Sagicor Financial Company Ltd. Annual Report 2007

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FY2007 Annual Report · Sagicor Financial Company Ltd.

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WISE FINANCIAL
THINKING FOR LIFE

Annual Report and Accounts 2007

Wise Financial Thinking for Life

Over the last 168 years, we at Sagicor

are proud that we have shared with

generations of people the wisdom

we have gained to help them make

prudent decisions to achieve their

goals in life .

“ KNOWLEDGE IS OF THE PAST,
WISDOM IS OF THE FUTURE.”

Contents

Overview 7

Directors’ Report 11
Chairman’s Statement 12
Chief Executive Ofﬁ cer’s Report 14
Operating and Financial Review 18
Corporate Citizenship 30

Governance 33
Board of Directors 34
Corporate Governance Report 40

Financial Statements 47
Index to Financial Statements 48
Auditors’ Report 50
Actuary’s Report 52
Financial Statements 53
Notes to the Financial Statements 58

Executive Management 161

Advisors and Bankers 167

Sagicor Ofﬁ ces 169

Shareholder Information 173
Shares 174
Dividends 174
Analysis of Shareholding 175
Notice of Meeting 177
Management Proxy Circular 178

“ HAPPINESS IS NOT THE MERE
POSSESSION OF MONEY, IT LIES
IN THE JOY OF ACHIEVEMENTS,
IN THE THRILL OF CREATIVE
EFFORT.”

“ MAKING MONEY IS EASY.
KEEPING IT IS THE HARD PART.”

01 Overview

Sagicor is synonymous with world-class ﬁ nancial
services. Our vision is “To be a great company
committed to improving the lives of the people in the
communities in which we operate.”

With a proud history dating back to 1840, Sagicor is a dynamic, indigenous Group which has been
redeﬁ ning ﬁ nancial services in the Caribbean, building a strong base, from which it has expanded
into the international ﬁ nancial services market. Sagicor now operates in 22 countries in the
Caribbean, Latin America, the UK and the US.

In 2002, after 162 years as the Barbados Mutual Life Assurance Society, the company
demutualised with the overwhelming support of its policyholders and Sagicor Financial
Corporation was formed as a publicly listed holding company. Sagicor, the new company name,
means “wise judgment” and reﬂ ects a new vision for ﬁ nancial advice and services. For over 167
years, we have worked to help families by providing the assurance and peace of mind needed,
especially during their most challenging times. This will never change.

Our name and identity draw on the strength, stability and ﬁ nancial prudence that are our
heritage, but this identity also represents the freedom that wise ﬁ nancial thinking can bring to
our Customers throughout their lives. Through a wide range of ﬁ nancial products and services,
Sagicor offers “wise judgment” throughout the entire life cycle - whether it is the purchase of
a new home, planning a child’s future and higher education, retirement, or simply providing
security for loved ones. Sagicor will meet ﬁ nancial needs now and for the future.

Sagicor has developed an incomparable reputation because of its ﬁ nancial stability. That solid
reputation is based on the Company’s excellent ﬁ nancial performance and ﬁ nancial prudence
over the years. Our insurance subsidiaries, Sagicor Life Inc, Sagicor Capital Life and Life of
Jamaica, are consistently rated “A” (Excellent) by A.M Best and Company and Sagicor Life Inc,
has a ﬁ nancial strength rating of BBB+ from Standard and Poor’s. Our new US subsidiary,
Sagicor Life Insurance Company is rated “A-” (Excellent) by A.M Best.

Sagicor’s objective is to create a leading international ﬁ nancial services group which provides world
class products and services to Customers, while generating excellent returns for Shareholders.

The Company’s strategy to achieve this objective is to:

(cid:129) Streamline new and existing operations to improve efﬁ ciency and deliver value to Customers;

(cid:129) Expand and develop products to offer a wider range of ﬁ nancial products and services;

(cid:129) Expand internationally and in the Caribbean and
(cid:129) Optimise the use of capital to maximise Shareholder returns.

“ TO ACCOMPLISH GREAT
THINGS, WE MUST NOT
ONLY ACT, BUT ALSO DREAM,
NOT ONLY PLAN, BUT ALSO
BELIEVE.”

“ OPPORTUNITIES MULTIPLY
AS THEY ARE SEIZED.”

02 Directors’ Report

TERRENCE A. MARTINS
Chairman

CHAIRMAN’S STATEMENT
YEAR END RESULTS TO DECEMBER 31, 2007

I am delighted to report to you for the ﬁ rst time as Chairman of the Sagicor Group of Companies. The Group
recorded yet another period of solid performance for the ﬁ nancial year 2007. Net Income for the year was US$108.7
million, compared with US$86.6 million for the previous year. Total assets of the Group amounted to US$3.6 billion,
while shareholders’ capital reached US$455.2 million. The Board accordingly approved a ﬁ nal dividend of BDS 8 cents
(US 4 cents) for a total dividend for the year of BDS 14 cents (US 7 cents). The share price as quoted on the Barbados
Stock Exchange ended the year at BDS $5.20 (US$2.60) increasing from BDS $ 4.13 (US$2.065) at the start of the
year. This amounted to an appreciation of approximately 25.9% for the year, for a total return to shareholders of
29.3%.

During 2007, the Group continued to implement its strategic vision by expanding into new geographies and new
product lines. In this regard, on September 1, 2007, Sagicor acquired a managing agency of a Lloyd’s syndicate,
now re-branded to Sagicor at Lloyd’s, and its associated capital and services providers, and immediately followed
this with an acquisition of a distribution network which supports the Sagicor at Lloyd’s business. The acquisition of
Sagicor at Lloyds will allow the Sagicor Group to further diversify its range of products and services, and will also
provide additional geographic diversiﬁ cation.

On February 14, 2007, Sagicor became the ﬁ rst Caribbean company to have its shares admitted to trading on the main
market of the London Stock Exchange. This is a signiﬁ cant milestone in our journey to become an international ﬁ nancial
services group. The listing on the London Stock Exchange will enhance our ability to access capital when required.

Through the implementation of our vision to expand, grow and diversify, ﬁ rst in our Caribbean home markets and
then internationally, it is to be noted that the Sagicor Group has doubled its size approximately every ﬁ ve years for
the last ﬁ fteen years.

We have moved from a single line, single company operation to a Group with multiple lines of business, operating
in 22 countries in the Caribbean, and in Latin America, the UK and the US. As expected, this has increased the
complexity of our operations requiring an effective and proactive response from the Board and Management.

In recognition, during 2007 a new and enhanced governance architecture was implemented reﬂ ecting best
practice. Policies and measures to identify the principal risks to our various operations are an important oversight
responsibility of the Board, which requires continuous attention as we seek to ensure that our business initiatives
and plans are prudent, properly aligned with our risk proﬁ le, and create sustainable shareholder value.

