. Mr. Lafond is an Actuary with over 20 years’ experience in both the
life and general insurance industries, and is a Fellow of both the Canadian Institute
of Actuaries and the Society of Actuaries. He attended Laval University in Quebec,
obtaining a Bachelors in Administration and Actuarial Science.
125
Sagicor Financial Corporation
Senior Management
Executive Management
Mr. Ken A. Marshall
Executive Vice President & General Manager (Trinidad and Tobago)
Mr. Kendrick (Ken) Marshall was formerly Executive Vice President responsible
for Barbados and the Eastern Caribbean, and President and CEO of Capital Life
Insurance Company Limited. He is currently the Executive Vice President of Sagicor
Life Inc and General Manager of the Trinidad and Tobago Operations. Mr. Marshall
has had extensive experience in the insurance field, both in sales and management.
He has been with the company for over 30 years, and has held several senior
positions within the Barbados, Eastern Caribbean and Capital Life operations.
Mr. Marshall is also a former President and member of the Life Underwriters’
Association of Barbados.
Ms. Maxine MacLure, BSc, MEd, MBA
President and CEO, Sagicor USA Inc and
President and CEO, Sagicor Life Insurance Company
Ms. Maxine MacLure currently spearheads our U.S. business expansion strategy.
Ms. MacLure joined Sagicor in December 2001 as President and CEO of
Life of Jamaica. She effectively managed that company through its merger
with Island Life Insurance Company. Prior to joining LOJ, Ms. MacLure led
a two-year joint insurance reform project sponsored by the Inter-American
Development Bank and the Jamaican Government, where she participated in
the resolution of the financial sector crisis. Ms. MacLure also spent seven
years as a Senior Government Financial Sector Regulator
in Canada.
Ms. MacLure has a Masters degree in Education from Western Washington
University in the United States and a BSc from the University of Manitoba, Canada,
with a major in Mathematics and an MBA from the Richard Ivey School of Business
at the University of Western Ontario, Canada.
Philip N. W. Osborne, BSc, FCA
Chief Financial Offi cer
Mr. Philip Osborne joined Life of Barbados in 1989 as Chief Accountant. He was
appointed Assistant Vice President, Finance, in 1995 and in September 1996 he was
appointed Vice President, Finance, and a Director of the Company. After qualifying
as a Chartered Accountant in 1983, Mr. Osborne served in various supervisory and
management positions in professional accounting firms in England and Barbados,
namely Touche Ross in the United Kingdom and Pricewaterhouse in Barbados.
Mr. Osborne is a graduate of the University of London, England where he earned a
BSc in Mathematics with Computer Science in 1978.
126
Sagicor Financial Corporation
Senior Management
Executive Management
Ms. Sandra Osborne, BSc, LLB, FCIS
Executive Vice President, General Counsel and Secretary
Ms. Sandra Osborne is an Attorney-at-Law and Chartered Secretary who joined
Sagicor in 1989 as General Counsel and Corporate Secretary. She has over 27 years’
experience in the legal and corporate secretarial field, having previously practiced
as a Crown Counsel and at the private Bar in civil practice in Barbados. Prior to
joining Sagicor, Ms. Osborne worked in private practice at the Juris Chambers law
firm in Barbados.
Ms. Osborne holds a BSc (Hons), in Political Science from the University of
the West Indies, Jamaica, a Bachelor of Laws (Hons) from the University of the
West Indies, Barbados, and a Certificate in Legal Education, Hugh Wooding Law
School, Council of Legal Education, Trinidad. She is also a Fellow of the Institute
of Chartered Secretaries and Administrators in Canada, and holds an Executive
Development Program Certificate from Kellogg Graduate School of Management,
Northwestern University, United States.
Mr. Ravi Rambarran, BSc, MSc, FIA
Executive Vice President, Strategy
Mr. Ravi Rambarran’s work experience includes Pensions Actuary of Life of Jamaica,
Appointed Actuary of Global Life Bahamas and Global Life Cayman, Chief Financial
& Investment Officer of LOJ, Managing Director of NCB Capital Markets and West
Indian Trust Company, part-time Lecturer in Actuarial Science at the University
of the West Indies and running his own actuarial practice. Prior to joining LOJ,
Mr. Rambarran was a Consulting Actuary with the Aon Group and the HSBC Group
in the United Kingdom.
Mr. Rambarran has a BSc (Hons) in Actuarial Science from City University, London,
and an MSc in Financial Economics from the University of London. Mr. Rambarran
was awarded an Open Mathematics Scholarship by the Government of Trinidad and
Tobago, and is also a Fellow of the Institute of Actuaries.
Mr. Vincent Yearwood, FCCA, MBA
Executive Vice President, Shared Services & Employee Benefits
Mr. Vincent Yearwood was appointed as Executive Vice President of Sagicor Financial
Corporation, with responsibility for the Shared Services Division, effective March
1, 2004. In 2005, he bacame responsible for Employee Benefits. Mr. Yearwood
brought to Sagicor a broad spectrum of experience in the areas of strategic
and change management, finance, marketing and planning and management
of information systems. The former CEO of Cable and Wireless BET and, more
recently, CEO of the Barbados Investment and Development Corporation, Mr.
Yearwood is a Certified Chartered Accountant and has an MBA from the University
of Wales and Manchester Business School.
127
Sagicor Financial Corporation
Senior Management
Vice Presidents
Ms. Susan Boyea, BSc, MBA, FLMI
Vice President, Shared Services, Information Technology
Mrs. Susan Boyea joined Life of Barbados in 1989 and was Assistant Vice President
in charge of Information Systems at the time of LOB’s acquisition by Sagicor. In
April 2003 she was appointed Head, Shared Services Information Systems during
the operational merger of Sagicor Life and Life of Barbados. She was appointed Vice
President, IT, in February, 2004.
