Sagicor Financial Company Ltd. Annual Report 2006

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FY2006 Annual Report · Sagicor Financial Company Ltd.

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Vision
To be a great Company
committed to improving the lives of the people
in the communities in which we operate.

Sagicor Financial Corporation

Contents

Financial Highlights

Directors’ Report

Board of Directors

Chairman’s Report

President & CEO’s Report

Auditors’ Report

Actuary’s 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

Executive Management

Advisors & Bankers

Ofﬁ ces

Notice of Annual Meeting

Management Proxy Circular

Shareholder Proxy

145

148

149

152

171

179

2006

2005

Bds 50.8 cents

Bds 46.0 cents

13.0 cents

12.0 cents

Bds$ 135.3m

Bds$ 121.5m

$ 827.7m

19.0%

$ 730.3m

18.8%

2006

2005

Bds$ 1,318.8m

Bds$ 1,158.0m

$ 201.1m

$ 173.2m

$ 6,726.6m

$ 1,084.6m

$ 194.4m

$ 170.4m

$ 6,396.8m

$ 952.7m

Sagicor Financial Corporation

Financial Highlights

SHAREHOLDER RETURNS

Earnings per common share

Dividends per common share

Net income attributable to shareholders

Total shareholders’ equity

Return on shareholders’ equity

GROUP PERFORMANCE

Total revenue

Income from ordinary operations

Net income after tax

Total assets

Total equity

Sagicor Financial Corporation

Directors’ Report
BOARD OF DIRECTORS

Mr Arthur Bethell is the non-executive Chairman of the Company. He retired
as President and Chief Executive Officer of the Group on June 30, 2002,
having been appointed to that office in 1995. Mr Bethell has extensive
knowledge of the insurance industry, having joined the Group in 1965. He has
held the positions of Superintendent of Agencies, Sales Manager and Vice
President, Marketing. He was also Chief Executive Officer of Sagicor Capital
Life Insurance Company Limited. He is a Director of a number of subsidiaries
within the Group.

Board/Board Committees

Position

Board of Directors
Board Investment Committee

Shares as at 31-Dec-06

Chairman
Member
Director’s Interest
Shares as at 10-May-07

J Arthur L Bethell
Age 66
Citizen of Barbados
Director since December 2002

Beneficial Non-beneficial Beneficial Non-beneficial

38,500

Nil

38,500

Nil

Attendance Record
10 of 10
N/A

100%
N/A

Grants/Options
As at
As at
10-May-07
31-Dec-06
Nil
Nil

Mr Terrence Martins is the non-executive Vice Chairman. He has brought a
wealth of knowledge to Sagicor, with over forty years of experience within the
financial services industry, both in the Caribbean and the United Kingdom.
His areas of expertise include banking, finance, administration, corporate
governance, and risk management. Mr Martins previously held the position
of Group Chief Executive Officer of RBTT Financial Holdings Limited. He is
currently the Chairman of Caribbean Information and Credit Rating Services Ltd
(CariCRIS), a Caribbean rating agency. He previously held several directorships
within the RBTT Financial Holdings Group in and outside of Trinidad and
Tobago, and is also a former member of the Integrity Commission of Trinidad
and Tobago.

Board/Board Committees

Board of Directors
Corporate Governance Committee
Human Resource Committee
Board Investment Committee

Position
Vice-Chairman
Chairman
Member
Chairman
Director’s Interest
Shares as at 10-May-07

Shares as at 31-Dec-06

Beneficial Non-beneficial Beneficial Non-beneficial

70,000

Nil

70,000

Nil

Attendance Record
10 of 10
6 of 6
3 of 3
N/A

100%
100%
100%
N/A

Grants/Options
As at
As at
10-May-07
31-Dec-06
Nil
Nil

Terrence A Martins
Age 65
Citizen of Trinidad and Tobago
Director since January 2004
Independent Director

Sagicor Financial Corporation

Mr Andrew Aleong holds an MBA from the Richard Ivey School of Business,
University of Western Ontario, Canada. He has spent his entire professional
career in various management positions within the Albrosco Group of Trinidad
and Tobago. He is currently the Director, Sales and Marketing, and a Director
of several companies within that Group. Mr Aleong is a past president of the
Trinidad and Tobago Manufacturers’ Association.

Board/Board Committees

Position

Board of Directors
Audit Committee

Attendance Record
10 of 10
2 of 2*

100%
100%

Director
Member
Director’s Interest
Shares as at 10-May-07

Shares as at 31-Dec-06

Beneficial Non-beneficial Beneficial Non-beneficial

Grants/Options
As at
As at
10-May-07
31-Dec-06
Nil
Nil
483,037
483,037
* Mr Aleong was appointed to the Audit Committee on June 28, 2006.

Nil

Andrew Aleong
Age 46
Citizen of Trinidad and Tobago
Director since June 2005
Independent Director

Mr David Allan is a former President and Chief Executive Officer 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. Mr Allan retired as President and Chief Executive Officer in 1995. He
also serves as a Director of Life of Jamaica Limited and Sagicor Life Inc and
is a Director of Barbados-registered exempt insurance companies. Mr Allan,
with more than 50 years experience in the life insurance industry, is a former
West Indies cricketer.

Board/Board Committees

Position

Attendance Record

Board of Directors
Audit Committee
Board Investment Committee

Shares as at 31-Dec-06

Director
Member
Member
Director’s Interest
Shares as at 10-May-07

David W Allan
Age 69
Citizen of Barbados
Director since December 2002
Independent Director

Beneficial Non-beneficial Beneficial Non-beneficial

1,705

Nil

1,705

Nil

8 of 10
1 of 4
N/A

80%
25%
N/A

Grants/Options
As at
As at
10-May-07
31-Dec-06
Nil
Nil

Sagicor Financial Corporation

Directors’ Report
BOARD OF DIRECTORS

Professor Hilary Beckles earned his PhD from Hull University, United
Kingdom, 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. He is a Director of
Sagicor Life Inc and Life of Jamaica Limited.

Board/Board Committees

Position

Attendance Record

Board of Directors
Human Resource Committee

Shares as at 31-Dec-06

Director
Member
Director’s Interest
Shares as at 10-May-07

Beneficial Non-beneficial Beneficial Non-beneficial

9,579

Nil

9,579

Nil

7 of 10
0 of 1*

70%
0%

Grants/Options
As at
As at
10-May-07
31-Dec-06
Nil
Nil

* Professor Beckles was appointed to the Human Resource Committee on June 28, 2006.

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 several entities such as hotels, attractions, a maintenance company,
a water supply company, a shopping centre, a conference centre and a golf
course. Prior to assuming this position she worked in other positions within
the UDC Group. She is a Director of Life of Jamaica Limited, and of several
other private and public sector companies within Jamaica.

Board/Board Committees

Position

Attendance Record

Board of Directors

Shares as at 31-Dec-06

Director
Director’s Interest
Shares as at 10-May-07

Beneficial Non-beneficial Beneficial Non-beneficial

1,087

Nil

1,087

Nil

8 of 10

80%

Grants/Options
As at
As at
10-May-07
31-Dec-06
Nil
Nil

Professor Hilary McD Beckles
Age 51
Citizen of Barbados
Director since June 2005
Independent Director

Marjorie M Chevannes-Campbell
Age 55
Citizen of Jamaica
Director since June 2005
Independent Director

Sagicor Financial Corporation

Mr Christopher deCaires is a Chartered Accountant and holds an MBA. He
has over 25 years’ professional and management consulting experience in
Barbados and the wider Caribbean, United Kingdom and Brazil. He is the
Managing Director of Fednav International Limited, and his areas of expertise
include corporate finance, international taxation, financial management,
mergers and acquisitions, information systems, organisational design and
business planning. He is Chairman of World Cup Barbados. Mr deCaires is a
former partner of Price Waterhouse, Barbados, where he was responsible for
corporate finance, business advisory, corporate secretarial and trust services.

Board/Board Committees

Position

Board of Directors
Human Resource Committee

Shares as at 31-Dec-06

Director
Chairman
Director’s Interest
Shares as at 10-May-07

Christopher D deCaires
Age 51
Citizen of Barbados
Director since June 2005
Independent Director

Beneficial Non-beneficial Beneficial Non-beneficial

2,378

Nil

2,378

Nil

Attendance Record
10 of 10
2 of 3

100%
66%

Grants/Options
As at
As at
10-May-07
31-Dec-06
Nil
Nil

Mrs Joyce Dear is a Fellow of the Association of Chartered Certified Accountants
of the United Kingdom and holds an MBA from the University of Warwick. She
is also a member of the Hospitality Financial and Technology Professionals.
She was, until 2004, a partner in the Assurance and Business Advisory Services
Division of PricewaterhouseCoopers (PwC) in Barbados. 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 and is a past President
of the Institute of Chartered Accountants of Barbados and a former Director of
a general insurance company in Barbados.

Board/Board Committees

Position

Attendance Record

Board of Directors
Audit Committee

Shares as at 31-Dec-06

Director
Member
Director’s Interest
Shares as at 10-May-07

Beneficial Non-beneficial Beneficial Non-beneficial

2,000

Nil

2,000

Nil

3 of 3*
0 of 2*

100%
0%

Grants/Options
As at
As at
10-May-07
31-Dec-06
Nil
Nil

* Mrs Dear was elected a Director on August 11, 2006 and appointed a Member
of the Audit Committee effective August 11, 2006.

Joyce E Dear
Age 63
Citizen of Barbados
Director since August 2006
Independent Director

Sagicor Financial Corporation

Directors’ Report
BOARD OF DIRECTORS

Dr Oscar Jordan, G.C.M., MB, ChB, FRCPE, DCH, Diabetologist, is an
honorary Consultant Physician, Department of Medicine of the Queen
Elizabeth Hospital, Barbados. He is a Fellow of Royal College of Physicians
of Edinburgh. He is Chairman of the Diabetes Foundation of Barbados and
Director of Clinical Medicine in Barbados for the University of St. George’s,
Grenada. A widely published and well respected physician, he is a past
President of the Caribbean Golf Association. He became a Director of Sagicor
Life Inc in 1990.

Board/Board Committees

Position

Attendance Record

Board of Directors
Director
Corporate Governance Committee Member
Director’s Interest
Shares as at 10-May-07

Shares as at 31-Dec-06

Beneficial Non-beneficial Beneficial Non-beneficial

18,381

Nil

18,381

Nil

9 of 10
6 of 6

90%
100%

Grants/Options
As at
As at
10-May-07
31-Dec-06
Nil
Nil

Mr William 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, specialising in all aspects of business valuations, privatisation,
mergers and acquisitions and corporate taxation. Mr Lucie-Smith has been
a special adviser to the Trinidad and Tobago Government and Central Bank
on divestment, and has served on several national committees, such as
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. He is a Director of a number of subsidiaries within the Group. Since his
retirement, Mr Lucie-Smith has been an independent Consultant.

Board/Board Committees

Position

Attendance Record

Board of Directors
Audit Committee
Board Investment Committee

Shares as at 31-Dec-06

Director
Chairman
Member
Director’s Interest
Shares as at 10-May-07

Beneficial Non-beneficial Beneficial Non-beneficial

14,000

Nil

14,000

Nil

9 of 10
4 of 4
N/A

90%
100%
N/A

Grants/Options
As at
As at
10-May-07
31-Dec-06
Nil
Nil

Dr Oscar W Jordan
Age 68
Citizen of Barbados
Director since December 2002
Independent Director

William P Lucie-Smith
Age 55
Citizen of Trinidad and Tobago
Director since June 2005
Independent Director

Sagicor Financial Corporation

Mr Stephen McNamara is Senior Partner of McNamara & Company, Attorneys-
at-Law of St. Lucia. He was elected to the Board of Sagicor Life Inc in 1997 and
is also a Director of the Group’s US subsidiaries, Sagicor USA Inc, Laurel Life
Insurance Company and Sagicor Life Insurance Company, and the St Lucian
subsidiary, The Mutual Finance Inc.

Board/Board Committees

Position

Board of Directors
Director
Corporate Governance Committee Member
Member
Board Investment Committee
Director’s Interest
Shares as at 10-May-07

Shares as at 31-Dec-06

Beneficial Non-beneficial Beneficial Non-beneficial

2,011

Nil

2,011

Nil

Attendance Record
10 of 10
6 of 6
N/A

100%
100%
N/A

Grants/Options
As at
As at
10-May-07
31-Dec-06
Nil
Nil

Mr Dodridge Miller is a Fellow of the Association of Chartered Certified
Accountants (United Kingdom), and obtained his MBA from the University of
Wales and Manchester Business School, United Kingdom. He holds an LLM
in Corporate and Commercial Law from the University of the West Indies. He
was appointed President and Chief Executive Officer of The Mutual Group of
Companies, now Sagicor, on July 1, 2002, having previously held the positions
of Treasurer and Vice President, Finance and Investments, Deputy Chief
Executive Officer and Chief Operating Officer. Mr Miller joined the Group
in 1989. He was elected a Director of The Mutual Group in 2001. He is the
Chairman of the Group’s main operating subsidiaries, Sagicor Life Inc, Life
of Jamaica Limited and Sagicor Life Insurance Company. Mr Miller has more
than 20 years’ experience in the insurance and financial services industries.

Board/Board Committees

Position

Board of Directors
Board Investment Committee

Shares as at 31-Dec-06

Director
Member
Director’s Interest
Shares as at 10-May-07

Beneficial Non-beneficial Beneficial Non-beneficial

Attendance Record
10 of 10
N/A

100%
N/A

Grants

As at
31-Dec-06
507,719

As at
10-May-07
507,719

521,109*

Nil
Options as at 31-Dec-06
Vested
Nil

Not vested
159,817

Nil
Options as at 10-May-07
Vested
39,954

Not vested
119,863

* Includes 507,791 Grants made in 2006

Stephen D R McNamara
Age 56
Citizen of St Lucia
Director since December 2002
Independent Director

Dodridge D Miller
Age 49
Citizen of Barbados
Director since December 2002
President and Chief Executive Officer

Sagicor Financial Corporation

Directors’ Report

SHAREHOLDERS’ REPORTS

No Shareholder owns more than 5% of the capital of the Company.

During 2006, 1,432,588 shares were issued under the Long-Term Incentive Plan (“LTI”) for Executives. On April 13, 2006,
1,342,027 fully vested Restricted Stock were issued under the LTI and on May 1, 2006, 304,915 Restricted Stock were granted
over the four-year period commencing May 1, 2006, of which 91,474 became fully vested on May 1, 2006, with 90,561 being
issued on August 31, 2006. 932,387 Stock Options at an exercise price of Bds $3.95 were also granted on May 1, 2006,
vesting evenly over the four-year period commencing May 1, 2007. These options expire on May 1, 2016. The total shares in
issue as at December 31, 2006 and at May 10, 2007 were 266,985,336.

ANALYSIS OF SHAREHOLDING

Size of Holding

1 - 1,000
1,001 - 2,500
2,501 - 5,000
5,001 - 10,000
10,001 - 25,000
25,001 - 100,000
100,001 - 1,000,000
1,000,001 - & above
Total

Total Shares Held

Number of Shareholders by Size of Holding as at December 31
Number of
Shareholders
2006
6,015
16,618
7,817
4,460
3,212
651
189
17
38,979

Percentage of
Shareholders
2006
15.43
42.64
20.06
11.44
8.24
1.67
0.48
.04
100.00

2006
3,917,331
27,634,402
27,081,522
31,920,923
45,979,406
30,457,612
50,692,562
49,301,578
266,985,336

2005
14.52
42.98
20.54
11.48
8.31
1.68
0.45
0.04
100.00

2005
5,781
17,107
8,177
4,570
3,302
670
180
15
39,802

2005
3,888,250
28,439,332
27,872,247
32,747,364
47,433,618
31,913,138
46,507,000
46,751,799
265,552,748

Percentage Shares
Held

2006
1.47
10.35
10.14
11.96
17.22
11.41
18.99
18.46
100.00

2005
1.46
10.71
10.50
12.33
17.86
12.02
17.51
17.61
100.00

Number of Shareholders by Country of Residence and by Type as at December 31, 2006

Country

Directors,
Management, Staff,
Agents

Companies

Individuals

Total

Trinidad and Tobago
Barbados
Eastern Caribbean
Other Caribbean
Other
Total

Shareholders % Shareholders % Shareholders % Shareholders %

68
129
3
1
1
202

33.66
63.86
1.48
0.50
0.50
100.00

536
190
34
50
3
813

65.93
23.37
4.18
6.15
0.37
100.00

16,593
12,464
7,558
366
983
37,964

43.71
32.83
19.91
0.96
2.59
100.00

17,197
12,783
7,595
417
987
38,979

44.12
32.80
19.48
1.07
2.53
100.00

Sagicor Financial Corporation

Number of Shareholders by Country of Residence and by Type - December 31, 2005 Comparative

Country

Directors,
Management, Staff,
Agents

Companies

Individuals

Total

Trinidad and Tobago
Barbados
Eastern Caribbean
Other Caribbean
Other
Total

Shareholders % Shareholders % Shareholders % Shareholders %

44
120
5
3
1
173

25.44
69.36
2.89
1.73
0.58
100.00

623
172
35
38
2
870

71.61
19.77
4.02
4.37
0.23
100.00

16,856
12,903
7,926
230
844
38,759

43.49
33.29
20.45
0.59
2.18
100.00

17,523
13,195
7,966
271
847
39,802

44.03
33.15
20.01
0.68
2.13
100.00

Number of Shares Held by Country of Residence and by Type as at December 31, 2006

Country

Directors,
Management, Staff,
Agents

Companies

Individuals

Total

Trinidad and Tobago

1,057,154

32.08

49,565,480

71.30

103,166,144

53.13 153,788,778

Barbados

Eastern Caribbean

Other Caribbean

Other

Total

2,224,473

67.51

15,686,559

22.56

62,509,406

3,956

1,000

8,540

0.12

0.03

0.26

459,252

3,802,979

3,786

0.66

5.47

0.01

21,759,381

2,519,460

4,217,766

32.19

11.21

1.30

2.17

80,420,438

22,222,589

6,323,439

4,230,092

3,295,123

100.00

69,518,056

100.00

194,172,157

100.00 266,985,336 100.00

57.60

30.12

8.32

2.37

1.59

Number of Shares Held by Country of Residence and by Type - December 31, 2005 Comparative

Country

Directors,
Management, Staff,
Agents

Companies

Individuals

Total

Trinidad and Tobago

Barbados

Eastern Caribbean

Other Caribbean

Other

Total

733,507

677,608

7,173

160,187

1,000

46.44

53,457,787

75.63 100,936,494

52.22

155,127,788

42.90

13,528,254

19.14

64,657,075

0.45

10.14

0.07

462,374

3,230,899

2,107

0.65

4.57

0.01

22,617,225

1,499,388

3,581,670

33.45

11.70

0.78

1.85

78,862,937

23,086,772

4,890,474

3,584,777

58.42

29.70

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

Sagicor Financial Corporation

Directors’ Report

DIVIDENDS

A ﬁ nal dividend of Bds 7 cents per Share, payable on May 11, 2007, was approved for the year ended December 31, 2006
to the holders of Common Shares whose names were registered on the books of the Company at the close of business
on April 19, 2007. An interim dividend of Bds 6 cents per Share approved for the half year ended June 30, 2006 was paid
on September 29, 2006 to the holders of Common Shares whose names were registered on the books of the Company at
the close of business on September 11, 2006. The total dividend for the 2006 ﬁ nancial year amounted to Bds 13 cents per
Common Share.

CORPORATE GOVERNANCE

BOARD OF DIRECTORS

As at December 31, 2006, the Board comprised twelve Directors – the Chairman, ten independent Non-Executive Directors
and the President and Chief Executive Ofﬁ cer. On August 11, 2006, Mrs Joyce Dear was elected to replace Mrs Vivian-Anne
Gittens as a Director. Messrs David Allan, Terrence Martins and Dodridge Miller will retire at the fourth annual meeting and
have offered themselves for re-election. The Directors bring a wide range of business and ﬁ nancial expertise to the Board.
Biographical details of the current Directors are set out earlier in this Report together with details of their current interests
in the Company.

The Sagicor Group has been successfully executing a business strategy to be the leading insurance company within the
Caribbean and to use this strong market position to expand internationally. During the past 15 years, the Sagicor Group has
doubled its size approximately every 5 years, when measured in terms of total assets. We intend to continue our growth
and expansion in order to maintain our position in the top tier of major regional ﬁ nancial institutions, a position we believe
is critical to Sagicor’s long-term viability.

Our business strategy comprises four key components:

1. Further expanding the scale of our operations by participating in the consolidation of the ﬁ nancial services industry
in the Caribbean, while continuing to streamline existing and acquired operations to extract synergies, and deliver
a high quality of service to our customers.

2. Expanding into new product markets to offer a wider range of ﬁ nancial products and services.
3. Expanding into new geographic markets which offer the Sagicor Group attractive opportunities to proﬁ tably grow

and expand its business operations.

4. Rigorous ﬁ nancial management to ensure optimization of the use of capital and the delivery of competitive returns

to Shareholders.

During 2006 the Board met 10 times. The principal business was to:

Receive and consider various reports and presentations from management on the performance of the Group

(cid:129)
(cid:129) Consider and approve the Strategic Plan and Projections of the Group for the period 2006 to 2009
Review the strategic and business development initiatives forming part of the Strategic Plan
(cid:129)
Review and approve unaudited interim and audited annual consolidated ﬁ nancial statements
(cid:129)
Approve interim and ﬁ nal dividends
(cid:129)
Receive reports on work being carried out by Board Committees and consider and approve their recommendations
(cid:129)
as required.

Sagicor Financial Corporation

COMMITTEE REPORTS

Corporate Governance Committee Report for the Year ended December 31, 2006

Role of Committee
The Corporate Governance Committee is a compulsory committee of the Board, and has powers delegated to it. The
Committee has Terms of Reference which were approved by the Board on March 9, 2004. Its primary purpose is to:

(i) monitor best practices for governance worldwide and review the Group’s governance practices to ensure they

(ii)

the frequency and content of Board meetings
the size and composition of the Board
suitable candidates for nomination as Non-Executive Directors
appointments to the Boards of Subsidiary and Associate Companies

comply with the highest standards of corporate governance;
recommend to the Board, inter alia:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129) membership and mandates of Board Committees
(cid:129)
(cid:129)

the communication process between the Board and Management
appointments of Executives to the Boards of companies outside the Sagicor Group;

(iii) establish/monitor an appropriate Code of Conduct for the Company and to consider and deal with all matters of an

(iv)
(v)
(vi)

ethical nature, including transactions between the Company, its subsidiaries and afﬁ liates involving Directors;
review annually the mandates and composition of Board Committees;
review the performance of Directors as a prelude to re-election;
review the compensation of Directors based on comparative industry practices, if necessary, in consultation with
independent advisors, and recommend appropriate adjustments.

Composition
The Board appoints and removes the Chairman and Members of the Committee which comprises independent Non-
Executive Directors. The Chairman and Chief Executive Ofﬁ cer (CEO) may be invited to attend meetings but have no vote.
The current members are:

(cid:129) Mr Terrence Martins who was appointed Chairman on August 24, 2005
(cid:129) Dr Oscar Jordan who was appointed a Member on March 9, 2004, and
(cid:129) Mr Stephen McNamara who was appointed a Member on March 9, 2004.

2006 Activities
The Committee met six times in 2006. The Corporate Secretary acts as secretary to the Committee and minutes of all
meetings are recorded. Mr Martins, Dr Jordan and Mr McNamara attended six of the six meetings held. Committee
Members earn no fees for serving as members other than their Directors’ fees.

An important aspect of the strategy outlined above is the strengthening of our Corporate Governance framework. In 2006
the Corporate Governance Committee embarked on a project to build a robust Corporate Governance architecture for
the Group which meets international best practice and regulatory standards. The project is ongoing. In this connection, a
number of initiatives were undertaken, including a review of the Bylaws.

During the year, the Committee was assisted in its work by two independent professional consultants offering Director
Compensation and Corporate Governance consultancy services. The principal business of meetings was to deal with:

A Corporate Governance architecture project

(cid:129)
(cid:129) Director compensation
Review of Bylaws
(cid:129)
(cid:129)
The chairmanship of subsidiary boards
(cid:129) Director nomination for the parent and subsidiary boards
(cid:129) Committee appointments
(cid:129) Director and Ofﬁ cer liability cover
(cid:129) Managing conﬂ icts of interest

Sagicor Financial Corporation

Directors’ Report

The main area to which much of the Committee’s time was devoted during the year related to the initiative to enhance the
Corporate Governance architecture including Director Compensation.

Corporate Governance Architecture Project
The subject which engaged much of the Committee’s attention relates to the Corporate Governance Architecture Project
which started in the last quarter of 2006 and continues into 2007.

The objective of the project is to build a Corporate Governance framework which provides entrepreneurial leadership,
guidance and oversight to the Company within the bounds of law, community standards and ethical behaviour. The
governance model therefore embraces international best practice, industry standards, statutory and regulatory requirements
and provides a guide to governing the Group, the relationship between the Board and Management as well as subsidiary
governance. The framework is structured on four main pillars:

(cid:129)
(cid:129)

(cid:129)

Values and Behaviours - corporate and business management values;
Policies and Procedures - a corporate governance policy, a code of business conduct and ethics, an enterprise
risk management policy, an internal control policy, investor relations and communications policy and other key
policies;
Roles and Responsibilities - size and composition of the Board, Director independence, subsidiary governance,
Board charter, roles of the Board, Chairman, Directors, Board Committees, Chief Executive Ofﬁ cer and certain key
Senior Management corporate positions, the relationship between the Board and Management, Board operations
including boardroom dynamics and Director education;
Performance and Accountability - performance evaluation of the Board, Committees and Directors, eligibility of
Directors for re-nomination, CEO and Senior Management performance evaluation, strategic plan implementation,
ﬁ nancial performance, enterprise risk management, internal control assessment, regulatory compliance,
Shareholder/Investor relations and communication.

The project will, on completion, provide the Group with a comprehensive governance model, implementation of which will
commence across the Group in 2007.

Review of Bylaws
Another important aspect of the overall strengthening of our Corporate Governance framework was to review the Bylaws
which relate generally to the conduct of the affairs of the Company. The following amendments were made to the Bylaws:

(cid:129)

By-law 3.6 provided for certain nationality qualiﬁ cations for Directors. A majority of the Board had to be citizens
or permanent residents of and ordinarily resident in Barbados and at least one director had to be a citizen of and
ordinarily resident in Jamaica, Trinidad and Tobago and any country in the Eastern Caribbean respectively. As the
Company pursues the strategy outlined above it is necessary to select Directors from a suitable pool of regional
and international candidates with the requisite knowledge and experience, and to include on the Board persons
who reﬂ ect the geographic and business diversity of the Group and who can make meaningful contributions to our
growth and development into a global ﬁ nancial services Group. This Bylaw was repealed by the Board.

(cid:129) Changes were made to Bylaws 9 and 12.3 to facilitate the listing of the Company’s shares on the London Stock
Exchange. Listing on an international stock exchange is also an integral part of the expansion strategy as it affords
the Company access to capital in more established markets, creates a footprint in an international capital market
and enhances our ability to compete in a global environment. The amendments to Bylaw 9 and the repeal of Bylaw
12.3 are intended principally to:
o permit the setting up of a branch register outside Barbados
o permit the deposit of Sagicor shares in depositaries other than the Barbados Central Securities Depositary
o
o permit Directors to prescribe the form of share transfer constituting a valid transfer (which may vary from
jurisdiction to jurisdiction), and recognize both the regional and international origin of our Shareholders.

remove any references applicable to share restrictions

The existing Bylaw 3.6 did not ﬁ t with the new operating realities of the Group and accordingly was repealed by the Board.

Sagicor Financial Corporation

Directors’ Compensation Project
The Board reviewed Directors’ remuneration as part of the strengthening of the Corporate Governance framework.
International best practice suggests that in order to attract Directors with the requisite knowledge and experience who
can make meaningful contributions to the growth and development of a global ﬁ nancial services organization, Directors’
remuneration should be sufﬁ cient to attract, retain and motivate Directors of the quality required to ensure the Company is
managed successfully, and should reﬂ ect the time, commitment, accountability, risk, impact of decisions and responsibilities
of the role, having regard to relevant market comparability.

Directors’ fees were ﬁ rst ﬁ xed in 2004 at US $20,000 per annum for the Chairman and US $12,500 per annum for Directors.
Over the last three years, the time, commitment and responsibilities required of their role as Directors have increased.
Accordingly in 2006, the Corporate Governance Committee commissioned the independent ﬁ rm of Ernst and Young of
Atlanta (“the Consultants”) to review director compensation. The objectives of the exercise were to:

(i)

Review competitive market practices for director total compensation, including best global practices and
trends.

(ii) Review all components of total compensation for the Non-Executive Chairman and Non-Executive Directors in
terms of annual retainer, Board meeting fees, committee meeting fees, Board chair and committee chair fees,
equity compensation, and other relevant items.

(iii) Recommend a competitive level and structure of Board compensation for the Company and its main operating

subsidiaries.

The project methodology involved gathering Board compensation data from comparable organizations in the Caribbean
region and the United States and data comparability was matched along the size of the Sagicor Financial Group in terms of
revenue, premium income and type of organization (ﬁ nancial services).

Best practices and trends in the United Kingdom, Europe and the United States were also reviewed in areas such as Board,
Director and Chief Executive Ofﬁ cer performance evaluations, succession planning, time spent by Directors on company
business, frequency of Board meetings, terms of ofﬁ ce of Non-Executive Directors, the number of Executives serving on
Boards, and the growing importance of Governance Committees as the third most prevalent Committee behind Audit and
Human Resource Committees, the structure of Boards and the structure of director compensation combination (cash and
equity).

Total cash compensation currently paid to the Chairman and Directors of the Company was then compared to US market
data using the 50th percentile and Caribbean market data using the 90th percentile. On the basis of the above ﬁ ndings,
the Consultants made the following recommendations which were accepted by the Board on the recommendation of the
Committee:

(i) Cash compensation should reﬂ ect accountability, risk, impact of decisions and market comparability.
(ii) Annual retainers for Board and Committee service should be paid with no separate meeting fees.
(iii)
(iv) No director compensation should be paid to Executives serving on subsidiary Boards.
(v) No equity compensation should be paid at this time and transition to equity compensation should be considered

Increased retainers should be paid for Board and Committee Chairs.

as the organization evolved and would include target ownership and pay-for-performance.

(vi) No other beneﬁ t or perquisite programs should be paid at this time.
(vii) Board and individual Director performance evaluations should be implemented and a tool and process should be

developed to evaluate effectively overall Board performance and individual contribution.

(viii) Cash retainers to compensate Non-Executive Board and Committee Chairs and Members should be recommended

for approval by Shareholders as follows:

Board/Committee

Board
Board Committees

Non-Executive Chair
US $45,000 per annum
US $7,000 per annum

Non-Executive Member
US $40,000 per annum
US $5,000 per annum

The Board recommends the above fees to shareholders for approval.

Sagicor Financial Corporation

Directors’ Report

Audit Committee Report for the Year ended December 31, 2006

Role of Committee
The Audit Committee is a compulsory committee of the Board, and has powers delegated to it. The Committee has a
Charter which was approved by the Board on August 25, 2004. Its mandate is to:

(a) Assist the Board with oversight of:

(i)
(ii)
(iii)
(iv)

the integrity of the Group’s ﬁ nancial statements,
the Group’s compliance with legal and regulatory requirements,
the Independent Auditor’s qualiﬁ cations and independence, and
the performance of the Group’s internal audit function and Independent Auditors.

(b) Keep under review:

(i)

(ii)
(iii)

the ﬁ nancial and compliance information required to be provided by the Group to shareholders, governmental
agencies, regulators and others,
the systems of internal controls, including the internal audit functions, and
the audit process.

(c) Review the results of the annual audit of the consolidated ﬁ nancial statements conducted by the Independent
Auditors, including the nature and disposition of comments appearing in the Independent Auditors’ management
letter.

(d) Exercise oversight responsibility of the major activities of subsidiaries and associates and ensure where necessary

that subsidiary Boards and Audit Committees are functioning and exercising requisite oversight.

(e) Review the actuarial reports and recommendations of the Actuaries.
(f) Review and discuss the annual audited ﬁ nancial statements with management and the Independent Auditors and

the quarterly ﬁ nancial statements with management.