We hold the view that a primary responsibility of the Board of Directors is to create an environment for management
which builds trust and demands integrity in all facets of our enterprise. In this regard, we are committed to the
provision of sound and timely advice to management in a manner which consistently facilitates the attainment of our
shared strategic and development goals.

We will continue to focus on the fundamentals of efﬁ ciency, cost containment and the acquisition of quality assets
within a framework of adherence to our Corporate Governance principles and the imperative of value creation for our
Customers and Shareholders.

My predecessor, Mr. Arthur Bethell, retired as Chairman and Director of Sagicor Financial Corporation after our
Annual Meeting on June 26, 2007. Mr. Bethell has served the Sagicor Group with distinction for more than 40 years
as an Agent, Executive, President and Chairman. On behalf of the Board, Management and Staff, we thank him
for his many years of service and wish him a healthy and happy retirement. Dr Jeannine Comma was appointed to
ﬁ ll the vacancy created by Mr. Bethell’s retirement. Dr Comma is Chief Executive Ofﬁ cer and Director of the Cave
Hill School of Business at the University of the West Indies. She is a Director of our principal operating subsidiary
Sagicor Life Inc, and brings a wealth of experience and expertise in the area of human resource management. We
welcome her to the Board of Sagicor Financial Corporation. Mr David Allan will retire at the end of the ﬁ fth Annual
Meeting. He has made an outstanding contribution to the Group for over 50 years, having begun his career at
Sagicor, then The Mutual, in 1956. He has served, with equal distinction, in several capacities, including Agent,
Agency Manager, General Manager and President. The Board, Management and Staff thank him sincerely for his
pivotal role in the development of Sagicor over the last half century and wish him well in his retirement.

The Sagicor Group continues to enjoy strong industry and ﬁ nancial ratings. Our insurance subsidiaries, Sagicor
Life Inc, Sagicor Capital Life and Life of Jamaica, are consistently rated “A” (Excellent) by A.M Best and Company.
Our new US subsidiary, Sagicor Life Insurance Company was recently upgraded to “A-” (Excellent). Our principal
operating subsidiary, Sagicor Life Inc, enjoys a BBB+ ﬁ nancial strength rating from Standard and Poor’s.

I wish to thank my fellow Directors, Management and Staff for their contribution to the 2007 results, and especially
to thank our Customers and Shareholders who continue to place conﬁ dence in the Sagicor Group.

TERRENCE A. MARTINS
Chairman

DODRIDGE D. MILLER
President and Chief Executive Ofﬁ cer

CHIEF EXECUTIVE OFFICER’S REPORT
In 2007, the Sagicor Group continued to execute on a business strategy which is designed to transform the Group
from a domestic Caribbean insurance entity to an international ﬁ nancial services Group. We consequently recorded
another proﬁ table and successful year as we continue to build on an already sound ﬁ nancial footing.

Key components of the strategy include:
1. Continuing to extract cost synergies and efﬁ ciencies from existing and acquired operations;
2. Expanding on the portfolio of products and services to become a fully integrated ﬁ nancial institution;
3. Expanding into new markets that offer attractive valuations and sustainable opportunities for growth; and
4. Optimising the use of capital to maximise Shareholder returns.

The careful execution of this strategy has produced very strong results for the Group over the last ﬁ fteen years and
we believe that this strategic platform remains the best ﬁ t for the Group at this time.

Performance Review*
All of our main operating companies, except for Sagicor USA and Sagicor General, met or exceeded performance
expectations.

Life of Jamaica Group:

In Jamaica, the Life of Jamaica Group, exceeded performance expectations for the ﬁ nancial year 2007. The Group
comprises Life of Jamaica Limited (LOJ), our insurance subsidiary, and Pan Caribbean Financial Services Limited,
(PCFS), our banking and asset management subsidiary. LOJ, which is the dominant insurance company in Jamaica
with more than 50% market share in all lines of business, recorded net proﬁ t for the year of US $49.8 million, of
which US $43.0 million was attributable to LOJ Shareholders. All lines of business enjoyed increased growth with
Individual Life recording increase in revenue of 17% while Employee Beneﬁ ts enjoyed a growth of 10%. Funds under
Management also experienced solid growth of 10% for the year moving from US $2.1 billion to US $2.3 billion. The
banking and asset management division, through PCFS, also experienced increased revenue, growing to US $37.3
million, a growth of 13% over 2006. Net income of PCFS grew by 4% to US $17.6 million in 2007.

*This review is based on the respective subsidiaries’ ﬁ nancial statements. Consequently, these cannot be referenced to the Group’s
audited ﬁ nancial statements.

Sagicor Life Inc:

Sagicor Life Inc is our Barbados based insurance subsidiary. It is the most geographically diverse of our insurance
subsidiaries, and owns and operates branches or companies in 19 of the 22 countries in which the Group operates.
Sagicor Life also produced a solid ﬁ nancial performance during 2007. Overall revenue grew by 15% when compared
to last year. Net Proﬁ t for the year was US $36.3 million, compared to US $37.8 million for the same period last year.
Sagicor Life enjoys strong market share in most of the territories in which it operates. Funds under Management
grew by 7% to reach US $1.5 billion.

Sagicor USA:

In the case of Sagicor USA, longer than anticipated product approvals in the 44 States and the District of Columbia,
and a slower build-out of our distribution network, adversely impacted our revenue targets for 2007. However, the
net loss for the year at US $1.5 million was signiﬁ cantly lower than the projected loss for the year at US $3.5 million.
Revenues for the last quarter of 2007 and the ﬁ rst quarter of 2008 are in line with expectation. During the ﬁ rst
quarter of 2008, A.M. Best & Company upgraded the ﬁ nancial strength rating from B++ (Good) to “A-“ (Excellent).
This has had a positive impact on both sales and the quality of distribution which we are now able to attract.

Sagicor General:

Sagicor General is our Caribbean Property & Casualty insurance subsidiary. In 2006, it expanded its operations in
Trinidad & Tobago and experienced exceptional growth in that market in 2006 and 2007. This rapid growth proved
burdensome for the size of the initial operations in that country, and as a result the Company’s overall performance
suffered and fell short of expectations. Management has strengthened the operations and addressed the
deﬁ ciencies, and this subsidiary is now expected to meet or exceed expectations during the current ﬁ nancial year.

Signiﬁ cant Milestones

London Stock Exchange Listing:

In November of 2006, Sagicor Shareholders removed all constrained share ownership provisions in the Company’s
Articles, thereby clearing the way for Sagicor to list on the London Stock Exchange (LSE).