A graduate of the University of the West Indies, Mrs Boyea has a BSc in Computer
Science and Mathematics, and an Executive Masters in Business Administration.
She is also a Fellow of the Life Management Institute (FLMI).
Ms. Tammy-Anne Campbell, BSc, FSA, FCIA
Vice President, Actuarial
Ms. Tammy-Anne Campbell joined Life of Barbados in 2001 as Assistant Vice President,
Actuarial. She was promoted to Vice President, Actuarial, of Sagicor Life Inc in April 2005.
Ms. Campbell has a diverse background, having worked for 11 years with an actuarial
consulting firm in Toronto, followed by two years with the Provincial Workers’
Compensation Board, before joining Life of Barbados. Ms. Campbell has expertise
in several practice areas including pensions, life insurance, property and casualty
insurance and investments, she has also been involved in over 2,000 litigation
situations involving actuarial mathematics. Ms Campbell attended the University
of Toronto where she earned a BSc in Mathematics, Statistics and Computer
Science in 1988. She later received her fellowship from the Society of Actuaries and
Canadian Institute of Actuaries in 2000.
Mr. Anthony O. Chandler, CGA, MBA
Vice President, Finance
Mr. Anthony Chandler is Vice President, Finance of Sagicor Life Inc. He joined the
company as Financial Accountant in 1995 until 2000, when he transferred to our
subsidiary Island Life Insurance Company Ltd. In 2003, he joined the management
of LOJ as Head of its Internal Audit Function. Mr. Chandler returned to Barbados
in the position of Vice President, Finance, in 2003. He has been a member of the
Institute of Chartered Accountants of Barbados since 1992 and a member of the
Certified General Accountants Association of Canada since 1990. Mr. Chandler has
over 15 years’ experience in the accounting profession. His experience includes the
provision of accounting, audit and business advisory services. Mr. Chandler earned
his MBA from the University of Wales and Manchester Business School in 2004.
Mrs. Althea Hazzard, LLM, FCIS
Vice President, Legal & Compliance
Mrs. Althea Hazzard is an Attorney-at-Law with sixteen (16) years’ experience, with
particular emphasis on Corporate Law as it relates to the international business
and financial sectors in Barbados. She joined Life of Barbados in 1997 and holds
a Master of Laws degree from the University of Cambridge and an International
Diploma in Compliance from the International Compliance Association in the
United Kingdom. Mrs. Hazzard is a Fellow of the Institute of Chartered Secretaries
and Administrators.
128
Sagicor Financial Corporation
Senior Management
Vice Presidents
Mr. Gregory Hinkson, BSc, FCGA
Vice President, Investments
Mr. Gregory Hinkson joined Sagicor in July, 2005, with responsibility for the
Investments Department. He is a graduate of the University of the West Indies
and holds a professional accounting designation and fellowship from the Certified
General Accountants (CGA) Association of Canada.
Mr. Hinkson is a Fellow of the Institute of Chartered Accountants of Barbados, a
member of the CFA Institute and the Barbados Chapter of Investment Professionals,
as well as a former President of the CGA Association of Barbados.
Mr. Hinkson has brought a wealth of industry knowledge and experience, both
public and private sector, to the Sagicor Group, and he has held several senior
positions in local and off-shore banking and investments.
Mr. Henry Inniss, LLIF, FLMI, MBA, BSc
Vice President, Barbados Operations
Mr. Henry Inniss joined Life of Barbados in 1990 as Manager, Marketing Support.
He was promoted in 1995 to Assistant Vice President, Marketing, and in 1998 he
became Vice President, Marketing. He is a Fellow of the LIMRA Leadership Institute
and the Life Management Institute. He holds a Bachelor’s degree in Business
Administration from the University of Puerto Rico and a Masters in Business
Administration from Inter American University. Mr. Inniss also speaks Spanish.
Mrs. Melba Smith, BA
Vice President, Corporate Communications
Mrs. Melba Smith is a Communications professional who joined Sagicor in 2002 as
Vice President, Corporate Communications, and has over 25 years’ experience in
Business Communication, Public Relations and Management.
Prior to joining Sagicor Mrs. Smith was the General Manager of the Caribbean
Broadcasting Corporation, a position she held for 7 years. She was also a Board
member of the Caribbean Broadcasting Union and became that Institution’s first
female President in 2000.
Mrs. Smith, a graduate of the University of the West Indies, holds a BA (Hons), and a
Post Graduate Diploma in Mass Communication, a Certificate in Privatisation from
the Irish Management Institute and is a member of the International Association of
Business Communicators.
129
Sagicor Financial Corporation
Senior Management
Vice Presidents
Mr. Robert Trestrail, BA
Vice President, Administration, Trinidad Operations
Mr. Robert Trestrail joined Sagicor Life in 2001 as an Assistant Vice President,
Administration.
In 2004, he was promoted to Vice President, Administration, with responsibility for
general branch administration and administration of the Investment Portfolio. He
has been a member of the Trinidad Investment Committee, and brings several years
of Commercial Banking experience to Sagicor.
Mr Trestrail is an Economics major, with a Bachelor of Arts from the University of
Ontario, Canada.
Ms. Teri Townsend, MBA
Vice President, Corporate Strategy, Information Systems
Ms. Teri Townsend joined the Sagicor Group in 2000, after successfully managing
the Company’s Y2K Project.
Prior to joining Sagicor, Ms Townsend spent 15 years with a large computer
manufacturer in Silicon Valley, California. On her return to Barbados she spent 5
years with Fujitsu Barbados in Services and then in General Management. She
has managed many large information technology projects in the region, and has
provided consulting services to Governments on education technology throughout
the Caribbean.