(g) Review with the Independent Auditors any audit problems or difﬁ culties and management response.
(h) Regularly review with the Independent Auditor any difﬁ culties encountered in the course of the audit work,
including any restrictions on the scope of the Independent Auditor’s activities or access to requested information,
and any signiﬁ cant disagreements with management.
Exercise oversight of the Company’s annual and quarterly ﬁ nancial reporting process, including the related
internal accounting controls and to review, prior to publication, the Company’s annual consolidated ﬁ nancial
statements and related signiﬁ cant accounting policies and changes.

(i)

(j) Review investments, loans and transactions that have a material impact on the Group’s earnings.
(k) Discuss earnings releases as well as ﬁ nancial information and earnings guidance generally (i.e. discussion of the

types of information to be disclosed and the type of presentation to be made).

(l) Where necessary, ensure the review by the Independent Auditors of ﬁ lings with the regulators and other published

documents containing the Company’s ﬁ nancial statements.
(m)
Inquire as to the accounting for new business transactions, products and changes to accounting policies.
(n) Discuss with the Independent Auditors and management pending accounting policy changes and their impact

on the Group, including implementation impacts on the ﬁ nancial statements.

(o) Review the work of other audit ﬁ rms.
(p) Review the ﬁ nancial management and controls on a regular basis with the Internal Auditor on a private basis.

Composition
The Board appoints and removes the Chairman and Members of the Committee who are all independent Directors. There
are clearly deﬁ ned rules for determining independence for the purpose of the Committee. The current members are:

(cid:129) Mr William Lucie-Smith, who was appointed Chairman on June 28, 2006 (and a Member on August 24, 2005)
(cid:129) Mr Andrew Aleong who was appointed a Member on June 28, 2006
(cid:129) Mr David Allan who was appointed a Member on November 23, 2005 and
(cid:129) Mrs Joyce Dear who was appointed a Member effective August 11, 2006.

All members of the Committee must be ﬁ nancially literate or must become ﬁ nancially literate within a reasonable period
of time after his or her appointment to the Committee. At least one member of the Committee must have accounting or
related ﬁ nancial management expertise. There are two experienced qualiﬁ ed Chartered Accountants on the Committee.

Sagicor Financial Corporation

2006 Activities
The Committee is required to meet at least quarterly and met four times in 2006 with the external Auditors being present
on one of these occasions. The Corporate Secretary acts as secretary to the Committee and minutes of all meetings are
recorded. Mr Lucie-Smith attended four of the four meetings held, Mr Aleong attended two of the two meetings held while
he was a Member, Mr Allan was present for one of four meetings and Mrs Dear was overseas for the two meetings held
after her appointment.

The Committee has power to require and oversee any investigations deemed necessary and to employ auditors, advisors,
or consultants as are needed to conduct such investigations. Committee Members earn no fees for serving as members
other than their Directors’ fees.

The principal business of the meetings was to:

(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)

(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)

Review actuarial reports
Review unaudited interim and audited annual consolidated ﬁ nancial statements
Recommend interim and ﬁ nal dividends to the Board
Receive a report from the external Auditors on the annual audit
Review the minutes of the audit committees of the main operating subsidiaries
Review the accounting treatment of important items such as intangible assets, the Long Term Incentive Plan and
the Employee Share Ownership Plan
Review the Auditors Management Letter on the annual audit and Management’s responses
Review Management’s audit plan and the Auditors approach to the audit for the current year
Approve non-audit services to be performed by the external Auditors
Approve the job description and advertisement for the recruitment of a Group Internal Auditor
Receive reports on the progress of the Enterprise Risk Management Project started during 2006.

Enterprise Risk Management
Enterprise Risk Management (“ERM”) plays a critical role in good Corporate Governance and in 2006 the Group commenced
an ERM Project, the primary objective of which is to ensure that all risk exposures are identiﬁ ed and managed effectively,
and more particularly to:

(cid:129)
(cid:129)
(cid:129)

coordinate the risk-taking activities of various business units and subsidiaries
ensure appropriate management of risk and create a risk management culture throughout the organization
broaden conﬁ dence of shareholders, policyholders, regulators and rating agencies that the risks are well
managed

(cid:129) maximize return on a risk adjusted basis
(cid:129)

gain competitive advantage by 1) leveraging existing exposure to design innovative products that have offsetting
exposures and 2) executing effective Asset Liability Management strategies that increase competitiveness of
products through yield enhancement, risk reduction and/or lower capital costs
promote effective allocation of capital and ensure that the organization is adequately compensated for the risks
underwritten
lower reserve and capital requirements
reduce the ﬁ nancial risk exposure and earnings volatility to within an acceptable level
increase proﬁ tability by improving the risk/reward proﬁ le of the business
establish risk limits that accurately reﬂ ect the organization’s willingness and ability to take on risk
understand the risk proﬁ le of all product lines and make any bets explicit
provide a strategic decision making framework for management
increase the economic value of the company, thereby increasing future earnings.

(cid:129)

(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)

Sagicor Financial Corporation

Directors’ Report

The methodology involves a review of current risk management practices and the benchmarking of those risk practices
with a view to:

(cid:129) making recommendations for improvements in the context of the implementation of ERM
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)

identiﬁ cation of signiﬁ cant sources of risk exposure
summary of the goals and objectives for the ERM initiative
determination of the priorities and scope for ERM
identiﬁ cation of implementation challenges and key success factors
an implementation plan for ERM
the development of an ERM Policy Statement and Procedure Manual.

Human Resource Committee Report for the Year ended December 31, 2006

Role of Committee
The Human Resource Committee is a committee of the Board, and has powers delegated to it. The Committee has a
Charter which was approved by the Board on May 1, 2006. Its primary purpose is to:

Exercise oversight responsibility over the development and effective utilization of Sagicor’s human resources.

(i)
(ii) Approve Sagicor’s human resources principles, policies and practices, including but not limited to recruitment,

compensation, beneﬁ ts, incentive and share plans.

(iii) Exercise oversight responsibility over the administration of Sagicor’s human resources policies and practices.
(iv) Review and recommend to the Board any material changes to Sagicor’s pension plans which require the approval

of the Board.

(v) Receive annual reports from Management on compliance with applicable legislation relating to Sagicor’s pension
plans, including conﬁ rmation that actuarial valuations are completed no less frequently than as required by law.

(vi) Report on executive compensation as required in public disclosure documents.
(vii) In relation to Senior Managers (excluding the Chief Executive Ofﬁ cer (CEO)):

a. Review and recommend to the Board for approval the general compensation philosophy and guidelines for

Senior Managers.

b. Approve the recruitment of Senior Managers and report to the Board on such appointments.
c. Agree on the compensation, including salary, incentives, beneﬁ ts and other perquisites, of Senior Managers

and approve adjustments to such compensation from time to time.

d. Review, approve and report to the Board on succession plans for all Senior Managers, including speciﬁ c

development plans and career planning for potential successors.

(viii) In relation to the CEO:

a. Review and recommend to the Board for approval the general compensation philosophy and guidelines for

the CEO.

b. Consider annually the Governance Committee’s report on the CEO’s performance and agree on the
compensation, including salary, incentives, beneﬁ ts and other perquisites of the CEO and approve adjustments
to such compensation from time to time.

(ix) With regard to incentive plans:

a. Review and recommend to the Board for approval the establishment and amendment of incentive plans for

Executives, Employees and Sales Agents.
Interpret and make determinations deemed necessary or desirable by the Committee for the administration
of incentive plans.

c. Make grants under incentive plans and report to the Board on any such grants.
d. Correct any deﬁ ciency, inconsistency or omission in incentive plans.

(x) With regard to equity based plans:

a. Review and recommend to the Board for approval the establishment and amendment of equity-based
plans for Employees and Executives, having regard at all times to the dilutive impact of such plans on the
shareholders of any public company within the Sagicor Group.
Interpret and make determinations deemed necessary or desirable by the Committee for the administration
of equity-based plans.

c. Recommend to the Board for its approval any proposed amendment to equity-based plans, including any

amendment requiring regulatory or shareholders’ approval.

d. Make grants under equity-based plans to eligible persons according to the rules of the plans and report to the

Board on such grants.

Sagicor Financial Corporation

Composition
The Board appoints and removes the Chairman and Members of the Committee who are all independent Directors. The
current members are:
(cid:129) Mr Christopher deCaires, who was appointed Chairman on June 28, 2006 (and a Member on October 26, 2005)
(cid:129) Professor Hilary Beckles who was appointed a Member on June 28, 2006 and
(cid:129) Mr Terrence Martins who was appointed a Member on October 26, 2005.

2006 Activities
The Committee is required to meet at least quarterly and in 2006 met three times. From 2007, the Committee will meet
six times per year The Corporate Secretary acts as secretary to the Committee and minutes of all meetings are recorded.
Mr deCaires and Mr Martins attended two and three of the three meetings held respectively, while Professor Beckles was
overseas for the one meeting held after his appointment. Any member of the Committee may, with Board approval, engage
outside advisors and consultants. Committee Members earn no fees for serving as members other than their Directors’
fees.

Throughout the year, the Committee was assisted in its work by an independent professional ﬁ rm offering human resource
consultancy services. The principal business of the meetings was to:

(cid:129)
(cid:129)

(cid:129)

Approve the Committee’s Charter
Approve a comprehensive Human Resource Development plan for the Sagicor Group, including the structure and
composition of management, succession planning and compensation
Review Human Resource strategic initiatives and their implications, including a review of the market competitiveness
of total executive compensation and developing a total compensation strategy which aligns pay with key business
strategies and succession planning
Approve the rules of the Long-term Incentive Plan (LTI) and the Employee Share Ownership Plan (ESOP)

(cid:129)
(cid:129) Designate LTI plan participants and award restricted stock and stock option awards to plan participants under the

LTI

(cid:129) Make awards to ESOP participants
(cid:129) Grant cash incentive awards to management and staff
(cid:129)
(cid:129)
(cid:129)
(cid:129) Commission a review of the Committee’s structure and operations.

Approve executive appointments
Review the accounting treatment for the LTI and ESOP
Authorize the audit of the LTI and ESOP

Board Investment Committee Report for the Year ended December 31, 2006

Matters pertaining to the group investment portfolio were handled directly by the full parent board during the period under
review. Individual ﬁ nancial investment decisions at subsidiary level were dealt with by the respective Board Investment
Committee of the speciﬁ c subsidiary. As an important component of the Corporate Governance Architecture Project, a
parent board Risk Policy Committee is being created with a mandate which will address the wider issue of group-wide
portfolio risk management under an enterprise risk management model.

AUDITORS

The incumbent Auditors, PricewaterhouseCoopers, offer themselves for re-appointment for the ensuing year.

By Order of the Board of Directors.

Sandra Osborne
Corporate Secretar

June 1, 2007

Sagicor Financial Corporation

Chairman’s Report

Dear Shareholders,

After a record year of acquisitions in 2005, during which the Sagicor
Group acquired ﬁ ve companies, 2006 has been a year of consolidation.
The year was used to bring these new acquisitions fully on-stream
and to integrate them within the Sagicor Group. This integration
process has gone very well and the newly acquired companies are
now contributing to our overall Group performance. However, 2006
was not just a year of consolidation, it was a year in which Sagicor
made two further but signiﬁ cant strides in our thrust to become a
global ﬁ nancial institution. The ﬁ rst of these occurred in May 2006,
when Sagicor raised US $150 million on the United States Bond
Market. This event was signiﬁ cant not only because our bond issue
was successful, but because Sagicor was the ﬁ rst non-governmental
Caribbean Company to receive a ﬁ nancial strength rating from
Standard & Poor’s, Sagicor Life Inc. our principal operating subsidiary
received a ﬁ nancial strength rating of BBB+ and an issuer credit rating
of BBB. This was indeed a proud and signiﬁ cant moment for us as it gave testimony to our ﬁ nancial strength
and strong and consistent operating performance. Through this strategic initiative, Sagicor established an
initial foot print in the international capital market. The second initiative was a successful application to list on
the main market of the London Stock Exchange, a process which was completed with the ofﬁ cial listing of all of
the common shares of Sagicor on the London Stock Exchange.

J Arthur L Bethell
Chairman

When we speak of becoming a global ﬁ nancial institution, it is not intended to suggest that Sagicor is or will
be operating all over the world. “Global” in this sense speaks to the path we intend to follow, a journey which
was started in 2000 when we began the process of demutualization. Indeed, the theme of this annual report
“From Mutual to Global” best describes Sagicor’s ongoing journey to become a globally integrated ﬁ nancial
institution.

Sagicor Milestones

1840 – 1858

Establishment of the
Barbados Mutual Life
Assurance Society

St Vincent branch
opened

Branches in Trinidad
and Tobago & Grenada
branches opened

1861 – 1896

St Kitts branch opened

Antigua & Montserrat
branches opened

Demerara (Guyana)
branch opened

Dominica branch
opened

Jamaica branch opened

1987

Mutual Finance
Company Ltd
established

Acquisition of Travelers
Portfolio and the
rebranding of Aruba,
Bahamas, Belize,
Cayman Islands,
Curacao, St Maarten
and Haiti to Capital
Life

1993 – 1994

Establishment of the
Mutual Bank of the
Caribbean, the first
indigenous bank to
Barbados

Mutual Financial
Services and Caribbean
Caricard Services
established

1996 – 1998

Capital International
Management Services
established

Establishment
of Mutual Asset
Management Inc and
Mutual Funds Inc

Acquisition of the
Panama branch of
Atlantic Southern
Insurance Company
and rebranding to
Capital de Seguros

Sagicor Financial Corporation

February 14, 2007, the day of our ofﬁ cial listing on the London Stock Exchange was therefore a proud and
important moment in the history of the Sagicor Group especially since such a listing is an important part of
our international business strategy.

Sagicor is the second oldest insurance company in the Americas, established in 1840 in Barbados, the company
operated for most of its history as a Mutual Life Assurance Society. However, we exist in an ever changing
world, and recognized that the mutual business model may not be appropriate for the future. And so it was
decided that we would reinvent our company and create a Caribbean based ﬁ nancial institution with the ﬁ nancial
strength and operating capability to compete in the international ﬁ nancial services arena.

From the beginning of the 1990s, we at Sagicor, have been following a carefully crafted business strategy
to transform our company from a local single line life insurance company into a regional and then into an
international ﬁ nancial services Group. Some of the key transformational points in this journey were:

1. The consolidation of the Caribbean life insurance industry between the late 1990s and early 2000s.

Sagicor led this consolidation emerging as the Region’s leading insurance company.

2. The demutualization of the Company at the end of 2002 and its conversion into a shareholder owned

company to create a ﬂ exible capital structure and to facilitate access to capital.

3. The re-branding of the company from “The Barbados Mutual Life Assurance Society”, a name it
carried for more than 160 years, to Sagicor, a name which reﬂ ects our heritage, but also reﬂ ects our
borderless, timeless journey into the future.

Today, Sagicor is the leading life insurance company in the Caribbean. Our assets have moved from US $150
million at the beginning of the 1990s to US $3.3 billion by end of Year 2006. Our Revenue has moved from
US $40 million to US $660 million and our proﬁ ts from US $2 million to US $87 million. Our policies inforce
have also grown substantially, moving from 60,000 to 600,000. All of this while maintaining very strong Risk
Base Capital ratios, low debt to equity ratios and adhering to the most stringent international regulatory
requirements.

We are rated “A” Excellent by A.M. Best, the international insurance rating agency, and have maintain this
rating since 1999. Our principle operating subsidiary Sagicor Life, is rated BBB+ by S&P, a rating that is only
constrained by our country rating.

1999 – 2000

Acquisition of Island
Life in Jamaica and
Nationwide Insurance
Company in Trinidad
and Tobago.

The acquisition of
shares in Life of
Jamaica

First AM Best Rating
‘A’ (Excellent)

The acquisition of
23% interest in Life of
Barbados

2002

Acquisition of
Life of Barbados

Resolution for the demutualisation of Barbados
Mutual Life Assurance Society was passed

Conversion from Barbados Mutual Life
Assurance Society to Sagicor Life Inc

The establishment of the holding Company,
Sagicor Financial Corporation, with 45,000
shareholders

The Initial Public Offering of Sagicor Shares,
increasing shareholders to 49,000

2003 – 2004

First Sagicor Listing
on the Barbados Stock
Exchange

Sale of the Mutual
Bank

Sagicor Listing on the
Trinidad & Tobago
Stock Exchange

2001

Acquisition of Life of
Jamaica and Allnation
in the US

Sagicor Financial Corporation

We operate in 20 countries including the Caribbean, Latin America and the US. Our recent entry into the US
is part of our international expansion and we are very excited about the opportunities in that market. It is a
market we are close to geographically, a market that culturally we understand. We are expanding in a business
area that we know well, and where the middle tier companies are going through some of the same issues
that the Caribbean experienced in the mid to late 1990s. We believe that there is value to be reaped from this
market and we are well poised to capitalize on the opportunities.

Our listing on the London Stock Exchange must therefore be viewed within the context of this journey and is
a signiﬁ cant part of our international transformation and we are naturally excited about it.

In conclusion, permit me to express my particular pride that this historic occurrence took place during my
tenure as Chairman of the Board of the Sagicor Group. During my time with the Mutual, now Sagicor, dating
back to 1965, the company has gone through many changes and has achieved many signiﬁ cant milestones,
all of which can be described as strategic. However, I believe I can say without fear of contradiction that the
changes which occurred during the last two decades have been the most signiﬁ cant in its history. I am proud
to have been a part of this great Company and to have been given the opportunity to have played a role in what
our Company has become. Along the way I have met several people who have given me their advice, guidance
and general assistance, and to them I am most grateful.

I have no doubt that the Sagicor Group will continue to enjoy strong growth and deliver solid results. I wish to
thank all who have contributed to the development of the company over the years and to this year of signiﬁ cant
achievement through their dedication and commitment. I would also like to thank the Board, Management,
Staff and Advisors of Sagicor for their contribution and support in the development of this Group. I would like
to especially thank our Customers who continue to place conﬁ dence in Sagicor by doing business with us. I am
conﬁ dent that the future of Sagicor will continue to be bright and rewarding for all of its stakeholders.

J Arthur L Bethell
Chairman

2005

Acquisition of majority interest in Pan Caribbean
Financial Services

Acquisition of Laurel Life and its wholly-owned
subsidiary, American Founders Life Insurance
Company in the US

Life of Jamaica acquires Cayman General
Insurance

Acquisition of 20% of FamGuard

Acquisition of First Life Insurance portfolio

2006

Successful US$150
million Bond Offering
on the US market

Sagicor Life Inc assigned
a Standard and Poor’s
(S&P) financial strength
rating of “BBB+”

American Founders Life
Insurance Company
rebrands as Sagicor Life
Insurance Company

2007

Sagicor’s Listing on the
London Stock Exchange

Sagicor Financial Corporation

President & CEO’s Report

MANAGEMENT DISCUSSION AND
ANALYSIS OF FINANCIAL RESULTS

Overview

2006 was another successful year for the Sagicor Group which recorded
net income of Bds $173.2 million. Of this, net income allocated to
shareholders was Bds $135.3 million. The return on shareholders’ equity
was 19% and earnings per share totalled Bds 50.8 cents.

Revenue totalled Bds $1,318.8 million, which is an increase of 13.9% over
2005. Beneﬁ ts amounted to Bds $686.1 million and expenses totalled
Bds $431.6 million.

Assets totalled Bds $6,726.6 million and liabilities were Bds $5,642.0
million as of December 31, 2006. Total equity stood at Bds $1,084.6
million, exceeding Bds $1,000 million for the ﬁ rst time.

Dodridge D Miller
President and Chief Executive Officer

In May 2006, Sagicor successfully raised US $150.0 million on the US market through an issue of senior notes
underwritten by Morgan Stanley & Co Incorporated. The notes carry a ﬁ xed interest rate of 7.5% and mature in May
2016.

The notes were issued at a price of 99.123% of par. In preparation for the issue, the Company sought a rating
from Standard and Poor’s, the internationally recognised rating agency. Sagicor Life Inc, as the principal operating
company within the Group was given a BBB+ rating, which is equal to the rating of its sovereign domicile, Barbados.
A rating of BBB was given for the issue of the notes.

This entry by Sagicor into an international capital market is testimony to the efforts by the management, staff and
professional advisors involved in the exercise. It is testimony to the Company’s goal of achieving an international
footprint. The notes are now traded in the United States among institutional investors and on the Euro MTF Market,
the alternative market of the Luxembourg Stock Exchange. At balance sheet date, the market value of these notes
approximated US $153.0 million.

With the issue of the notes, the debt to total equity ratio for 2006 increased to 29.6% as of December 31, 2006, up
from 16.9% one year previously.

Having made ﬁ ve acquisitions in 2005, this year we have consolidated and integrated these recent additions to the
Group. We have re-branded our US subsidiary as Sagicor Life Insurance Company, as an initial step to introducing
the Sagicor brand in that market.

In the Caribbean, we have continued to expand our business and to bring greater efﬁ ciency to our operations. The
2005 additions have enhanced our product offerings in merchant banking, investment and fund management and
in health, property and casualty insurance in the region. Sagicor now has signiﬁ cant operations in the English and
Dutch speaking countries in the region. On December 1, 2006, we signed an agreement with Industrial Life (the
successor company to National Life of Canada) to acquire their life insurance portfolio in the region. Once this
acquisition is completed, it will signiﬁ cantly enhance our market position in the Dutch Caribbean.

We intend to build a market position in the U.S. and internationally which will be signiﬁ cant to the Sagicor Group. We
will further develop our well established position in the Caribbean. In these endeavours, we will rely on our talented
and dedicated human resources on the strong ﬁ nancial position of the Group.

Sagicor Financial Corporation

President & CEO’s Report

Economic Conditions

The global economy recorded strong real GDP growth of 5% in 2006. This rate has been one of the highest in 30
years despite rising oil prices, rising interest rates and severe conﬂ ict in the Middle East.

In the United States, growth in 2006 was 3.4%. The housing market started to soften in 2006, after many years of
being a major stimulus to the economy. Growth in employment continues to drive spending in the economy. After
regular interest rate increases since mid 2004, the Federal Reserve has maintained its funds rate at 5.25% for the
latter part of 2006. While the US Treasury 10 year bond yield increased around 0.2% during the year, the yield stood
below the funds rate at 4.7% at the end of 2006.

In Europe, growth in the euro zone in 2006 was 2.7%. The largest economy in the euro zone, Germany, recorded
positive growth of 2.6%. In the United Kingdom, GDP growth was 2.7% in 2006.

In Asia, China’s economy continues to expand rapidly. Economic growth was estimated at 10.5% for 2006 and was
being propelled by investment and exports. India’s economy continues to experience signiﬁ cant growth recording
an estimated 8.3% for the year. Japan’s economy has started to rebound after a period of stagnation, with real GDP
growth estimated at 2.1% for 2006.

Fuelled by new demand in Asia, oil and other commodity prices have trended upwards with a resulting positive
effect on commodity producing economies throughout the world.

Barbados

The Barbados economy expanded an estimated 3.5% in 2006. The tourism sector is estimated to have grown at
some 2.5% for the year, with long-stay tourists being the source of growth. The construction industry grew by some
7%, a consequence of the Cricket World Cup related projects and other ventures. Manufacturing output was ﬂ at.

Government’s ﬁ scal position has improved, with the deﬁ cit estimated at 1.7% of GDP. Inﬂ ation averaged at 7.6%
for most of the year.

Jamaica

Jamaica’s economy improved in 2006. Most key indicators showed positive trends. Interest rates have continued
their decline with treasury-bill yields declining by some 1.3% in 2006. The Jamaica dollar declined some 4% during
the year. Net international reserves at the end of year approximated four months of imports. Inﬂ ation was 5.8%, the
lowest in many years. Real GDP growth is estimated at 2.7% and tourist arrivals in 2006 increased by 15%.

Against this trend of positive improvements, public debt remains high and debt service utilises a signiﬁ cant
percentage of government revenues.

Trinidad and Tobago

2006 was a positive year for the Trinidad and Tobago economy. Real GDP growth was estimated at 12% for the year.
Energy is the dominant sector in the economy and accounted for 42% of GDP in 2006. GDP growth was propelled
by a full year’s production emanating from new gas and methanol plants.

Consumer inﬂ ation also increased in 2006 and was 9.1% for the year. In response to Central Bank initiatives, interest
rates have trended upwards in 2006. The government’s ﬁ scal position remained strong, achieving an overall surplus
of 0.4% of GDP. The Trinidad and Tobago dollar remained stable during the year, and net international reserves were
estimated to be equivalent to more than seven months of imports.

Sagicor Financial Corporation

Results of Operations

The results of operations for the years ended December 31, 2006 and 2005 are summarised in the following table.

Revenue
Beneﬁ ts
Expenses
Net income from ordinary operations
Income taxes
Net income for the year

2006

2005
Bds millions Bds millions

$1,318.8
(686.1)
(431.7)
201.0
(27.8)
$173.2

$1,158.0
(608.7)
(354.9)
194.4
(24.0)
$170.4

Sagicor has signiﬁ cant concentrations of business in Barbados, Jamaica, Trinidad and Tobago and the United States,
where operations are primarily managed through subsidiaries or branches. The following table presents, for 2006
and 2005, the distribution by country of net income from ordinary operations.

Barbados
Jamaica
Trinidad and Tobago
United States
Other Caribbean
Not allocated to segments
Total

2006

2005

Bds millions

% Bds millions

$39.1
103.8
51.6
13.9
32.1
(39.5)
$201.0

19.5
51.6
25.7
6.9
16.0
(19.7)
100.0

$6.8
92.3
64.2
(10.0)
37.6
3.5
$194.4

%
3.5
47.4
33.0
(5.1)
19.4
1.8
100.0

Barbados operations have recorded income from ordinary operations of Bds $39.1 million, well surpassing that in
2005. 2006 has beneﬁ ted from growth in premium income, investment property gains and a more favourable change
in actuarial liabilities. In 2005 there were notable investment impairment losses which did not recur in 2006.

Jamaica operations recorded income from ordinary operations of Bds $103.8 million, an increase of Bds $11.5
million over 2005. Operations in 2006 beneﬁ ted positively from the impact of individual life new business. Group
insurance, development banking and investment management also recorded better results in 2006.

In 2005, Trinidad operations beneﬁ ted signiﬁ cantly from realised investment gains on equity securities as the
Group sought to rebalance its Trinidad investment portfolio. This did not recur in 2006, which now reﬂ ects a more
normalised level of income from ordinary activities.

The net loss of Bds $10.0 million in 2005 from United States operations has been turned around to a net proﬁ t of
Bds $13.9 million in 2006. Our acquisition, Sagicor Life Insurance Company, has had a successful year in 2006.

Other Caribbean operations recorded income from ordinary activities of Bds $32.1 million in 2006. Though this
is less than the 2005 results, proﬁ ts in 2006 are more evenly distributed among companies in this region. Our
acquisition, Sagicor General (Cayman) Limited has had a successful year in 2006.

Operations which are not allocated to operating segments showed a loss of Bds $39.5 million in 2006. In this
category are ﬁ nance costs which support operations in other segments. Finance costs have risen by some
Bds $14.4 million as a result of the additional debt ﬁ nancing on the balance sheet. Also the 2005 results beneﬁ ted
from one-off gains on business combinations and acquisitions of Bds $25.1 million.

Sagicor Financial Corporation

President & CEO’s Report

Revenue

The following table summarises the composition of total revenue for 2006 and 2005.

Net premium revenue
Net investment income
Share of operating income of associated
companies
Fees and other revenue
Gains arising on business combinations and
acquisitions
Total

2006

2005

Bds millions

% Bds millions

$755.2
471.0

5.5

87.1

57.3
35.7

0.4

6.6

$637.0
415.4

3.5

77.0

25.1

%
55.0
35.9

0.3

6.6

2.2

$1,318.8

100.0

$1,158.0

100.0

Trends in revenue by component are discussed in the following sections.

Net Premium Revenue

The following table shows an analysis of net premium revenue for the years ended December 31, 2006 and 2005.

Life insurance
Annuities
Health insurance
Property and casualty insurance

Total premium revenue

Reinsurance premiums
Net premium revenue

2006

2005

Bds millions

% Bds millions

$463.2
112.2
227.1
134.9
937.4
(182.2)
$755.2

49.4
12.0
24.2
14.4
100.0

$392.3
85.3
197.0
74.1
748.7
(111.7)
$637.0

%
52.4
11.4
26.3
9.9
100.0

Total premium revenue was Bds $937.4 million in 2006 as compared to Bds $748.7 million in 2005. After deducting
the cost of reinsurance premiums, net premium revenue totalled Bds $755.2 million in 2006, an increase of 18.6%
over 2005.

Premium revenue from life insurance remains the largest class of premium, recording 49.4% of total premium in
2006 (52.4% in 2005).

The comparison of 2006 premium revenue with that of 2005 reﬂ ects a combination of

(cid:129)

the impact of acquisitions made in 2005, for whom a full year’s premium is not reﬂ ected in the 2005
ﬁ gures, and
intrinsic growth in the Group’s continuing operations.

Premium revenue for 2005 includes revenue from Sagicor Life Insurance Company (USA) for three months only, and
from Sagicor General (Cayman) Limited for one month only, since these subsidiaries were acquired on September
30 and November 30, 2005 respectively. Sagicor Life Insurance Company (USA) has premium revenues in life
insurance and annuities. Sagicor General (Cayman) Limited has premium revenues in health, property and casualty
insurance. Collectively, these two acquisitions have added some Bds $112.9 million in premium revenues in 2006
over 2005, and Bds $59.7 million in reinsurance premium costs in 2006 over 2005.

The Group’s remaining operations recorded total premium revenue growth of Bds $75.8 million, or 10.4% over 2005.

Sagicor Financial Corporation

Net Investment Income

2006

2005

Bds millions

% Bds millions

Interest income from debt securities
Interest income from loans and other securities
Net gains on ﬁ nancial investments and investment
property
Other investment income
Total investment income

Investment expenses

Net investment income

$284.7
98.7

59.2

34.9
477.5
(6.5)
$471.0

59.6
20.7

12.4

7.3
100.0

$242.4
87.5

79.9

29.9
439.7
(24.3)
$415.4

Net investment income increased by 13.4% to Bds $471.0 million in 2006.

%
55.1
19.9

18.2

6.8
100.0

Interest from debt securities comprises the largest component of investment income, representing 59.6% in 2006
(55.1% in 2005). Interest income from debt securities increased by Bds $42.3 million in 2006, of which Sagicor
Life Insurance Company (USA) accounted for Bds $35.0 million. (Sagicor Life Insurance Company (USA) was
consolidated for three months only for 2005, as compared to the full year for 2006).

Net gains on ﬁ nancial investments declined by Bds $37.7 million, but were offset by increases gains on investment
property totalling Bds $16.9 million. In 2005, the Group recorded signiﬁ cant gains on its equity securities as it
rebalanced the Trinidad investment portfolio. Investment expenses declined Bds $17.8 million, largely as a result of
a reduction in impairment charges on loans and securities.

Other Revenue Items

In 2006, the share of operating income from associated companies includes returns from FamGuard Corporation.
This associated company investment was made at the end of 2005 and did not generate any income in 2005.

Fees and other revenue increased by 13.1% in 2006 to Bds $87.1 million.

Gains on business combinations and acquisitions were Bds $25.1 million in 2005 (nil in 2006). These gains arose
on the reduction in Sagicor’s interest in Life of Jamaica, from 78% to 60%, and on the acquisition of a 37% interest
in Pan Caribbean Financial Services.

Beneﬁ ts

Beneﬁ ts comprise the returns provided to the holders of policy contracts and the interest return to clients and
institutions who deposit funds with or advance special purpose loans to the Group. Beneﬁ ts are accounted for either
as policy beneﬁ ts, or as change in actuarial liabilities (i.e. changes in amounts set aside for future policy beneﬁ ts), or
as interest expense. Beneﬁ ts for the years ended December 31, 2006 and 2005 are summarised in the table below.

Net policy beneﬁ ts
Net change in actuarial liabilities
Interest expense
Total

2006

2005

Bds millions

% Bds millions

$509.5
17.9
158.7
$686.1

74.3
2.6
23.1
100.0

$388.2
72.6
147.9
$608.7

%
63.8
11.9
24.3
100.0

Sagicor Financial Corporation

President & CEO’s Report

Trends in policy beneﬁ ts by component are discussed in the following sections.

Net policy beneﬁ ts

The following table shows an analysis of net policy beneﬁ ts for the years ended December 31, 2006 and 2005.