Sagicor applied to the Financial Services Authority for all Sagicor Common Shares to be admitted to the Ofﬁ cial List,
and to trading on the market for listed securities of the London Stock Exchange. In February 2007, all of the Common
Shares were admitted to trading on the main market of the LSE.

Sagicor’s listing is a major achievement for the Group. A presence in the international capital markets is an integral part
of our business strategy. More importantly, the listing was a signiﬁ cant milestone, not just for our Company, but the
Caribbean, since it is the ﬁ rst company from the region to have its shares admitted to trading on the main market of the LSE.

Sagicor at Lloyd’s:

In the latter part of 2007, the Group acquired Sagicor at Lloyd’s Limited, the managing agency of Lloyd’s Syndicate
1206, and its associated capital and service providers. The Group also purchased Byrne and Stacey Underwriting
Limited (BSU), a marketing agency in the Lloyd’s market. These were our ﬁ rst acquisitions in Europe since obtaining
a secondary listing on the LSE and extended our operating base to the important London market. They provide
a platform for the Group to expand its operations into new geographies and markets, and is in furtherance of its
business strategy to diversify earnings by risk and currency. The syndicate is part of the Lloyd’s of London franchise,
a specialist insurance market consisting of independent syndicates. The key features of the market are that risks are
accepted in syndicates with members having several but not joint liability. Syndicate 1206, now known as Sagicor at
Lloyd’s, writes property and casualty business. The Management and Staff of Sagicor at Lloyd’s and BSU have many
years’ experience in the London Market and we have no doubt that through these acquisitions we will be able to
spearhead the development of the Group as a competitive ﬁ nancial institution in the European market place.

In accordance with International Financial Reporting Standards (IFRS), the Group recorded a gain on this acquisition
of US $26.4 million, of which US $23.7 million is attributable to Shareholders’ interests.

Allnation:

During the year, Management disposed of its international health company Sagicor Allnation. Allnation specialised
in the provision of Individual and Group Health coverage to international groups and clients, including Third Country
Nationals. As Sagicor has continued to expand its base of operations, this line of business often overlapped with our
domestic markets and accordingly became less strategic to the Group.

Barbados Farms:

In January 2008, Sagicor acquired a controlling interest in Barbados Farms Limited, the principal business of which
is the operation of sugar cane plantations, the cultivation of various other crops and the development of non-
productive land. The acquisition permits the Group to participate in an important economic activity in Barbados,
and also facilitates the orderly transition of non-productive lands into their next viable alternative, whereby lands
not suitable for agriculture will be transitioned in an orderly manner to their next best use, including residential
developments.

Management:

During the year, as part of a general restructuring, the Group established a Group Executive Committee to oversee
the effective management of the Group across all geographies and lines of business. Speciﬁ cally, the purpose of
the Committee is to assist the Group CEO in the development and implementation of strategy, operational plans
and policies; monitoring operating and ﬁ nancial performance; assessment and control of risk; prioritisation and
allocation of resources; and monitoring competitive and environmental forces.

This Committee, called EXCOM, comprises the President & CEO of the Group, the CEOs of the main operating
subsidiaries, the Chief Financial Ofﬁ cer, Chief Risk Ofﬁ cer, General Counsel and Secretary, Group Chief Internal
Auditor and the Vice President, Corporate Communications. EXCOM meets on a monthly basis.

Human Resources

As an employer, Sagicor is committed to providing the highest quality of work life and the opportunity for personal
and professional development of all its Staff in the countries in which we operate. To this end, we have engaged
the services of the Human Resource Development section of Ernst & Young, Atlanta, USA, to assist us with
implementing Human Resources Best Practice across the Group.

During the past year, the Sagicor Group continued to pursue a series of initiatives aimed at optimising the
development of key business skills, and attracting and retaining the best talent in the Group. By the end of 2007, we
had undertaken several initiatives.

A comprehensive pay for performance programme was implemented for Management and Staff, using the Balanced
Score Card methodology. This methodology was ﬁ rst introduced in 2005, for the administration of the Executive
Long Term Incentive Programme and the Employee Stock Option Programme. It is now being used to determine the
performance of employees at all levels in the Group.

Ernst & Young is in the process of completing a comprehensive succession plan which identiﬁ es the key positions vital
for the sustainability of our success and a development matrix for potential leaders. In this regard, we have begun a
robust programme of training and development. The aim of the programme is to ensure an executive team with not
only the technical abilities speciﬁ c to their disciplines, but with the critical skills and abilities necessary in a global
environment. The Wharton School of Business and the Cave Hill School of Business of the University of the West
Indies have been identiﬁ ed as two of the institutions to provide such training.

Both Life of Jamaica (LOJ) and Sagicor Life Inc continue to focus on the strategic issues of employee engagement
and have completed, with the assistance of LOMA, surveys to determine the level of employee morale. This ﬁ rst-year
survey data will be the benchmark from which the companies will develop initiatives for improvements and Staff
development during the coming year.

We continued to sponsor industry training for all Staff through LOMA, with increasing numbers of Staff completing
the LOMA and AHIP designations. We also introduced an eLearning programme. Group companies facilitated a
number of workshops in Customer Service, Customer Retention Strategies, and Health and Safety for our Managers
and Supervisors through the Cave Hill School of Business in Barbados and the Leadership Management Institute in
Trinidad and Tobago.

A new Corporate Induction Programme was launched to ensure that all new members of the Sagicor team have a
common understanding of our Corporate Goals, Values, Code of Ethics, Performance Expectations and HR Policies
and Procedures.

Other employee initiatives in 2007 included a series of lunch-time learning sessions, which were introduced to assist
our employees to recognise the importance of a balanced work life, and to improve the management of health and
wellness. In keeping with our mission to provide “Wise Financial Thinking for Life”, we also facilitated a series of
workshops on retirement planning.

Life of Jamaica continued its commitment to provide an enriched after-school facility for children of employees.
In addition, 55 children of employees at primary and secondary schools were awarded scholarships. Similar
programmes will be introduced across the Group in 2008.

Conclusion

The outlook for the global economy for 2008 is one of lower or negative growth. The fallout of the credit crisis and
the almost certain recession in the US economy will present its challenges across the global ﬁ nancial landscape. We,
at Sagicor, enjoy strong market share in most of our operations, a geographically diversiﬁ ed portfolio of businesses,
and a strong well-capitalised balance sheet with quality assets. We are conﬁ dent of our future and remain optimistic
about our performance for 2008.

I wish to thank the Board of Directors, Management and Staff for their continued support over the past year.