Ms. Townsend brings this international and regional expertise and knowledge in
business and technology to the Sagicor Group. She holds an Executive Masters in
Business Administration from the University of the West Indies. She is a member
of the ICT Advisory Committee for the Government of Barbados and is a past
President of the Information Society of Barbados.
Mr. Gregory Whiby
Vice President, Marketing and Deputy General Manager, Trinidad Operations
Mr. Gregory Whiby is responsible for the Sales and Marketing functions of Sagicor
Life in Trinidad. He was a successful salesman and agency manager before being
promoted to lead the sales force.
With over 30 years’ experience in sales and management in the insurance industry,
Mr. Whiby started his career as an insurance agent and went on to win every
major award that the Company and the insurance industry had to offer for sales
producers.
130
Sagicor Financial Corporation
Advisors and Bankers
Appointed Actuary
Sylvain Goulet, FCIA, FSA, MAAA, Affiliate Member
of the (British) Institute of Actuaries
Medical Consultants
Dr Livingstone A Forde, MBBS, DM (Medicine) (UWI)
Dr Oscar W Jordan, MB, ChB, FRCPE, DCH, Diabetologist
Dental Consultant
Dr Trevor E H Talma, BSc, DDS
Auditors
PricewaterhouseCoopers, Chartered Accountants
Head Office Attorneys
Edmund A Bayley
Carrington & Sealy
Patterson K H Cheltenham, QC, LLM (Lond)
Clarke, Gittens & Farmer
Cottle Catford & Company
Hon Sir Henry de B Forde, K.A., QC, MA, LLM (Cantab)
Barry L V Gale, QC, LLB (Hon)
Sir Douglas P Lynch, K.A., CMG, QC
Principal Bankers
Butterfield Bank (Barbados) Limited
Bank of Montreal
Caribbean Mercantile Bank NV
Citibank
FirstCaribbean International Bank Limited
First Union National Bank
JP Morgan Chase Bank
Maduro & Curiel’s Bank NV
National Commercial Bank Jamaica Limited
RBTT Bank Limited
Republic Bank Limited
Royal Bank of Canada
The Bank of Nova Scotia
131
Sagicor Financial Corporation
Offices
Parent Company
SAGICOR FINANCIAL CORPORATION
Sagicor Corporate Centre
Wildey, St Michael
Barbados
Tel: (246) 467-7500
Fax: (246) 436-8829
Email: info@sagicor.com
Website: www.sagicor.com
Insurance Subsidiaries
SAGICOR LIFE INC
Sagicor Financial Centre
Lower Collymore Rock
St Michael, Barbados
Tel: (246) 467-7500
Fax: (246) 436-8829
Email: info@sagicor.com
SAGICOR LIFE INC BRANCH OFFICES
Barbados
1st Avenue, Belleville
St Michael
Tel: (246) 467-7700
Fax: (246) 429-4148
Email: info@sagicor.com
Antigua
Sagicor Financial Centre
#9 Factory Road,
St John’s
Tel: (268) 480-5550
Fax: (268) 480-5520
Email: bmlas_an@caribsurf.com
Grenada
The Mutual/Trans-Nemwil Office Complex
The Villa, St George’s
Tel: (473) 440-1223
Fax: (473) 440-4169
Email: bmlas_gre@caribsurf.com
St Kitts
Cnr Cayon and West Independence Square Sts
Basseterre
Tel: (869) 465-9476
Fax: (869) 465-6437
Email: bmlas_sk@caribsurf.com
132
St Lucia
Sagicor Financial Centre
Choc Estate, Castries
Tel: (758) 452-3169
Fax: (758) 450-3787
Email: bmlas@candw.lc
Trinidad and Tobago
Sagicor Financial Centre
16 Queen’s Park West, Port of Spain
Tel: (868) 628-1636/7/8
Fax: (868) 628-1639
Email: comments@sagicor.com
SAGICOR LIFE INC AGENCIES
Anguilla
Malliouhana Insurance Co Ltd
Caribbean Commercial Centre
The Valley
Tel: (264) 497-3712
Fax: (264) 497-3710
Dominica
WillCher Services Inc
44 Hillsborough Street
Corner Hillsborough & Independence Street
Roseau
Tel: (767) 440-2562
Fax: (767) 440-2563
Email: bmlas@cwdom.dm
Guyana
Hand-in-Hand Mutual Life Assurance Company Limited
Lots 1, 2 and 3, Avenue of the Republic
Georgetown
Tel: (592) 251861
Fax: (592) 251867
Monserrat
Administered by Antigua Branch
St Vincent
Incorporated Agencies Limited
Kenmars Building, Halifax Street
Kingstown
Tel: (784) 456-1159
Fax: (784) 456-2232
Sagicor Financial Corporation
Offices
SAGICOR ALLNATION INSURANCE COMPANY
1201 North Orange Street
Suite 716
Wilmington, Delaware
19801-1186
USA
Tel: (302) 884-6770
Fax: (302) 884-6771
Website: www.allnation.com
CAPITAL de SEGUROS, SA
Ave Samuel Lewis y Calle Santa Rita
Edificio Plaza Obarrio
3er Piso Oficina 201
Panama City, Panama
Tel: (507) 223-1511
Fax: (507) 264-1949
Email: capital1@sinfo.net
CAPITAL LIFE INSURANCE COMPANY BAHAMAS
LIMITED
C/o Colina Insurance Company Limited
56 Collins Avenue, P O Box 4937
Nassau, Bahamas
Tel: (242) 393-9518
Fax: (242) 393-9523
SAGICOR CAPITAL LIFE INSURANCE COMPANY
LIMITED
Registered Office
Grosvenor Close and Shirley Street
Nassau, Bahamas
CAPITAL LIFE BRANCH OFFICES
Aruba
Fergusonstraat #106
AHMO Plaza Building, Suites 1 and 2
Oranjestad
Tel: (297) 823967
Fax: (297) 826004
Email: calico@setarnet.aw
Belize
The Insurance Centre