Life insurance beneﬁ ts
Annuity beneﬁ ts
Health insurance claims
Property and casualty insurance claims

Total policy beneﬁ ts

Reinsured beneﬁ ts

Net policy beneﬁ ts

2006

2005

Bds millions

% Bds millions

$258.8
164.8
165.6
32.7
621.9
(112.4)
$509.5

41.6
26.5
26.6
5.3
100.0

$219.8
58.7
134.1
20.0
432.6
(44.4)
388.2

%
50.8
13.6
31.0
4.6
100.0

Total policy beneﬁ ts amounted to Bds $621.9 million in 2006 and Bds $432.6 million in 2005. After deducting
reinsurance recoveries, net policy beneﬁ ts totalled Bds $509.5 million in 2006, an increase of 31.2% over 2005.

The comparison of 2006 policy beneﬁ ts with those of 2005 reﬂ ects a combination of:

(cid:129)

the impact of acquisitions made in 2005, for whom a full year’s beneﬁ ts are not reﬂ ected in the 2005
ﬁ gures, and
intrinsic growth in the Group’s continuing operations.

Policy beneﬁ ts for 2005 includes beneﬁ ts from Sagicor Life Insurance Company (USA) for three months only, and
from Sagicor General (Cayman) Limited for one month only, since these subsidiaries were acquired on September
30 and November 30, 2005 respectively. Sagicor Life Insurance Company (USA) incurs life insurance and annuity
beneﬁ ts and Sagicor General (Cayman) Limited incurs health, property and casualty insurance claims. Collectively,
these two acquisitions have added some Bds $143.6 million in policy beneﬁ ts in 2006 over 2005, and Bds $70.9
million in reinsurance recoveries in 2006 over 2005.

The Group’s remaining operations experienced growth in total policy beneﬁ ts of Bds $45.7 million, or 11.6% over
2005.

Change in actuarial liabilities

The change in actuarial liabilities records the amounts set aside for future beneﬁ ts on insurance contracts. The
quantum of actuarial liabilities is computed as of December 31 each year. The change in actuarial liabilities reﬂ ects
the expected normal increase in liability of inforce policies, the effect of new policies issued during the year, and the
impact of changes in actuarial assumptions and modelling.

The net change in actuarial liabilities decreased by Bds $54.7 million to Bds $17.9 million in 2006. The overall
decrease is a reﬂ ection of the large maturing inforce block of policies of Sagicor Life Insurance Company (USA) and
of the changes in actuarial assumptions and modelling, most notably for improvements in expense factors. These
trends have offset other normal increases in actuarial liabilities.

Interest expense

Interest expense is recognised on funds placed on deposit with the Group or on funds loaned to the Group for the
purpose of generating operating assets. The interest expense totalled Bds $158.7 million in 2006, an increase of Bds
$10.8 million over 2005.

Sagicor Financial Corporation

Expenses

The following table shows an analysis of expenses for the years ended December 31, 2006 and 2005.

Administrative expenses
Commissions and related compensation
Premium taxes
Finance costs
Depreciation and amortisation
Total

2006

2005

Bds millions

% Bds millions

$250.8
114.1
13.3
18.8
34.7
$431.7

58.1
26.4
3.1
4.4
8.0
100.0

$214.6
95.0
15.3
4.4
25.6
$354.9

%
60.5
26.8
4.3
1.2
7.2
100.0

Total expenses have increased by Bds $76.8 million to Bds $431.7 million in 2006.

Expenses for administration comprise the most signiﬁ cant part of overall expenses, amounting to 58.1% of total
expenses in 2006 and 60.5% of total expenses in 2005. A signiﬁ cant proportion of administrative expenses comprise
remuneration and beneﬁ ts paid to employees.

Administrative expenses for 2005 include expenses from Sagicor Life Insurance Company (USA) for three months
only, and from Sagicor General (Cayman) Limited for one month only, since these subsidiaries were acquired on
September 30 and November 30, 2005 respectively. Collectively, these two acquisitions have added some Bds $28.8
million in administrative expenses in 2006 when compared to 2005.

The Group’s remaining operations experienced a 3.6% growth in administrative expenses over 2005.

Commissions and related compensation have increased by some Bds $19.1 million in 2006, mirroring the trends
recorded with premium revenues.

Finance costs have increased by some Bds $14.4 million in 2006. This increase is attributable to the issue of senior
notes by the Group which increased the level of debt ﬁ nancing.

Income taxes

Sagicor is taxed in the countries in which its operations are carried out. Taxes are based on investment income or
on net income in each country according to the tax regulations of that country. The income tax expense is composed
of current taxes and deferred taxes. Income taxes increased by 15.8% to Bds $27.8 million in 2006. The effective
income tax rate on income from ordinary activities was 13.8% for 2006 (12.4% for 2005).

Net Income

Group net income totalled Bds $173.2 million for 2006 and Bds $170.4 million for 2005.

Group net income is allocated to shareholders, to participating policies of Sagicor Life Inc, and to minority interests.
The allocation for the years ended December 31, 2006 and 2005 is summarised below.

Shareholders
Participating policyholders
Minority interest
Total net income

2006

2005

Bds millions Bds millions
$121.5
12.0
36.9
$170.4

$135.3
(0.6)
38.5
$173.2

Sagicor Financial Corporation

President & CEO’s Report

Net income attributable to shareholders totalled Bds $135.3 million for 2006, an increase of Bds $13.8 million or
11.4% over 2005.

The net income attributed to participating policyholders is inﬂ uenced by the levels of investment income, the
mortality and lapse experience and by the level of expenses, all attributable to the policies in the participating
funds. In 2005, the participating account reﬂ ected the recognition of new business proﬁ ts which had been deferred
from earlier years. In addition, changes in the mechanisms for valuing policies in the participating funds, and in
the accounting for these funds have resulted in a restatement of the 2005 proﬁ ts allocated to these participating
policies.

The net income attributable to minority interest reﬂ ects the allocation of net income to the minority shareholders in
subsidiaries which are not wholly owned by Sagicor.

Assets

The Group’s assets totalled Bds $6,726.6 million as of December 31, 2006. This represents an increase of Bds $329.8
million since December 31, 2005. The principal components of the Group’s assets as of December 31, 2006 and
2005 are set out in the following table.

Financial investments and cash
Properties, plant and equipment
Intangible assets
Reinsurance assets
Other assets and receivables
Total assets

Asset components are discussed in the following sections.

Financial investments and cash

2006

2005

Bds millions Bds millions
$4,851.7
329.8
240.2
686.7
288.4
$6,396.8

$5,225.0
342.2
225.4
643.4
290.6
$6,726.6

2006

2005

Bds millions

% Bds millions

Debt securities
Equity securities
Mortgage loans
Policy loans
Finance loans and leases
Securities purchased under agreements to re-sell
Deposits
Cash
Total

$3,301.7
374.2
492.0
251.8
245.9
44.6
339.4
175.4
$5,225.0

63.2
7.2
9.4
4.8
4.7
0.8
6.5
3.4
100.0

$3,140.7
440.4
420.6
255.0
235.1
69.0
172.0
118.9
$4,851.7

%
64.7
9.1
8.7
5.3
4.8
1.4
3.5
2.5
100.0

Financial investments and cash totalled Bds $5,225.0 million as of December 31, 2006, an increase of Bds $373.3
million for the year. Financial investments and cash are held in various currencies, with balances in United States
dollars comprising 47.0%, in Jamaica dollars 21.4%, in Barbados dollars 13.6%, in Trinidad dollars 9.5% and in other
currencies 8.5%.

Sagicor Financial Corporation

Debt securities comprise the largest class of ﬁ nancial assets, at $3,301.7 million, or 63.2% of the total, as of December
31, 2006. Debt securities include government debt obligations, corporate debt securities and collateralised mortgage
securities.

The effective interest income yield on ﬁ nancial investments for the years ended December 31, 2006 and 2005 is set
out below.

Debt securities
Mortgage loans
Policy loans
Finance loans and leases
Securities purchased under agreements to re-sell
Deposits

Other asset classes

2006
%
9.4
8.2
8.3
11.6
11.4
4.8

2005
%
11.6
7.7
9.7
12.9
9.1
5.2

Investment property, owner-occupied property, plant and equipment totalled Bds $342.2 million as of December 31,
2006. The property components totalled Bds $281.9 million.

Intangible assets totalled Bds $225.4 million as of December 31, 2006. Intangible assets largely comprise assets
which are recognised on the acquisition of subsidiaries and insurance portfolios, with the largest items being
goodwill and customer relationships.

Reinsurance assets arise when the Groups cedes insurance risks to reinsurers in order to limit the Group’s exposure
on claims. The asset represents the reinsurers’ share of the risks. Total reinsurance assets as of December 31, 2006
totalled Bds $643.4 million.

Assets under management

In addition to the assets in the Group balance sheet, the Group manages assets of pension funds, mutual funds and
unit trusts for fee income. As of December 31, 2006, invested assets of these funds totalled Bds $2,290.5 million.

Liabilities

The Group’s liabilities totalled Bds $5,642.0 million as of December 31, 2006, an increase of Bds $197.9 million since
December 31, 2005. The principal components of the Group’s liabilities as of December 31, 2006 and 2005 are set
out in the following table.

Policy liabilities
Deposits and security liabilities
Senior notes and loans payable
Other liabilities and payables
Total liabilities

2006

2005

Bds millions Bds millions
$3,500.6
1,440.5
160.7
342.3
$5,444.1

$3,494.3
1,490.8
321.1
335.8
$5,642.0

Sagicor Financial Corporation

President & CEO’s Report

Liability components are discussed in the following sections.

Policy Liabilities

Actuarial liabilities – individual insurance
Actuarial liabilities – group insurance
Other insurance liabilities
Investment contract liabilities
Total

2006

2005

Bds millions

% Bds millions

$2,394.1
353.1
305.4
441.7
$3,494.3

68.5
10.1
8.7
12.7
100.0

$2,422.5
368.7
283.2
426.2
$3,500.6

%
69.2
10.5
8.1
12.2
100.0

Policy liabilities totalled Bds $3,494.3 million as of December 31, 2006. These policy liabilities are denominated
in various currencies, with obligations in United States dollars representing 36.7%, in Jamaica dollars 12.7%, in
Barbados dollars 26.3%, in Trinidad dollars 15.2% and in other currencies 9.1%.

Individual insurance actuarial liabilities represent the largest class of policy liabilities and comprise some 68.5% of
balances as of December 31, 2006 (69.2% for 2005). These obligations are principally in respect of long-term life
insurance and annuity contracts.

Investment contract liabilities arise from contracts which do not have an insurance element, and comprise mainly
pension and savings deposits.

Deposit and Security Liabilities

Deposit and security liabilities represent sources of funds for on-lending, leasing and portfolio investments. Balances
as of December 31, 2006 and 2005 are set out in the table below.

2006

2005

Bds millions

% Bds millions

Other funding instruments
Deposits
Securities sold under agreements to repurchase
Bank overdrafts
Total

$289.7
246.3
948.8
6.0
$1,490.8

19.4
16.5
63.7
0.4
100.0

$296.3
227.5
908.0
8.7
$1,440.5

%
20.6
15.8
63.0
0.6
100.0

Deposit and security liabilities are denominated in various currencies, with obligations in United States dollars
representing 55.6%, in Jamaica dollars 35.7%, in Barbados dollars 6.7%, in Trinidad dollars nil, and in other
currencies 2.0%.

Other funding instruments comprise loans from ﬁ nancial institutions.

Securities sold under agreements to repurchase represent deposits made by customers and other ﬁ nancial
institutions which are collateralised by debt securities held by the Group. These agreements are customarily short-
term in nature, with most agreements maturing within three months of balance sheet date.

Sagicor Financial Corporation

The effective interest rate paid on deposit and security liabilities for the years ended December 31, 2006 and 2005
is set out below.

Other funding instruments
Deposits
Securities sold under agreements to repurchase

Senior Notes and Loans Payable

2006
%
6.1
7.1
9.3

2005
%
5.6
7.3
10.0

Senior notes and loans payable are obligations arising from funding received to be used for Group expansion and
corporate purposes. These obligations are regarded as debt ﬁ nancing.

During 2006, the Group issued US $150.0 million (Bds $300.0 million) in Senior Notes in the United States market.
Interest is ﬁ xed at 7.5% for the 10 year duration of the notes.

With the issue of the notes, the Group utilised Bds$ 147.7 million of the proceeds to re-ﬁ nance bank loans, thereby
extending the overall maturity of its debt. The remaining proceeds are available for further corporate activity.

In addition to the senior notes outstanding, the Group had bank loans payable of Bds $28.0 million at balance sheet
date.

Cash Flows

Cash ﬂ ows are summarised into categories of operating activities, investing activities, or ﬁ nancing activities. Cash
and cash equivalents comprise readily available cash balances, ﬁ nancial investments with original maturities of 90
days or less, less bank overdraft balances.

Summary movements in cash ﬂ ows and cash and cash equivalents for the years ended December 31, 2006 and 2005
are set out in the following table.

Cash ﬂ ows from operating activities
Cash ﬂ ows used in investing activities
Cash ﬂ ows from ﬁ nancing activities
Effects of exchange rate changes
Net increase, cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year

2006

2005

Bds millions Bds millions
$313.9
(261.6)
109.6
(23.2)
138.7
135.6
$274.3

$178.5
(26.5)
112.1
(23.7)
240.4
274.3
$514.7

Financial investments included in cash equivalents totalled Bds $357.6 million as of December 31, 2006. This
represents an increase of Bds $191.7 million over 2005’s total, reﬂ ecting high liquidity within the Group at balance
sheet date. This rise in liquid ﬁ nancial investments has also brought down the cash from operating activities that
would otherwise have been generated.

Cash used in investing activities in 2005 included Bds $214.9 million in acquisition related cash outﬂ ows. With no
acquisitions in 2006, the cash used in investing activities largely comprised the purchase of ofﬁ ce related assets and
vehicles for leasing.

Sagicor Financial Corporation

President & CEO’s Report

Cash generated from ﬁ nancing activities reﬂ ect the net additional debt ﬁ nancing received by the Group. From this
amount are deducted the dividends paid to shareholders and minority interests.

Equity and Capital Resources

Equity

Total equity of the Group comprises shareholders’ equity, the participating policyholders’ accounts of Sagicor Life
Inc, and minority interests in subsidiaries not wholly owned by Sagicor.

As of December 31, 2006, total equity amounted to Bds $1,084.6 million, an increase of Bds $131.9 million since
December 31, 2005. The components of equity as of December 31, 2006 and 2005 were as follows:

Shareholders’ equity
Participating accounts
Minority interests
Total equity

Capital Resources

2006

2005

Bds millions Bds millions
$730.3
20.9
201.5
$952.7

$827.7
19.8
237.1
$1,084.6

The principal capital resources of the Group comprise its shareholders’ equity, its minority interest equity, and its
debt ﬁ nancing The resources totalled Bds $1,385.9 million as of December 31, 2006, and Bds $1,092.5 million as of
December 31, 2005.

The Group deploys its capital resources to its operating activities. These operating activities are carried out through
subsidiary companies which are either insurance entities or provide other ﬁ nancial services. The capital is deployed
in such a manner as to ensure that subsidiaries have adequate and sufﬁ cient capital resources to carry out their
activities and to meet regulatory requirements.

The capital adequacy of the principal subsidiaries is discussed in the following section.

Capital Adequacy

Sagicor Life Inc Group**

Capital adequacy is managed at the operating company level. It is calculated by the Appointed Actuary and reviewed
by executive management, the audit committee and the board of directors. In addition, The Group Appointed
Actuary (who is independent of the Group) also reviews capital adequacy. The Group seeks to maintain internal
capital adequacy at levels higher than the regulatory requirements. To assist in evaluating the current business and
strategy opportunities, a risk-based capital approach is one of our core measures of ﬁ nancial performance. The
risk-based assessment measure which we have adopted is the Canadian Minimum Continuing Surplus and Capital
Requirement (MCCSR) standard. It should be noted that many of the jurisdictions in which the Sagicor Life Inc
Group operates have no capital adequacy requirements. The minimum standard recommended by the Canadian
regulators for companies is an MCCSR of 150%. The MCCSR for the Sagicor Life Inc Group as of December 31, 2006
and 2005 is set out below.

Sagicor Life Inc

2006
MCCSR

2005
MCCSR

263%

256%

** includes Life of Jamaica Limited, Sagicor Capital Life Insurance Company Limited and Nationwide Insurance
Company Limited.

Sagicor Financial Corporation

Sagicor Life Insurance Company (USA)

A risk-based capital (RBC) formula and model were adopted by the National Association of Insurance Commissioners
(NAIC) of the United States. 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 least severe regulatory action is 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.

Sagicor Life Insurance Company looks to maintain at least 250% of the Company Action Level, allowing it ﬂ exibility
in its asset and product mix. The RBC ratios, deﬁ ned to be “the % of the Company Action Level” as of December 31,
2006 and 2005 are set out in the table below.

Sagicor Life Insurance Company

Pan Caribbean Financial Services Group

2006
RBC
360%

2005
RBC
438%

Under the Bank of Jamaica (BOJ) and the Financial Services Commission (FSC) regulatory framework, the securities
and banking operations are required to maintain unconsolidated Capital Adequacy Ratios of at least 10% of their
risk-weighted assets.

The FSC’s early warning benchmark is 14% while the BOJ’s trigger is 12%. Pan Caribbean Financial Services Limited
(PCFS) is regulated by the FSC in respect of its securities operations. Pan Caribbean Merchant Bank Limited (PCMB)
is regulated by the BOJ in respect of its banking operations. The Capital Adequacy Ratios as of December 31, 2006
and 2005 are set out in the table below.

PCFS
PCMB

Risk Management

2006

2005

Capital Adequacy Ratio

79%
23%

62%
27%

The Group’s activities of issuing insurance contracts, of accepting funds from depositors and by investing insurance
premium and deposit receipts in a variety of ﬁ nancial and other assets, exposes the Group to various insurance,
ﬁ nancial and operational risks.

Before issuing any insurance contract, Sagicor considers the nature and amount of the insurance risk, and by the
process of underwriting, determines if it will assume the insurance risk, and if so, at what rate of premium and if
any conditions should be attached. Sagicor has in place many reinsurance agreements, which will or may allow the
cession of some of the insurance risk. Sagicor has in place underwriting guidelines which are updated with company
and industry experience.

Sagicor Financial Corporation

President & CEO’s Report

Financial risks include credit, liquidity and market risks. Credit risk is the exposure that a counterparty, to whom
funds have been loaned, is unable to pay amounts when due. Liquidity risk is the exposure that funds may be
required when unavailable or that excess funds may accumulate with loss of opportunity to earn returns. Group
companies monitor cash inﬂ ows and outﬂ ows. Through experience and monitoring, the Group is able to maintain
sufﬁ cient liquid resources to meet current obligations. Market risks arise from changes in market conditions relating
to interest rates, fair values or currency exchange rates. The Group mitigates these risks by a variety of policies.

Operational risks may arise in the conduct of business operations. The risks include technology failure, business
interruption, error, fraud or money laundering. The Group mitigates these risks by having in place technology back-
ups or alternative procedures; business interruption policies and plans; employee / management selection, training
and performance procedures; internal audit processes; anti-money laundering procedures; and management review
of ﬁ nancial and operating criteria.

An Enterprise Risk Management process is being introduced throughout the Group’s operations. On completion,
the Group will then have fully documented risk management policies and procedures which undergo constant
monitoring.

Financial Ratings

The Group has obtained ﬁ nancial ratings for certain subsidiaries. Current ratings are set out in the table below.

Sagicor Life Inc
Sagicor Capital Life Insurance Company Limited
Life of Jamaica Limited
Sagicor Life Insurance Company (USA)
Sagicor General Insurance Inc

CORPORATE SOCIAL RESPONSIBILITY

Standard & Poor’s
Financial Strength Rating
BBB+

A.M. Best
Financial Strength Rating
A (Excellent)
A (Excellent)
A (Excellent)
B++ (Good)
A- (Excellent)

Sagicor’s belief in corporate social responsibility is inherent in its vision – “To be a great company committed to
improving the lives of the people in the communities in which it operates.” Not only are we committed to the delivery
of quality products and services, but also to initiatives that provide ﬁ nancial support and voluntary assistance,
primarily in the areas of health, education, youth development and sports.

Over the past year, and indeed over several decades, we have provided signiﬁ cant support to the Chronic Disease
Research Centre, a project of the School of Clinical Medicine and Research of the University of the West Indies. Our
funding has been crucial in sustaining ongoing research, and seeding new projects to address the rapidly growing
problem of life-style related chronic diseases such as hyper-tension, diabetes and ischemic heart disease.

Sagicor’s collaboration with the Caribbean Food and Nutrition Institute, dedicated as they are to advancing nutrition
knowledge and showcasing creative and innovative forms of food and nutrition promotion across the Caribbean,
has been a fruitful and successful one. In 2006, schools from 18 countries participated in the programme. This level
of participation serves to promote a heightened awareness for proper nutrition among the people of the region, and
further embodies Sagicor’s commitment to the improvement of their health.

We have continued to promote healthy living by assisting in the funding of the National Council on Substance
Abuse’s Life Education Centre, a mobile learning centre for Primary school children. This initiative helps children
to make informed choices by teaching them the dangers of using hard drugs, as well as providing information on
socially acceptable drugs like tobacco and alcohol. The centre’s focus is on prevention and it uses hi-tech training
equipment and interactive training techniques.

Sagicor Financial Corporation

Sagicor also assists a number of youth development and sporting organisations in areas such as table tennis,
basketball, swimming, chess and horseracing. However, it is in the area of cricket that we have concentrated our
efforts. In collaboration with the University of the West Indies, Cave Hill Campus we have developed the Sagicor
Cricket Operations Research Enterprise (SCORE), a cricket research and training facility that will implement
academic and training programmes geared towards assisting cricketers at all levels throughout the region in pursuit
of attaining excellence at their craft.

The Sagicor Cricket Operations Research Enterprise, was also designed to give tangible sustenance and visibility to
the development of regional cricket, thereby nourishing one of the primary vehicles through which Caribbean people
have demonstrated world-class excellence.

In addition, given the historical importance of the sport of cricket in the Caribbean, Sagicor has invested heavily in
cricket research and development to ensure that Caribbean people can record, celebrate, analyze, learn and build on
the single most unifying force in the region – Cricket.

Sagicor’s corporate responsibility reaches beyond strategic management decisions, and is inherent in its corporate
culture with staff-initiated community activities.

In 2006, employees donated an impressive US$35,000 towards London’s Run, a 13-mile race named after London
Solomon, a courageous six-year-old who died from leukemia. Proceeds from this race beneﬁ ted the Phoenix
Children’s Hospital Centre of Blood Disorders and Cancer. Employees also participated in the race’s fundraising
Breakfast, which assisted another child in accessing the medicines needed following a bone marrow transplant.

Individual employees are also whole-heartedly committed to the “Make a Difference” Project, which provides meals
for homeless teenagers at the Home Base Youth Services. Employees also volunteer personal time to “Save the
Family”, a comprehensive program of transitional housing, case management and supportive services. This program
also protects young children by providing for the entire family, and “Adopt a Classroom” programmes’ employees
contribute monies, clothes and toys to deserving children.

At Sagicor, in addition to our strong belief in the link between proﬁ tability and economic development, we are also
highly cognizant of the importance of maintaining and improving societal values and attitudes that are conducive
to quality living.

This commitment describes the essence of our vision for the foreseeable future. It is this commitment which will
shape and inform our business strategies and operating plans as we strive to continue evolving as a great Caribbean
company for the next decade and beyond. We ﬁ rmly believe that we have a vital role to play in the future development
of our region, and are acutely aware that we must deliver on this promise in order to do so.

HUMAN RESOURCES

The Sagicor Group is committed to the creation and maintenance of a performance driven working environment
which is characterized by innovation, continuous learning, opportunity for growth and development and fair and
equitable treatment for all staff. We believe that this is essential to future growth and development of the Group.

The Human Resource strategy of the Group is therefore centered on the achievement of this important objective
through the implementation of projects designed to ensure that the Group is adequately served over the long-
term by employees who are well trained, highly motivated and operate within a performance driven environment.
Some of the projects cover areas such as organizational structures, succession planning, resource alignment with
business objectives, compensation and performance based incentive programs. Other projects review the process
of recruitment, orientation and retention in order to ensure that Sagicor gets its fair share of a limited pool of critical
skills.

At the beginning of 2006, the HR Committee approved an 18 month development plan which covers all of the
key areas outlined above. Several HR projects are now in progress pursuant to this development plan. One of
these projects covers the harmonization of organization structures, compensation structures and performance

Sagicor Financial Corporation

President & CEO’s Report

incentive programs across the Group. In addition, in order to align the performance of management and staff
with the objectives of the company, the project has introduced a performance evaluation program based on a
“balanced score card” approach. This program was ﬁ rst introduced at the Parent Company level but is now being
implemented across all Group companies. Another project focuses on succession planning and is designed to
ensure organizational continuity, orderly and systematic knowledge transfers, and the availability of an adequate
supply of quality resources to support the Group’s business strategy.

During the year, a new on-line performance management system was introduced in Sagicor Life during the year and
it is expected that this system will be introduced into all major Group companies within the next eighteen months.
The Group also implemented a new enterprise compensation system for our sales representatives and Sagicor
Advisors. This new compensation system recognizes the changing face of the ﬁ nancial services industry today – the
new products and services being delivered and the quality of advice that customers require from an integrated
ﬁ nancial institution. The new compensation system was implemented with the assistance of the Life Insurance
Management and Research Association (LIMRA).

With regards to training and professional development, Sagicor continues to support training and professional
development for all categories of staff. We continue to support employees pursuing educational programs and
training offered through the Life Ofﬁ ce Management Association (LOMA), the American Health Insurance Plans
(AHIP), and the Academy of Life Underwriting (ALU). Employees and Advisors now have 24 hour access to training
through the LOMA E-Learning facility. We also take a very active part in the future development of these programs
with our Senior Executive Vice President Mr. Steve Stoute being a member of the LOMA Education Council. At a
less formal level, management and supervisory staff continue to beneﬁ t from exposure to a number of conferences,
workshops and seminars, covering areas such as performance management, ﬁ nance and information technology.

In order to ensure that our employees deliver a high quality of service to our customers, we continue to expose our
executives and staff to industry and compliance related training covering important areas such as money laundering
and data protection and privacy. These programs are designed to ensure that management and staff adhere to a
high standard of ethical behavior, comply with international regulatory best practice in the delivery of their products
and services and comply with all legal and regulatory requirements for the protection of our customers.

We continue to recognize the outstanding performance of our employees and ﬁ nancial advisors with several Sagicor
Advisors and Employee Recognition programs across the Group. Our family fun days have become signiﬁ cant
events on our annual calendar, and we encourage our staff and advisors to participate in our Wellness Programs
and healthy lifestyles initiatives.

We believe that these programs and initiatives which form part of our Human Resource development plan support
our objective to encourage a performance base culture and the creation of an exciting, innovative and growth
oriented working environment.

CONCLUSION

The ﬁ nancial year 2006 was another successful one for the Sagicor Group of Companies. Net income for the year of
$173 million exceeded both the net income of the previous year and planned net income for 2006. During the year,
the company made two strategic decisions which supported its international business strategy. The ﬁ rst was to
develop an initial foot-print in the international capital markets with a successful bond issue in the US Bond Market.
Through this initiative, the Company received further conﬁ rmation of its capital strength and consistent proﬁ tability
when Sagicor Life Inc., its principal operating subsidiary, was given a ﬁ nancial strength rating of BBB+ by Standard
and Poor’s (S&P) and BBB issuer credit rating. The second strategic decision was to seek a listing on the London
Stock Exchange (LSE). If Sagicor is to continue to grow and expand internationally, access to capital and exposure to
capital markets, where fundamental share price discovery is possible, is critical to our overall success. A listing on the
LSE was therefore an important part of our business strategy, and we are all delighted to have achieved this. Sagicor
was admitted to the Ofﬁ cial List of the London Stock Exchange on February 14th 2007, to become the ﬁ rst Caribbean
company to have achieved this milestone.

While the two strategic events described earlier reinforced Sagicor’s reputation as a ﬁ nancially, solid proﬁ table
company, with the operating capability to compete internationally, we at Sagicor have not been sitting on our laurels.
During the year, we have taken further steps to enhance our governance systems and operating capabilities. We

Sagicor Financial Corporation

have commenced the implementation of three initiatives, which are designed to ensure that Sagicor can enter the
international market with the conﬁ dence that it can compete successfully.

The ﬁ rst initiative is a project to strengthen our Corporate Governance processes by the development and
implementation of a Group-wide corporate governance framework, which meets international best practice, and
enhances our governance practices across the Group of companies. The second project is an enterprise-wide
risk management framework (ERM), designed to facilitate the early identiﬁ cation of ﬁ nancial and operating risk
and to provide adequate opportunity to properly manage these risks. The third, and perhaps the most important
initiative, is a comprehensive Human Resource Development plan. This plan covers all aspects of human resource
management, with particular focus on ensuring that the Sagicor Group is adequately served by a well-trained, highly
motivated Executive and Staff, who are committed to the proper execution of the long-term vision of the Sagicor
Group. Successful execution of these projects will enhance our infrastructure as we continue to expand.

Finally, we are conﬁ dent that with our solid ﬁ nancial condition and our operating capabilities, Sagicor is well placed
to compete successfully in the international ﬁ nancial services market, and we are fully conﬁ dent in our future.

I would like to thank our Customers, the Board of Directors, Management, Staff and Advisors for their contribution
to what has been, indeed, another successful year for the Sagicor Group.

Dodridge D Miller
President and Chief Executive Ofﬁ cer

INDEPENDENT AUDITORS’ REPORT

To the Shareholders of
Sagicor Financial Corporation

We have audited the accompanying consolidated ﬁ nancial statements of Sagicor Financial
Corporation set out on pages 46 to 144 which comprise the consolidated balance sheet as of
December 31, 2006 and the consolidated income statement, consolidated statement of changes
in equity, and consolidated cash ﬂ ow statement for the year then ended and a summary of
signiﬁ cant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these ﬁ nancial
statements in accordance with International Financial Reporting Standards. This
responsibility includes: designing, implementing and maintaining internal control relevant
to the preparation and fair presentation of ﬁ nancial statements that are free from material
misstatement, whether due to fraud or error; selecting and applying appropriate accounting
policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these ﬁ nancial statements based on our audit.
We conducted our audit in accordance with International Standards on Auditing. Those
standards require that we comply with ethical requirements and plan and perform the audit
to obtain reasonable assurance whether the ﬁ nancial statements are free from material
misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the ﬁ nancial statements. The procedures selected depend on the auditors’
judgment, including the assessment of the risks of material misstatement of the ﬁ nancial
statements, whether due to fraud or error. In making those risk assessments, the auditors
consider internal control relevant to the entity’s preparation and fair presentation of
the ﬁ nancial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the

…/2

Page 2

Independent Auditors’ Report …/cont’d.

entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the ﬁ nancial statements.

We believe that the audit evidence we have obtained is sufﬁ cient and appropriate to provide a
basis for our audit opinion.

Opinion

In our opinion, the consolidated ﬁ nancial statements present fairly, in all material respects,
the ﬁ nancial position of Sagicor Financial Corporation as of December 31, 2006, and
its ﬁ nancial performance and its cash ﬂ ows for the year then ended in accordance with
International Financial Reporting Standards.

PricewaterhouseCoopers
Chartered Accountants

April 4, 2007

Sagicor Financial Corporation

CONSOLIDATED BALANCE SHEET

As of December 31, 2006

Amounts expressed in Barbados $000

Notes

2006

2005

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
Other insurance liabilities
Investment contract liabilities

Other liabilities
Senior notes and 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

7
8
9
10
11
12
13
14
15

16
17
18

19
20
21
22
23

24
25

181,156
161,055
53,671
225,416
5,049,644
643,378
36,665
200,202
175,367
6,726,554

2,747,168
305,402
441,709
3,494,279

321,065
1,490,783
41,130
37,355
257,331
5,641,943

460,470
96,212
271,017
827,699
19,805
237,107
1,084,611

181,586
148,248
49,829
240,187
4,732,847
686,648
35,711
202,888
118,863
6,396,807

2,791,197
283,248
426,161
3,500,606

160,728
1,440,445
37,446
30,958
273,890
5,444,073

458,451
106,526
165,329
730,306
20,920
201,508
952,734

Total equity and liabilities

6,726,554

6,396,807

These financial statements have been approved for issue by the Board of Directors on April 4, 2007.