DODRIDGE D. MILLER
President and Chief Executive Ofﬁ cer

OPERATING AND FINANCIAL REVIEW

Introduction

The Group produced strong results in 2007. Net income reached US $108.7 million, an increase of US $22.1 million
or 25.5% over 2006.

The net income allocated to Shareholders was US $86.3 million, producing a 22.1% return on Shareholders’
equity, and earnings per share of US 32.3 cents. Comparable amounts for 2006 were US $67.7 million, 19.0% and
US 25.4 cents respectively.

The main highlight of the year has been the acquisition, effective September 1, 2007, of the corporate entity
participating in Lloyd’s of London insurance syndicate 1206. The acquisition resulted in a gain of US $26.4
million, of which US $23.7 million is allocable to Shareholders. This gain has been computed in accordance with
International Financial Reporting Standards (IFRS), which require the recognition of the fair value of the net tangible
and intangible assets acquired. The capacity of the syndicate is an intangible asset and, with the assistance of an
independent professional accounting ﬁ rm, was valued at US $23.7 million as of September 1, 2007. The capacity
of a syndicate has to be supported by capital, and determines how much premium the syndicate can generate. On
acquisition, Sagicor provided US $66.8 million in new capital to support the capacity of the syndicate.

The acquisition of the interest in syndicate 1206, the managing agency and associated companies, augments
considerably the Group’s geographical spread of business to the Lloyd’s of London insurance market, which writes
property and casualty insurance business across the world.

In addition, the Group has made some additional charges, in accordance with IFRS, to write down certain intangible
assets which were acquired with two prior acquisitions. These charges amounted to US $3.7 million, of which US
$3.1 million is allocable to Shareholders.

Overall, the performance of the Group was very sound and is comparable to that recorded in 2006.
This performance is discussed in greater detail in the sections which follow.

With the increase in income allocable to Shareholders, the Directors have increased the ﬁ nal dividend to Barbados
8 cents (US 4 cents) per share to be paid in May 2008. Together with the interim dividend of Barbados 6 cents
(US 3 cents) per share paid in October 2007, this makes a total dividend of Barbados 14 cents (US 7 cents) per share,
an increase of 7.7% over the previous year. Accordingly, the total dividends declared for 2007 and 2006 respectively
are illustrated in the following chart.

TOTAL DIVIDENDS DECLARED

2007 ﬁ nal - US $11.1 million

2007 interim - US $8.0 million

2006 ﬁ nal - US $9.3 million

2006 interim - US $8.0 million

Overall Results

The results for the year ended December 31, 2007 are set out below, with recurring operating activities being
separated from the IFRS adjustments outlined in the foregoing section. These adjustments are set out in the non-
operating column in the table below. 2006 results consisted wholly of operating activities.

2007 US$ millions

2006 US$ millions

Operating Non-operating

Revenue

Beneﬁ ts

Expenses

Net income before income taxes

Income taxes

Net income for the year

Net income attributable to:

Shareholders

Participating policyholders

Minority interests

746.5

(384.6)

(256.1)

105.8

(19.8)

86.0

65.7

(0.2)

20.5

86.0

Earnings per share in US cents

24.6 c

26.4

(3.7)

22.7

20.6

2.1

22.7

7.7 c

Total

772.9

(384.6)

(259.8)

128.5

(19.8)

108.7

86.3

(0.2)

22.6

108.7

32.3 c

Total

662.3

(346.0)

(215.8)

100.5

(13.9)

86.6

67.7

(0.3)

19.2

86.6

25.4 c

Operating revenue grew by 12.7% to reach US $746.5 million in 2007. Beneﬁ ts and operating expenses also increased
by 11.1% and 18.7% respectively. As a result, operating net income before taxation has increased by US $5.3 million
or 5.3%, to reach US $105.8 million in 2007.

The effective income tax rate on operating income has increased to 18.7% from 13.8% in 2006. The increase is attributed
largely to a change in the distribution of taxable income within the Group, with increased taxable income emerging in
a country within the Other Caribbean Region where income tax is computed at the rate of 34.5% of net income.

The net income attributable to minority interest primarily arises from income generated by the Life of Jamaica Group
(including the Pan Caribbean Group), Sagicor at Lloyd’s and Sagicor General, all of which are majority, but only part-
owned by Sagicor.

Results by Segment

Sagicor results by segment are reported by its operations in Barbados, Jamaica, Trinidad and Tobago, United
Kingdom, United States and Other Caribbean. The following table presents the overall contribution of each segment
to Group net income and Shareholders’ net income respectively for 2007 and 2006.

Barbados

Jamaica

Trinidad & Tobago

USA

Other Caribbean

Not allocated to segments

Net income for the year

Group net income
US$ millions

Shareholders’ net income
US$ millions

2007

2006

2007

2006

12.1

45.8

13.3

29.6

0.6

31.9

17.6

42.1

21.6

8.5

16.5

12.3

27.9

13.4

26.7

0.6

29.5

18.0

26.3

21.6

8.5

12.0

(24.6)

(19.7)

108.7

86.6

(24.1)

(18.7)

86.3

67.7

Barbados operations comprise the Barbados Branch operations of Sagicor Life Inc and Sagicor General Insurance
respectively, and the operations of Sagicor Asset Management and Globe Finance Inc. Group net income from Barbados
operations totalled US $12.1 million in 2007, as compared with US $17.6 million in 2006. The decline in results in 2007 as
compared with 2006 can be attributed to a relative increase in the reserve for life and annuity beneﬁ ts.

Jamaica operations comprise the operations of Life of Jamaica Limited and of the Pan Caribbean Group of Companies.
Group net income from Jamaica operations totalled US $45.8 million in 2007, as compared with US $42.1 million in
2006. Revenue from Jamaica operations grew by 6.5% in 2007, resulting in an overall increase in net income. Since
Sagicor owns 59% of Life of Jamaica and 64% of the Pan Caribbean Group and the Group net income is shared with
the minority interest, the net income contribution to Shareholders amounted to US $27.9 million and US $26.3 million
in 2007 and 2006 respectively.

Trinidad and Tobago operations comprise the Trinidad Branch operations of Sagicor Life Inc and Sagicor General
Insurance respectively, and the operations of Nationwide Insurance Company and Sagicor Merchant Limited. Group
net income from Trinidad operations totalled US $13.3 million in 2007, as compared with US $21.6 million in 2006.
The decline in results in 2007, as compared with 2006 can be attributed to a relative increase in the reserve for life and
annuity beneﬁ ts.

United Kingdom operations, comprise the Sagicor at Lloyd’s operations, which was acquired effective September 1,
2007. After deducting the gain that arose on this acquisition of US $26.4 million, the contribution to Group net income
was US $3.2 million for the four months .