212 North Front Street
Belize City
Tel: (501) 223-3147
Fax: (501) 223-7390
Email: capitalbe@btl.net
Curaçao
Schottegatweg Oost #11
Tel: (599) 9 736-8558
Fax: (599) 9 736-8575
Email: capital.life@curinfo.an
CAPITAL LIFE AGENCIES
Haiti
Cabinet d’Assurance Fritz de Catalogne
Angles Rues de Peuple et des Miracles
Port-au-Prince
Tel: (509) 226695
Fax: (509) 230827
Email: capital@compa.net
St Maarten
C/o Charlisa NV, Walter Nisbeth Road #99B
Phillipsburg
Tel: (599) 542-2070
Fax: (599) 542-3079
Email: capital@sintmaarten.net
LIFE OF JAMAICA LIMITED
28-48 Barbados Avenue
Kingston 5, Jamaica
Tel: (876) 929-8920(-9)
Fax: (876) 960-1927
Website: www.life-of-ja.com
NATIONWIDE INSURANCE COMPANY LIMITED
Sagicor Financial Centre
16 Queen’s Park West
Port of Spain, Trinidad
Tel: (868) 628-1636
Fax: (868) 628-1639
Email: comments@sagicor.com
SAGICOR LIFE INSURANCE COMPANY
4343 N. Scottsdale Road, Suite 300
Scottsdale, Arizona
85251
Tel: 1-800-531-5067
Fax: (345) 949-8262
Email: info@sagicor.com
133
Sagicor Financial Corporation
Offices
SAGICOR LIFE OF THE CAYMAN ISLANDS LIMITED
Global House, 198 North Church Street
George Town, Grand Cayman
Cayman Islands
Tel: (345) 949-8211
Fax: (345) 949-8262
Email: global@candw.ky
Trinidad and Tobago
Sagicor Financial Centre
16 Queen’s Park West
Port of Spain
Tel: (868) 628-1636/7/8
Fax: (868) 628-1639
SAGICOR RE INSURANCE LIMITED
Global House, 198 North Church Street
George Town, Grand Cayman
Cayman Islands
Tel: (345) 949-8211
Fax: (345) 949-8262
Email: global@candw.ky
General Insurance Subsidiaries
CAYMAN GENERAL INSURANCE COMPANY LIMITED
Harbour Place
Box 2171 GT
George Town , Grand Cayman
Cayman Islands
Tel: (345) 949 7028
Fax: (345) 949 7457
SAGICOR GENERAL INSURANCE INC
Beckwith Place, Lower Broad Street
Bridgetown, Barbados
Tel: (246) 431-2800
Fax: (246) 426-0752
Email: barbadosfire@caribsurf.com
Sagicor General Insurance Branch Offices
Barbados
Mall Internationale
Haggatt Hall
St Michael
Tel: (246) 431-2886
Fax: (246) 426-8245
Barbados
Sagicor Financial Centre
Lower Collymore Rock
St Michael
Tel: (246) 467-7650
Fax: (246) 428-6269
134
Sagicor General Insurance Agencies
HHV Whitchurch & Company Limited
Old Street
PO Box 771
Roseau
Dominica
Tel: (767) 448-2181
Fax: (767) 448-5787
WillCher Services Inc
44 Hillsborough Street
Corner Hillsborough & Independence Street
Roseau
Dominica
Tel: (767) 440-2562
Fax: (767) 440-2563
Email: bmlas@cwdom.dm
Peter & Company Limited
Vide Boutielle
Castries
St Lucia
Tel: (758) 452 2771
Fax: (758) 457-7079
JE Maxwell & Company Limited
PO Box GGM507
Bridge Street
Castries
St Lucia
Tel: (758) 451-7829
Fax: (758) 451-7271
Derek Bogle & Assocaites Insurance Limited
34 Pasadora Place
Smith Road
Grand Cayman
Cayman Islands
Tel: (345) 949-0579
Sagicor Financial Corporation
Offices
SAGICOR ASSET MANAGEMENT INC
Sagicor Corporate Centre
Wildey, St Michael,
Barbados
Tel: (246) 467-7500
Fax: (246) 426-1153
Email: info@sagicor.com
FAMGUARD CORPORATION LIMITED
East Bay & Shirley Street
PO Box SS-6232
Nassau, NP
Bahamas
Tel: (242) 396 4000
Fax: (242) 393 1100
Website: www.famguardbahamas.com
BANKING AND OTHER FINANCIAL SERVICES
SAGICOR MERCHANT LIMITED
Sagicor Financial Centre
16 Queen’s Park West, Port of Spain
Tel: (868) 628-1636/7/8
Fax: (868) 628-1639
PAN CARIBBEAN FINANCIAL SERVICES LIMITED
Pan Caribbean Building
60 Knutsford Boulevard
Kingston 5, Jamaica
Tel: (876) 929-5583-4
Fax: (876) 926-4385
Website: www.gopancaribbean.com
Email: options@gopancaribbean.com
Finance Companies
GLOBE FINANCE INC
6 Rendezvous Court, Rendezvous Main Road
Christ Church, Barbados
Tel: (246) 426-4755
Fax: (246) 426-4772
Website: www.globefinanceinc.com
THE MUTUAL FINANCE INC
Sagicor Financial Centre
Choc Estate, Castries
Tel: (758) 452-4272
Fax: (758) 452-4279
Other Subsidiaries/Associated Companies
SAGICOR INTERNATIONAL MANAGEMENT SERVICES,
INC
(Capital Life’s GlobalSURE International Benefits)
1511 North West Shore Blvd, Suite 820
Tampa, Florida 33607-4543,
USA
Tel: (813) 287-1602
Fax: (813) 287-7420
Website: www.globalsure.com
SAGICOR FUNDS INCORPORATED
Sagicor Corporate Centre, Wildey
St Michael, Barbados
Tel: (246) 467-7500
Fax: (246) 436-8829
Email: info@sagicor.com
135
NOTICE OF MEETING
NOTICE is hereby given that the Third Annual Meeting of Shareholders of Sagicor Financial Corporation (“the Company”)
will be held at Hilton Barbados, Needham’s Point, St Michael, Barbados, on Wednesday June 28, 2006 at 5.00 pm to
transact the following business:-
1. To receive and consider the Statement of Accounts and the Balance Sheet for the year ended December 31, 2005 and
the Auditors’ Report thereon.