Director

Sagicor Financial Corporation

CONSOLIDATED INCOME STATEMENT

Year ended December 31, 2006

Amounts expressed in Barbados $000

Notes

2006

2005

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 acquisitions

Total revenue

BENEFITS

Policy benefits and change in actuarial liabilities

Policy benefits and change in actuarial liabilities reinsured

Net policy benefits and change 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

Net income attributable to shareholders - EPS

Basic earnings per common share

Fully diluted earnings per common share

937,406

(182,162)

755,244

471,032

5,455

87,115

748,707

(111,689)

637,018

415,415

3,473

76,951

25,115

1,318,846

1,157,972

586,780

(59,395)

527,385

158,739

686,124

250,743

114,132

13,240

18,839

34,700

431,654

201,068

(27,818)

173,250

135,325

(606)

38,531

173,250

498,986

(38,189)

460,797

147,869

608,666

214,544

94,961

15,308

4,426

25,636

354,875

194,431

(24,046)

170,385

121,455

12,013

36,917

170,385

50.8 cents

46.0 cents

Sagicor Financial Corporation

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended December 31, 2006

Amounts expressed in Barbados $000

Year ended December 31, 2006

Share
capital
Note 24

Reserves
Note 25

Retained
earnings

Participating
accounts
Note 26

Minority
interest

Total

458,451

106,526

165,329

20,920

201,508

952,734

-
-

-
5,652

-
(3,633)
-
-
2,019

(11,875)
-

2,944
-
-
(1,383)
(10,314)

(44)
135,325

135,281

-
-
(31,980)
2,387
105,688

2
(606)

(604)
-

-
-
-
(511)
(1,115)

7,920
38,531

46,451
4,123

-
-
(14,482)
(493)
35,599

(3,997)
173,250

169,253
9,775

2,944
(3,633)
(46,462)
-

131,877

Balance, beginning of year as
restated (note 43)

Net gains/(losses) recognised
directly in equity
Net income/(loss) for the year
Total recognised gains and
income for the year
Issue of shares
Value of employee services
rendered
Purchase of treasury shares
Dividends declared (note 35)
Other movements

Balance, end of year

460,470

96,212

271,017

19,805

237,107

1,084,611

Year ended December 31, 2005

Share
capital
Note 24

Reserves
Note 25

Retained
earnings

Participating
accounts
Note 26

Minority
interest

Total

432,495

167,694

85,705

676

57,918

744,488

-
-

-
25,956
-

-
-
25,956

(63,499)
-

(63,499)
-
-

2,331
(61,168)

96
121,455

121,551

-
(31,600)

-
(10,327)
79,624

235
12,013

12,248

-
-

7,996
20,244

(23,469)
36,917

13,448
88,200
(9,026)

50,968
-

143,590

(86,637)
170,385

83,748
114,156
(40,626)

50,968
-
208,246

Balance, beginning of year as
restated (note 43)

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
Other movements

Balance, end of year

458,451

106,526

165,329

20,920

201,508

952,734

Sagicor Financial Corporation

CONSOLIDATED CASH FLOW STATEMENT

Year ended December 31, 2006

Amounts expressed in Barbados $000

Notes

2006

2005

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, net
Investment in associated companies, net
Intangible assets, net
Acquisition of subsidiaries and insurance businesses, net of
cash and cash equivalents
Net cash used in investing activities

Cash flows from financing activities

Purchase of treasury shares
Dividends paid to shareholders
Shares issued to minority interest
Dividends paid to minority interest
Senior notes and loans payable, net
Net cash from financing activities

Effects of exchange rate changes

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

36
36

201,068
(211,201)
384,321
(172,731)
(27,048)
(121,042)
125,137
178,504

(22,690)
620
(4,456)

-
(26,526)

(3,633)
(31,594)
3,534
(14,538)
158,299
112,068

194,431
(177,242)
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

(23,676)

(23,198)

240,370
274,342
514,712

138,734
135,608
274,342

Sagicor Financial Corporation

INDEX TO THE NOTES TO THE FINANCIAL STATEMENTS

1.
INCORPORATION AND PRINCIPAL ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
2. ACCOUNTING POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
4. RISK MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
5. STATUTORY RESTRICTIONS ON ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
6. SEGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
INVESTMENT PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
7.
8. PROPERTY, PLANT AND EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
9.
INVESTMENT IN ASSOCIATED COMPANIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
10. INTANGIBLE ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
11. FINANCIAL INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
12. REINSURANCE ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
13. INCOME TAX ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
14. MISCELLANEOUS ASSETS AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
15. CASH RESOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
16. ACTUARIAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
17. OTHER INSURANCE LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
18. INVESTMENT CONTRACT LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
19. SENIOR NOTES AND LOANS PAYABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
20. DEPOSIT AND SECURITY LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
21. PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
22. INCOME TAX LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
23. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
24. SHARE CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
25. RESERVES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
26. PARTICIPATING ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
27. PREMIUM REVENUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
28. NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
29. FEES AND OTHER REVENUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
30. POLICY BENEFITS AND CHANGE IN ACTUARIAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
31. INTEREST EXPENSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
32. EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
33. INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
34. DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
35. EARNINGS AND DIVIDENDS PER COMMON SHARE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
36. CASH FLOWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
37. ASSETS AND LIABILITIES BY CURRENCY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
38. ACQUISITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
39. COMMITMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
40. CONTINGENT LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
41. ASSETS UNDER ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
42. RELATED PARTY TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
43. RESTATEMENT AND RECLASSIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

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:

(cid:129)
Insurance
(cid:129) Annuities
(cid:129) Pensions
(cid:129) Pension fund management
(cid:129) Mutual fund management
(cid:129) Corporate trust services
(cid:129) Securities dealing
(cid:129) Currency dealing
(cid:129) Merchant banking
(cid:129) 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 Jamaica Limited

Life and health insurance,
annuities and pension
administration services
Life and health insurance and
annuities

Sagicor Life Insurance Company ( formerly
American Founders Life Insurance Company) (2) Life insurance and annuities
Life and health insurance,
annuities and pension
administration services

Sagicor Capital Life Insurance Company Limited

Country of
Incorporation

Effective
Shareholders’
Interest

Barbados

100%

Jamaica

60% (1)

Texas, USA

100%

The Bahamas

100%

Capital Life Insurance Company Bahamas
Limited
Capital de Seguros, SA

Life insurance

The Bahamas

Life and health insurance

Nationwide Insurance Company Limited

Life insurance

Panama
Trinidad &
Tobago

100%

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

INCORPORATION AND PRINCIPAL ACTIVITIES (continued)

Subsidiary Companies

Principal Activities

Sagicor Life of the Cayman Islands Limited

Life insurance

Laurel Life Insurance Company (2)
Sagicor Allnation Insurance Company
Sagicor General Insurance Inc

Life insurance
Health insurance
Property and casualty insurance

Sagicor Re Insurance Limited

Property and casualty insurance

Country of
Incorporation

The Cayman
Islands
Texas, USA
Delaware, USA
Barbados
The Cayman
Islands

Sagicor General Insurance (Cayman) Limited
(formerly Cayman General Insurance Company
Limited) (3)
LOJ Pooled Investment Funds Limited
Employee Benefits Administrator Limited

Pan Caribbean Financial Services Limited (5)

Pan Caribbean Merchant Bank Limited (5)
Pan Caribbean Asset Management Limited (5)
Manufacturers Investments Limited (5)

Globe Finance Inc

The Mutual Finance Inc

Sagicor Asset Management Inc
LOJ Property Management Limited
Sagicor Insurance Managers Limited (formerly
Cayman National Insurance Managers Limited)
(3)

Property, casualty and health
insurance

The Cayman
Islands

Pension fund management
Pension administration services
Development banking and
investment management
Merchant banking
Investment management
Investment management

Loan and lease financing, and
deposit taking
Loan and lease financing, and
deposit taking
Investment management
Property management

Jamaica
Jamaica

Jamaica

Jamaica
Jamaica
Jamaica
Trinidad &
Tobago

St. Lucia

Barbados
Jamaica

Captive insurance management
services

The Cayman
Islands

Sagicor Merchant Limited (7)

Investment management

Effective
Shareholders’
Interest

60% (1)

100%
100%
53%

60% (1)

31%

60% (1)
60% (4)

65% (6)

65% (6)
65% (6)
65% (6)

100%

70%

100%
60% (1)

31%

Barbados

51%

Sagicor International Management Services, Inc

Management and business
development services

Florida, USA

100%

Sagicor Finance Limited (8)

Group financing vehicle

LOJ Holdings Limited
Sagicor USA Inc

The Mutual Financial Services Inc

Sagicor Funds Incorporated
LTE Limited (9)

Insurance holding company
Insurance holding company
Financial
company
Mutual fund holding company
Holding company

services

holding

The Cayman
Islands
Jamaica
Delaware, USA

Barbados

Barbados
Barbados

100%

100%
100%

73%

100%
100%

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

INCORPORATION AND PRINCIPAL ACTIVITIES (continued)

(1) An equity interest of 78% until April 1, 2005.
(2) Acquired September 30, 2005.
(3) Acquired by Life of Jamaica Limited on November 30, 2005. Through control of Life of Jamaica Limited, the

Group has a 51% voting interest in the subsidiary.

(4) An equity interest of 39% until April 1, 2005.
(5) Acquired January 7, 2005.
(6) 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.
Incorporated March 30, 2006.
Incorporated as a special purpose vehicle to temporarily hold the Company’s direct 34% interest in Pan
Caribbean Financial Services Limited.

(7)
(8)
(9)

The associated companies of the Group are as follows:

Associated Companies

Principal Activities

Country of
Incorporation

Effective
Shareholders’
Interest

RGM Limited

Property ownership and management

FamGuard Corporation Limited (10)
Family Guardian Insurance Company
Limited (10)
Family Guardian General Insurance
Agency Limited (10)
BahamaHealth Insurance Brokers and
Benefit Consultants Limited (10)

(10) Acquired December 28, 2005.

Trinidad &
Tobago
Bahamas

Bahamas

Investment holding company
Life and health insurance and
annuities

General insurance brokerage

Bahamas

Insurance brokers and benefit
consultants

Bahamas

33%

20%

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.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

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.
Where necessary, comparative figures have been reclassified to conform to changes in presentation in the
current year.

(a) Changes in IFRS

New and revised IFRSs and revised International Accounting Standards (IASs) are effective from the 2006
reporting year.

A new standard which is effective for accounting periods beginning on January 1, 2006 has been introduced
and is as follows:

IFRS 6 Exploration for and Evaluation of Mineral Resources.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

ACCOUNTING POLICIES (continued)

2.1 Basis of preparation (continued)

The standards which have amendments effective for accounting periods beginning January 1, 2006 are as
follows:

IFRS 1 First-time Adoption of International Financial Reporting Standards
IFRS 4 Insurance Contracts
IAS 21 The Effects of Changes in Foreign Exchange Rates
IAS 39 Financial Instruments: Recognition and Measurement

None of the above changes have a significant effect on the presentation, disclosure or accounting in the
Group’s financial statements.

(b) Prior period adjustments

Prior period adjustments have been made in respect of intangible assets, policy liabilities, participating
accounts and gains arising on business combinations. These changes are summarised in note 43.

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.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

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 in associated companies are originally recorded at cost and include intangible assets identified on
acquisition.

Accounting policies of associates have been changed where necessary to ensure consistency with the accounting
policies adopted by the Group.

The Group recognises in income its share of associated companies’ post acquisition income and its share of
the amortisation and impairment of intangible assets which were identified on acquisition. 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.

The Group recognises in equity its share of associated companies reserve movements.

(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
separate 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 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.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

ACCOUNTING POLICIES (continued)

2.2 Basis of consolidation (continued)

(f) Employees share ownership plan (ESOP)

The Company has established an ESOP Trust which either acquires Company shares on the open market, or is
allotted new shares by the Company. The Trust holds the shares on behalf of employees until the employees’
retirement or termination from the Group. Until distribution to employees, shares held by the Trust are
accounted for as treasury shares. Dividends accruing to the Trust are used to acquire additional Company
shares on the open market.

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.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

ACCOUNTING POLICIES (continued)

2.3 Foreign currency translation (continued)

Exchange rates of the other principal operating currencies to the Barbados dollar were as follows:

December 2006
closing rate

2006
average rate

December 2005
closing rate

2005
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

33.4741

0.90

3.1473

0.50

1.00

0.4175

1.35

32.8257

0.90

3.1450

0.50

1.00

0.4175

1.35

32.1903

0.90

3.1493

0.50

1.00

0.4175

1.35

31.1218

0.90

3.1332

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.

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.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

ACCOUNTING POLICIES (continued)

2.4 Segment reporting

The Group’s primary segments are geographic and the secondary segments are defined by business activity.

Geographical segments are determined by the location of the subsidiary or branch initiating the business. This
segmentation is not materially different from the segmentation by location of the customers.

The Group’s business segments reflect how the Group’s operations are managed within geographical
segments.

Certain balances can be clearly allocated to geographical segments, but not to business segments. These
include certain associated company, income tax, and pension plan balances which relate to specific geographical
segments, but are attributable to more than one business segment. In such instances, these balances are
allocated to their geographic segments, but are not allocated by business segment.

Other balances not allocated to segments mainly comprise borrowings and finance costs related to Group
expansion and other corporate activities.

2.5

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 2.6.

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.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

ACCOUNTING POLICIES (continued)

2.6 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. Owner-
occupied property includes property held under partnership and joint venture arrangements with third parties.
These are accounted for under the proportionate consolidation method.

Subsequent expenditure is capitalised when it will result in future economic benefits to the Group.

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
40 to 50 years
10 years or lease term
3 to 10 years
4 to 5 years
5 to 6 years

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

ACCOUNTING POLICIES (continued)

2.7

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 not larger than a subsidiary’s operations in
a geographical segment or in a business segment. Goodwill arising from an investment in an associate is
included in the carrying value of the investment in associated companies.

Goodwill is tested annually for impairment and is carried at cost less accumulated impairment.

(b) Other intangible assets

Other intangible assets identified on acquisitions 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
4 – 20 years
4 years, indefinite
2 – 10 years

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

ACCOUNTING POLICIES (continued)

2.8 Financial assets

(a) Classification

The Group classifies its financial assets into four categories:

(cid:129)
(cid:129)
(cid:129)
(cid:129)

held to maturity financial assets;
available for sale financial assets;
financial assets at fair value through income;
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.

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active
market.

Financial assets in the category at fair value through income include held for trading securities. An asset is
classified as held for trading at inception if acquired principally for the purpose of selling in the short-term or
if it forms part of a portfolio of financial assets in which there is evidence of short-term profit taking. Financial
assets at fair value through income include investments held to back certain deposit administration and unit
linked policy contracts where the full return on the asset accrues to the contract-holder.

Other financial assets are classified as available for sale.

(b) Recognition and measurement

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.

Held to maturity assets, loans and receivables are carried at amortised cost less provision for impairment.

Financial assets in the category at fair value through income 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.

Financial assets in the available for sale category 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.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

ACCOUNTING POLICIES (continued)

2.8 Financial assets (continued)

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.

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.

(d) 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.

(e) 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 financial asset at fair value through income.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

ACCOUNTING POLICIES (continued)

2.8 Financial assets (continued)

(f) Financial assets held in trust under modified coinsurance arrangements

These assets are held in trust for a reinsurer and are in respect of policy liabilities ceded to the reinsurer. The
assets are included in the balance sheet along with a corresponding account payable to the reinsurer. No
income is recorded from these assets in the income statement.

2.9 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.

2.10 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 its value in use.

2.11 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 held to meet statutory requirements.

2.12 Policy contracts

(a) Classification

The Group issues policy contracts that transfer insurance risk and / or financial risk from the policyholder.

The Group defines insurance risk as an insured event that could cause an insurer to pay significant additional
benefits in a scenario that has a discernable effect on the economics of the transaction.

Insurance contracts transfer insurance risk and may also transfer financial risk. Investment contracts transfer
financial risk and no insurance risk. Financial risk includes credit risk, interest rate risk and fair value risk.

A reinsurance contract is an insurance contract in which an insurance entity cedes assumed risks to another
insurance entity.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

ACCOUNTING POLICIES (continued)

2.12 Policy contracts (continued)

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:

(cid:129)
that are likely to be a significant portion of the total contractual benefits;
(cid:129) whose amount or timing is contractually at the discretion of management; and
(cid:129)

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.

(b) Recognition and measurement

Policy 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.

Property insurance contracts provide coverage for the risk of property damage or of loss of property. For
commercial policyholders insurance may include coverage for loss of earnings arising from the inability to use
property which has been damaged or lost.

Casualty insurance contracts provide coverage for the risk of causing physical harm to third parties. Personal
accident, employers’ liability and public liability are common types of casualty insurance.

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 balance sheet date. Reserving involves uncertainty and the use of informed estimates and
judgements. The claim reserve is included in other insurance liabilities.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

ACCOUNTING POLICIES (continued)

2.12 Policy contracts (continued)

An insurer may obtain 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 or of the reinsurance
contract as appropriate. 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 earned. At balance
sheet date, commissions and premium taxes arising on unearned premiums are included in miscellaneous
assets and receivables.

(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 2.13.

An insurer 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.

(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, either the contract may terminate or an automatic premium
loan may settle the premium or the contract may continue at a reduced value.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

ACCOUNTING POLICIES (continued)

2.12 Policy contracts (continued)

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 balances.

Reserves for future policy liabilities are recorded as described in note 2.13.

An insurer 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.

(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.

Policy benefits are recognised on notification of death, receipt of a withdrawal request or on the annuity
payment date. Reserves for future policy liabilities are recorded as described in note 2.13.

An insurer 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.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

ACCOUNTING POLICIES (continued)

2.12 Policy contracts (continued)

(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.

(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.

Policy liabilities 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 insurer’s 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) Deposit administration and other investment 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 investment contracts are valued at amortised cost and are otherwise accounted in a manner similar to
deposit administration contracts.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

ACCOUNTING POLICIES (continued)

2.12 Policy contracts (continued)

Certain insurance contracts contain embedded derivatives which are options whose value may vary in response
to changes in interest rates or other market variables.

The Group does not separately measure embedded derivatives that are closely related to the host insurance
contract or that meet the definition of an insurance contract. Options to surrender an insurance contract for a
fixed amount are also not measured separately. In these cases, the entire contract liability is measured as set
out in note 2.13.

(d) 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.

2.13 Actuarial liabilities

(a) Life insurance and annuity contracts

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 Group 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.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

ACCOUNTING POLICIES (continued)

2.13 Actuarial liabilities (continued)

(b) Health insurance contracts

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.

2.14 Financial liabilities

During the ordinary course of business, the Group issues investment contracts or otherwise assumes financial
liabilities that expose the Group to financial risk. The recognition and measurement of the Group’s principal
types of financial liabilities are disclosed in note 2.12(b) (vii) and in the following paragraphs.

(a) 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.

(b) Deposit liabilities

Deposits are recognised initially at fair value and are subsequently stated at amortised cost using the effective
yield method.

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 notes or 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.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

ACCOUNTING POLICIES (continued)

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 includes coupon
interest on fixed rate financial instruments 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.

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.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

ACCOUNTING POLICIES (continued)

2.18 Employee benefits (continued)

(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.

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. An accrual is recognised where there are
contractual obligations or where past practice has created a constructive obligation.

(d) Equity compensation benefits

The Group has a number of share-based compensation plans in place for administrative, sales and managerial
staff.

(i) Equity-settled share-based transactions with staff

The services received in an equity-settled transaction with staff are measured at the fair value of the equity
instruments granted. The fair value of those equity instruments is measured at grant date.

If the equity instruments granted vest immediately and the individual is not required to complete a further
period of service before becoming entitled to those instruments, the services received are recognised in full on
grant date in the income statement for the period, with a corresponding increase in equity.

Where the equity instruments do not vest until the individual has completed a further period of service, the
services received are accounted for in the income statement during the vesting period, with a corresponding
increase in the share based payment reserves or in minority interest. Until the instrument vests, the number
of instruments vesting is re-measured annually and the corresponding change in fair value is adjusted at the
re-measurement date.

Amounts held in the share based payment reserve are transferred to share capital or minority interest either on
the distribution of share grants or on the exercise of share options.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

ACCOUNTING POLICIES (continued)

2.18 Employee benefits (continued)

(ii) Cash-settled share-based transactions with staff

The services received in a cash-settled transaction with staff and the liability to pay for those services, are
recognised at fair value as the individual renders services. Until the liability is settled, the fair value of the liability
is re-measured at balance sheet date and at the date of settlement, with any changes in fair value recognised
in income during that period.

(iii) Measurement of the fair value of equity instruments granted

The equity instruments granted consist either of grants of, or options to purchase, common shares of listed
entities within the Group. Common shares granted are measured at the listed price prevailing on the grant date.
Options granted are measured using standard option pricing valuation models, which incorporate factors and
assumptions that knowledgeable, willing market participants would consider in setting the price of the equity
instruments.

(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 Taxes

(a) Premium taxes

Insurers are subject to tax on premium revenues generated in certain jurisdictions. The principal rates of
premium tax are as follows:

Barbados
Jamaica
Trinidad and Tobago
United States of America

Life insurance and
non-registered
annuities
3% - 5%
3%
Nil
0.75% - 3.5%

Health insurance

Property and
casualty insurance

3%
Nil
6%
Nil

3% - 5%
Nil
6%
Nil

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

ACCOUNTING POLICIES (continued)

2.19 Taxes (continued)

(b) Income taxes

The Group is subject to taxes on income in the jurisdictions in which business operations are conducted. Rates
of taxation in the principal jurisdictions for income year 2006 are as follows:

Life insurance and non-
registered annuities
5% of gross investment
income
15% of
investment income
15% of
investment income
35% of net income

Registered annuities

Other lines of business

Nil

25% of net income

33 1/3 % of net income

25% - 35% of net income

35% of net income

Barbados

Jamaica

Trinidad and Tobago

United States of America

(i) Current income taxes

Current tax is the expected tax payable on the taxable income for the year, using the tax rates in effect for the
year. Adjustments to tax payable from prior years are also included in current tax.

(ii) Deferred income taxes

The Group uses the balance sheet liability method of accounting for deferred 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. No provision is made
for deferred taxes which could arise on the remittance of retained earnings from subsidiaries, unless there is a
current intention to remit such earnings.

2.20 Participating Accounts

(a) “Closed” participating fund

For participating policies of Sagicor Life Inc in force at de-mutualisation, 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 de-mutualisation. The fund also includes
an ancillary fund comprising the required provisions for adverse deviations as determined in the computation
of actuarial liabilities of the said policies. Changes in the ancillary fund are not recorded in the participating
account, but are borne by the general operations of Sagicor Life Inc.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

ACCOUNTING POLICIES (continued)

2.20 Participating Accounts (continued)

(b) “Open” participating fund

Sagicor Life Inc also established an open participating fund for participating policies it issues after de-
mutualisation. 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 de-mutualisation. 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
an ancillary fund comprising the provisions for adverse deviations on the transferred policies. Changes in the
ancillary fund are not recorded in the participating account, but are borne by the general operations of Sagicor
Life Inc. 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, was
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.

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 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.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

ACCOUNTING POLICIES (continued)

2.21 Treasury shares

Where a Group entity purchases the Company’s common shares, the consideration paid, including any directly
attributable cost, is deducted from share capital. Where such shares are subsequently sold to a third party, the
deduction from share capital is reversed, and any difference with net consideration received is taken to retained
earnings.

2.22 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.

2.23 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.

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 financial 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.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)

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 cash flows or of net income from ordinary activities 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 or earnings
multiple models to these projections to determine if there is any impairment of goodwill.

(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.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)

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.

(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.

The principal assumptions and margins used in the determination of actuarial liabilities are summarised in note
16.3. However, the liability resulting from the application of these assumptions can never be definitive as to the
ultimate timing or the amount of benefits payable and is therefore subject to future re-assessment.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

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.

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 liaibilities by currency are set out in note 37.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

RISK MANAGEMENT (continued)

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 policy contracts and financial
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 financial 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:

(cid:129) minimum annuity rates which are guaranteed to be applied at some future date;
(cid:129) minimum guaranteed death benefits which are applicable when the performance of an interest bearing or

unit linked fund falls below expectations;

(cid:129) 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, policy contracts and financial liabilities in
response to market changes. In certain Caribbean markets, 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 these 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.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

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, 19 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.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

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
(cid:129)
(cid:129)
(cid:129)

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;
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.

Insurers are also exposed to lapse and expense risk. At early durations, lapses and surrenders are likely to
result in a loss to the insurer, as the acquisition costs associated with the policy contract would not have
been recovered from product margins. Higher expenses in maintaining a policy contract may mean that the
policy reserve may be inadequate to cover future policy maintenance expenses, thereby requiring the insurer to
increase the associated policy reserve.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

RISK MANAGEMENT (continued)

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, Netherlands 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 quantifies 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
insured at December 31, 2006, gross and net of reinsurance on life, property and casualty risks are summarised
below.

Contracts issued to individuals – life insurance
Contracts issued to groups – life insurance
Property and casualty insurance

Gross amount insured
2005
2006
27,270,155
30,579,784
8,800,346
11,848,761
11,920,398
14,932,984

Net amount insured
2005
2006
20,988,717
21,288,570
7,242,619
9,842,180
7,295,843
7,818,375

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

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

(cid:129) maximum retention of $20,000 for a single event;
(cid:129) maximum retention of $10,000 for a catastrophic event;
(cid:129)

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.

(cid:129)

Motor and liability risks

Miscellaneous accident risks

(cid:129) maximum retention of $1,000 for a single event;
(cid:129)

treaty limits apply.

(cid:129) maximum retention of $216 for a single event;
(cid:129)

treaty limits apply.

Engineering business risks

(cid:129) maximum retention of $300
(cid:129)

treaty limits apply for material damage and for liability claims.

Marine risks

(cid:129) maximum retention of $150 for a single event;
(cid:129)

treaty limits apply.

Property, motor, liability, and
engineering risk

(cid:129)

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 $800

Retention per individual to a maximum of $400

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

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

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
above $10 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, 17, 23,
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.

Total assets under administration are disclosed in note 41.

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 $1,319 million (2005 - $1,271 million) have been
deposited with regulators or are held in trust to the order of regulators.

In some countries where the Group operates, there are exchange controls or other restrictions on the remittance of
funds out of those countries.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

6. SEGMENTS

6.1 Geographical Segments

Barbados
Jamaica
Trinidad & Tobago
USA
Other Caribbean
Not allocated to segments

Year ended December 31, 2006

Total
assets

Total
liabilities

Total
revenue

Income from
ordinary
activities

Total cash
flows

1,156,090
2,114,599
798,949
1,680,068
821,188
155,660
6,726,554

1,079,964
1,611,756
559,237
1,538,795
519,464
332,727
5,641,943

252,431
560,323
167,130
106,310
232,576
76
1,318,846

39,092
103,814
51,652
13,887
32,101
(39,478)
201,068

47,760
52,108
(27,079)
(3,780)
(11,351)
182,712
240,370

Year ended December 31, 2005

Total
assets

Total
liabilities

Total
revenue

Income from
ordinary
activities

Total cash
Flows

1,159,784
1,990,820
734,358
1,782,293
729,148
404
6,396,807

1,029,101
1,561,793
536,803
1,646,972
493,711
175,693
5,444,073

218,652
513,850
191,558
46,012
160,892
27,008
1,157,972

6,835
92,270
64,153
(9,970)
37,647
3,496
194,431

(9,114)
71,340
25,104
5,588
54,998
(9,182)
138,734

Other balances by geographical segment are disclosed in notes 8, 9, 10, 16 and 41.

6.2 Business segments

Life insurance, health insurance and
annuities from contracts issued to individuals
Life insurance, health insurance, annuities
and pensions from contracts issued to groups
Property and casualty insurance
Banking, investment management and other
financial services
Not allocated to segments (1)

Total assets

Total revenue

2006

2005

2006

2005

3,914,456

3,975,728

724,401

609,367

832,719
230,041

788,075
188,803

327,162
58,535

279,147
44,785

1,549,887
199,451
6,726,554

1,416,207
27,994
6,396,807

207,098
1,650
1,318,846

197,665
27,008
1,157,972

(1) Includes associated company, income tax and pension plan balances attributable to more than one

business segment.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

INVESTMENT PROPERTY

The movement in investment property for the year is as follows:

Balance, beginning of year
Additions at cost
Transfers to real estate developed for resale
Transfers to property, plant & equipment
Disposals
Appreciation in fair values
Effects of exchange rate changes
Balance, end of year

2006
181,586
3,043
(2,551)
(9,017)
(8,977)
18,602
(1,530)
181,156

2005
179,015
8,873
(5,849)
-
(336)
1,710
(1,827)
181,586

Investment property includes $37,302 (2005 - $43,552) which represents the Group’s proportionate interest in 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
United Nations House, Marine Gardens, Christ Church
BET Building, Wildey, St Michael

Trinidad & Tobago:
Ernst & Young Building, Sweet Briar Road, Port-of-Spain

Percentage owned
by the Group

50%
50%
33%
25%
10%

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

2006
2,084
886
4,492
47

2005
4,830
553
3,588
221

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

PROPERTY, PLANT AND EQUIPMENT

Net book value, beginning of year
Additions at cost
Transfers from investment property
Transfers to intangible assets
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, 2006

Owner-

Furnishings
occupied & leasehold
properties improvements

Office
equipment
& vehicles

Leased
vehicles &
equipment

91,263
980
9,017
-
(261)
1,579
(1,447)
(383)
100,748

10,036
10,200
-
-
(41)
-
(2,283)
(119)
17,793

27,224
8,135
-
(2,270)
(666)
-
(8,090)
(300)
24,033

19,725
7,290
-
-
(3,134)
-
(5,400)
-
18,481

Total

148,248
26,605
9,017
(2,270)
(4,102)
1,579
(17,220)
(802)
161,055

102,792
(2,044)
100,748

41,455
(23,662)
17,793

82,084
(58,051)
24,033

28,154
(9,673)
18,481

254,485
(93,430)
161,055

Year ended December 31, 2005

Owner-

Furnishings
occupied & leasehold
properties improvements

Office
equipment
& vehicles

Leased
vehicles &
equipment

6,939
5,333
2,113
(2,349)
-
(1,886)
(114)
10,036

20,264
7,671
7,497
(461)
-
(7,162)
(585)
27,224

16,089
10,322
-
(2,094)
-
(4,592)
-
19,725

Total

131,562
23,865
9,610
(5,723)
4,896
(15,020)
(942)
148,248

31,629
(21,593)
10,036

77,261
(50,037)
27,224

28,318
(8,593)
19,725

229,188
(80,940)
148,248

Net book value, beginning of year
Additions at cost
Assumed on 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

88,270
539
-
(819)
4,896
(1,380)
(243)
91,263

91,980
(717)
91,263

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

PROPERTY, PLANT AND EQUIPMENT (continued)

Additions to and depreciation of property, plant and equipment by geographical segment are as follows:

Barbados
Jamaica
Trinidad & Tobago
USA
Other Caribbean
Not allocated to segments

Additions

Depreciation

2006

2005

2006

2005

16,591
1,770
3,289
1,258
3,628
69
26,605

16,998
3,819
1,089
260
1,695
4
23,865

9,993
3,170
1,266
718
2,062
11
17,220

9,163
2,872
1,097
342
1,546
-
15,020

Owner-occupied property includes $2,972 which represents the Group’s proportionate interest in joint ventures set
out below.

Description of property

Belize:
Belize Insurance Centre, North Front Street, Belize City

Grenada:
The Mutual / Trans-Nemwil Office Complex, The Villa, St George’s

Percentage owned
by the Group

50%

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

INVESTMENT IN ASSOCIATED COMPANIES

Investment, beginning of year
Additions
Income from ordinary activities
Amortisation of intangible assets which were identified on acquisition
Income taxes
Dividends received
Effects of exchange rate changes
Investment, end of year

2006
49,829
1,327
5,455
(987)
(16)
(1,948)
11
53,671

2005
24,276
25,280
3,473
-
(16)
(3,102)
(82)
49,829

The investment in associated companies and the income from ordinary activities by geographical segment are as
follows:

Barbados
Jamaica
Trinidad & Tobago
Other Caribbean

Investment in associated
companies

Income from ordinary
activities

2006
249
81
28,128
25,213
53,671

2005
253
85
24,775
24,716
49,829

2006
(4)
-
3,373
2,086
5,455

2005
40
68
3,365
-
3,473

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

2006
586,047
406,736
176,527
21,951

2005
447,823
284,502
34,099
10,321

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

10.