The United States of America operations comprise the operations of Sagicor Life Insurance Company, Sagicor Allnation
and Laurel Life Insurance Company. Group net income from USA operations totalled US $0.6 million in 2007, as
compared with US $8.5 million in 2006. During 2007, Sagicor Life Insurance Company incurred additional costs as it
ﬁ led a number of new products with insurance regulators prior to distribution and established additional distribution
capacity. By the end of the year, Sagicor Life Insurance Company had appointed a total of 588 independent and
managing general agents to distribute its products.

Other Caribbean operations comprise various branch operations of Sagicor Life Inc and Sagicor General Insurance
respectively, and the operations of Sagicor Capital Life Insurance Company, Capital Life Insurance Company Bahamas
Limited, Sagicor Panamá SA, Sagicor Life of the Cayman Islands, Sagicor General Insurance (Cayman) Limited and
Sagicor Finance Inc (formerly Mutual Finance Inc). Group net income from these operations totalled US $31.9 million
in 2007, as compared with US $16.5 million in 2006. The signiﬁ cant improvement in results in 2007, as compared with
2006, can be attributed to a reduction in the reserve for life and annuity beneﬁ ts in Sagicor Life Inc and Sagicor Capital
Life Insurance Company. This change in reserve arose from the re-organisation of branch and head ofﬁ ce operations,
which resulted in lowering overall policy maintenance expenses.

Group activities which are not allocated to segments comprise ﬁ nance costs and Group corporate costs. Group net
expenses from these operations totalled US $24.6 million in 2007, as compared with US $19.7 million in 2006.

REVENUE BY GEOGRAPHICAL SEGMENT

Barbados
Jamaica
Trinidad
UK
United States
Other Caribbean

17%
39%
13%
8%
6%
17%

Operating Revenue

The following table summarises the composition of operating revenue for 2007 and 2006 respectively.

Net premium revenue

Net investment income

Income from associates

Fees and other revenue

Total

2007

2006

US$ millions

430.4

261.2

4.2

50.7

57.6

35.0

0.6

6.8

377.6

238.4

2.7

43.6

57.0

36.0

0.4

6.6

746.5

100.0

662.3

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, 2007
and 2006 respectively.

Life insurance

Annuities

Health insurance

Property and casualty insurance

Total premium revenue

Reinsurance premiums

Net premium revenue

2007

2006

US$ millions

46.5

10.0

23.0

20.5

100.0

249.5

53.4

123.2

109.7

535.8

(105.4)

430.4

231.6

56.1

113.5

67.5

468.7

(91.1)

377.6

49.4

12.0

24.2

14.4

100.0

Life insurance continues to be the largest class of insurance business written by Sagicor. Life insurance premiums
increased by US $17.9 million or 7.7% to US $249.5 million in 2007. Annuity premiums declined by US $2.7 million
in 2007. This class of premium often includes single premiums, as opposed to recurring premiums, which can
inﬂ uence the total premium written.

Individual life and annuity new business premium continues to be strong in the Caribbean markets. New business
annualised premium income amounted to US $4.3 million from the Barbados market ,US $18.1 million from the
Jamaica market, US $5.9 million from the Trinidad market, and US $8.1 million from the Other Caribbean markets.

Health insurance premiums increased by US $9.7 million or 8.5% to reach US $123.2 million for the year.

The addition of the Sagicor at Lloyd’s syndicate to the Group from September 1, 2007 has materially augmented
the premium revenue generated from property and casualty insurance. During this 4-month period, the syndicate
generated premiums of US $34.0 million, adding to the property and casualty insurance from Caribbean operations
of US $75.7 million in 2007. On an annualised basis, property and casualty insurance premium as of December 31,
2007 was approximately US $177.7 million, becoming the second largest class of insurance written by Sagicor.

Net Investment Income

Investment income by asset class is summarised in the following table.

Investment property

Debt securities

Equity securities

Loans and ﬁ nance leases

Deposits and other items

Total investment income

Investment expenses

Net investment income

2007

2006

5.8

59.9

10.0

17.0

7.3

100.0

US$ millions

15.1

157.4

26.4

44.6

19.3

262.8

(1.6)

261.2

6.1

63.4

6.9

16.7

6.9

100.0

US$ millions

14.7

153.2

16.8

40.3

16.7

241.7

(3.3)

238.4

As the largest asset class, debt securities provide the largest source of investment income. Debt securities generated
interest income of US $148.3 million in 2007 and US $143.7 million in 2006, representing an average interest yield of 9.4%
in both years. Debt securities also generated investment gains of US $9.1 million in 2007 and US $9.5 million in 2006.

Equity securities generated investment gains of US $19.7 million in 2007 as compared with US $10.5 million in 2006.
After taking into account dividend income of US $6.7 million in 2007 and US $6.3 million in 2006, the total return
from equity securities increased by US $9.6 million, or 57.2% in 2007.

The Group advances mortgage loans, policy loans, ﬁ nance loans and ﬁ nance leases to Customers and Policyholders.
Interest income from these ﬁ nancial instruments totalled US $44.6 million in 2007, as compared with US $40.3
million in 2006, representing an increase of US $4.3 million or 10.7% in 2007. The average investment yield on loans
and ﬁ nance leases totalled 8.8% in 2007 and 8.7% in 2006.

Income from Associates and Other Revenue

The associated companies of the Group performed well, generating income before tax to the Group of US $4.2 million
in 2007.

Other revenue items, comprising fee income, commission income and other operating income, totalled
US $50.7 million in 2007, an increase of US $7.1 million or 16.3% over the previous year. Fee income includes income
generated from assets under administration, the latter totalling US $1,507 million as of December 31, 2007.

REVENUE BY BUSINESS SEGMENT

49%
Individual Insurance
24%
Group Insurance
Property & Casualty Insurance
12%
Banking & Investment Management 15%

Beneﬁ ts

The following table summarises the composition of beneﬁ t expenses for 2007 and 2006 respectively.

Net policy beneﬁ ts

Net change in actuarial liabilities

Interest – policy contracts

Interest – deposit and security liabilities

2007

2006

US$ millions

272.8

27.7

19.5

320.0

64.6

70.9

7.2

5.1

83.2

16.8

384.6

100.0

US$ millions

254.7

9.0

20.2

283.9

62.1

346.0

73.6

2.6

5.8

82.0

18.0

100.0

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.

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, 2007 and 2006
respectively.