2. To elect Directors.
3. To re-appoint the incumbent Auditors for the ensuing year and to authorize the Directors to fix their remuneration.
4. To consider and if thought fit adopt the following Resolution as a Special Resolution:
WHEREAS:
(a) The Shares of the Company were cross-listed on the Trinidad and Tobago Stock Exchange on August 24, 2004.
(b) The Trinidad and Tobago Securities and Exchange Commission has issued Guidelines relating to the listing on the
Trinidad and Tobago Stock Exchange of demutualized companies with constrained share ownership provisions limiting
any single shareholder to owning a maximum of 5% of outstanding shares (“the Guidelines”).
(c) Under the Guidelines, it is recommended that within two years of listing, a demutualized company seek the approval of
shareholders for the retention of its constrained share ownership provisions.
(d) Pursuant to the terms of the Demutualization Plan of its wholly owned subsidiary, Sagicor Life Inc, the Company was
incorporated with constrained share ownership provisions limiting any single shareholder to owning a maximum of
5% of outstanding shares for the first five years following incorporation and thereafter a maximum of 20% subject to
certain conditions as stated in the Restated Articles of Incorporation of the Company.
BE IT RESOLVED AS A SPECIAL RESOLUTION of the Shareholders of the Company that:
(1) Pursuant to Section 197(1)(e) of the Companies Act, the Restated Articles of Incorporation of the Company be and
are hereby amended to change or remove the rights, privileges, restrictions or conditions in respect of the Shares of the
Company as follows:
The restrictions, if any, on share holding and on share transfers are amended by:
(a) the deletion of Article 3.1.5 of Schedule 2 of the Restated Articles of Incorporation and the substitution therefor of
a new Article 3.1.5 as set out in the annexed Schedule 1 which is incorporated herein;
(b) the deletion of Article 3.1.7 of Schedule 2 of the Restated Articles of Incorporation and the substitution therefor of
a new Article 3.1.7 as set out in the annexed Schedule 2 which is incorporated herein.
(2) The proper officers of the Company be and are hereby authorized to file and register all such documents and instruments
and to take all such action as may be necessary or advisable to give effect to this Special Resolution.
5. To transact such other business as may properly come before the Meeting.
By Order of the Board of Directors
Sandra Osborne
Corporate Secretary
May 15, 2006.
136
PROXIES:
Shareholders who are unable to attend the Meeting in person may complete and return the enclosed form of proxy to the
Corporate Secretary, Sagicor Financial Corporation, Sagicor Corporate Centre, Wildey, St Michael, Barbados, at least 48
hours before the appointed time of the Meeting or adjourned Meeting.
DOCUMENTS AVAILABLE FOR INSPECTION:
1 Copies of the Restated Articles of Incorporation of the Company dated December 6, 2002, are available for inspection
at the following offices:
•
•
Barbados - Sagicor Financial Corporation, Sagicor Corporate Centre, Wildey, St Michael
Sagicor Life Inc Branch Offices/Agencies:
o Trinidad - Sagicor Financial Centre, 16 Queen’s Park West, Port of Spain
o Anguilla - Malliouhana Insurance Co Ltd, Caribbean Commercial Centre, The Valley
o Antigua - Sagicor Financial Centre, 9 Factory Road, St John’s
o Dominica – Willcher Services Inc, 44 Hillborough Street, Corner Hillsborough & Independent Street, Roseau
o Grenada - The Mutual/Trans-Nemwil Office Complex, The Villa, St George’s
o St Kitts - Corner Cayon and West independence Square Streets, Basseterre
o St Lucia - Sagicor Financial Centre, Choc Estate, Castries
o St Vincent - Incorporated Agencies Limited Kenmars Building, Halifax Street, Kingstown
Jamaica - Life of Jamaica Limited, 28-48 Barbados Avenue, Kingston 5.
•
2 There are no service contracts granted by the Company, or its subsidiaries, to any Director of the Company.
137
1.
Name of Company
SAGICOR FINANCIAL CORPORATION
2.
Company No.
21849
3.
Restrictions, if any, on share holding and share transfers.
SCHEDULE 1
3.1.5 “maximum aggregate holdings” means the number of shares in any class in the capital of the Company
that would amount to 20% of the total number of shares in any class of the capital of the Company issued and
outstanding at such time;
1.
Name of Company
SAGICOR FINANCIAL CORPORATION
2.
Company No.
21849
3.
Restrictions, if any, on share holding and share transfers.
SCHEDULE 2
3.1.7 No person may hold, or be beneficially entitled to, or control, or have any other interest, directly or indirectly, in
any shares (whether in one or more classes of shares in the capital of the Company) that represent more than
the maximum aggregate holdings unless:
3.1.7.1 not less than two thirds of the directors then in office approve of the same; and
3.1.7.2
there is an agreement between the Company and such person restricting the transfer of such shares;
and
3.1.7.3
the Supervisor of Insurance (or the Supervisor’s successor regulatory authority) is satisfied that such
shareholder is a fit and proper person.