INTANGIBLE ASSETS

(a) Analysis and changes for the year

Goodwill

Customer
relationships

Year ended December 31, 2006
Trade
names

Software

Total

Net book value, beginning of year
as restated
Transfer from property, plant
and equipment
Additions at cost
Amortisation and other charges
Effects of exchange rate changes
Net book value, end of year

Represented by:
Cost
Accumulated amortisation and
charges

121,406

98,076

11,663

9,042

240,187

-
-
(1,965)
(1,145)
118,296

-
-
(6,092)
(3,328)
88,656

-
-
(4,238)
(353)
7,072

2,270
4,456
(4,198)
(178)
11,392

2,270
4,456
(16,493)
(5,004)
225,416

120,261

99,274

14,777

22,031

256,343

(1,965)
118,296

(10,618)
88,656

(7,705)
7,072

(10,639)
11,392

(30,927)
225,416

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

10.

INTANGIBLE ASSETS (continued)

Net book value, beginning of year
Additions at cost
Assumed on acquisitions
Identified on acquisitions:
PCFS (note 38.1)
EBA (note 38.2)
First Life (note 38.3)
Laurel Life (note 38.4)
Cayman General (note 38.5)
Disposals
Amortisation charge
Effects of exchange rate changes
Net book value, end of year

Represented by:
Cost
Accumulated amortisation

Net book value,
as previously stated
Adjustment for disposal of
goodwill (note 38)
Adjustment for valuation of
intangible assets (note 38)
Net book value, as restated

(b) Geographical segment information

Customer
relationships
-
-
-

Year ended December 31, 2005
Trade
names
-
-
-

Software
3,223
6,117
1,207

63,798
33,803
-
724
8,088
-
(4,763)
(3,574)
98,076

15,212
-
-
-
656
-
(3,803)
(402)
11,663

-
106
-
-
659
-
(2,050)
(220)
9,042

Goodwill
100,124
-
-

5,814
16,385
3,856
1,965
3,688
(8,099)
-
(2,327)
121,406

Total
103,347
6,117
1,207

84,824
50,294
3,856
2,689
13,091
(8,099)
(10,616)
(6,523)
240,187

121,406
-
121,406

102,884
(4,808)
98,076

15,340
(3,677)
11,663

14,318
(5,276)
9,042

253,948
(13,761)
240,187

120,350

106,892

13,049

10,214

250,505

(8,099)

9,155
121,406

(8,816)
98,076

(1,386)
11,663

(1,172)
9,042

(2,219)
240,187

Barbados
Jamaica
Trinidad & Tobago
USA
Other Caribbean
Not allocated to segments

Goodwill

2006
45,266
40,822
9,831
-
22,377
-
118,296

2005
45,266
41,958
9,840
1,965
22,377
-
121,406

Additions to
intangible assets
2005
2006
2,539
1,485
3,578
1,387
-
-
-
1,406
-
82
-
96
6,117
4,456

Amortisation of
intangible assets
2005
2006
896
1,448
9,720
10,519
-
5
-
2,915
-
1,606
-
-
10,616
16,493

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

10.

INTANGIBLE ASSETS (continued)

Goodwill arising on past acquisitions is reviewed by cash generating unit (CGU). The recoverable amount of
each CGU is determined either by its value in use or by its fair value less costs to sell.

A CGU’s value in use is estimated using cash flow projections prepared by management. Detailed cash flow
projections are prepared for three years and are extrapolated for subsequent years.

The fair value of a CGU is estimated by capitalising its expected earnings over time.

Cash flow discount factors, residual growth rates and earnings multiples utilised in the assessment of
recoverable amounts were as follows:

Cash Flow
discount factor

2006
Cash flow
residual
Growth rate

Barbados
Jamaica
Trinidad & Tobago
Other Caribbean

13.3%, 14.7%
21.2%
n/a
14.6%

4.5%
7.0%
n/a
3.5%

Earnings
multiples

8.67
4.48, 5.30
8.01
7.70, 8.54

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

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

December 31, 2006
Fair
Value

Carrying
Value

December 31, 2005
Fair
Value

Carrying
Value

6,503

6,451

4,062

3,984

2,461,493
326,667
2,788,160

2,308,667
397,174
2,705,841

175,437
47,549
222,986

150,884
43,261
194,145

658,288
492,018
251,782
245,880
44,640
339,387
2,031,995

661,479
490,533
251,782
245,880
44,640
339,387
2,033,701

677,084
420,600
254,993
235,133
69,029
171,960
1,828,799

712,053
419,406
254,993
235,133
69,029
171,960
1,862,574

Total financial investments

5,049,644

5,051,298

4,732,847

4,766,544

Debt securities comprise:

Government debt securities
Corporate debt securities
Collateralised mortgage obligations
Other securities

2006
2,058,119
657,180
480,452
105,970
3,301,721

2005
1,943,775
612,692
475,636
108,594
3,140,697

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

11. FINANCIAL INVESTMENTS (continued)

11.1 Analysis of financial investments (continued)

Debt securities include $46,900 (2005 - $49,452) and policy loans include $60,824 (2005 - $62,930) in assets
held in trust for a reinsurer. The Group earns no income on these assets.

Debt securities include $14,893 (2005 - $12,733) that contain options to convert to common shares of the
issuer.

Corporate debt securities include:

(i) convertible loans totalling $9,543 (2005 - $1,548) issued to the Group by an associated company. These

loans can be converted into equity or bonds issued by the associated company.

(ii) $23,833 (2005 - $25,598) in bonds issued by an associated company.

Equity securities include $12,503 (2005 - $12,526) in mutual funds managed by the Group.

11.2 Pledged assets

Debt securities include $78,440 (2005 – $82,330) held in trust supporting reinsurance liabilities assumed. The
Group manages these investments and bears the investment risk.

Debt and equity securities include $40,993 (2005 - $55,749) as collateral for loans payable.

The collateral for other funding instruments from the Federal Home Loan Bank (FHLB), consists of an equity
holding in the FHLB with market value of $10,622 (2005 - $12,026), and mortgages and mortgage backed
securities having a total market value of $247,792 (2005 - $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, 2006, these pledged assets totalled $949,662 (2005 - $904,302). Of these assets pledged as
security $378,151 (2005 – $394,706) 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

Deposits:
FirstCaribbean International Bank

2006

2005

1,447,125
585,506
164,796

1,322,041
576,354
208,154

164,049

9,211

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

11. FINANCIAL INVESTMENTS (continued)

11.4 Effective interest rates

Debt securities
Mortgage loans
Policy loans
Finance loans and finance leases
Securities purchased under agreements to resell
Deposits

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

2006
9.4%
8.2%
8.3%
11.6%
11.4%
4.8%

2005
11.6%
7.7%
9.7%
12.9%
9.1%
5.2%

December 31, 2006
Repayable
between
one and
five years

Repayable
after
five years

966,468
38,478
89,593
-
25,418
1,119,957

1,955,405
441,908
62,889
-
3,171
2,463,373

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

Repayable
within
one year

379,848
11,632
93,398
44,640
310,798
840,316

Repayable
within
one year

235,775
7,965
81,163

69,029
134,326
528,258

Total

3,301,721
492,018
245,880
44,640
339,387
4,423,646

Total

3,140,697
420,600
235,133

69,029
171,960
4,037,419

Policy loans are repayable either at the discretion of the policyholder or on termination of the policy.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

11. FINANCIAL INVESTMENTS (continued)

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 and certain deposit administration contracts.

Debt securities
Equity securities
Mortgage loans
Securities purchased under agreements to resell

11.7 Allowances for impairment losses

Mortgage loans
Debt securities
Finance loans and finance leases

2006
130,301
44,089
87,317
4,903
266,610

2006
5,728
14,608
4,947
25,283

2005
125,899
35,520
82,504
6,706
250,629

2005
5,222
14,826
5,710
25,758

Interest of $6,557 (2005 - $3,645) has been accrued on impaired financial investments.

12. REINSURANCE ASSETS

Reinsurers’ share of:
Actuarial liabilities (note 16.1)
Policy benefits in the course of settlement (note 17.2)
Provision for unearned premiums (note 17.3)
Other items

2006

2005

552,941
42,003
35,886
12,548
643,378

605,995
43,483
24,662
12,508
686,648

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.

The reinsurers’ share of actuarial liabilities and claim recoveries from reinsurers include the following significant
balances:

Scottish Re (U.S.) Inc - rated B (Fair) by A.M. Best
Washington National Insurance Company
- rated B++ (Good) by A.M. Best

2006
337,442

2005
366,900

190,522

211,532

The reinsurers’ share of liabilities held by Scottish Re is secured by assets held in trust by a third party totalling
$296,745 and by the Group (see note 11.1).

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

13.

INCOME TAX ASSETS

Deferred income tax assets (note 34)
Income and withholding taxes recoverable

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

2006
8,451
28,214
36,665

2005
8,226
27,485
35,711

2006
2,008
25,802
55,852
6,028
110,512
200,202

2005
2,195
23,498
52,517
10,722
113,956
202,888

Real estate developed for resale includes $17,675 (2005 - $8,611) which is expected to be realised after one year.

Real estate developed for resale includes $6,323 (2005 - $4,628) 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

2006
31,204

2005
72,440

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

16. ACTUARIAL LIABILITIES

16.1 Analysis of actuarial liabilities

Gross liability

Reinsurers’ share

2006

2005

2006

2005

(a) Life insurance, annuities and health insurance -

contracts issued to individuals:
Life - participating polices
Life and annuity - non-participating policies
Health
Unit linked funds
Reinsurance contracts held

(b) Life insurance, annuities and health insurance -

contracts issued to groups:
Life
Annuities
Health

559,078
1,635,984
7,903
178,980
12,114
2,394,059

537,231
1,689,997
7,192
169,151
18,910
2,422,481

50,560
266,933
35,616
353,109

54,704
282,565
31,447
368,716

6,554
441,662
3,179
-
-
451,395

4,790
95,858
898
101,546

6,302
483,188
2,666
-
-
492,156

7,157
106,428
254
113,839

Total actuarial liabilities

2,747,168

2,791,197

552,941

605,995

The following notes are in respect of the above:

(cid:129) Life insurance includes coverage for disability and critical illness.
(cid:129) Actuarial liabilities include $305,419 (2005 - $368,271) in assumed reinsurance.
(cid:129) Liabilities for reinsurance contracts held occur because the reinsurance premium costs exceed the

mortality costs assumed in determining the gross liability of the policy.

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

16. ACTUARIAL LIABILITIES (continued)

16.2 Movement in actuarial liabilities

The movement in actuarial liabilities for the year is as follows:

Gross amount

Reinsurers’ share

2006

2005

2006

2005

Balance, beginning of year as restated
(note 43)
Transfers
Amounts assumed on acquisitions
Change in actuarial liabilities (note 30)
Effect of exchange rate changes
Balance, end of year

2,791,197
1,804
-
(35,135)
(10,698)
2,747,168

1,485,042
-
1,254,825
66,379
(15,049)
2,791,197

The change in gross liability by geographical segment is as follows:

Barbados
Jamaica
Trinidad & Tobago
USA
Other Caribbean

16.3 Assumptions

605,995
-
-
(53,062)
8
552,941

2006
8,170
25,321
7,207
(91,794)
15,961
(35,135)

2,889
-
609,373
(6,267)
-
605,995

2005
28,834
8,660
31,374
(1,624)
(865)
66,379

(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.

100

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

16. ACTUARIAL LIABILITIES (continued)

(b) Assumptions for mortality and morbidity

Mortality rates are related to the incidence of death in the insured population. Morbidity rates are related to the
incidence of sickness and disability in the insured population.

For the 2006 valuation, certain insurers 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 (Canadian Institute of Actuaries (CIA) 1986
– 1992 tables) 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 CIA tables
or to other established scales.

Assumptions for morbidity are determined after taking into account insurer and industry experience and
established guidelines from Actuarial Institutes.

(i) Change in assumption and prior year adjustment

For the 2006 valuation, the AA reviewed the approach for determining the mortality assumption for the former
Life of Barbados Limited insurance policies which were transferred into the opening participating fund on
February 1, 2005 (the date of amalgamation of Sagicor Life Inc and Life of Barbados Limited). It was concluded
that the use of a specific mortality assumption for these insurance policies provides a closer representation of
best estimate than the use of a combined mortality assumption derived from a wider grouping of insurance
policies. This conclusion is supported by actuarial practice and is consistent with the terms of the open
participating fund as described in the Scheme of Amalgamation of Sagicor Life Inc and Life of Barbados
Limited. Accordingly, revised mortality assumptions were adopted for these open participating policies and for
the other policies in the wider grouping of insurance policies referred to above. These changes have resulted
in a restatement of the actuarial liabilities from February 1, 2005, and are reflected in the restated amounts for
the year ended December 31, 2005 as summarised in note 43.

Lapses relate to the forced termination of policies due to non-payment of premium or to the voluntary
termination of policies by policyholders.

Lapse studies were performed by certain insurers for the 2006 valuation, to determine the most recent
experience of persistency. Appropriate rates of termination by policy duration were determined and applied in
the actuarial valuation.

101

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

16. ACTUARIAL LIABILITIES (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 the valuation date, all
investments, except policy loans, are reinvested in long-term, default free government bonds.

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

2006
URR
5.0%
7.0%
5.0%
4.0% - 4.75%
5.0%

(e) Assumptions for operating expenses and taxes

Policy acquisition and policy maintenance expense costs for long-term business of each insurer are measured
and monitored using internal expense studies. Policy maintenance expense costs are reflected in the actuarial
valuation after adjusting for expected inflation. Costs were updated for the 2006 valuation and were applied on
a per policy basis.

(i) Change in assumption and prior year adjustment

For the 2006 valuation, the AA reviewed the approach for determining the inflation assumption for the former
Life of Barbados Limited insurance policies which were transferred into the opening participating fund on
February 1, 2005 (the date of the amalgamation of Sagicor Life Inc and Life of Barbados Limited). The rate of
inflation and the methodology for applying the inflation assumption were changed for consistency to those
applied to the policies in the closed participating funds. These changes in rate and methodology have resulted
in a restatement of actuarial liabilities of the open participating insurance polices from February 1, 2005, and is
reflected in the restated amounts for the year ended December 31, 2005 as summarised in note 43.

(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.

102

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

16. ACTUARIAL LIABILITIES (continued)

(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

(h) Health insurance

2006

46,479
36,903
108,572
20,976
212,930

2005
Restated
50,337
34,864
162,908
25,627
273,736

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 from the balance sheet
date.

(i) Movement in actuarial liabilities arising from changes in assumptions

The increase in actuarial liability for the year includes the effects arising from changes in assumptions.

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 total effect of changes in assumptions and actuarial modelling are as follows.

Decrease in actuarial liabilities

2006
(103,206)

2005
(68,577)

Significant specific changes in assumptions and actuarial modelling which represent more than 5% of actuarial
liabilities at the beginning of the year are set out below.

Increase in actuarial liabilities arising from the introduction of
margins on equity securities and real estate supporting policy liabilities

2006

2005

76,400

103

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

16. ACTUARIAL LIABILITIES (continued)

16.4 Sensitivity analysis

(a) Sensitivity arising from the valuation of actuarial liabilities

The valuation of actuarial liabilities is sensitive to:

(cid:129) the economic scenario used in CALM,
(cid:129) the investments allocated to back the liabilities,
(cid:129) the underlying assumptions used, and
(cid:129) 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:

(cid:129) Operating expenses and taxes
(cid:129) Lapse
(cid:129) Mortality and morbidity

104

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

16. ACTUARIAL LIABILITIES (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
(cid:129) 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;

(cid:129) to alert management to material, plausible and imminent threats to the insurer’s solvency;
(cid:129) and to describe possible courses of action to address these threats.

Full DCAT testing has not yet been completed for certain insurers. However, limited sensitivity tests have been
completed in accordance with DCAT scenarios for the following insurers:

(cid:129) Sagicor Life Inc;
(cid:129) Life of Jamaica Limited;
(cid:129) Sagicor Life of the Cayman Islands Limited;
(cid:129) Sagicor Capital Life Insurance Company Limited;
(cid:129) Capital Life Insurance Company Bahamas Limited;
(cid:129) Nationwide Insurance Company Limited.

These insurers have net actuarial liabilities totalling $1,619,331 or 74% of the Group total.

105

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

16. ACTUARIAL LIABILITIES (continued)

The results are as follows.

(i) Worsening rate of lapse. The scenario was tested in either of the following ways:

(cid:129) For business which produces higher valuation reserves with an increase in lapse rates, the scenario

lapse rates were increased. For business which produces higher valuation reserves with a decrease in
lapse rates, the scenario lapse rates were reduced.

(cid:129) The business was tested by applying a factor of 1.1 and 0.9 to the existing lapse rates. The 0.9 factor

produced the higher valuation reserve and was included in the results.

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 – 0.5% per year for 10

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.

(vi) Level new business. New business planned for 2007 was maintained for the 5 year period. Overall, this

scenario has no effect on the 2006 liabilities.

(vii) Double new business. New business planned for the 5 year period was projected to grow at twice the rate
of growth anticipated in the base scenario. Overall, this scenario has no effect on the 2006 liabilities.

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.

106

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

16. ACTUARIAL LIABILITIES (continued)

The following table represents the estimated sensitivity of each of the above scenarios to net actuarial liabilities
totalling $1,619,331 at balance sheet date.

Scenario

(i) Worsening rate of lapse
(ii) High interest rate
(iii) Low interest rate
(iv) Worsening mortality / morbidity
(v) Higher expenses
(vi) Level new business
(vii) Double new business

2006
(Increase)/decrease in
net actuarial liability

(58,378)
328,484
(159,171)
(53,560)
(75,094)
-
-

17. OTHER INSURANCE LIABILITIES

17.1 Analysis of other insurance liabilities

Dividends on deposit and other policy balances
Policy benefits in the course of settlement
Provision for unearned premiums

17.2 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:

2006
121,750
113,080
70,572
305,402

2005
116,685
109,596
56,967
283,248

Life insurance and annuity benefits
Health claims
Property and casualty claims

Gross liability

Reinsurers’ share

2006
70,536
2,019
40,525
113,080

2005
64,826
1,140
43,630
109,596

2006
21,700
2,630
17,673
42,003

2005
20,377
851
22,255
43,483

Health claims include $1,648 (2005 - $315) in provisions for claims incurred but not yet reported. Property and
casualty claims include $8,209 (2005 – $8,744) in provisions for claims incurred but not yet reported.

107

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

17. OTHER INSURANCE LIABILITIES (continued)

(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, as restated
(note 43)
Amounts assumed on acquisitions
Policy benefits incurred (note 30)
Policy benefits paid
Effect of exchange rate changes
Balance, end of year

Gross amount

Reinsurers’ share

2006

2005

2006

2005

109,596
-
621,915
(616,677)
(1,754)
113,080

150,908
33,022
432,607
(505,028)
(1,913)
109,596

43,483
-
112,457
(113,206)
(731)
42,003

90,883
10,263
44,456
(101,238)
(881)
43,483

The method for computing the provision for claims incurred but not reported for property and casualty business
was changed in 2006. The change provides a more comprehensive assessment of the provision. It was applied
retroactively and resulted in increases in the gross liability of $6,822 as of December 31, 2004 and of $7,049 as
of December 31, 2005. The reinsurers’ share of the liability decreased by $2,029 as of December 31, 2004 and
by $913 as of December 31, 2005. These restatements are summarised in note 43.

17.3 Provision for unearned premiums

(a) Analysis of provision for unearned premiums

The provision for unearned premiums arises from:

Property and casualty insurance
Health insurance

Gross liability

Reinsurers’ share

2006

2005

2006

2005

68,026
2,546
70,572

53,857
3,110
56,967

35,886
-
35,886

24,662
-
24,662

108

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

17. OTHER INSURANCE LIABILITIES (continued)

(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, as restated
(note 43)
Amounts assumed on acquisitions
Premiums written
Premium revenue
Effect of exchange rate changes
Balance, end of year

Gross amount

Reinsurers’ share

2006

2005

2006

2005

56,967
-
190,533
(176,914)
(14)
70,572

35,636
21,131
99,869
(97,931)
(1,738)
56,967

24,662
-
107,841
(96,636)
19
35,886

6,950
15,003
38,207
(35,325)
(173)
24,662

The method for computing the reinsurers’ share of the provision for unearned premiums for property and
casualty business was adjusted in 2006 to exclude the effects of calendar year reinsurance treaties. The
adjustment was applied retroactively and resulted in decreases of $6,449 as of December 31, 2004 and of $8,627
as of December 31, 2005 in the reinsurers’ share of the provision for unearned premiums. These restatements
are summarised in note 43.

18.

INVESTMENT CONTRACT LIABILITIES

Deposit administration liabilities
Other investment contracts

18.1 Deposit administration liabilities

The effective interest rate of deposit administration liabilities is as follows:

Effective interest rate

2006

2005

352,388
89,321
441,709

340,615
85,546
426,161

2006

7.8%

2005

7.8%

Deposit administration liabilities represent pension fund balances on deposit which are long term in nature and
which are generally expected to be settled after one year.

109

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

18.

INVESTMENT CONTRACT LIABILITIES (continued)

18.2 Other investment contract liabilities

The effective interest rate and contractual maturity profile of other investment contract liabilities are as
follows:

Effective interest rate

Contractual maturity profile:
Repayable on demand or within one year
Repayable between one and five years
Repayable after five years

19. SENIOR NOTES AND LOANS PAYABLE

7.5% senior notes due 2016
Bank loans

2006

7.9%

48,698
10,917
29,706
89,321

2005

8.9%

52,828
15,459
17,259
85,546

December 31, 2006
Fair
Value

Carrying
Value

December 31, 2005
Fair
Value

Carrying
Value

293,030
28,035
321,065

305,955
28,035
333,990

-
160,728
160,728

On May 12, 2006, Sagicor Finance Limited issued US$ 150 million senior notes which are guaranteed by the Company
and another subsidiary. The notes are repayable 10 years after issue and the rate of interest is fixed for the duration.
The notes are traded and are listed on the Luxembourg Euro MTF Market.

Bank loans are secured either by portfolios of investment securities or by the holdings in subsidiaries.

The effective interest rate and contractual maturity profile of senior notes and loans payable are as follows:

Effective interest rate

Contractual maturity profile:
Repayable within one year
Repayable between one and five years
Repayable after five years

110

2006

7.4%

19,292
11,788
289,985
321,065

2005

4.9%

132,168
28,560
-
160,728

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

20. DEPOSIT AND SECURITY LIABILITIES

Other funding instruments:
Loans for mortgage financing
Loans for development financing
Loans from commercial banks
Deposits:
Customer deposits
Securities:
Securities sold under agreements to
repurchase
Bank overdrafts
Total deposit and security liabilities

December 31, 2006
Fair
Value

Carrying
Value

December 31, 2005
Fair
Value

Carrying
Value

247,585
31,003
11,081

254,547
31,003
11,121

252,704
31,042
12,496

250,792
31,042
12,451

246,315

227,504

948,836
5,963
1,490,783

948,836
5,963
1,497,785

907,987
8,712
1,440,445

907,987
8,712
1,438,488

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 $3,558 (2005
– $6,054).

(a) Significant concentrations

Other funding instruments:

Federal Home Loan Bank (FHLB)

(b) Effective interest rates

Other funding instruments
Deposits
Securities

2006

2005

241,310

252,704

2006
6.1%
7.1%
9.3%

2005
5.6%
7.3%
10.0%

111

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

20. DEPOSIT AND SECURITY LIABILITIES (continued)

Other funding instruments
Deposits
Securities
Bank overdrafts

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

112

2006

Repayable
between
one and
five years

35,582
70,100
703
-
106,385

2005

Repayable
between
one and
five years

41,886
47,952
107
-
89,945

Repayable
within
one year

164,580
156,550
943,689
5,963
1,270,782

Repayable
within
one year

154,103
163,665
907,880
8,712
1,234,360

Repayable
after
five years

89,507
19,665
4,444
-
113,616

Repayable
after
five years

100,253
15,887
-
-
116,140

2006
35,925
5,205
41,130

2006
14,868
22,487
37,355

Total

289,669
246,315
948,836
5,963
1,490,783

Total

296,242
227,504
907,987
8,712
1,440,445

2005
34,080
3,366
37,446

2005
10,938
20,020
30,958

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

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

2006
3,299
135,533
7,217
111,282
257,331

2005
2,331
139,046
11,956
120,557
273,890

Amounts due to reinsurers include $107,724 (2005 – $112,382) due to a reinsurer in respect of assets held in trust
by the Group (see note 11.1).

24. SHARE CAPITAL

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.

Issued and fully paid common shares:
Balance, beginning of year
Allotments
Balance, end of year

Treasury shares:
Shares acquired by ESOP trustees

Year ended December 31,
2006

Year ended December 31,
2005

Number of
shares
‘000

$000

265,553
1,432
266,985

458,451
5,652
464,103

260,030
5,523
265,553

$000

432,495
25,956
458,451

(798)

(3,633)

Total share capital

266,187

460,470

265,553

458,451

The Company’s shares are listed on the Barbados and Trinidad stock exchanges. On February 14, 2007, the Company’s
shares were listed on the London stock exchange.

113

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

25. RESERVES

Fair value reserves

Year ended December 31, 2006

Balance, beginning of year,
as restated (note 43)

Unrealised gains arising on
revaluation, net of taxes
Gains transferred to income on
disposal and impairment
Retranslation of foreign operations
Net gains/(losses) recognised
directly in equity
Value of employee services
rendered
Net change for the year

Available
for sale
assets

Owner
occupied
property

Currency
translation
reserve

112,013

17,771

(32,878)

9,378

1,290

(9,799)
-

-
-

-
(12,744)

(421)

1,290

(12,744)

Share
based
payment
reserves

-
-

-
39
(382)

-
-
1,290

-
-
(12,744)

2,944
-
2,944

-
(1,422)
(1,422)

Statutory
reserves

Total

9,620

106,526

-
-

10,668

(9,799)
(12,744)

(11,875)

2,944
(1,383)
(10,314)

Balance, end of year

111,631

19,061

(45,622)

2,944

8,198

96,212

Year ended December 31, 2005

Fair value reserves

Available
for sale
assets

Owner
occupied
property

Currency
translation
reserve

Statutory
reserves

Total

Balance, beginning of year

172,920

12,971

(25,486)

7,289

167,694

Unrealised gains arising on revaluation,
net of taxes
(Gains)/losses transferred to income on
disposal and impairment
Gains transferred to retained earnings
on disposal
Retranslation of foreign operations
Net gains/(losses) recognised directly
in equity
Net change for the year

4,967

4,896

(65,874)

5,732(1)

-
-

(96)
-

-
(13,124)

-
-

(60,907)
-
(60,907)

4,800
-
4,800

(7,392)
-
(7,392)

-
2,331
2,331

9,863

(60,142)

(96)
(13,124)

(63,499)
2,331
(61,168)

Balance, end of year

112,013

17,771

(32,878)

9,620

106,526

(1) Restated amount (see notes 38 and 43).

114

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

26. PARTICIPATING ACCOUNTS

The movements in the participating accounts during the year were as follows:

Balance, beginning of year:
As previously stated
Prior year adjustments (see below)
As restated
Net unrealised gains arising on available for
sale investment securities
Transfer from retained earnings to support the
profit distribution to shareholders
Return of transfer to support profit distribution
to shareholders
Return of seed capital to retained earnings
Net income/(loss) for the year
Balance, end of year

Closed participating
account

Open participating
account

2006

2005

2006

2005

13,964
(3,424)
10,540

-
-
3,773
14,315

779
(712)
67

235

-
-
10,238
10,540

20,683
(10,303)
10,380

(511)
-
(4,379)
5,490

609
-
609

13,994

(498)
(5,500)
1,775
10,380

During 2006, management reviewed the mechanisms for valuing policies in the participating funds and for accounting
for these funds.

In notes 16.3(b)(i) and 16.3(e)(i), valuation changes are described to insurance policies included in the participating
funds. These changes have also given rise to a decrease of $2,298 in 2005 of income attributable to the closed
participating account and a decrease of $8,865 in 2005 of income attributable to the open participating account.

The review also considered the method for allocating investment income derived from the assets backing the
ancillary fund components of the two participating funds. In prior years this income was included in the income of the
participating funds. Management has now determined that this income should be excluded from the income of the
participating funds because it is the responsibility of the general operations of Sagicor Life Inc to support the ancillary
funds in the two participating funds. This change is also consistent with the terms of the Demutualization Scheme,
the Scheme of Amalgamation of Sagicor Life Inc and Life of Barbados Ltd, and with actuarial practice. Accordingly,
the allocation of investment income for the ancillary funds has been restated from the establishment of the first
ancillary fund. In 2005, the change gave rise to a decrease of $620 in income attributable to the closed participating
account and a decrease of $3,134 in income attributable to the open participating account.

Other consequential changes have given rise to increases in 2005 income of $206 and $1,202 attributable to the
closed and open participating accounts respectively. Prior year changes to the participating accounts are also
summarised in note 43.

115

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

26. PARTICIPATING ACCOUNTS (continued)

The amounts in the financial statements relating to participating funds are as follows:

Assets
Liabilities
Revenues
Benefits
Expenses
Income taxes

27. PREMIUM REVENUE

Life insurance
Annuities
Health insurance
Property and casualty insurance

Closed participating
fund

Open participating
fund

2006
184,817
170,502
21,857
14,569
3,137
378

2005
181,104
170,564
20,589
6,208
3,573
570

2006
424,241
418,751
70,299
55,659
17,337
1,682

2005
403,784
393,404
68,045
44,197
20,615
1,458

Gross revenue

2006
463,205
112,183
227,095
134,923
937,406

2005
392,303
85,302
197,039
74,063
748,707

Reinsurance expense
2005
2006
57,726
75,016
122
730
8,452
11,324
45,389
95,092
111,689
182,162

Gross revenue includes $38,377 (2005 - $24,640) in reinsurance assumed.

28. NET INVESTMENT INCOME

Income:
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
Rental income from investment property
Net fair value gains on investment property
Foreign exchange translation and trading
Other investment income

116

2006

2005

284,681
35,843
15,346
26,423
8,056
12,790
271
383,410
12,551
40,530
10,690
18,628
5,739
6,018
477,566

242,360
28,071
14,184
25,431
10,735
8,619
509
329,909
12,432
78,189
11,179
1,710
4,461
1,825
439,705

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

28. NET INVESTMENT INCOME (continued)

Income (page 116)

Expenses
Allowances for impairment losses
Direct operating expenses of investment property
Other direct investment expenses

Net investment income

Interest from debt securities includes $2,648 (2005 - $2,881) from an associated company.

29. FEES AND OTHER REVENUE

Fee income – assets under administration
Fee income – deposit administration and policy funds
Commission income on insurance and reinsurance contracts
Other fees and commission income
Other operating and miscellaneous income

30. POLICY BENEFITS AND CHANGE IN ACTUARIAL LIABILITIES

2006

2005

477,566

439,705

365
2,610
3,559
6,534

15,608
2,430
6,252
24,290

471,032

415,415

2006
23,393
5,749
22,680
15,411
19,882
87,115

2005
19,792
5,762
16,687
17,038
17,672
76,951

Policy benefits:

Life insurance benefits
Annuity benefits
Health insurance claims
Property & casualty insurance claims

Total policy benefits
Change in actuarial liabilities (note 16.2)
Total policy benefits and change in actuarial liabilities

Gross amount

Reinsurers’ share

2006

2005

2006

2005

258,844
164,820
165,606
32,645
621,915
(35,135)
586,780

219,788
58,676
134,128
20,015
432,607
66,379
498,986

47,873
45,338
6,705
12,541
112,457
(53,062)
59,395

27,242
2,634
8,782
5,798
44,456
(6,267)
38,189

Gross policy benefits include $42,342 (2005 - $23,085) arising from reinsurance assumed.

31.

INTEREST EXPENSE

Insurance contracts
Investment contracts
Other funding instruments
Deposits
Securities
Other Items

2006
5,319
35,002
17,309
16,163
82,793
2,153
158,739

2005
6,107
32,060
5,801
14,598
87,418
1,885
147,869

117

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

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

2006
111,539
8,540
3,436
688
4,978
1,756
130,937

2005
91,272
7,082
6,773
1,026
4,672
1,403
112,228

The total number of administrative staff at December 31 was 1,764 persons (2005 – 1,627 persons).