Life insurance beneﬁ ts

Annuity beneﬁ ts

Health insurance claims

Property and casualty insurance claims

Total policy beneﬁ ts

Reinsured beneﬁ ts and claims

Net policy beneﬁ ts

2007

2006

US$ millions

38.9

25.2

26.7

9.2

100.0

130.1

84.4

89.2

30.8

334.5

(61.7)

272.8

129.4

82.4

82.8

16.3

310.9

(56.2)

254.7

41.6

26.5

26.6

5.3

100.0

As the largest insurance class of business at Sagicor, life insurance provides the largest quantum of beneﬁ ts to
insured persons and beneﬁ ciaries. Life insurance beneﬁ ts include death and disability claims, policy surrenders
and withdrawals, policy bonuses and dividends. The level of beneﬁ ts incurred totalled US $130.1 million and was
comparable to the previous year’s total. The level of annuity beneﬁ ts was also comparable the previous year, and
amounted to US $84.4 million.

Consistent with the increase in premiums from health insurance, the level of incurred claims increased to US $89.2
million in 2007, as compared with US $82.8 million in 2006.

The addition of the Sagicor at Lloyd’s syndicate to the Group from September 1, 2007 has signiﬁ cantly augmented
the property and casualty insurance operations of Sagicor. During this 4-month period, the syndicate generated
incurred claims of US $8.5 million which, when added to the incurred claims from property and casualty insurance,
Caribbean operations resulted in a total expense of US $30.8 million in 2007.

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 overall increase in actuarial liabilities after accounting for the impact of reinsurance was US $27.7 million for 2007.

Gross actuarial liabilities in respect of the Barbados, Jamaica and Trinidad segments increased overall, whilst the
corresponding liabilities decreased in the USA and Other Caribbean segments. The decline in the USA is a reﬂ ection
of the large maturing inforce block of policies of Sagicor Life Insurance Company, but is offset by the release in
corresponding liabilities ceded to reinsurers. The decline in gross actuarial liabilities in the Other Caribbean Region
is a result largely of the policy maintenance expense savings, arising from the transfer of certain administrative
functions from branch ofﬁ ces to head ofﬁ ce.

Interest expense
Interest expense arising from investment policy contracts and from policy dividends on deposit totalled US $19.5
million in 2007, a slight decrease in the expense incurred in 2006.

The interest expense on other operating ﬁ nancial liabilities totalled US $64.6 million, an increase of US $2.5million
or 4.0% for the year. The average interest yields on these operating ﬁ nancial liabilities totalled 8.4% in 2007 and
8.3% in 2006.

Operating expenses

The following table shows an analysis of expenses for the years ended December 31, 2007 and 2006 respectively.

Administrative expenses

Commissions and related compensation

Premium taxes

Finance costs

Depreciation and amortisation

2007

2006

US$ millions

142.2

77.9

7.3

12.3

16.4

55.5

30.4

2.9

4.8

6.4

US$ millions

125.4

57.1

6.6

9.4

17.3

58.1

26.5

3.1

4.3

8.0

Total

256.1

100.0

215.8

100.0

Total operating expenses have increased to US $256.1 million from US $$215.8 million in 2006.

Compensation is the most signiﬁ cant component of operating expenses. Compensation costs for Administrative
Personnel and Directors are included in administrative expenses. Commissions and related compensation are
incurred and are payable to Sagicor Advisors, Independent Agents and Brokers who distribute insurance products on
behalf of Sagicor.

Salaries, bonuses, fees and short-term employer beneﬁ ts schemes for Administrative Personnel and Directors
totalled US $63.9 million in 2007 and US $55.8 million in 2006. Employer contributions to social security and
pension schemes on behalf of Administrative Personnel and Sagicor Advisors totalled US $9.8 million in 2007 and
US $8.0 million in 2006.

The addition of the Sagicor at Lloyd’s syndicate to the Group from September 1, 2007 has signiﬁ cantly augmented
the insurance distribution capacity of Sagicor. During this 4- month period, the syndicate incurred commissions of
US $12.0 million, adding to the insurance distribution costs from other operations of US $65.9 million in 2007.

Finance costs have increased to US $12.3 million in 2007 from US $9.4 million in 2006, the increase being attributed
to the ﬁ nancing cost of the Sagicor 7.5% senior notes which were issued from May 12, 2006.

Cash Flows

Cash ﬂ ows generated or used by the Group are summarised into categories of operating, investing, or ﬁ nancing
activities. Summary cash ﬂ ows for the years ended December 31, 2007 and 2006 respectively are set out in the
following table.

Operating activities

Investing activities

Financing activities

Effect of exchange rates

Net change in cash and cash equivalents

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

2007

(71.7)

(18.3)

(30.0)

8.8

(111.2)

224.7

113.5

2006

56.0

(13.3)

56.0

(11.2)

87.5

137.2

224.7

Cash used in operating activities totalled US $71.7 million for the year ended December 31, 2007. Within this total,
US $83.9 million was generated by income ﬂ ows, US $268.1 million was used to acquire additional operating
investments and US $90.4 million was provided by operating ﬁ nancial liabilities. Other movements in receivables,
payables and insurance liabilities generated net cash ﬂ ows of US $22.1 million.

Cash used in investing activities in 2007 totalled US $18.3 million. Within this total, US $16.6 million was used to
acquire additional property, plant, equipment and software.

Cash used in ﬁ nancing activities in 2007 totalled US $30.0 million. Within this total are dividends paid to
Shareholders of US $17.1 million, dividends paid to minority interests of US $8.2 million and net repayment of loans
payable of US $8.0 million.

The overall reduction in cash and cash equivalents is a result of two main factors. Firstly, the investment of the
remaining proceeds from the 2006 issue of senior notes in assets to support the capital requirements of the Sagicor
at Lloyd’s syndicate and secondly, the re-investment of call deposits and other liquid balances at the beginning of the
year in longer-term operating investments.

With cash and cash equivalents amounting to US $113.5 million at balance sheet date, the Group has adequate
resources to meet its ongoing obligations.

Assets

As of December 31, 2007, the Group’s assets totalled US $3,649.7 million, 78.7% of which was represented
by investments and cash. The principal components of the Group’s assets as of December 31, 2007 and 2006
respectively are summarised in the following table.

2007

2006

US$ millions

Investments and cash

2,872.7

78.7

2,703.1

80.4

Property, plant equipment and intangible assets

Reinsurance assets

Receivables and other assets

Total

231.5

320.1

225.4

6.3

8.8

6.2

193.2

321.7

145.3

5.7

9.6

4.3

3,649.7

100.0

3,363.3

100.0

Investments and cash

Investment property

Debt securities

Equity securities

Loans and ﬁ nance leases

Deposits and cash

Total

2007

US$ millions

97.5

1,750.5

188.7

566.2

269.8

3.4

60.9

6.6

19.7

9.4

2006

US$ millions

90.6

1,650.8

187.1

496.7

277.9

3.3

61.1

6.9

18.4

10.3

2,872.7

100.0

2,703.1

100.0

Debt securities remain the largest asset class in the investment portfolio, comprising 60.9% of the total portfolio as
of December 31, 2007. Debt securities comprise US $1,074.5 million in government securities, US $394.9 million in
corporate securities, US $229.4 million in mortgage-backed securities and US $51.7 million in other securities.