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MANAGEMENT PROXY CIRCULAR
SAGICOR FINANCIAL CORPORATION
Company No 21849
Management is required by the Companies Act Chapter 308 of the Laws of Barbados (hereinafter called “the Act”) to send
with the Notice convening the Meeting, forms of proxy. By complying with the Act, management is deemed to be soliciting
proxies within the meaning of the Act.
This Management Proxy Circular accompanies the Notice of the third annual meeting of shareholders of Sagicor Financial
Corporation (“the Company”) to be held on June 28, 2006 at 5:00 pm (“the Meeting”) and is furnished in connection with
the solicitation of proxies by the management of the Company for use at the Meeting, or any adjournments thereof. The
solicitation will primarily be by mail. The cost of the solicitation will be borne by the Company.
APPOINTMENT AND REVOCATION OF PROXY
A form of proxy is enclosed and, if it is not your intention to be present at the Meeting, you are asked to sign, date and
return the proxy. Proxies to be exercised at the Meeting must be deposited with the Company not later than 5:00 pm on
June 26, 2006.
Any shareholder having given a proxy has the right to revoke it by depositing an instrument in writing executed by the
shareholder or his/her attorney authorized in writing, or if the shareholder is a company, by any officer or attorney thereof
duly authorized, with the Corporate Secretary at the registered office of the Company at Sagicor Corporate Centre, Wildey,
St Michael, Barbados, at any time up to and including the last business day preceding the day of the Meeting or any
adjournment thereof.
The persons named in the enclosed form of proxy are Directors of the Company. If you wish to appoint some other person
or company to represent you at the Meeting you may do so by inserting the name of your appointee, who need not be a
shareholder, in the blank space provided on the proxy form.
RECORD DATE AND VOTING OF SHARES
The Directors of the Company have fixed May 12, 2006 as the record date for determining the shareholders entitled to
receive Notice of the Meeting and have given notice thereof by advertisement as required by the Act. Only the holders
of common shares of the Company of record at the close of business on that day will be entitled to receive Notice of the
Meeting.
Common shareholders are voting on (i) the election of Directors (ii) the re-appointment of the incumbent Auditors
and Directors’ authorization to fix their remuneration and (iii) the amendment of Schedule 2 of the Restated Articles of
Incorporation of the Company to change or remove the rights, privileges, restrictions or conditions in respect of the Shares
of the Company by removing the provisions limiting any single shareholder to owning a maximum of 5% of outstanding
shares.
Only the holders of common shares of the Company will be entitled to vote at the Meeting. On a show of hands, each
shareholder has one vote. On a poll, each holder of a Series A common share is entitled to one vote for each share held.
Each holder of a Series C common share is entitled to one vote for the first 1,000,000 Series C common shares held, or
any part thereof, plus one additional vote for every additional 1,000,000 Series C common shares held. As at December
31, 2005, there are 265,552,748 Series A common shares of the Company outstanding. As at the date hereof there are no
Series C common shares of the Company outstanding.
PRESENTATION OF FINANCIAL STATEMENTS AND AUDITORS’ REPORT
The Financial Statements of the Company for the year ended December 31, 2005 and the Auditors’ Report thereon are
included in the 2005 Annual Report which is being mailed to shareholders with this Notice of Meeting and Management
Proxy Circular.
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ELECTION OF DIRECTORS
The Board of Directors consists of twelve members. The number of Directors to be elected at the Meeting is four.
Mr John Arthur Lionel Bethell, Dr Oscar Wendell Jordan, GCM, and Mr Stephen David Rupert McNamara will retire at the
end of the Meeting and will be seeking re-election. Mrs Vivian-Anne Lenora Gittens will also retire at the end of the Meeting
but will not be seeking re-election.
The following are the names of the qualified persons proposed as nominees for election as Directors of the Company, and
for whom it is intended that votes will be cast pursuant to the form of proxy hereby enclosed:
• MR JOHN ARTHUR LIONEL BETHELL
• DR OSCAR WENDELL JORDAN, GCM, MB, CHB, FRCPE, DCH
• MR STEPHEN DAVID RUPERT McNAMARA
• MRS JOYCE ETTIENNETTE DEAR, FCCA, MBA
J Arthur L Bethell is non-executive Chairman. He retired as President and Chief Executive Officer of The Mutual Group, now
the Sagicor Group of Companies, on June 30, 2002, having been appointed to that office in 1995. He joined The Mutual
as a sales representative in 1965 and has held the positions of Superintendent of Agencies, Sales Manager, Vice President,
Marketing, and Chief Executive Officer of Capital Life Insurance Company Limited (Bahamas). Mr. Bethell was elected a
director of The Mutual, now Sagicor Life Inc., in 1994 and is presently chairman of the subsidiary, Life of Jamaica Limited
and a director of a number of subsidiaries in the Group. He is Barbadian.
Dr Oscar W Jordan, GCM, MB, ChB, FRCPE, DCH, Diabetologist, is Consultant Physician, Department of Medicine
of the Queen Elizabeth Hospital, Barbados. He holds a Bachelor of Medicine and Surgery (MB, ChB) from Edinburgh
University, Scotland, and is a Fellow of the Royal College of Physicians (FRCPE), Edinburgh University, Scotland. He also
holds a Diploma in Child Health (DCH) from Glasgow University, Scotland. He is Chairman of the Diabetes Foundation
of Barbados and Director of Clinical Medicine in Barbados for the University of St. Georges, Grenada. A widely published
and well-respected physician, he is President of the Caribbean Golf Association. He became a director of The Mutual, now
Sagicor Life Inc, in 1990. Dr Jordan is Barbadian.