32.1 Equity compensation benefits

(a) The Company

Effective December 31, 2005, the company introduced a Long Term Incentive (LTI) plan for designated executives
of the Sagicor Group and an Employee Share Ownership Plan (ESOP) for permanent administrative employees
and sales agents of the Group. A total of 26,555,274 common shares of the Company (or 10% of shares then in
issue) have been set aside for the purposes of the LTI plan and the ESOP.

(i) LTI plan

Share options and restricted share grants have been granted to designated key management of the Group
during the year.

Options are granted at the fair market price of the shares at the time that the option is granted. 25% of the
options each vest on the first, second, third and fourth anniversaries of the grant date. Options are exercisable
up to 10 years from the grant date.

Restricted share grants have been granted to designated key management of the Group during the year. Share
grants may vest over a four year period beginning at the grant date. The vesting of share grants is conditional
upon the relative profitability of the Group as compared to a number of peer companies. Relative profitability
is measured with reference to the financial year preceding the vesting date.

118

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

32. EMPLOYEE BENEFITS (continued)

The movement in share options and restricted share grants during the year is as follows:

Balance, beginning of year
Granted during the year
Vested during the year
Balance, end of year
Exercisable at the end of the year

Share options

Restricted share grants

Number of
options
‘000
-
932
-
932
-

Weighted

average Number of
grants
exercise
‘000
price
-
-
305
B$ 3.95
(91)
-
214
B$ 3.95
-
-

Weighted
average
fair value

-
B$ 3.95
B$ 3.95
B$ 3.95
-

Further details of share options and the assumptions used in determining their pricing are as follows:

Share price at grant date
Fair value of options at grant date
Expected volatility
Expected life
Expected dividend yield
Risk-free interest rate

Share options
B$3.95
B$1.38
35.8%
7.0 years
3.0%
6.0%

Effective December 31, 2005 and during 2006, the Company authorised further compensation to designated
key management which, at the option of the recipient, could be settled either in cash or in shares issued by the
Company, or by a combination of cash and shares. During 2006, 1,342,000 common shares were issued to key
management out of the compensation awarded. These shares were issued at the market price prevailing at the
exercise dates for a total value of $5,294.

(ii) ESOP

During the year, the Company approved an award under the ESOP in respect of permanent administrative
employees and sales agents of the Company and Sagicor Life Inc. The ESOP is administered by Trustees under
a discretionary trust. The amount awarded is used by the Trustees to acquire company shares. Administrative
employees and sales agents are required to serve a qualifying period of five years from the award date in
order to qualify as a beneficiary. Shares are distributed to beneficiaries upon their retirement or termination of
employment.

During the year, 798,000 common shares have been acquired by the Trustees in order to satisfy current and
future awards.

119

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

32. EMPLOYEE BENEFITS (continued)

(iii) Expense

The expense recorded in the income statement in respect of the LTI plan and ESOP totalled $2,395.

(b) Life of Jamaica Limited (LOJ)

Effective May 1, 2003, LOJ instituted a share based plan for executives. 150,000,000 ordinary shares (or 5% of
the authorised share capital at that date) have been set aside for the plan.

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

2006

Weighted

2005

Number of
options
‘000
19,045
4,047
23,092
9,682

average Number of
options
exercise
‘000
price
14,959
J$ 6.14
4,086
J$ 8.00
19,045
J$ 8.81
3,739
J$ 7.39

Weighted
average
exercise
price
J$ 5.13
J$ 9.86
J$ 6.14
J$ 9.86

Further details of share options outstanding at December 31, 2006 are as follows:

Fair value of options outstanding
Weighted average share price at grant date
Exercise price
Standard deviation of expected share price returns
Weighted average remaining contractual term
Risk-free interest rate

Share options

J$15,463,000
J$ 2.70
J$ 2.30 – 5.67
34.0%
3 years
13.7%

The total expense recorded in the income statement in respect of the share option plan totalled $179 (2005
– $292).

LOJ has in place a share purchase plan which enables its administrative and sales staff to purchase shares at a
discount. The proceeds from shares issued under this plan totalled $3,245 (2005 - $4,754).

120

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

32. EMPLOYEE BENEFITS (continued)

PCFS offers share options to employees who have completed the minimum eligibility period of employment.
Options are conditional on the employee completing a minimum service period of one year. Options are
forfeited if the employee leaves PCFS before the options vest. PCFS share options were granted as follows:

(i) 450,000 share options on February 7, 2002. These expired on December 31, 2006. The shares in respect of
these options have been issued by PCFS and are held in an Employee Share Option Trust. The exercise price for
these options is J$4.55. The remaining 290,000 of these options were taken up during the year.

(ii) 17,220,000 share options on March 8, 2004. These options expire on December 31, 2007. The exercise price
for these options is J$10. The options were vested December 31, 2006. 7,500,000 of these options were vested
and exercised in prior years. A further 5,168,000 vested options were exercised in 2006.

(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 February 28, 2009. The exercise price
for the options is J$36.50. The options vest over four years – 25% on each anniversary date of the grant. 600,000
of these options were forfeited and contracts for 450,000 were cancelled. 150,000 of the share options vested
on March 1, 2006.

(v) 1,200,000 share options on March 1, 2006. These options expire on February 28, 2010. The exercise price
for the options is J$19.29. The options vest over four years – 25% on each anniversary date of the grant.

The movement in share options was as follows:

Balance, beginning of year
Assumed on acquisition
Options granted
Options exercised
Options lapsed/forfeited
Balance, end of year
Exercisable at the end of the year

2006

Weighted

2005

Number of
options
‘000
11,210
-
1,200
(5,458)
(1,050)
5,902
4,702

average Number of
options
exercise
‘000
price
-
J$ 12.70
11,887
-
1,200
J$ 19.29
(1,817)
J$ 9.71
(60)
J$ 36.50
11,210
J$ 12.56
7,510
J$ 10.85

Weighted
average
exercise
price
-
J$ 9.80
J$ 36.50
J$ 10.00
J$ 4.55
J$ 12.70
J$ 10.20

The weighted average share price at the date of exercise for options exercised during the year was J$18.95.

121

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

32. EMPLOYEE BENEFITS (continued)

Further details of share options outstanding at December 31, 2006 are as follows:

Share options
J$ 32,400,000
J$ 13.18
J$ 10.00 - 36.50
30.0%
2 years
13.7%

The total expense recorded in the income statement in respect of the share option plan totalled $ 364 (2005
– $ 656).

32.2 Employee retirement benefits

Certain Group subsidiaries have contributory defined benefit pension schemes in place for eligible administrative
staff. Some subsidiaries also offer medical and life insurance benefits that contribute to the health care and life
insurance coverage of retirees and beneficiaries.

The amounts recognised in the balance sheet are determined as follows:

Fair value of retirement plan assets
Present value of retirement obligations

Unrecognised actuarial (gains)/losses
Amounts recognised in the balance sheet

Represented by:
Asset balances
Liability balances

Other retirement
benefits

Pension benefits

2006
130,680
(163,592)
(32,912)
6,606
(26,306)

2005
116,780
(138,051)
(21,271)
(4,326)
(25,597)

2006
1,939
(14,421)
(12,482)
4,871
(7,611)

2,008
(28,314)
(26,306)

2,195
(27,792)
(25,597)

-
(7,611)
(7,611)

2005
-
(9,117)
(9,117)
2,829
(6,288)

-
(6,288)
(6,288)

Included in liability balances are interest bearing deposit administration fund balances totalling $33,690 (2005
- $31,422) representing employee pension plan funds on deposit with the Group.

122

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

32. EMPLOYEE BENEFITS (continued)

The amounts recognised in the income statement are determined as follows:

Current service cost
Interest cost
Net actuarial (gains)/losses recognised during
the year
Past service cost
Expected return on retirement plan assets
Total cost

Pension benefits

2006

2005

5,608
12,697

2,096
348
(15,771)
4,978

5,322
10,519

123
696
(11,988)
4,672

Other retirement
benefits

2006

872
1,109

(6)
-
(219)
1,756

2005

734
670

(1)
-
-
1,403

The actual return on retirement plan assets was $14,488 (2005 – $10,573).

The movement in the amounts recognised in the balance sheet is as follows:

Pension benefits

Other retirement
benefits

2006

2005

2006

2005

Amounts recognised, beginning of year
Amounts recognised on subsidiaries acquired
Total cost
Contributions made
Effects of exchange rate changes
Amounts recognised, end of year

(25,597)
-
(4,978)
4,210
59
(26,306)

(24,531)
452
(4,672)
3,043
111
(25,597)

(6,288)
-

(1,756)
160
273
(7,611)

(5,149)
(110)
(1,403)
154
220
(6,288)

The principal actuarial assumptions used were as follows:

Pension benefits

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
Long term increase in health costs

Jamaica

Trinidad &
Tobago

12.0%
14.0%
9.5%
3.5%

0.0%

0.0%
n/a

8.0%
8.0%
6.5%
1.5%

0.0%

2.5%
n/a

Other
retirement
benefits

Jamaica
12.0%
14.0%
9.5%
n/a

Barbados &
other
countries
6.0% - 8.0%
6.0% - 8.0%
2.3% - 6.5%
2.0% - 2.5%

0.0%

n/a

2.5% - 3.5%
n/a

n/a
11.0%

123

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

33.

INCOME TAXES

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

2006
27,566
236
16
27,818

2006
124,852
29,428
154,280

2005
17,514
6,516
16
24,046

2005
66,083
13,034
79,117

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 relating to the origination of temporary differences
Deferred tax (income) expense relating to changes in tax rates
and the imposition of new taxes
Deferred tax income that arises from the reversal of a write down
of a deferred tax asset
Tax on distribution of profits from policyholder funds
Other taxes

2006
154,280

28,797
(8,597)

10
1,963
(203)
1,325

2005
79,117

13,091
(3,813)
(1,353)
(131)
10,549
(315)

(97)

695

(1,958)
3,002
3,576
27,818

552
3,526
1,245
24,046

124

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

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
Unrealised gains on available for sale investments
Other items
Total (Note 22)

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

2006

2005

1,411
7,436
(396)
8,451

1,332
7,693
(799)
8,226

2006

2005

3,344
372
134
1,373
6,999
2,646
14,868

2006
7,537
11,836

2,192
372
75
397
5,884
2,018
10,938

2005
8,606
7,516

The Group has not recognised potential deferred income tax assets of $44,847 (2005 – $36,950) arising from
unrecognised tax losses of $148,389 (2005 - $118,207).

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. Due to a recently
announced change in income tax rules to eliminate tax on overseas dividends, no tax liability is expected to arise in
the future.

125

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

35. EARNINGS AND DIVIDENDS PER COMMON SHARE

35.1 Earnings per common share

The basic earnings per common share is computed by dividing the net income for the year attributable to
shareholders by the weighted average number of common shares in issue during the year, excluding treasury
shares.

The computation of diluted earnings per common share recognises the dilutive impact of LTI share grants and
share options and of ESOP shares grants.

2006

2005
Restated

2005
Previously
stated

Net income for the year attributable to shareholders

135,325

121,455

136,562

Weighted average number of shares in issue in thousands
LTI restricted share grants
ESOP shares
Adjusted weighted average number of shares in issue

266,514
70
6
266,590

263,937
-
-
263,937

Basic earnings per common share

50.8 cents

46.0 cents

51.7 cents

Fully diluted earnings per common share

50.8 cents

46.0 cents

51.7 cents

35.2 Dividends per common share

In respect of the financial year 2005, the Company declared dividends totalling 12 cents per common share. The
interim dividend was 6 cents which was declared and paid in 2005. The final dividend was 6 cents which was
declared and paid in 2006.

In respect of the financial year 2006, the Company declared dividends totalling 13 cents per common share.
The interim dividend was 6 cents which was declared and paid in 2006. The final dividend was 7 cents which
was declared on April 4, 2007.

126

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

36. CASH FLOWS

The components of certain items in the cash flow statement are as follows:

OPERATING ACTIVITIES

2006

2005

Adjustments for non-cash items, interest and dividends
Interest and dividend income
Net gains on financial investments and investment property
Gain on business combinations and acquisitions
Net increase in actuarial liabilities
Interest expense
Depreciation and amortisation
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
Other assets and receivables

(395,961)
(59,158)
-
17,927
177,578
34,700
13,713
(211,201)

2006
5,999
(86,200)
56,168
(72,375)
(1,172)
(16,908)
22,171
(30,210)
1,485
(121,042)

(342,341)
(79,899)
(25,115)
72,646
153,140
25,636
18,691
(177,242)

2005
(2,688)
(144,400)
78,181
(38,153)
(303)
(53,623)
272,529
42,623
60,218
214,384

127

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

36. CASH FLOWS (continued)

The gross changes in investment property, debt securities and equity securities are as follows.

Investment property
2005

2006

Debt securities

2006

2005

Equity securities
2006

2005

Disbursements
Disposal proceeds

(3,043)
9,042
5,999

(8,873) (1,538,210)
1,452,010
6,185
(86,200)
(2,688)

(675,475)
531,075
(144,400)

(58,953)
115,121
56,168

(171,860)
250,041
78,181

Changes in operating liabilities
Insurance liabilities
Investment contract liabilities
Other funding instruments
Customer deposits
Securities sold under agreements to repurchase
Other liabilities and payables

INVESTING ACTIVITIES

Property, plant and equipment
Purchases
Disposal proceeds

FINANCING ACTIVITIES

Senior notes and 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

128

2006
10,897
19,866
(4,798)
25,397
77,158
(3,383)
125,137

2005
(14,578)
18,438
(4,977)
48,674
6,740
(87,507)
(33,210)

2006

2005

(26,605)
3,915
(22,690)

(23,865)
5,570
(18,295)

2006

2005

319,969
(161,670)
158,299

162,905
(18,911)
143,994

2006

2005

163,078
357,597
(5,963)
514,712

117,105
165,949
(8,712)
274,342

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

37. ASSETS AND LIABILITIES BY CURRENCY

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
Other insurance liabilities
Investment contract liabilities

Other liabilities
Senior notes and loans payable
Deposit and security liabilities
Provisions
Income tax liabilities
Accounts payable and accrued
liabilities
Total liabilities

Barbados
$

Balances denominated in
Trinidad
$

Jamaica
$

US
$

Other
currencies

2006

Total

101,078
82,753
249
48,593
679,801
12,474
5,275

39,454
17,118
81
133,413
1,094,055
2,115
22,066

40,548
24,937
28,128
9,829
479,699
14,130
576

-
9,424
-
3,450
2,407,730
570,428
4,636

76
26,823
25,213
30,131
388,359
44,231
4,112

181,156
161,055
53,671
225,416
5,049,644
643,378
36,665

55,386
29,104
1,014,713

52,641
23,453
1,384,396

12,918
18,204
628,969

63,674
47,866
3,107,208

15,583
56,740
591,268

200,202
175,367
6,726,554

686,837
121,845
110,159
918,841

-
99,431
12,892
7,180

273,032
64,338
104,720
442,090

-
532,426
11,248
20,772

369,292
29,701
131,599
530,592

1,198,142
41,201
43,452
1,282,795

219,865
48,317
51,779
319,961

2,747,168
305,402
441,709
3,494,279

88
-
7,393
7,327

320,977
829,260
609
(12)

-
29,666
8,988
2,088

321,065
1,490,783
41,130
37,355

28,888
1,067,232

45,248
1,051,784

15,158
560,558

131,281
2,564,910

36,756
397,459

257,331
5,641,943

Net position

(52,519)

332,612

68,411

542,298

193,809

1,084,611

129

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

37. ASSETS AND LIABILITIES BY CURRENCY (continued)

LIABILITIES
Policy liabilities
Actuarial liabilities
Other insurance liabilities
Investment contract liabilities

Other liabilities
Senior notes and loans payable
Deposit and security liabilities
Provisions
Income tax liabilities
Accounts payable and accrued
liabilities
Total liabilities

Barbados
$

98,699
78,663
253
48,507
700,281
6,501
5,907
37,169
29,920
1,005,900

Balances denominated in
Trinidad
$

Jamaica
$

US
$

Other
currencies

2005

Total

33,678
18,782
85
156,009
1,003,742
4,247
22,083
64,534
12,389
1,315,549

38,641
20,790
24,775
9,847
484,632
10,004
300
14,363
6,120
609,472

7,191
5,369
-
3,447
2,164,149
623,564
5,690
45,800
44,666
2,899,876

3,377
24,644
24,716
22,377
380,043
42,332
1,731
41,022
25,768
566,010

181,586
148,248
49,829
240,187
4,732,847
686,648
35,711
202,888
118,863
6,396,807

671,532
105,132
106,349
883,013

-
85,571
12,851
3,098

263,537
19,102
127,471
410,110

-
513,912
8,938
18,080

355,924
28,801
121,318
506,043

1,304,632
58,912
22,392
1,385,936

195,572
71,301
48,631
315,504

2,791,197
283,248
426,161
3,500,606

-
861
5,851
4,579

160,728
817,406
1,226
2,516

-
22,695
8,580
2,685

160,728
1,440,445
37,446
30,958

25,549
1,010,082

52,076
1,003,116

7,916
525,250

191,898
2,559,710

(3,549)
345,915

273,890
5,444,073

Net position

(4,182)

312,433

84,222

340,166

220,095

952,734

130

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

38. ACQUISITIONS

During 2005, the Group acquired control of:

(cid:129)
(cid:129)

(cid:129)
(cid:129)
(cid:129)

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) and now renamed Sagicor General
(Cayman) Limited.

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 $12,938. The gain reflects differences
in the values of shares issued to the minority interest shareholders and in their share of the net assets after the
transaction. The goodwill and currency translation attributable to the 18% interest have also been charged against
the gain and are reflected in these financial statements as a prior year adjustment of $13,831 to revenue, $8,099 to
goodwill and $5,732 to currency translation (see notes 10, 25 and 43).

The Group also acquired an interest in an associated company, FamGuard Corporation Limited (Family Guardian).

In 2005, the Group accounted for the above acquisitions provisionally. Adjustments have now been incorporated in
these financial statements, resulting in a decrease of $2,219 in the carrying amounts of goodwill and other intangible
assets (see note 10). Finalised details of the above acquisitions are set out below.

131

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

38. ACQUISITIONS (continued)

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.

The fair values of the net assets acquired, the purchase consideration and the goodwill arising on the January
7 acquisition are set out below.

Acquiree’s
Total fair value carrying value
January 2005

January 2005

2,920
25,227
1,237,064
5,069
17,086
24,898
(1,091,279)
(16,838)
(21,425)
182,722

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

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

132

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

38. ACQUISITIONS (continued)

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

90,976

643
14,537
939
62,856
78,975

12,001

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 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

133

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

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

Acquiree’s
(restated) carrying value

167
-
63,065
338
9,297
4,713
(24,662)
(25,458)
(10,129)
(1,767)
(234)
(3,898)
11,432

167
33,908
63,065
338
9,297
4,713
(24,662)
(25,458)
(10,129)
(1,767)
(234)
(4,082)
45,156

11,419
739
49,383
61,541

16,385

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.

134

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

38. ACQUISITIONS (continued)

(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

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:
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 (note 10)

Total fair value

Acquiree’s
(restated) carrying value

11,813
40
47
1,355
508
(9,045)
(4,101)
(617)
-

3,856

In Jamaica, it is common for shares of listed financial services entities to trade above their related book values.
The individual life insurance business was acquired from a listed Jamaica company. The goodwill recognised in
this transaction is therefore a reflection of market conditions and the further synergies which the acquisition
brings to the Group.

(b) Details of acquiree’s net income

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.

135

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

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 (now renamed Sagicor 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)

Total fair value

Acquiree’s
(restated) 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

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 acquiree’s 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.

136

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

38. ACQUISITIONS (continued)

38.5 Cayman General

(a) Details of acquisition

On November 30, 2005, 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

Total fair value

Acquiree’s
(restated) carrying value

2,250
372
103
33,489
16,254
23,291
(28,266)
(24,830)
22,663

2,250
9,776
103
33,489
16,254
23,291
(28,266)
(24,828)
32,069
16,355

20,043
3,688

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 was not coterminous with the Group and the information is not readily available.

137

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

38. ACQUISITIONS (continued)

38.6 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 arising on acquisition

2005
(restated)
20,916
24,838
3,922

The market value, as determined by the listed price of Family Guardian’s shares, of the Group’s shareholding
amounted to $24,200 as of December 31, 2005. At acquisition date, a strategic alliance with Family Guardian
was formalised through which the Group anticipates benefits from future operational synergies.

(b) Details of net income and fair value

The Group has not recognised any net income or loss between the acquisition date and December 31, 2005.

39. COMMITMENTS

Effective December 1, 2006, Sagicor Capital Life Insurance Company Limited entered into a transfer and assumption
agreement to acquire an insurance portfolio in the Netherlands Antilles and Aruba. The agreement is subject to
regulatory approvals. The liabilities to be assumed are estimated at $78,225 and the effective purchase price is
estimated at $5,336.

In the normal course of business, the Group has entered into commitments at balance sheet date for which no
provision has been made in these financial statements. Such commitments include the following:

Loan advances
Expenditure on real estate
Operating lease agreements and rental payments
Customer guarantees and letters of credit

2006
94,745
5,980
11,778
9,182

2005
44,824
19,229
8,543
6,751

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.

138

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

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 in Jamaica. The
design of a Universal Life policy is such that on realistic assumptions, the fund value built-up from premiums paid
and from investment earnings is required in later years to pay the administrative costs and mortality charges.

A review of the Universal Life policies portfolio in Jamaica revealed that approximately 17,000 policies were affected
by fund values which were insufficient to cover these costs through the life of the policies.

Once the problem was recognised, the company initiated discussion with the Regulators, the Financial Services
Commission (FSC), as a result of which the affected policyholders were given the opportunity to reduce their existing
coverage under the policies or to increase the premiums at their expense. More than 90% of these policyholders have
already agreed to adjustments to their policies.

The Group estimates that less than 1% of the affected policyholders have filed complaints with the FSC, which
carried out investigations and made a submission to the company. The FSC suggested a number of alternatives to
remedy the problem.

The Group is in discussions with the FSC on the matter. The cost, if any, of resolving this issue cannot be quantified
at this time.

139

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

41. ASSETS UNDER ADMINISTRATION

In the ordinary course of business, the Group manages assets of pension funds, mutual funds, unit trusts and other
assets which are not included in the group’s balance sheets. The invested and cash assets under administration by
geographical segment are as follows:

Barbados
Jamaica
Trinidad & Tobago
Other Caribbean

42. RELATED PARTY TRANSACTIONS

(a) Key management

2006

2005

724,245
1,471,107
20,104
75,023
2,290,479

733,565
1,333,611
17,600
69,878
2,154,654

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
Effects of exchange rate changes
Balance, end of year

2006
24,344
2,724
1,110
28,178

Other
loans
791
117
(445)
(14)
449

2005
17,196
6,773
401
24,370

Total
loans
6,499
2,309
(995)
(14)
7,799

Mortgage
loans
5,708
2,192
(550)
-
7,350

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 4% to 8%. Other loans bear interest at rates from 5% to 11%.

(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, 2006 amounted to $132,997 (2005 - $116,806)
and are included in the assets under administration referred to in note 41.

140

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

42. RELATED PARTY TRANSACTIONS (continued)

In 2005, 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 which are set out
in note 38, First Jamaica holds a 25% interest in LOJ and is a significant minority interest. Because of the size of
this shareholding, First Jamaica is considered to be a related party. As of December 31, the Group has the following
balances with First Jamaica:

Financial investments
Accounts receivable
Accounts payable

2006
8,890
3,000
6,362

2005
4,970
7,856
6,138

141

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

43. RESTATEMENT AND RECLASSIFICATION

Adjustments to intangible assets, policy liabilities, participating accounts and gains arising on business combinations,
have been applied retroactively as indicated in notes 10, 16.3, 17.2, 17.3, 26 and 38 respectively.

Reclassification has also been made to some prior year numbers to conform to the current year reporting.

The effect of these changes to the 2005 balance sheet, 2005 income statement and 2004 balance sheet is summarised
in the following tables.

December 31, 2005

Effect of changes to

Previously
stated

Business
combinations

Policy
liabilities

Restatement &
reclassification
Ancillary
fund
interest

Other

250,505
696,188
5,470,500
6,417,193

2,777,231
276,199
2,370,156
5,423,586

458,451
100,794
188,304
747,549
34,647
211,411
993,607

(10,318)
-
-
(10,318)

-
-
-
-

-
5,732
(13,969)
(8,237)
-
(2,081)
(10,318)

-
(9,540)
-
(9,540)

13,966
7,049
-
21,015

-
-

(12,978)
(12,978)
(9,755)
(7,822)
(30,555)

-
-
-
-

-
-
4,466
4,466
(4,466)
-
-

-
-
(528)
(528)

-
-
(494)
(494)
494
-
-

Total

240,187
686,648
5,469,972
6,396,807

2,791,197
283,248
2,369,628
5,444,073

458,451
106,526
165,329
730,306
20,920
201,508
952,734

Balance sheet
Intangible assets
Reinsurance assets
Other items
Total assets

Actuarial liabilities
Other insurance liabilities
Other items
Total liabilities

Share capital
Reserves
Retained earnings
Total shareholders’ equity
Participating accounts
Minority interest
Total equity

142

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

43. RESTATEMENT AND RECLASSIFICATION (continued)

December 31, 2005

Effect of changes to

Previously
stated

Business
combinations

Policy
liabilities

Restatement of
ancillary fund interest

Total

Income statement
Gains arising on business
combinations and
acquisitions
Other items
Total revenue

38,946
1,135,035
1,173,981

(13,831)
-
(13,831)

Net policy benefits and
change in actuarial liabilities
Other items
Total benefits and expenses

447,720
502,606
950,326

-
138
138

-
(2,178)
(2,178)

13,077
-
13,077

223,655
(24,046)
199,609

(13,969)
-
(13,969)

(15,255)
-
(15,255)

Income from ordinary
activities
Income taxes
Net income for the year

Net income attributable to:
Shareholders
Participating policyholders
Minority interest

-
-
-

25,115
1,132,857
1,157,972

460,797
502,744
963,541

194,431
(24,046)
170,385

136,562
25,522
37,525
199,609

(13,969)
-
-
(13,969)

(4,892)
(9,755)
(608)
(15,255)

3,754
(3,754)
-
-

121,455
12,013
36,917
170,385

143

Sagicor Financial Corporation

NOTES TO THE FINANCIAL STATEMENTS

Year ended December 31, 2006

Amounts expressed in Barbados $000

43. RESTATEMENT AND RECLASSIFICATION (continued)

Balance sheet
Reinsurance assets
Other items
Total assets

Other insurance liabilities
Other items
Total liabilities

Share capital & reserves
Retained earnings
Total shareholders’ equity
Participating accounts
Minority interest
Total equity

Previously
stated

109,200
3,028,687
3,137,887

272,240
2,105,859
2,378,099

600,189
93,079
693,268
1,388
65,132
759,788

December 31, 2004

Effect of changes to
policyliabilities

Restatement of
ancillary fund interest

(8,478)
-
(8,478)

6,822
-
6,822

(8,086)
(8,086)
-
(7,214)
(15,300)

-
-
-

-
712
712
(712)
-
-

Total

100,722
3,028,687
3,129,409

279,062
2,105,859
2,384,921

600,189
85,705
685,894
676
57,918
744,488

144

Sagicor Financial Corporation

Executive Management

Mr Dodridge D Miller, FCCA, MBA, LLM

Mr Dodridge Miller was appointed President and Chief
Executive Officer of The Mutual Group of Companies,
now Sagicor, on July 1, 2002, having previously held the
positions of Treasurer and Vice President, Finance and
Investments, Deputy Chief Executive Officer and Chief
Operating Officer.

Mr Miller joined the Group in 1989. He was elected a
Director of The Mutual Group in 2001. He is the Chairman
of the Group’s main operating subsidiaries, Sagicor Life
Inc, Life of Jamaica Limited and Sagicor Life Insurance
Company.

Mr Miller is a Fellow of the Association of Chartered
Certified Accountants (United Kingdom), and obtained
his MBA from the University of Wales and Manchester
Business School, United Kingdom. He holds an LLM in
Corporate and Commercial Law from the University of the
West Indies. He has more than 20 years’ experience in the
insurance and financial services industries.

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 Chairman of Red Stripe and the National Water
Commission.

Mrs Patricia Downes-Grant
President and Chief Executive Officer Sagicor Life Inc

Dr. Patricia Downes-Grant was appointed President and
Chief Executive Officer on January 1, 2006, having served
as Group Chief Operating Officer, since July 1, 2002. 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 Chief Executive
Officer.

She holds an MBA in Finance, an MA in Economics, and a
Doctorate in Business Administration (Finance).

joining Sagicor, Dr. Downes-Grant was a
Prior to
Senior Manager
the Management, Consulting
and Insolvency Division of Coopers & Lybrand (now
PricewaterhouseCoopers). Dr. Downes-Grant has also had
significant work experience in development banking. She
is a former Chairman of the Barbados Stock Exchange and
Barbados Central Securities Depository and a Director of
several companies within Sagicor and the private sector
of Barbados.

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.

145

Sagicor Financial Corporation

Executive Management

Mr J. Andrew Gallagher, FSA, FCIA
Chief Risk Officer

Ms. Maxine MacLure, BSc, MEd, MBA
President and CEO, Sagicor USA Inc.

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.

Ms. Maxine MacLure was appointed President and CEO of
Sagicor USA in 2004. In September 2005, she successfully
completed the Group’s acquisition of its first US life
insurance subsidiary, American Founders Life (AFLIC)
and oversaw its integration into the Sagicor Group. 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 the Sagicor Group, Ms. MacLure was General
Manager of Insurance for the Jamaican Government, and
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. She also spent seven years as a
Senior Government Financial Sector Regulator in Canada.

Ms. MacLure has am Masters degree in Education from
Western Washington University in the United States, 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.

Mr Philip N. W. Osborne BSc, FCA
Chief Financial Officer

Mr Osborne has held senior finance positions in life
insurance for over 17 years, having joined Life of Barbados
Limited (then a Barbados based life insurer) in 1989.
Subsequently in 1996, he was appointed a Director of
Life of Barbados and remained so through its acquisition
by and its eventual amalgamation with Sagicor Life Inc.
Mr Osborne was appointed Chief Financial Office for
the Group in 2003. He is currently a director of three
subsidiaries in the Sagicor Group and of Almond Resorts
Inc., a publicly listed company in Barbados.

Mr Osborne is a U.K. trained chartered accountant and
has worked in professional accounting firms in London
and Barbados over a ten year period. He also holds a
BSc in Mathematics with Computer Science from the
University of London.

146

Sagicor Financial Corporation

Ms. Sandra Osborne, S.C.M., BSc, LLB, FCIS
Executive Vice President, General Counsel and Secretary

Mrs Melba Smith, BA
Vice President, Corporate Communications

Mrs Melba Smith is a Communications professional with
over 25 years’ experience in business communication,
public relations and management. Prior to joining Sagicor
in 2002 as Vice President, Corporate Communications,
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, and is a member of the International
Association of Business Communicators.

Ms. Sandra Osborne is an Attorney-at-Law and Chartered
Secretary who joined Sagicor in 1989. She has almost 30
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. Ms. Osborne
holds a BSc (Hons) in Political Science and an LLB (Hons)
from the University of the West Indies 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.