Loans and ﬁ nance leases comprise ﬁ nancial instruments originated by the Group and consist of US $294.0 million in
mortgage loans, US $126.4 million in policy loans and US $145.8 million in ﬁ nance loans and ﬁ nance leases.

Liabilities

As of December 31, 2007, the Group’s liabilities totalled US $3,063.0 million. The principal components of the
liabilities as of December 31, 2007 and 2006 respectively are summarised in the following table.

Policy liabilities

Deposit and security liabilities

Payables and other liabilities

Total operating liabilities

Notes and loans payable

Total

2007

2006

US$ millions

1,920.6

790.6

199.1

2,910.3

152.7

62.7

25.8

6.5

95.0

5.0

1,747.2

745.4

167.9

2,660.5

160.5

62.0

26.4

5.9

94.3

5.7

3,063.0

100.0

2,821.0

100.0

The Group considers notes and loans payable to be debt ﬁ nancing, whilst the other liability classes are considered to
arise from operating activities.

Policy Liabilities

Actuarial liabilities – individual

Actuarial liabilities – group

Other insurance liabilities

Investment contract liabilities

Total

2007

2006

US$ millions

1,183.2

181.1

313.9

242.4

61.6

9.4

16.3

12.7

1,197.0

176.6

152.7

220.9

68.5

10.1

8.7

12.7

1,920.6

100.0

1,747.2

100.0

Actuarial liabilities arising from life, annuity and health insurance contracts with individuals comprise the largest
proportion of policy liabilities. These liabilities include US $288.1 million in participating policies, US $795.6 million
in other life and annuity policies and US $93.1 million in unit linked policy funds.

Actuarial liabilities arising from life, annuity and health insurance contracts with groups (i.e. employers or
associations) totalled US $181.1 million as of December 31, 2007. These liabilities include US $131.7 million arising
from annuity contracts.

The addition of the Sagicor at Lloyd’s syndicate to the Group from September 1, 2007, has signiﬁ cantly augmented
the property and casualty insurance liabilities of Sagicor. As of December 31, 2007, the syndicate’s insurance
liabilities totalled US $138.4 million, thereby accounting for much of the increase in these liabilities from 2006.

Investment contract liabilities arise from policy 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. As of
December 31, 2007, these liabilities included US $487.3 million in securities sold under agreements to repurchase,
US $163.7 million in loans from banks and other ﬁ nancial institutions, and US $136.6 million in customer deposits.

Capital Resources

The principal capital resources of the Group as of December 31, 2007 and 2006 respectively are summarised in the
table below.

Shareholders’ equity

Minority interest

Notes and loans payable

Total balance sheet capital resources

Off balance sheet resources – letter of credit facility

Total capital resources

2007

455.2

122.1

152.7

730.0

80.0

810.0

2006

413.8

118.6

160.5

692.9

The Group’s debt to total equity ratio was 26.0% at the end of the year, a reduction of 3.6% during the year.
Consequent to the Sagicor at Lloyd’s acquisition, the Group replaced the initial capital support of US $66.8 million
with a partially secured letter of credit facility of US $80.0 million. The utilisation of this facility represents a more
efﬁ cient use of capital, while still maintaining an adequate amount of collateral which is available for capital support.

The Group is subject to a number of capital adequacy standards for its insurance, banking and securities operations.
In addition, in some Caribbean jurisdictions where there are no prevailing international capital adequacy insurance
standards, the Group has voluntarily adopted a standard for its subsidiaries operating in those countries. The Group
comfortably meets the prevailing capital adequacy standards and the standards it has voluntarily adopted. These are
discussed and disclosed in note 45.2 of the ﬁ nancial statements.

Risk Management

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, expose the Group to various insurance,
ﬁ nancial and operational risks.

Insurance risks include pricing, claims and lapse risk. Financial risks include credit, liquidity, interest rate, foreign
exchange and equity price risks. Exposure to and sensitivity to insurance and ﬁ nancial risks are discussed and
disclosed in notes 41 to 44 of the ﬁ nancial statements.

Operational risks include the loss of Management control, the valuation of assets and liabilities requiring the
signiﬁ cant exercise of judgement, technology failure, business interruption, money laundering, fraud and theft.
The Group has a number of policies and controls in place to mitigate sources of operational risks, and it continues
to develop and strengthen policies and controls to address additional risks that are identiﬁ ed.

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 will undergo constant monitoring.

Conclusion

2007 was a year of sound performance with an exceptional gain.

The economic environment in 2008 is proving to be a challenging one. The sub-prime mortgage crisis has generated
adverse effects in the USA and in many international ﬁ nancial institutions. The price increases in oil and food are
having adverse effects across many countries, which are likely to continue for some time.

The economies in the Caribbean are exposed in varying ways to these price increases, which will affect inﬂ ation and
economic growth and limit consumer spending. There has been a slow-down in economic growth in the USA which,
with the sub-prime mortgage crises, is also likely to limit consumer spending.

The increasing diversiﬁ cation of the Sagicor Group helps us to mitigate potential sectoral and/or country downturns.
In addition, the company is in a strong ﬁ nancial position and could take advantage of many opportunities which may
arise.

In conclusion, the company continues to consolidate its operations, extracting efﬁ ciencies wherever feasible.
Our marketing and sales thrust in the USA market and the growth and development of the Sagicor at Lloyd’s
business are expected to contribute signiﬁ cantly to the future development of the Sagicor Group.

CORPORATE CITIZENSHIP
Sagicor is committed to being an outstanding corporate citizen with a focus on providing ﬁ nancial services that
create value for Customers; generating excellent returns to Shareholders; providing the highest quality of work
life and the opportunity for personal and professional development of its Staff; and the development of youth,
education, health and sports in the community.

Sagicor recognises that its corporate social responsibility must go hand in hand with its vision and reputation for
Wise Financial Thinking for Life. Sagicor maintains its belief that social investment is at the heart of wealth creation
and wealth protection. Over the years, Sagicor has proven its ability to impact the communities in which it operates,
and 2007 was no exception.

During the year, Sagicor continued to support the development of sport through its continuing contribution to the
Sagicor Cricket Operations and Research Enterprise (SCORE) at the 3W’s Oval, a project undertaken at the Cave Hill
Campus of the University of the West Indies. SCORE was designed to give tangible sustenance and visibility to the
development of regional cricket.