Stephen D R McNamara is Senior Partner of McNamara & Company, Attorneys-at-Law of St Lucia. He is also a Barrister-
at-Law of Lincoln’s Inn, College of Legal Education, England. He was elected to the board of The Mutual, now Sagicor Life
Inc, in 1997. He is a former chairman of the St Lucia Tourist Board and is currently a director of a number of subsidiaries
in the Group. Mr. McNamara is a citizen of St Lucia.
Joyce E Dear, FCCA, MBA, was, until 2004, a partner in the Assurance and Business Advisory Services Division of
PricewaterhouseCoopers (“PwC”) in Barbados. She is a Fellow of the Association of Chartered Certified Accountants
of the United Kingdom and holds a Masters in Business Administration from the University of Warwick. She is also a
member of the Hospitality Financial and Technology Professionals. Mrs Dear has over 31 years’ experience in rendering
audit and financial services to a wide variety of industries, including public companies, tourism and hospitality entities,
manufacturing companies, statutory corporations and international funding agencies/government financed programs and
projects. Mrs Dear was the PwC Industry lead partner for the public service assignments. She is a past President of the
Institute of Chartered Accountants of Barbados and a former director of a general insurance company in Barbados.
Mr Bethell, a former senor insurance executive, Dr Jordan, GCM, a noted and widely published physician, and
Mr McNamara, one of St Lucia’ leading Attorneys-at-Law, each brings a wealth of experience to the Board of Directors. They
continue to be effective and demonstrate commitment to the role of Director, including commitment of time for board and
committee meetings. Mrs Dear brings a wealth of financial experience spanning different industries and will add financial
depth to the Board. The Management of the Company does not contemplate that any of the persons named above will, for
any reason, become unable to serve as a Director.
The Directors recommend that the shareholders vote FOR the election of the above-named Nominees.
RE-APPOINTMENT OF INCUMBENT AUDITORS
PricewaterhouseCoopers, Chartered Accountants, of The Financial Centre, Bishops Court Hill, St Michael, Barbados, are
the incumbent Auditors of the Company. It is proposed to re-appoint PricewaterhouseCoopers as Auditors of the Company
to hold office until the next annual meeting of shareholders.
The Directors recommend that the shareholders vote FOR the re-appointment of PricewaterhouseCoopers and the
authorization of Directors to fix the Auditors’ remuneration.
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CONSTRAINED SHARE OWNERSHIP PROVISIONS
The Company’s Articles contain constrained share ownership provisions (“the Provisions”) which provide that, at any
time during the 5 year period immediately following the date of incorporation of the Company, no person may hold, or be
beneficially entitled to, or control, or have any other interest, directly or indirectly, in any shares (whether in one or more
classes of shares in the capital of the Company) that represent more than 5% of any class in the capital of the Company.
The Articles provide further that, at any time after such 5 year period, no person may hold, or be beneficially entitled to,
or control, or have any other interest, directly or indirectly, in any shares (whether in one or more classes of shares in the
capital of the Company) that represent more than 20% of any class in the capital of the Company unless:
(i) not less than two thirds of the directors then in office approve of the same;
(ii) there is an agreement between the Company and such person restricting the transfer of such shares; and
(iii) the Supervisor of Insurance of Barbados (or the Supervisor’s successor regulatory authority) is satisfied that such
shareholder is a fit and proper person.
The Trinidad and Tobago Securities and Exchange Commission has issued Guidelines (“the Guidelines”) relating to the
listing on the Trinidad and Tobago Stock Exchange (“the Exchange”) of demutualized companies with constrained share
ownership provisions limiting any single shareholder to owning a maximum of 5% of outstanding shares. Under the
Guidelines, it is recommended that within two years of listing, such a company seek the approval of shareholders for the
retention of its constrained share ownership provisions. The company may retain these provisions for a maximum period
of five years after listing. At the expiration of the five-year period, the entity may retain its listing with constrained share
ownership provisions only if it seeks and obtains the approval of shareholders and the Exchange. These approvals may only
be granted for a further period not exceeding two years. Thereafter the entity may only continue to be listed if it removes
the provisions completely.
The Company was incorporated on December 6, 2002 pursuant to the terms of the Demutualization Plan of the Company’s
wholly owned subsidiary, Sagicor Life Inc. The shares of the Company were listed on the Barbados Stock Exchange on
February 4, 2003 and cross-listed on the Exchange on August 24, 2004.
In accordance with the Company’ Articles, the 5% constrained share ownership provisions are due to expire on December
6, 2007, five years after incorporation of the Company. The Provisions were implemented in 2002 in order to give the
Sagicor Group time to adjust from being a mutual society to a publicly listed company, consistent with the practice of
demutualized companies in Canada, the demutualization model of which Sagicor Life Inc adopted.
The Company’s business strategy is to:
Expand internationally and in the Caribbean
•
• Diversify its product offerings and cross-sell its products
•
• Continue to improve the efficiency of its operations
Effectively use its balance sheet, and
The Provisions may limit the Company’s ability to engage in transactions that require an offering or an exchange of shares,
which in turn could limit its ability to engage in certain strategic acquisitions, thus having a material adverse effect on its
strategic options and growth.
The Directors consider it appropriate at this time to remove the constrained share ownership provisions limiting any single
shareholder to owning a maximum of 5% of outstanding shares, and to retain the constrained share ownership provisions
limiting any single shareholder to owning a maximum of 20% of outstanding shares subject to the existing conditions. The
rationale for this recommendation is:
•
•
•
the Guidelines;
the fact that the 5% constrained share ownership provisions will expire in any event within the next 18 months;
and
the potential constraints that the Provisions pose to the Company’s ability to execute its strategy.