147

Sagicor Financial Corporation

Advisors and Bankers

Appointed Actuary
Sylvain Goulet, FCIA, FSA, MAAA, Affiliate Member of the

(British) Institute of Actuaries

Auditors
PricewaterhouseCoopers, Chartered Accountants

Legal Advisors
Allen & Overy LLP, New York, USA
Allen & Overy LLP, London, United Kingdom
Carrington & Sealy, Barbados
Patterson K H Cheltenham, QC, LLM, Barbados
Barry L V Gale, QC, LB (Hons), Barbados
Hobsons, Trinidad and Tobago
Shutts & Bowen LLP, Florida, USA

Bankers
Butterfield Bank (Barbados) Limited
FirstCaribbean International Bank Limited
RBTT Bank Limited
The Bank of Nova Scotia

148

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

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

Montserrat
Administered by Antigua Branch

St Vincent
Incorporated Agencies Limited
Kenmars Building, Halifax Street
Kingstown
Tel: (784) 456-1159
Fax: (784) 456-2232

149

Sagicor Financial Corporation

Offices

Curaçao
Schottegatweg Oost #11
Tel: (599) 9 736-8558
Fax: (599) 9 736-8575
Email: capital.life@curinfo.an

SAGICOR 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

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

SAGICOR 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

150

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

GLOBE FINANCE INC
6 Rendezvous Court, Rendezvous Main Road
Christ Church, Barbados
Tel: (246) 426-4755
Fax: (246) 426-4772
Website: www.globefinanceinc.com

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

SAGICOR GENERAL INSURANCE (CAYMAN) 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

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

THE MUTUAL FINANCE INC
Sagicor Financial Centre
Choc Estate, Castries, St Lucia
Tel: (758) 452-4272
Fax: (758) 452-4279

SAGICOR FUNDS INCORPORATED
Sagicor Corporate Centre, Wildey
St Michael, Barbados
Tel: (246) 467-7500
Fax: (246) 436-8829
Email: info@sagicor.com

SAGICOR ASSET MANAGEMENT INC
Sagicor Corporate Centre
Wildey, St Michael,
Barbados
Tel: (246) 467-7500
Fax: (246) 426-1153
Email: info@sagicor.com

Other Subsidiaries/Associated Companies

SAGICOR INTERNATIONAL MANAGEMENT SERVICES,
INC
1511 North West Shore Blvd, Suite 820
Tampa, Florida 33607-4543,
USA
Tel: (813) 287-1602
Fax: (813) 287-7420
Website: www.globalsure.com

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

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

151

Sagicor Financial Corporation

NOTICE OF ANNUAL MEETING

NOTICE is hereby given that the Fourth Annual Meeting of Shareholders of Sagicor Financial Corporation (“the Company”)
will be held at Hilton Barbados, Needham’s Point, St Michael, Barbados, Tuesday June 26, 2007 at 5.30 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, 2006 and

the Auditors’ Report thereon.

2. To elect Directors.

3. To re-appoint the incumbent Auditors for the ensuing year and to authorize Directors to fix their remuneration.

4. To consider and if thought advisable adopt the following resolution:

WHEREAS it is considered expedient and in the best interests of the Company to amend Bylaw No. 1 of the Company (“the
Bylaws”):

BE IT RESOLVED that the following amendments to the Bylaws made by the Directors on March 16, 2007 be and are hereby
confirmed without amendment:
(a) the repeal of Bylaw 3.6 and the consequential renumbering of Bylaws 3.7 to 3.17 as Bylaws 3.6 to 3.16;
(b) the insertion in place of Bylaw 9 of a new Bylaw 9 as set out in Schedule 1 to this Notice which is incorporated by

reference herein;

5. To consider and if thought advisable adopt the following resolution:

BE IT RESOLVED that Directors’ remuneration be and is hereby fixed at the following amounts with effect from January
1, 2007:
(a) US $45,000 per annum for the Non-Executive Chairman of the Board
(b) US $40,000 per annum for a Non-Executive Director
(c) US $7,000 per annum for the Non-Executive Chairman of a Board Committee
(d) US $5,000 per annum for a Non-Executive Director serving on a Board Committee.

6. To transact such other business as may properly come before the Meeting.

By Order of the Board of Directors

Sandra Osborne
Corporate Secretary

June 1, 2007

152

PROXIES:

Sagicor Financial Corporation

Shareholders who are unable to attend the Meeting in person may complete and return the enclosed form of proxy to
either:
(cid:129)

the Corporate Secretary, Sagicor Financial Corporation, Sagicor Corporate Centre, Wildey, St Michael, Barbados,
or
the Corporate Secretary, Sagicor Financial Corporation, c/o Sagicor Life Inc, Sagicor Financial Centre, 16 Queen’s
Park West, Port of Spain, Trinidad, or
the Branch Registrar, Computershare Investor Services (Channel Islands) Limited, Ordinance House, 31 Pier
Road, St Helier, Jersey, Channel Islands,

(cid:129)

at least 48 hours before the appointed time of the Meeting or adjourned Meeting.

DOCUMENTS INCLUDED IN SCHEDULES TO NOTICE OF MEETING:

1 The new Bylaw 9 is set out in Schedule 1 to the Notice of the Meeting.

2 Repealed Bylaws 3.6, 9 and 12.3 are set out in Schedule 2 to the Notice of the Meeting.

3 The complete Bylaws as amended on March 16, 2007 are set out in Schedule 3 to the Notice of the Meeting.

DOCUMENTS AVAILABLE FOR INSPECTION:

1 Copies of the original Bylaws enacted December 6, 2002 and the Bylaws as amended on March 16, 2007 are available

for inspection on the Company’s website www.sagicor.com and at the following offices:
(cid:129)
(cid:129)

Sagicor Financial Corporation, Sagicor Corporate Centre, Wildey, St Michael, Barbados
Sagicor Life Inc’s Branch Offices/Agencies:
o Sagicor Financial Centre, 16 Queen’s Park West, Port of Spain, Trinidad
o Malliouhana Insurance Co Ltd, Caribbean Commercial Centre, The Valley, Anguilla
o Sagicor Financial Centre, 9 Factory Road, St John’s, Antigua
o Willcher Services Inc, 44 Hillborough Street, Corner Hillsborough & Independent Street, Roseau, Dominica
o The Mutual/Trans-Nemwil Office Complex, The Villa, St George’s, Grenada
o Corner Cayon and West independence Square Streets, Basseterre, St Kitts
o Sagicor Financial Centre, Choc Estate, Castries, St Lucia
o
Life of Jamaica Limited, 28-48 Barbados Avenue, Kingston 5, Jamaica
Barbados Central Securities Depositary Inc, First Floor, Hincks Street, Bridgetown, Barbados

(cid:129)
(cid:129)
(cid:129) Computershare Investor Services (Channel Islands) Limited, Ordinance House, 31 Pier Road, St Helier, Jersey,

Incorporated Agencies Limited, Kenmars Building, Halifax Street, Kingstown, St Vincent

Channel Islands

2 There are no service contracts granted by the Company, or its subsidiaries, to any Director of the Company.

153

Sagicor Financial Corporation

SCHEDULE 1 TO NOTICE OF MEETING

(New Bylaw 9)

9 – Securities

9.1

9.2

9.3

9.4

9.5

9.6

9.7

9.8

9.9

Allotment – Subject to the Act, the articles and any unanimous shareholder agreement, the directors may from time
to time allot, issue and grant options to purchase any part of the authorized and unissued shares of the Company at
such times and to such persons or class of persons and for such consideration and on such terms and conditions
as the directors shall determine provided that no share shall be issued until it is fully paid as prescribed by the
Act.

Commissions – The directors may from time to time authorise the Company to pay a commission to any person
in consideration of his purchasing or agreeing to purchase shares of the Company, whether from the Company or
from any other person, or procuring or agreeing to procure purchasers for any such shares.

Registers – Securities registers issued by the Company shall be kept at the registered office of the Company or such
other place within or outside Barbados as may from time to time be designated by the directors.

Registration and Deposit of Securities – Without prejudice to the Company’s discretion to keep its securities
registers in such format as it deems fit, the Company may register or deposit securities issued by it with the BCSDI
under the provisions of the Securities Act. The Company may also register or deposit its securities in such other
depositaries as it deems fit and may issue and transfer all or any part of such securities referred to in this Bylaw by
book entries.

Security Certificates – Any issue or transfer of securities may be automatically credited to accounts maintained for
security holders in the register of security holders of the Company and the form of security certificate shall be in
the form of a security holding statement, depositary receipt or such other document showing details of a holder’s
interest in the capital of the Company as may be approved by the directors.

Effect of Later Security Holding Statement – The issue of a security holding statement bearing a later date cancels
and replaces any security holding statement in favour of the same person bearing an earlier date.

Joint Security Holders – If two or more persons are registered as joint holders of any securities the Company shall
not be bound to issue more than one certificate in respect thereof and delivery of such certificate to one of such
persons shall be sufficient delivery to all of them. Any one of such persons may give effectual receipts for the
certificate issued in respect thereof or for any dividend, bonus, return of capital or other money payable or warrant
issuable in respect of such securities.

Deceased Security Holders – In the event of death of a holder or of one of the joint holders of any securities the
Company shall not be required to make any entry in the securities register in respect thereof or to make payment
of any dividends thereon except upon production of all such documents as may be required by law and upon
compliance with the reasonable requirements of the Company and its transfer agents.

Transfers of Securities – Subject to the provisions of the Act and the articles, the directors may from time to time
prescribe the form of transfer constituting a valid instrument of transfer of the securities in the capital of the
Company and may authorise the same for registration as a valid transfer of the number of securities specified
therein.

9.10

Transfer Agents and Registrars – The directors may from time to time appoint a registrar to maintain the securities
register and a transfer agent to maintain the register of transfers and may also appoint one or more branch
registrars to maintain branch securities registers and one or more branch transfer agents to maintain branch
registers of transfers but one person may be appointed both registrar and transfer agent. The directors may at any
time terminate any such appointment.

154

9.11 Disclosure of Interests

Sagicor Financial Corporation

9.11.1 The Company may by notice in writing require any security holder within such reasonable time as is specified in the
notice to indicate in writing the capacity in which he holds any shares in the capital of the Company, and if he holds
them otherwise than as a beneficial owner, to indicate in writing so far as it lies within his knowledge, the person
who has an interest in them (either by name and address or by other particulars sufficient to enable that person to
be identified) and the nature of that person’s interest.

9.11.2 Where the Company is informed in pursuance of a notice given to any person under by-law 9.11.1, that any other
person has an interest in any shares in the capital of the Company, the Company may by notice in writing require
that other person within such reasonable time as specified in the notice to indicate in writing the capacity in which
he holds that interest, and if he holds it otherwise than as a beneficial owner, to indicate in writing so far as it lies
within his knowledge, the person who has an interest in it (either by name and address or by other particulars
sufficient to enable him to be identified) and the nature of that person’s interest.

9.11.3 The Company may by notice in writing require any member of the Company to indicate in writing, within such
reasonable time as is specified in the notice, whether any of the voting rights carried by any shares comprised in the
capital of the Company held by him are the subject of an agreement or arrangement under which another person
is entitled to control his exercise of those rights and, if so, to give, so far as it lies within his knowledge, written
particulars of the agreement or arrangement and the parties to it.

9.11.4 Where the Company is informed, in pursuance of a notice given to any person under by-law 9.11.3 or this by-law,
that any other person is a party to such agreement or arrangement as is mentioned in by-law 9.11.3, the Company
may by notice in writing require that other person within such reasonable time as is specified in the notice to give,
so far as it lies within his knowledge, written particulars of the agreement or arrangement and the parties to it.

SCHEDULE 2 TO NOTICE OF MEETING

(Repealed Bylaw 3.6)

3.6

Nationality and Residence – A majority of the directors must at all times be citizens or permanent residents of and
ordinarily resident in Barbados. At least one director must be a citizen of and ordinarily resident in Jamaica; at least
one director must be a citizen of and ordinarily resident in Trinidad and Tobago and at least one director must be
a citizen of and ordinarily resident in any country in the Eastern Caribbean.

(Repealed Bylaw 9)

9 – Shares

9.1

9.2

9.3

9.4

Registers – Registers of shares, securities and debentures (“securities”) issued by the Company shall be kept at the
registered office of the Company or such other place within Barbados as may from time to time be designated by
the directors.

Registration of Securities – Without prejudice to the Company’s discretion to keep its registers of securities in such
format as it deems fit, the Company may register securities issued by it with the BCSDI under the provisions of the
Securities Act and may issue and transfer such securities by book entries.

155

Sagicor Financial Corporation

9.5

9.6

9.7

9.8

Share Certificates – Any issue of shares may be automatically credited to accounts maintained for shareholders
in the register of shareholders of the Company and the form of share certificate shall be in the form of a
shareholding statement showing details of transactions each time the shareholder acquires or disposes of shares
during the period covered by the statement, or in the form of such a statement sent annually or semi-annually to
shareholders.

Effect of Later Shareholding Statement – The issue by BCSDI of a shareholding statement bearing a later date
cancels and replaces any shareholding statement in favour of the same person bearing an earlier date.

Joint Shareholders – If two or more persons are registered as joint holders of any shares the Company shall not be
bound to issue more than one shareholding statement in respect thereof and delivery of such statement to one
of such persons shall be sufficient delivery to all of them. Any one of such persons may give effectual receipts for
the shareholding statement issued in respect thereof or for any dividend, bonus, return of capital or other money
payable or warrant issuable in respect of such shares.

Deceased Shareholders – In the event of death of a holder or of one of the joint holders of any shares or debentures
the Company shall not be required to make any entry in the securities register in respect thereof or to make payment
of any dividends thereon except upon production of all such documents as may be required by law and upon
compliance with the reasonable requirements of the Company and its transfer agents.

9.9

Issue and Transfer of Shares – No shares may be issued or transferred without the person in whose name the
shares are to be registered furnishing a declaration, if required, as to:

(a)

the identity of the beneficial owner of the shares;

(b) whether the shareholder is an affiliate or associate of any other shareholder or beneficial owner of the shares;

and

(c)

such other information or further facts that the directors consider relevant.

9.10

9.11

Registration of Transfers – Subject to the provisions of the Act and the articles, no transfer of shares shall be
registered in a securities register except upon presentation of a transfer in the form prescribed by the directors
and endorsed thereon or delivered therewith duly signed or executed by the registered holder and the transferee
or by their respective attorney or successor duly appointed, together with such reasonable assurance or evidence
of signature, identification and authority to transfer as the directors may from time to time prescribe, and upon
payment of all applicable taxes and any fees prescribed by the directors, and upon compliance with such restrictions
on transfer as are stipulated or authorized by the articles.

(Repealed Bylaw 12.3)

12.3 Recorded Address – Any shareholder whose address is not in a country that is a member of Caricom (“Caricom
country”) shall provide the Company with a recorded address for service and the payment of dividends within a
Caricom country. If such shareholder fails to do so within six months of being entered on the register of shares
or of acquiring an address outside of a Caricom country, the Company shall not be obliged to send any notice
or dividends to such shareholder until the shareholder provides the Company with a recorded address within
a Caricom country. The secretary may change or cause to be changed the recorded address of any shareholder,
director, officer, auditor or member of a committee of the directors in accordance with any information believed by
him to be reliable.

156

Sagicor Financial Corporation

SCHEDULE 3 TO NOTICE OF MEETING

THE COMPANIES ACT CHAPTER 308

BY-LAW NO. 1

SAGICOR FINANCIAL CORPORATION

Enacted December 6, 2002
Amended March 16, 2007

157

Sagicor Financial Corporation

BY-LAW NO. 1

A by-law relating generally to the conduct of the affairs of

SAGICOR FINANCIAL CORPORATION

(herein called “the Company”)

BE IT ENACTED and it is hereby enacted as a general by-law of the Company as follows:-

1 – Interpretation

1.1

Definitions and Interpretations – In this by-law, and all other by-laws of the Company, unless the context otherwise
specifies or requires:

(a)

“Act” means the Companies Act Chapter 308 as from time to time amended and every statute substituted
therefor and, in the case of such substitutions, any references in the by-laws of the Company to provisions of
the Act shall be read as references to the substituted provisions therefor in the new statute;

(b)

“BCSDI” means the Barbados Central Securities Depository Inc or its successor;

(c)

“by-laws” means any by-law of the Company from time to time in force;

(d)

“dollars” or “$” means Barbados currency and in respect of any other currency a conversion thereto as at the
relevant date;

(e)

“non-business day” means Saturday, Sunday or a day that is a public holiday in Barbados;

(f)

“number of directors” means the number of directors provided for in the articles or, where a minimum and
maximum number of directors is provided for in the articles, the number of directors determined by a special
resolution or resolution passed pursuant to section 59 of the Act;

(g)

“recorded address” means the latest address of a person as shown in the records of the Company;

(h)

(i)

(j)

(k)

(l)

“Regulations” means any regulations made under the Act and every regulation substituted therefor and, in
the case of such substitution, any references in the by-laws of the Company to provisions of the Regulations
shall be read as references to the substituted provisions therefor in the new regulations;

“Securities Act” means the Securities Act, 2001-13 as from time to time amended and every statute substituted
therefor and, in the case of such substitutions, any references in the by-laws of the Company to provisions of
the Securities Act shall be read as references to the substituted provisions therefor in the new statute;

all terms contained in the by-laws and defined in the Act or the Regulations shall have the meanings given to
such terms in the Act or the Regulations;

the singular includes the plural and the plural includes the singular; the masculine gender includes the
feminine and neuter genders; the word “person” includes bodies corporate, companies, partnerships,
syndicates, trusts and any association of persons; and the word “individual” means a natural person;

the headings used in the by-laws are inserted for reference only and are not to be considered or taken into
account in construing the terms or provisions thereof or to be deemed in any way to clarify, modify or explain
the effect of any such terms or provisions.

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2 – Business of the Company

2.1

2.2

2.3

2.4

2.5

Registered Office – The registered office of the Company shall be in Barbados at such address as the directors may
fix from time to time by resolution.

Head Office – The head office of the Company shall be in Barbados at such address as the directors may fix from
time to time by resolution. The Company may also maintain other offices at such other places both within and
outside Barbados as the directors may from time to time determine.

Seal – The common seal of the Company shall be such as the directors may by resolution from time to time
adopt.

Execution of Instruments – Deeds, debentures, mortgages, transfers, assignments, contracts, obligations,
certificates, documents and other instruments executed under seal may be signed on behalf of the Company by
any two directors or by a director together with the secretary or the assistant secretary. In addition, the directors
may from time to time direct the manner in which any particular instrument or class of instruments may or shall be
signed. The directors shall have power from time to time by resolution to appoint any officer or person on behalf of
the Company either to sign contracts, documents and instruments in writing generally or to sign specific contracts,
documents or instruments in writing.

Signatures – The signature of a Chairman, a Vice-Chairman, a Managing Director, a President, a Vice-President,
the Secretary, Assistant Secretary or any director of the Company or any officer or person appointed pursuant to
by-law 2.4 hereof by resolution of the directors, may be printed, engraved, lithographed or otherwise mechanically
reproduced upon any contract, document or instrument in writing, certificate, bond, debenture or other security
of the Company executed or issued by or on behalf of the Company. Any document or instrument in writing on
which the signature of any such officer or person is so reproduced shall be deemed to have been manually signed
by such officer or person whose signature is so reproduced and shall be as valid to all intents and purposes as if
such document or instrument in writing is delivered or issued.

2.6

Financial Year – The financial year of the Company shall terminate on such day in each year as the directors may
from time to time by resolution determine.

3 – Directors

3.1

3.2

Number – The number of directors or the minimum and maximum number of directors of the Company is set out
in the articles of the Company.

Powers – Subject to any unanimous shareholder agreement, the directors shall manage the business and affairs
of the Company and may exercise all such powers and do all such acts and things as may be exercised or done by
the Company and are not by the Act, the articles, the by-laws, any special resolution of the Company, a unanimous
shareholder agreement or by statute expressly directed or required to be done in some other manner.

3.3

Borrowing Powers – The directors may from time to time:

(a) borrow money upon the credit of the Company;

(b)

issue, re-issue, sell, or pledge debentures of the Company;

(c)

subject to section 53 of the Act, give a guarantee on behalf of the Company to secure performance of an
obligation of any person;

(d) mortgage, charge, pledge or otherwise create a security interest in all or any property of the Company owned

or subsequently acquired to secure any obligation of the Company;

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(e) by resolution delegate to any officer of the Company all or any of the powers conferred on the directors by this
by-law to the full extent thereof or such lesser extent as the directors may in any such resolution provide. The
powers conferred by this by-law shall be in supplement to and not in substitution for any powers to borrow
money for the purposes of the Company possessed by its directors or officers independently of a borrowing
by-law.

3.4

Qualification – No person shall be qualified to hold the office of director if:

(a)

subject to by-law 3.10, he is less than 25 or more than 70 years of age;

(b) he is found to be of unsound mind;

(d) being a corporation, it enters into liquidation; or

(e) he holds less than 1,000 Series A common shares in the Company.

3.5

3.6

3.7

3.8

Corporate Director – A person who is a director of the Company but who is not an individual shall, by such
procedure as may be appropriate for the management of the affairs of such person, appoint an individual to
act as such person’s representative as a director of the Company with power to exercise all of the powers of a
director of the Company but the person appointing any such individual shall remain fully liable as a director of the
Company notwithstanding such appointment. A duly certified copy of the resolution or document whereby any
such appointment is made shall be filed with the Company before any such individual acts as representative as
aforesaid. Any person appointing an individual under the provisions of this paragraph may from time to time revoke
the appointment of such individual and appoint another in his place.

Executive Directors – Not more than two directors, including the president or managing director of the Company,
may be officers or employees of the Company or its affiliates.

Eligibility for Election – Except as otherwise provided by the by-laws, no person shall be eligible for election as a
director at any meeting of shareholders unless:

(a) nominated by the board, or

(b) not more than 60 days after the end of the financial year, written notice, signed by persons holding in aggregate
not less than 5% of the issued and outstanding shares in the capital of the Company, has been given to the
Company of the intention to propose a person for election together with a letter of consent signed by that
person confirming his willingness to be appointed and to serve as a director if elected, provided however that
no person as defined in the articles and the by-laws may nominate more than one director for election under
this paragraph.

Rotation of Directors – Unless otherwise provided in the by-laws, at the annual general meeting held each year
at least one third or the number nearest thereto of the directors shall be required to retire. A director shall not be
required to retire unless he has been in office for three years except for the directors retiring at the first and second
annual general meetings who shall be required to retire after one year and two years in office respectively. The
retiring directors shall be eligible for re-election if qualified and shall be those who have been longest in office. As
between two or more who have been in office an equal length of time, the directors or director to retire shall in
default of agreement between them be determined by lot. The length of time a director has been in office shall be
computed from the date of commencement of his last unbroken service as a director.

3.9

Compulsory Retirement – A director shall retire from office at the annual general meeting following the attainment
of age 70 and shall not be eligible for re-election. Any director who is age 70 at the date of incorporation of the
Company shall retire from office at the annual general meeting following the attainment of age 72 and shall not be
eligible for re-election.

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3.10

3.11

Tenure of Office – Unless his tenure is sooner determined a director shall hold office from the close of the meeting
at which he is elected or appointed until the close of the third annual general meeting of shareholders next
following or until his successor is elected or appointed, whichever shall first occur.

Removal of Directors – Subject to the provisions of the Act the shareholders may by resolution passed at an annual
or special meeting remove any director from office and the vacancy created by such removal may be filled at the
same meeting failing which it may be filled by the directors.

3.12

Vacation of Office – A director shall cease to be a director when:

(a) he dies;

(b) he is removed from office by the shareholders;

3.13

3.14

(d) his written resignation is sent or delivered to the Company or if a time is specified in such resignation at the

time so specified, whichever is later; or

(e)

if he is an officer of the Company, his appointment as an officer is revoked, his services are terminated by the
directors or he resigns his office.

Vacancies – Subject to the Act, a quorum of the board may fill a vacancy in the board except a vacancy resulting
from an increase in the number of directors or in the maximum number of directors or from a failure of the
shareholders to elect the number of directors. In the absence of a quorum of the board, or if the vacancy has
arisen from a failure of the shareholders to elect the number of directors, the directors shall forthwith call a special
meeting of shareholders to fill the vacancy. If the directors fail to call such meeting or if there are no such directors
then in office the secretary or any shareholder may call the meeting.

Remuneration and Expenses – Subject to the articles or any unanimous shareholder agreement, the directors
shall be paid such remuneration for their services as the shareholders may from time to time determine. Such
remuneration may be in addition to the salary paid any officer or employee of the Company who is also a director.
The directors shall also be entitled to be reimbursed for travelling and other expenses properly incurred by them in
attending meetings of the directors or any committee thereof. The directors may also award special remuneration
to any director undertaking any special services on the Company’s behalf other than the routine work ordinarily
required of a director and any such special remuneration shall be disclosed at the next meeting of shareholders
immediately following the award and to such regulatory authorities as may be required. Nothing herein contained
shall preclude any director from serving the Company in any other capacity and receiving remuneration therefor.
If any director or officer of the Company is employed by or performs services for the Company otherwise than
as a director or officer or is a member of a firm or a shareholder, director or officer of a body corporate which is
employed by or performs services for the Company, the fact of his being a shareholder, director or officer of the
Company shall not disentitle such director or officer or such firm or body corporate, as the case may be, from
receiving proper remuneration for such services.

3.15

Conflict of Interest – A director or officer who is a party to, or who is a director or officer of or has a material
interest in any person who is a party to, a material contract or proposed material contract with the Company shall
disclose the nature and extent of his interest at the time and in the manner provided by the Act. Any such contract
or proposed contract shall be referred to the directors or shareholders for approval even if such contract is one
that in the ordinary course of the Company’s business would not require approval by the directors or shareholders.
A director interested in a contract so referred to shall not vote on any resolution to approve the same except as
provided by the Act. Disclosure of such contract or proposed contract shall however be made at the next meeting
of shareholders immediately following the disclosure and to such regulatory authorities as may be required.

3.16

Submission of Contracts or Transactions to Shareholders for Approval – The directors in their discretion may
submit any contract, act or transaction for approval or ratification at any annual meeting of the shareholders
or at any special meeting of the shareholders called for the purpose of considering the same and subject to the

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provisions of section 89 of the Act any such contract, act or transaction that is approved or ratified or confirmed
by a resolution passed by a majority of the votes cast at any such meeting (unless any different or additional
requirement is imposed by the Act or by the Company’s articles or any other by-law) shall be as valid and as binding
upon the Company and upon all the shareholders as though it had been approved, ratified or confirmed by every
shareholder of the Company.

4 – Meetings of Directors

4.1

4.2

4.3

Place of Meetings – Meetings of the directors and of any committee of directors may be held at any place within or
outside Barbados.

Calling of Meetings – Meetings of the directors shall be convened at any time as the chairman, vice-chairman or
any two directors may determine or by the Secretary when so directed or authorized.

Notice of Meetings – Notice of the time and place of each meeting of the directors shall be given in the manner
provided in by-law 12.1 to each director not less than 48 hours before the time when the meeting is to be held.
Subject to section 76(1) of the Act, the notice of a meeting of directors need not specify the purpose of or the
business to be transacted at the meeting. It shall not be necessary to give notice of a meeting of the directors to
a newly elected or appointed director for a meeting held immediately following the election of directors by the
shareholders or the appointment to fill a vacancy among the directors.

4.4

Quorum – The quorum for the transaction of business at any meeting of the directors shall consist of a majority
of the number of directors and, notwithstanding any vacancy among the directors, a quorum may exercise all the
powers of the directors. No business may be transacted at a meeting of directors unless a quorum is present.

4.5 Meetings by Telephone – If all the directors consent, a director may participate in a meeting of the directors or of
a committee of the directors by means of such telephone or other communication facilities as permit all persons
participating in the meeting to hear each other and a director participating in such a meeting by such means is
deemed to be present at the meeting. Any such consent shall be effective whether given before or after the meeting
to which it relates and may be given with respect to all meetings of the directors and of committees of the directors
held while a director holds office.

4.6

4.7

4.8

4.9

Adjourned Meetings – Notice of an adjourned meeting of the directors is not required if the time and place of the
adjourned meeting is announced at the original meeting.

Regular Meetings – The directors may appoint a day or days in any month or months for regular meetings of the
directors at a place and hour to be named. A copy of any resolution of the directors fixing the place and time of such
regular meetings shall be sent to each director forthwith after being passed but no other notice shall be required
for any such regular meeting except where the Act requires the purpose thereof or the business to be transacted
thereat to be specified.

Chairman – The chairman of any meeting of the directors shall be the chairman and in his absence the vice-
chairman. If no such officer is present the directors present shall choose one of their number to be chairman.

Votes to Govern – At all meetings of the directors every question shall be decided by a majority of the votes cast
on the question. In case of an equality of votes the chairman of the meeting shall, in addition to his original vote,
have a second or casting vote.

4.10

Resolution in lieu of Meeting – Notwithstanding any of the foregoing provisions of this by-law a resolution in writing
signed by all the directors entitled to vote on that resolution at a meeting of the directors or any committee of the
directors is as valid as if it had been passed at a meeting of the directors or any committee of the directors.

5.1

Committee of Directors – The directors may appoint a committee of directors, however designated, and delegate
to such committee any of the powers of the directors except those which, under the Act, a committee of directors
has no authority to exercise.

5 – Committees

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5.2

5.3

5.4

5.5

6.1

6.2

Transaction of Business – The powers of a committee of directors may be exercised by a meeting at which a quorum
is present or by resolution in writing signed by all the members of such committee who would have been entitled
to vote on that resolution at a meeting of the committee. Meetings of such committee may be held at any place
within or outside Barbados.

Procedure – Unless otherwise determined by the directors each committee shall have the power to fix its quorum
at not less than a majority of its members, to elect its chairman and to regulate its procedure.

Audit and Governance Committees – Notwithstanding by-law 5.1 the directors shall elect annually from among
their number an audit committee and a governance committee, each comprising not less than three directors.
No employee of the Company or its affiliates shall be a member of either committee but may be invited to attend
meetings. A member of any such committee shall serve during the pleasure of the directors and in any event only
so long as he is a director.

Audit Committee – The audit committee shall have power to fix its quorum at not less than a majority of its
members and to determine its own rules of procedure subject to any regulations imposed by the board of directors
from time to time. The auditor of the Company is entitled to receive notice of every meeting of the audit committee
and at the expense of the Company to attend and be heard at the meeting. If so requested by a member of the audit
committee, the auditor shall attend every meeting of the committee held during his term of office. Any member of
the audit committee may call a meeting of the committee.

6 – Officers

Appointment – The directors shall as often as may be required appoint a secretary and may as often as may be
required appoint a chairman and vice-chairman of the board both of whom shall be directors and, subject to any
unanimous shareholder agreement, a president or managing director, and one or more vice-presidents (to which
title may be added words indicating seniority or function), and such other officers as the directors may determine,
including one or more assistants to any of the officers so appointed.

Duties – If appointed, the chairman and vice-chairman shall, subject to the provisions of the Act, the articles or any
unanimous shareholder agreement, have such other powers and duties as the directors may specify and during the
absence or disability of the chairman his duties shall be performed and his powers exercised by the vice-chairman.
The directors may from time to time specify the duties of and, in accordance with this by-law and subject to the
provisions of the Act, delegate to such officers powers to manage the business and affairs of the Company.

7.1

Limitation of Liability – No director or officer shall be liable for:

7 – For the Protection of Directors and Officers

(a)

the acts, receipts, neglects or defaults of any other director or officer or employee or for joining in any receipt
or other act for conformity;

(b) any loss, damage or expense happening to the Company through the insufficiency or deficiency of title to any

property acquired for or on behalf of the Company;

(c)

the insufficiency or deficiency of any security in or upon which any of the moneys of the Company shall be
invested;

(d) any loss or damage arising from the bankruptcy, insolvency or tortuous acts of any person with whom any of

the moneys, securities or effects of the Company shall be deposited;

(e)

any loss occasioned by any error of judgement or oversight on his part or for any other loss, damage or
misfortune whatever which shall happen in the execution of the duties of his office or in relation thereto;

unless the same are occasioned by his own wilful neglect or default or happens through his failure to exercise the powers
and to discharge the duties of his office honestly and in good faith with a view to the best interests of the Company. Except

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as provided by law, the directors for the time being of the Company shall not be under any duty or responsibility in respect
of any contract, act or transaction whether or not made, done or entered into in the name of the Company, except such
as is submitted to or authorized or approved by the directors. Nothing herein shall relieve any director or officer from the
duty to act in accordance with the Act and the Regulations or from liability for any breach thereof.

7.2

Indemnity – Subject to the limitations contained in the Act the Company shall indemnify a director or officer, a
former director or officer or a person who acts or acted at the Company’s request as a director or officer of a body
corporate of which the Company is or was a shareholder or creditor (or a person who undertakes or has undertaken
any liability on behalf of the Company or any such body corporate) and his heirs and legal representatives against
all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgement, reasonably
incurred by him in respect of any civil, criminal or administrative action or proceeding to which he is made a party
by reason of being or having been a director or officer of the Company or such body corporate if:

(a) he acted honestly and in good faith with a view to the best interests of the Company; and

(b)

in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty he had
reasonable grounds for believing that his conduct was lawful.

7.3

Insurance – Subject to the limitations contained in the Act the Company may purchase and maintain such insurance
for the benefit of its directors and officers, as the directors may from time to time determine.

8 – Meetings of Shareholders

8.1

8.2

Annual Meetings – Subject to the provisions of section 105 of the Act, the annual meeting of the shareholders shall
be held not later than six months after the end of the financial year of the Company on such day in each year and
at such time as the directors may by resolution determine at any place within Barbados or, if all the shareholders
entitled to vote at such meeting so agree, outside Barbados.