The Board of Directors therefore recommends that the Articles of the Company be amended to remove the constrained
share ownership provisions limiting any single shareholder or group of shareholders to holding a maximum of 5% of
outstanding shares, but retaining the constrained share ownership provisions limiting any single shareholder to holding a
maximum of 20% subject to the condition that no person may hold, or be beneficially entitled to, or control, or have any
other interest, directly or indirectly, in any shares (whether in one or more classes of shares in the capital of the Company)
that represent more than 20% of any class in the capital of the Company unless:
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(i) not less than two thirds of the directors then in office approve of the same;
(ii) there is an agreement between the Company and such person restricting the transfer of such shares; and
(iii) the Supervisor of Insurance of Barbados (or the Supervisor’s successor regulatory authority) is satisfied that such
shareholder is a fit and proper person.
A majority of not less than two-thirds of the votes cast by Shareholders at the Meeting, whether by proxy or otherwise, will
constitute approval of this Special Resolution.
EXERCISE OF DISCRETION BY PROXIES
Shares represented by any proxy given on the enclosed form of proxy to the persons named in the proxy will be voted or
withheld from voting on any ballot in accordance with the instructions contained therein.
In the absence of shareholder instructions, COMMON SHARES represented by proxies received will be voted FOR:
(a) The election as Directors of:
• MR JOHN ARTHUR LIONEL BETHELL
• DR OSCAR WENDELL JORDAN, MB, CHB, FRCPE, DCH
• MR STEPHEN DAVID RUPERT McNAMARA
• MRS JOYCE ETTIENNETTE DEAR, FCCA, MBA
(b) The re-appointment of the incumbent Auditors, PRICEWATERHOUSECOOPERS, and the authorization of the
Directors to fix their remuneration.
(c) The amendment of the Restated Articles of Incorporation of the Company, pursuant to Section 197(1)(e) of the Act ,
to change or remove the rights, privileges, restrictions or conditions in respect of the Shares of the Company by:
(i) deleting Article 3.1.5 of Schedule 2 of the Restated Articles of Incorporation and substituting therefor a
new Article 3.1.5 as set out in Schedule 1 annexed to the Notice of the Meeting; and
(ii) deleting Article 3.1.7 of Schedule 2 of the Restated Articles of Incorporation and substituting therefor a
new Article 3.1.7 as set out in Schedule 2 annexed to the Notice of the Meeting.
The enclosed form of proxy confers discretionary authority upon the persons named with respect to amendments to or
variations in matters identified in the Notice of Meeting or other matters that may properly come before the Meeting.
The management of the Company knows of no matter to come before the Meeting other than the matters referred to in
the Notice of Meeting. If any other matters which are not now known to management should properly come before the
Meeting, the persons named in the accompanying form of proxy will vote on such matters in accordance with their best
judgement.
Unless otherwise noted, a simple majority of the votes cast at the Meeting, whether by proxy or otherwise, will constitute
approval of any matter submitted to a vote.
The contents of this Management Proxy Circular and the sending thereof to the holders of the common shares of the
Company have been approved by the Directors of the Company.
No Directors’ statement is submitted pursuant to Section 71(2) of the Act.
No Auditors’ statement is submitted pursuant to Section 163(1) of the Act.
Dated May 15, 2006.
Sandra Osborne
Corporate Secretary
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SHAREHOLDER PROXY
THIRD ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder(s) of SAGICOR FINANCIAL CORPORATION hereby appoint(s) J Arthur L Bethell, Chairman,
or failing him, Dodridge D Miller, President and Chief Executive Officer and Director, or instead of either of them:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(PLEASE PRINT NAME OF PROXY ON THIS LINE ONLY IF YOU WISH TO APPOINT A PROXY OTHER THAN THE CHAIRMAN OR PRESIDENT)
of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(PLEASE PRINT PROXY’S ADDRESS HERE)
as my/our proxy to attend, vote and otherwise act for and on behalf of the undersigned in respect of all other matters
that may properly come before the THIRD ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 28, 2006
and any adjournments thereof.
The Directors and Management recommend Shareholders vote FOR items numbered 1, 2 and 3 below:
1 Election as Directors of the Nominees listed below:
Vote
FOR
WITHHOLD
from Voting
JOHN ARTHUR LIONEL BETHELL
DR OSCAR WENDELL JORDAN, GCM
STEPHEN DAVID RUPERT McNAMARA
JOYCE ETTIENNETTE DEAR
Vote
FOR
Vote
FOR
WITHHOLD
from Voting
WITHHOLD
from Voting
2 Re-appointment of Incumbent Auditors and
Authorization of Directors to fix their Remuneration:
3 Adoption of Special Resolution to amend the Articles
to change or remove the rights, privileges,
restrictions or conditions in respect of the Shares
of the Company:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NAME OF SHAREHOLDER (S) (PLEASE PRINT)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SIGNATURE OF SHAREHOLDER(S)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DATE
NOTES ON PROXY:
This form must be executed by the shareholder or by his/her attorney duly authorized in writing. If the shareholder is a body corporate, an estate,
or trust, the form must be executed by the officers or attorney thereof or the person, duly authorized, in which case each signatory should state the
capacity in which he/she signs.
If this form is not dated in the space provided, it will be deemed to bear the date on which it was mailed to the shareholder.
This proxy authorization form confers discretionary authority upon the person whom it appoints in respect of any variation or amendments or additions
to the matters identified in the Notice of Meeting and any other matter that may properly come before the Meeting or any adjournment thereof.
THIS IS YOUR PROXY AUTHORIZATION FORM. PLEASE COMPLETE, SIGN AND RETURN THIS FORM BY 5.00 PM ON JUNE 26, 2006, OR AT
LEAST 48 HOURS BEFORE THE TIME APPOINTED FOR HOLDING THE MEETING OR ADJOURNED MEETING, TO THE CORPORATE SECRETARY,
SAGICOR FINANCIAL CORPORATION, SAGICOR CORPORATE CENTRE, WILDEY, ST MICHAEL, BARBADOS.
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