Special Meetings – Special meetings of the shareholders may be convened by order of the directors at any date and
time and at any place within Barbados or, if all the shareholders entitled to vote at such meeting so agree, outside
Barbados. Whenever and as soon as there is not a quorum of directors in office it shall be the duty of the secretary
to call a special meeting of shareholders to elect directors to fill the vacancies, provided that if such lack of quorum
shall occur within a month before the regular time for the annual meeting the secretary may call the annual meeting
instead of a special meeting.

8.3

Special Meetings on Requisition of Shareholders – The directors shall, on the requisition of the holders of not less
than 5% of the issued shares of the Company that carry a right to vote at the meeting requisitioned, forthwith
convene a meeting of shareholders, and in the case of such requisition the following provisions shall have effect:

(a) The requisition must state the purposes of the meeting and must be signed by the requisitionists and
deposited at the registered office of the Company and may consist of several documents in like form, each
signed by one or more of the requisitionists.

(b)

If the directors do not, within 21 days from the date of the requisition being so deposited, proceed to convene
a meeting, the requisitionists or any of them may themselves convene the meeting but any meeting so
convened shall not be held after three months from the date of such deposit.

(c) Unless subsection (3) of section 129 of the Act applies the directors shall be deemed not to have duly
convened the meeting if they do not give such notice as is required by the Act within 21 days from the deposit
of the requisition.

(d) Any meeting convened under this by-law by the requisitionists shall be called as nearly as possible in the
manner in which meetings are to be called pursuant to the by-laws and Divisions E and F of Part I of the
Act.

(e) A requisition by joint holders of shares must be signed by all such holders.

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8.4

8.5

8.6

8.7

8.8

8.9

8.10

Notice of Meetings – Notice of the time and place of each meeting of shareholders shall be given in the manner
provided in by-law 12.1 not less than 21 nor more than 50 days before the date of the meeting to each director, to the
auditor and to each shareholder who at the close of business on the record date, if any, is entered in the securities
register as the holder of one or more shares carrying the right to vote at the meeting. Notice of a meeting of
shareholders at which special business is to be transacted shall state the nature of such business in sufficient detail
to permit the shareholder to form a reasoned judgement thereon and shall state the text of any special resolution
to be submitted to the meeting.

List of Shareholders Entitled to Notice – For every meeting of shareholders the Company shall prepare a list of
shareholders entitled to receive notice of the meeting, arranged in alphabetical order and showing the number of
shares entitled to vote at the meeting held by each shareholder. The list shall be available for examination by any
such shareholder during usual business hours at the registered office of the Company or at the place where the
securities register is kept.

Record Date for Notice – The directors may fix in advance a record date, preceding the date of any meeting of
shareholders by not more than 50 days and not less than 21 days, for the determination of the shareholders entitled
to notice of the meeting provided that notice of any such record date is given not less than seven days before such
record date by newspaper advertisement in the manner provided in the Act. If no record date is so fixed the record
date for the determination of the shareholders entitled to notice of the meeting shall be the close of business on
the day immediately preceding the day on which the notice is given or, where no such notice is given, the day on
which the meeting is held.

Chairman, Secretary and Scrutineers – The chairman of any meeting of shareholders shall be the chairman and in
his absence the vice-chairman. If no such officer is present within 15 minutes from the time fixed for holding the
meeting the persons present and entitled to vote shall choose one of the directors present to be chairman. If the
secretary of the Company is absent the chairman shall appoint some person, who need not be a shareholder, to act
as secretary of the meeting. If desired, one or more scrutineers, who need not be shareholders, may be appointed
by resolution of the directors or by the chairman with the consent of the meeting.

Persons Entitled to be Present – The only persons entitled to be present at a meeting of the shareholders shall be
those entitled to vote thereat, the directors and auditors of the Company and others who, although not entitled to
vote, are entitled or required under any provision of the Act or the articles or by-laws to be present at the meeting.
Any other person may be admitted only on the invitation of the chairman of the meeting or with the consent of the
meeting.

Quorum – Subject to by-law 8.21, a quorum for the transaction of business at any meeting of shareholders shall be
100 shareholders present in person or by proxy. If a quorum is present at the opening of any meeting of shareholders,
the shareholders present or represented may proceed with the business of the meeting notwithstanding that a
quorum is not present throughout the meeting. If a quorum is not present within 30 minutes of the time appointed
for a meeting of shareholders, the meeting stands adjourned to the same day two weeks thereafter at the same
time and place and if at the adjourned meeting a quorum is not present within 30 minutes of the appointed time
the shareholders present constitute a quorum.

Right to Vote – Subject to the provisions of the Act as to authorized representatives of any other body corporate, at
any meeting of shareholders in respect of which the Company has prepared the list referred to in by-law 8.5, every
person who is named in such list shall be entitled to vote the shares shown thereon opposite his name except
where the Company has fixed a record date in respect of such meeting pursuant to by-law 8.6 to the extent that
such person has transferred any of his shares after such record date and the transferee, upon producing properly
endorsed certificates evidencing such shares or otherwise establishing that he owns such shares, demands not
later than ten days before the meeting that his name be included to vote the transferred shares at the meeting. In
the absence of a list prepared as aforesaid in respect of a meeting of shareholders every person shall be entitled to
vote at the meeting who at the time is entered in the securities register as the holder of one or more shares carrying
the right to vote at such meeting.

8.11

Proxies – Every shareholder entitled to vote at a meeting of shareholders may appoint a proxyholder or one or
more alternate proxyholders, who need not be shareholders, to attend and act at the meeting in the manner and

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to the extent authorized and with the authority conferred by the proxy. A proxy shall be in writing executed by the
shareholder or his attorney and shall conform to the requirements of the Act.

8.12

Time for Deposit of Proxies – The directors may specify in a notice calling a meeting of shareholders a place and a
time, preceding the time of such meeting by not more than 48 hours exclusive of non-business days, before which
time proxies to be used at such meeting must be deposited. A proxy shall be acted upon only if, prior to the time so
specified, it shall have been deposited with the Company or an agent thereof specified in such notice or, if no such
time is specified in such notice, unless it has been received by the secretary of the Company or by the chairman of
the meeting or any adjournment thereof prior to the time of voting.

8.13

Form of Proxy – Subject to the provisions of Part V of the Regulations, a proxy may be in the following form:

I,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , the undersigned, being a shareholder of the Company,
hereby appoint. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . of. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . or
failing him. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . of. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , as my
proxy to attend and act for me and on my behalf at the. . . . . . . . . . . meeting of the shareholders of the Company to be
held on the. . . . . . day of. . . . . . . . , and at any adjournment thereof in the same manner, to the same extent and with
the same powers as if the undersigned were present at the meeting or such adjournment.

Dated this. . . . . . . . . day of. . . . . . . . . . . . ,. . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signature of Shareholder

8.14

Bodies Corporate and Associations – A body corporate or association which is a shareholder may by resolution
authorize an individual to represent it and vote for it at meetings of shareholders.

8.15

8.16

8.17

Joint Shareholders – If two or more persons hold shares jointly any one of them present in person or represented
by proxy at a meeting of shareholders may, in the absence of the other, vote the shares; but if two or more of those
persons are present in person or represented by proxy and vote they shall vote as one on the shares jointly held by
them.

Votes to Govern – At any meeting of shareholders every question shall, unless otherwise required by the articles or
by-laws or by law, be determined by the majority of the votes cast on the question. In case of an equality of votes
either upon a show of hands or upon a poll the chairman of the meeting shall be entitled to a second or casting
vote.

Show of Hands – Subject to the provisions of the Act, any question at a meeting of shareholders shall be decided
by a show of hands unless a ballot thereon is required or demanded as hereinafter provided. Upon a show of hands
every person who is present and entitled to vote shall have one vote. Whenever a vote by show of hands shall have
been taken upon a question, unless a ballot thereon is so required or demanded, a declaration by the chairman of
the meeting that the vote upon the question has been carried or carried by a particular majority or not carried and
an entry to that effect in the minutes of the meeting shall be prima facie evidence of the fact without proof of the
number or proportion of the votes recorded in favour of or against any resolution or other proceeding in respect
of the said question and the result of the vote so taken shall be the decision of the shareholders upon the said
question.

8.18 Ballots – On any question proposed for consideration at a meeting of shareholders and, whether or not a show
of hands has been taken thereon, any shareholder or proxyholder entitled to vote at the meeting may require
or demand a ballot. A ballot so required or demanded shall be taken in such manner and at such time as the
chairman shall direct. A requirement or demand for a ballot may be withdrawn at any time prior to the close or
adjournment of the meeting at which the ballot was required or demanded. If a ballot is taken each person present
shall be entitled, in respect of the shares which he is entitled to vote at the meeting upon the question, to that
number of votes provided by the Act or the articles, and the result of the ballot so taken shall be the decision of the
shareholders upon the said question.

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8.19 Adjournments – Without prejudice to the right of the chairman to adjourn a meeting of shareholders for reasons
of disorder, the chairman of any meeting may, with the consent of the meeting, adjourn the same from time to
time to a fixed time and place. If the meeting is adjourned for less than 30 days it shall not be necessary to give
notice of the adjourned meeting other than by announcement at the earliest meeting that is adjourned. If a meeting
of shareholders is adjourned by one or more adjournments for an aggregate of 30 days or more notice of the
adjourned meeting shall be given as for an original meeting.

8.20 Resolution in Writing – Notwithstanding any of the foregoing provisions of this by-law, a resolution in writing signed
by all of the shareholders entitled to vote on that resolution at a meeting of shareholders is, subject to section 128
of the Act, as valid as if it had been passed at a meeting of the shareholders.

8.21 Only One Shareholder – Where the Company has only one shareholder or only one holder of any class or series of

shares the shareholder present in person or by proxy constitutes a meeting.

9 – Securities

9.1

9.2

9.3

9.4

9.5

9.6

9.7

9.8

9.9

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Company and may authorise the same for registration as a valid transfer of the number of securities specified
therein.

9.10

9.11 – Disclosure of Interests

10 – Dividends and Rights

10.1 Dividends – Subject to the provisions of the Act and the articles, the directors may from time to time declare and the
Company may pay dividends on the issued and outstanding shares in the capital of the Company to shareholders
according to their respective rights and interests in the Company. Dividends may be paid in money or property or
by issuing fully paid shares of the Company.

10.2

Payment of Dividends – A dividend payable in cash shall be paid either:

(a) by cheque drawn on the Company’s bankers or one of them to the order of each registered holder of shares
of the class or series in respect of which it has been declared and mailed by prepaid ordinary mail to such
registered holder at his recorded address unless such holder otherwise directs; in the case of joint holders
the cheque shall, unless such joint holders otherwise direct, be made payable to the first named joint holder
on the register and mailed to the recorded address of the joint holders; or

(b)

electronically to each registered holder of shares of the class or series in respect of which it has been declared
and by deposit into a bank account designated by such registered holder for the payment of dividends unless
such holder otherwise directs; in the case of joint holders payment by deposit shall, unless such joint holders
otherwise direct, be made to the order of the first named joint shareholder on the register.

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10.3 Good Receipt – The mailing of such cheque, unless the same is not paid on due presentation, or the electronic
payment as aforesaid shall satisfy and discharge the liability for the dividend to the extent of the sum represented
thereby plus the amount of any tax which the Company is required to and does withhold.

10.4 Non-Receipt of Dividend – In the event of non-receipt of any dividend by the person to whom it is sent as aforesaid
the Company shall effect payment to such person for a like amount on such terms as to indemnity, reimbursement
of expenses and evidence of non-receipt and of title as the directors may from time to time prescribe, whether
generally or in any particular case.

10.5 Record Date for Dividends and Rights – The directors may fix in advance a date, preceding by not more than 50
days the date for the payment of any dividend or the date for the issue of any warrant or other evidence of right to
subscribe for securities of the Company, as a record date for the determination of the persons entitled to receive
payment of such dividend or to exercise the right to subscribe for such securities provided that notice of any such
record date is given not less than 14 days before such record date by newspaper advertisement in the manner
provided in the Act. Where no record date is fixed in advance as aforesaid the record date for the determination
of the persons entitled to receive payment of any dividend or to exercise the right to subscribe for securities of the
Company shall be at the close of business on the day on which the resolution relating to such dividend or right to
subscribe is passed by the directors.

10.6 Unclaimed Dividends – Any dividend unclaimed after a period of six years from the date on which the same has

been declared to be payable shall be forfeited and shall revert to the Company.

11 – Information Available to Shareholders

11.1

Shareholder Information – Except as provided by the Act, no shareholder shall be entitled to any information
respecting any details or conduct of the Company’s business which in the opinion of the directors it would be
inexpedient in the interests of the Company to communicate to the public but the directors may, from time to time,
subject to the rights conferred by the Act, determine whether and to what extent and at what time and place and
under what conditions or regulations the documents, books and registers and accounting records of the Company
or any of them may be open to the inspection of shareholders and no shareholder shall have any right to inspect
any document or book or register or accounting record of the Company except as conferred by statute or authorized
by the directors or by special resolution of the shareholders.

12 – Notices

12.1 Method of Giving Notice – Any notice (which term includes any communication or document) to be given (which
term includes sent, delivered or served) pursuant to the Act, the Regulations, the articles, the by-laws or otherwise
to a shareholder, debenture holder, director, officer, auditor or member of a committee of the directors shall be
sufficiently given if:

(a) delivered personally to the person to whom it is to be given;

(b) delivered to his recorded address;

(d)

sent to him at his recorded address by any means of prepaid transmitted or recorded communication; or

(e)

in the case of a director, sent by facsimile or other means of electronic transmission.

A certificate of an officer of the Company in office at the time of the making of the certificate or any transfer agent of
shares or debentures of any class of the Company as to the facts in relation to the delivery or sending of any notice shall
be conclusive evidence of those facts.

12.2 Computation of Time – In computing the date when notice must be given under any provision requiring a specified
number of days or other period of notice of any meeting or other event the date of giving the notice and the date
of the meeting or other event shall not be counted and:

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Sagicor Financial Corporation

(a) where the notice is delivered personally to the person to whom it is addressed or delivered to his recorded

address service shall be deemed to have been effected at the time of delivery of such notice;

(b) where the notice is sent by post service of the notice shall be deemed to be effected on the day of posting;

effected on the date on which the notice was sent.

12.3 Notice to Joint Shareholders – If two or more persons are registered as joint holders of any shares or debentures
any notice shall be addressed to the first named of such joint holders and notice to such persons shall be sufficient
notice to all of them.

12.4 Undelivered Notices – If any notice given to a shareholder or debenture holder pursuant to by-law 12.1 is returned
on three consecutive occasions because he cannot be found the Company shall not be required to give any further
notices to such shareholder or debenture holder until he informs the Company in writing of his new address.

12.5 Omissions and Errors – The accidental omission to give any notice to any shareholder, director, officer, auditor
or member of a committee of the directors or the non-receipt of any notice by any such person or any error or
irregularity in any notice not affecting the substance thereof shall not invalidate any resolution passed or action or
proceedings taken at any meeting held pursuant to such notice or otherwise founded thereon.

12.6

Persons Entitled by Death or Operation of Law – Every person who, by operation of law, transfer, death of a
shareholder or any other means whatsoever, shall become entitled to any shares shall be bound by every notice in
respect of such shares which shall have been duly given to the shareholder from whom he derives his title to such
shares prior to his name and address being entered on the securities register (whether such notice was given before
or after the happening of the event upon which he became so entitled) and prior to his furnishing the Company the
proof of authority or evidence of his entitlement prescribed by the Act.

12.7 Waiver of Notice – Notice may be waived or the time for the notice may be waived or abridged at any time by any
person entitled thereto. Any such waiver or abridgement shall be in writing except a waiver of notice of a meeting of
directors which may be given in any manner. The attendance of such person at a meeting shall constitute a waiver
of notice of the meeting unless he attends for the express purpose of objecting to the transacting of any business
on the grounds that the meeting is not lawfully called.

This By-law was made by resolution of the Directors on December 6, 2002 and confirmed by resolution of the Shareholders
on June 30, 2004, and amended by resolution of the Directors made on March 16, 2007.

Chairman

Secretary

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Sagicor Financial Corporation

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 Fourth Annual Meeting of Shareholders of Sagicor Financial
Corporation (“the Company”) to be held on June 26, 2007 at 5:30 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 not later than 5:30 pm on June 24, 2007.

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, under its corporate seal or by any
officer or attorney thereof duly authorized, at any time up to and including the last business day preceding the day of the
Meeting or any adjournment thereof with:

(cid:129)

the Corporate Secretary at the registered office of the Company at Sagicor Corporate Centre, Wildey, St Michael,
Barbados, or
the Corporate Secretary, Sagicor Financial Corporation, c/o Sagicor Life Inc, Sagicor Financial Centre, 16 Queen’s
Park West, Port of Spain, Trinidad, or
the Branch Registrar, Computershare Investor Services (Channel Islands) Limited, Ordinance House, 31 Pier
Road, St Helier, Jersey, Channel Islands.

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 10, 2007 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:

the election of Directors
the re-appointment of the incumbent Auditors and Directors’ authorization to fix their remuneration,

(i)
(ii)
(iii) the confirmation without amendment of amendments made to Bylaw No 1 of the Company on March 16, 2007,
(iv)

the fixing of Directors’ fees.

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 common share is entitled to one vote for each share held. As at May
10, 2007, there are 266,985,336 common shares of the Company outstanding.

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Sagicor Financial Corporation

PRESENTATION OF FINANCIAL STATEMENTS AND AUDITORS’ REPORT

The Financial Statements of the Company for the year ended December 31, 2006 and the Auditors’ Report thereon are
included in the 2006 Annual Report.

ELECTION OF DIRECTORS

The Board of Directors consists of twelve members. The number of Directors to be elected at the Meeting is three. Mr David
Walter Allan, Mr Terrence Anthony Martins and Mr Dodridge Denton Miller will retire at the end of the Meeting and will
be seeking re-election. 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:

(cid:129) Mr DAVID WALTER ALLAN
(cid:129) Mr TERRENCE ANTHONY MARTINS
(cid:129) Mr DODRIDGE DENTON MILLER

Mr David Allan, aged 69, is a Barbadian and a former President and Chief Executive Officer 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 a director of Life of Jamaica Limited and Sagicor Life Inc and is a director of Barbados
registered exempt insurance companies. Mr Allan, with more than 50 years’ experience in the life insurance industry, is a
former West Indies cricketer. He is a member of the Audit Committee of the Board.

Mr Terrence Martins, aged 64, is the non-executive Vice Chairman who is a citizen and resident of Trinidad and Tobago.
He has brought a wealth of knowledge to Sagicor, with over 40 years of experience within the financial services industry
both in the Caribbean and the United Kingdom. His areas of expertise include banking, finance, administration, corporate
governance, and risk management. Mr Martins has previously held the position of Group Chief Executive Officer of
RBTT Financial Holdings Limited. He is currently the Chairman of Caribbean Information and Credit Rating Services Ltd
(CariCRIS), a Caribbean rating agency. He previously held several directorships within the RBTT Financial Holdings Group,
in and outside of Trinidad and Tobago and is also a former member of the Integrity Commission of Trinidad and Tobago. In
addition to being Vice Chairman of the Board, Mr Martins chairs the Corporate Governance Committee and is a member
of the Human Resource Committee.

Mr Dodridge Miller, FCCA, MBA, LLM, is 49 years of age. He was appointed President and Chief Executive Officer of
The Mutual Group of Companies, now Sagicor, on July 1, 2002, having previously held the positions of Treasurer and Vice
President, Finance and Investments, Deputy Chief Executive Officer and Chief Operating Officer. Mr Miller, a Barbadian,
joined the Group in 1989. He was elected a director of The Mutual Group, in 2001. He is the Chairman of the Group’s
main operating subsidiaries, Sagicor Life Inc, Life of Jamaica Limited and Sagicor Life Insurance Company. Mr Miller Is a
Fellow of the Association of Chartered Certified Accountants (UK), and obtained his MBA from the University of Wales and
Manchester Business School, United Kingdom, and holds an LLM in Corporate and Commercial Law from the University
of the West Indies. He has more than 20 years’ experience in the insurance and financial services industries.

Messrs Allan, Martins and Miller 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.
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 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 Shareholders vote FOR the re-appointment of PricewaterhouseCoopers and the authorization
of Directors to fix the Auditors’ remuneration.

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AMENDMENT TO BYLAW NO. 1 (“THE BYLAWS”)

Sagicor Financial Corporation

The Sagicor Group has been successfully executing a business strategy to be the leading insurance company within the
Caribbean and to use this strong market position to expand internationally. During the past 15 years, the Sagicor Group has
doubled its size approximately every 5 years, when measured in terms of total assets. We intend to continue our growth
and expansion in order to maintain our position in the top tier of major regional financial institutions, a position we believe
is critical to Sagicor’s long-term viability.

Our business strategy comprises four key components:

2.
3.

Further expanding the scale of our operations by participating in the consolidation of the financial services
industry in the Caribbean, while continuing to streamline existing and acquired operations to extract synergies,
and deliver a high quality of service to our customers.
Expanding into new product markets to offer a wider range of financial products and services.
Expanding into new geographic markets which offer the Sagicor Group attractive opportunities to profitably grow
and expand its business operations.
Rigorous financial management to ensure optimization of the use of capital and the delivery of competitive
returns to Shareholders.

Through the careful implementation of this strategy, Management has built a strong financial Group and has delivered
exceptional returns to Shareholders.

An important aspect of this strategy is the strengthening of our Corporate Governance framework. In this connection,
a review of the Bylaws was conducted. These Bylaws relate generally to the conduct of the affairs of the Company and
were enacted on incorporation of the Company on December 6, 2002 and confirmed by Shareholders at the first annual
meeting held on June 30, 2004. Pursuant to their power under Section 61(1) of the Act, Directors unanimously amended
the By-laws on March 16, 2007. The amendments took immediate effect and remain in effect until the amendments are
confirmed, amended or rejected by Shareholders pursuant to Section 61(2) of the Act. Under Section 61(2) of the Act,
Directors are required to submit any amendment or repeal of a Bylaw made under Section 61(1) to the Shareholders at the
next meeting of Shareholders after such amendment or repeal for confirmation, amendment or rejection.

Bylaw 3.6 - Nationality and Residence

Bylaw 3.6 provided for certain nationality qualifications for Directors. A majority of the Board had to be citizens or
permanent residents of and ordinarily resident in Barbados and at least one director had to be a citizen of and ordinarily
resident in Jamaica, Trinidad and Tobago and any country in the Eastern Caribbean respectively.

As the Company pursues the strategy outlined above it is necessary to select Directors from a suitable pool of regional
and international candidates with the requisite knowledge and experience, and to include on the Board persons who
reflect the geographic and business diversity of the Group and who can make meaningful contributions to our growth and
development into a global financial services Group. Accordingly, Bylaw 3.6 has been repealed.

The full text of the Bylaw 3.6 (which has been repealed) is set out in Schedule 2 to the Notice of the Meeting.

Bylaw 9 – Shares; Bylaw 12.3 - Recorded Address

An integral part of our strategy also involves listing on an international stock exchange in order to gain access to capital
in more established markets to pursue our strategy of expansion, create a footprint in an international capital market and
enhance our ability to compete in a global environment. Accordingly, on February 14, 2007, all of the issued common shares
of the Company were admitted to trading on the main market for listed securities of the London Stock Exchange.

The Directors consider it expedient to make amendments to Bylaw 9 and repeal Bylaw 12.3 in order to facilitate the listing
of the Company’s shares on the London Stock Exchange. The amendments to Bylaw 9 and the repeal of Bylaw 12.3 are
intended principally to:

(a) permit the setting up of a branch register outside Barbados
(b) permit the deposit of Sagicor shares in depositaries other than the Barbados Central Securities Depositary
(c)

remove any references applicable to share restrictions

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Sagicor Financial Corporation

(d) permit Directors to prescribe the form of share transfer constituting a valid transfer (which may vary from

jurisdiction to jurisdiction), and
recognize both the regional and international origin of our Shareholders.

(e)

The full text of the original Bylaw 9 (which has been repealed and replaced) is set out in Schedule 2 to the Notice of the
Meeting.

The full text of the new Bylaw 9 is set out in Schedule 1 to the Notice of the Meeting.

The full text of the Bylaw 12.3 (which has been repealed) is set out in Schedule 2 to the Notice of the Meeting.

Recommendation

In order to facilitate the current business strategy of the Company, the Board of Directors recommends that Shareholders
confirm without amendment the Bylaws as amended on March 16, 2007, specifically:

(a)
(b)
(c)

the repeal of Bylaw 3.6;
the repeal and replacement of Bylaw 9 as set out in Schedule 1 to the Notice of the Meeting; and
the repeal of Bylaw 12.3.

FIXING OF DIRECTORS’ REMUNERATION

Directors’ Compensation Project

In implementing the international business strategy of the Group, the Board of Directors has commissioned several
strategic initiatives designed to enhance the operating capability of the Group. One of these initiatives includes a review
of the management structure to ensure that it is aligned with the business strategy, is appropriately staffed and provides
adequate resources for the future. Another initiative involves the total review of the Corporate Governance architecture to
ensure that it reflects international best practice and provides the level of governance required for a company of its size,
diversity and geographical reach.

The Board reviewed Directors’ remuneration as part of the strengthening of the Corporate Governance framework.
International best practice suggests that in order to attract Directors with the requisite knowledge and experience
who can make meaningful contributions to the growth and development of a global financial services organization,
Directors’ remuneration should be sufficient to attract, retain and motivate Directors of the quality required to ensure the
Company is managed successfully, and should reflect the time, commitment, accountability, risk, impact of decisions and
responsibilities of the role, having regard to relevant market comparability.

Directors’ fees were first fixed in 2004 at US $20,000 per annum for the Chairman and US $12,500 per annum for Directors.
Over the last three years as the Company continues to grow and expand, the time, commitment and responsibilities required
of their role as Directors has increased. Accordingly in 2006, the Corporate Governance Committee commissioned the
independent firm of Ernst and Young of Atlanta (“the Consultants”) to review director compensation. The objectives of
the exercise were to:

(i) Review competitive market practices for director total compensation, including best global practices and

trends.

(ii) Review all components of total compensation for the Non-Executive Chairman and Non-Executive Directors in
terms of annual retainer, board meeting fees, committee meeting fees, board chair and committee chair fees,
equity compensation, and other relevant Items.

(iii) Recommend a competitive level and structure of Board compensation for the Company and its main operating

subsidiaries.

Project Methodology

In order to achieve the above mentioned objectives, the Consultants adopted the following methodology:

(i) Board compensation data was gathered from comparable organizations in the Caribbean region and the United
States. Caribbean data was sourced from a custom survey conducted by Economic Resources Limited and US
data was sourced from the following multiple, nationally recognized published surveys:

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Sagicor Financial Corporation

– Investor Responsibility Research Center, Board Practices/Board Pay
– National Association of Corporate Directors, Director Compensation Report
– The Conference Board, Directors’ Compensation and Board Practices
– Buck Consultants, Board of Directors Compensation and Governance Practices Survey
– Korn/Ferry International, Annual Board of Directors Study.

(ii) Data comparability was matched along the size of the Sagicor Financial Group in terms of revenue, premium

income and type of organization (financial services).

International Best Practices and Trends

Best practices and trends in the United Kingdom, Europe and the United States were reviewed in areas such as board,
director and chief executive officer performance evaluations, succession planning, time spent by directors on company
business, frequency of Board meetings, terms of office of non-executive directors, the number of executives serving on
boards, and the growing importance of governance committees as the third most prevalent committee behind audit and
human resource committees.

(a)

The following best practices and trends on the operation of boards and director compensation emerged from the review:
the trend towards eliminating or reducing separate board and committee meeting fees and providing higher
retainer fees with some companies, in some cases, cutting retainer compensation for unsatisfactory meeting
attendance;
the significant increase in cash compensation for audit, investment and human resource/compensation chairs
and committee members, compared to other board committees, based on the fact that these committees are
meeting more frequently and for longer periods of time;

(b)

the average board had 4 to 6 committees;

(c) on average boards met between 10 to 12 times per year and committees met 3 to 6 times per year;
(d)
(e) non-executive directors served on an average of 2 committees;
(f)

total direct compensation for non-executive directors generally included two main components:
(i)

total cash compensation comprised a combination of annual retainer for service, fees for attending full-
board meetings, and fees for serving as either chairman or member of a committee and fees for attending
committee meetings, and
total equity compensation comprised an initial allocation upon election to serve and annual equity grants.

(ii)

Recommendations

Total cash compensation currently paid to the Chairman and Directors of the Company was then compared to US market
data using the 50th percentile and Caribbean market data using the 90th percentile.

On the basis of the approach set out above, the Consultants made the following recommendations:

(i) Cash compensation should reflect accountability, risk, impact of decisions and market comparability.
(ii) Annual retainers for Board and Committee service should be paid with no separate meeting fees.
(iii) Increased retainers should be paid for Board and Committee Chairs.
(iv) No director compensation should be paid to Executives serving on subsidiary boards.
(v) No equity compensation should be paid at this time and transition to equity compensation should be considered

as the organization evolved and would include target ownership and pay-for-performance.

(vi) No other benefit or perquisite programs should be paid at this time.
(vii) Board and individual Director performance evaluations should be implemented and a tool and process should

be developed to evaluate effectively overall Board performance and individual contribution.

(viii) Cash retainers to compensate Non-Executive Board and Committee Chairs and Members should be recommended

for approval by Shareholders as follows:

Board/Committee

Board
Board Committees

Non-Executive Chair
US $45,000 per annum
US $7,000 per annum

Non-Executive Member
US $40,000 per annum
US $5,000 per annum

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Sagicor Financial Corporation

The Corporate Governance Committee considered and accepted the above recommendations which were approved
by the Board on November 8, 2006. The Board of Directors considers that the above recommendations for Director
Compensation are consistent with comparable companies in the region, reflect international best practice and trends and
are reasonable and appropriate for the Company having regard to the number of board and committee meetings held,
the time required to read and otherwise prepare for meetings, commitment, accountability, risk, impact of decisions and
market comparability.

The Board of Directors therefore recommends Directors’ remuneration be fixed as set out above.

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 David Walter Allan, Mr Terrence Anthony Martins and Mr Dodridge Denton

Miller.

(b) The re-appointment of the incumbent Auditors, PricewaterhouseCoopers, and the authorization of Directors to

fix their remuneration.

Meeting.

(d) The fixing of Directors’ remuneration as set out in 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 June 1, 2007.

Sandra Osborne
Corporate Secretary

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SHAREHOLDER PROXY

FOURTH 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 matters that may
properly come before the FOURTH ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 26, 2007 and any
adjournments thereof.

The Directors and Management recommend Shareholders vote FOR items numbered 1, 2, 3 and 4 below:

Election as Directors of the Nominees listed below:

Vote
FOR

WITHHOLD
from Voting

DAVID WALTER ALLAN

TERRENCE ANTHONY MARTINS

DODRIDGE DENTON MILLER

Re-appointment of Incumbent Auditors and
Authorization of Directors to fix their Remuneration:

Confirmation of Amendments to Bylaw No 1:
(Please refer to Item 4 of the Notice of the
Meeting for the full text of the Resolution)

Fixing of Directors’ Remuneration:
(Please refer to Item 5 of the Notice of the
Meeting for the full text of the Resolution)

Vote
FOR

WITHHOLD
from Voting

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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.

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THIS IS YOUR PROXY AUTHORIZATION FORM. PLEASE COMPLETE, SIGN AND RETURN THIS FORM BY 5.30 PM ON JUNE 24, 2007, OR AT LEAST
48 HOURS BEFORE THE TIME APPOINTED FOR HOLDING THE MEETING OR ADJOURNED MEETING, TO:
THE CORPORATE SECRETARY, SAGICOR CORPORATE CENTRE, WILDEY, ST MICHAEL, BARBADOS
THE CORPORATE SECRETARY, SAGICOR FINANCIAL CORPORATION, C/O SAGICOR LIFE INC, SAGICOR FINANCIAL CENTRE, 16 QUEEN’S
PARK WEST, PORT OF SPAIN, TRINIDAD, OR
THE BRANCH REGISTRAR, COMPUTERSHARE INVESTOR SERVICES (CHANNEL ISLANDS) LIMITED, ORDINANCE HOUSE, 31 PIER ROAD,
ST HELIER, JERSEY, CHANNEL ISLANDS.

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