SCORE focuses on cricket research and the development of appropriate playing and training facilities at the Cave
Hill Campus. The Group viewed the support of the 3W’s Oval, the Walk of Fame, the Indoor Cricket School and
the Cricket Library and Research Centre as an important development to help empower the cricket fraternity of
the region and beyond. The four facets of SCORE are interrelated facilities, and will be used to deliver a series of
innovative, practical, training and academic programmes to assist cricketers at all levels throughout the region in
pursuit of attaining excellence at their craft.

Speciﬁ c to the development of cricket in Barbados, the Sagicor Cup and the Sagicor Shield tournaments, for ﬁ rst
and second division teams, are sponsored by Sagicor General, our regional Property and Casualty company. These
sponsorships are now in their 30th and 29th consecutive years respectively.

Within the Group, we supported other areas of sport across the Caribbean region. These include Junior Squash,
Junior Tennis, Chess, Game Fishing, Golf, Netball, Football and Swimming.

In the area of Health, the Group has provided funding for the purchase of a mobile HIV/AIDS unit, a medical
bed, a special scale and testing supplies to assist the Jamaica AIDS Support for Life. This was done through its
Life of Jamaica subsidiary, Pan Caribbean Financial Services’ Sigma Run. Since the inception of the Run in 1999,
organisations with an excellent track record of impacting the lives of people in the Jamaican community have been
the beneﬁ ciaries of the funds raised. LOJ partnered with the Jamaica Cancer Society, Jamaica Business Council on
HIV/AIDS, Jamaica Society for the Blind, the Urology Development Fund and St. Christopher’s School for the Deaf.

Sagicor is also a Gold Star Donor to the Chronic Disease Research Centre (CDRC) of the University of the West
Indies. The CDRC focuses on the major chronic diseases (hypertension, diabetes, obesity and heart disease) which
cause most of the morbidity and mortality in the Caribbean today. They carry out research to ﬁ nd the best and most
cost-effective prevention and treatment strategies.

The Group has also supported other community activities in several countries which encourage a healthy lifestyle.

Sagicor employees demonstrate a deep personal commitment to very important causes, and they are to be
commended for being the driving force behind several projects. In Trinidad and Tobago, employees raised funds
to provide medical attention for children in need, while in Barbados, they partnered with the YWCA to provide and
serve breakfast to school children. In Jamaica, Life of Jamaica employees were active in the community, contributing
to the improvement in the lives of citizens of all ages, as they assisted projects like the Environmental Health
Foundation.

In the United States, Sagicor Life Insurance Company (SLIC) Management and Staff became involved with three
projects. The ﬁ rst was the Christmas in July project, an “Americans for a Better Tomorrow” programme. They
helped package and donate gifts to needy children during the holiday season. The programme also gives children
the opportunity to develop social skills, such as learning to respect authority, leadership, and coping with peer
pressure issues including resisting drugs, gangs, alcohol and tobacco.

The other two projects were the Kids Café Open, a food bank programme to feed needy children, and the Children’s
Angel Foundation Thrift Store, which raises funds to help pay for patients of low-income families to go on
excursions, obtaining toys, games and clothes, and purchasing specialised equipment not covered by health care
plans.

Finally, in the area of Education, the Sagicor Group provides several scholarships tenable at the University of the
West Indies, and in addition, has continued to assist schools at both the primary and secondary level throughout the
Caribbean.

The Group also supports international and regional institutions, such as the Pan American Health Organisation
(PAHO) and the Caribbean Broadcasting Union, sponsoring their competitions to improve the standard of health
journalism and ﬁ nancial reporting respectively.

“ WISDOM CONSISTS
OF KNOWING WHAT TO DO
WITH WHAT YOU KNOW.”

03 Governance

BOARD OF DIRECTORS

TERRENCE A. MARTINS
Age 66 / Citizen of Trinidad and Tobago / Director since January 2004 / Independent Director

Terrence Martins was appointed non-executive Chairman on June 26, 2007. He has brought a wealth of knowledge
to Sagicor, with over 40 years of experience within the ﬁ nancial services industry both in the Caribbean and the
United Kingdom. His areas of expertise include banking, ﬁ nance, administration, corporate governance and risk
management. Mr Martins previously held the position of Group Chief Executive Ofﬁ cer of RBTT Financial Holdings
Limited. He was appointed a Director of Sagicor Life Inc in 2004 and 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. He was elected a Director of Sagicor Life Inc in 2004.

BOARD/BOARD COMMITTEES
BOARD OF DIRECTORS
CORPORATE GOVERNANCE COMMITTEE
HUMAN RESOURCE COMMITTEE
RISK MANAGEMENT COMMITTEE

POSITION
Chairman
Chairman
Member
Chairman

ATTENDANCE RECORD
100%
6 of 6
100%
5 of 5
100%
6 of 6
100%
3 of 3

DIRECTOR’S INTEREST
SHARES AS AT 31-DEC-07
BENEFICIAL NON-BENEFICIAL

SHARES AS AT 8-MAY-08
BENEFICIAL NON-BENEFICIAL

GRANTS/OPTIONS
AS AT 31-DEC-07 AS AT 8-MAY-08

70,000

NIL

100,000

Nil

STEPHEN D. R. MCNAMARA
Age 57 / Citizen of St Lucia / Director since December 2002 / Independent Director

Stephen McNamara was appointed non-executive Vice-Chairman on June 26, 2007. He is the 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, Sagicor Finance Inc (formerly Mutual Finance Inc).

BOARD/BOARD COMMITTEES
BOARD OF DIRECTORS
CORPORATE GOVERNANCE COMMITTEE
RISK MANAGEMENT COMMITTEE

POSITION
Vice-Chairman
Member
Member

ATTENDANCE RECORD
83%
5 of 6
100%
5 of 5
100%
3 of 3

DIRECTOR’S INTEREST
SHARES AS AT 31-DEC-07
BENEFICIAL NON-BENEFICIAL

SHARES AS AT 8-MAY-08
BENEFICIAL NON-BENEFICIAL

GRANTS/OPTIONS
AS AT 31-DEC-07 AS AT 8-MAY-08

2,011

Nil

2,011

Nil

ANDREW ALEONG
Age 47 / Citizen of Trinidad and Tobago / Director since June 2005 / Independent Director

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. He was elected a Director of
Sagicor Life Inc in 2005.

BOARD/BOARD COMMITTEES
BOARD OF DIRECTORS
AUDIT COMMITTEE

DIRECTOR’S INTEREST
SHARES AS AT 31-DEC-07
BENEFICIAL NON-BENEFICIAL

POSITION
Director
Member

ATTENDANCE RECORD
83%
5 of 6
100%
5 of 5

SHARES AS AT 8-MAY-08
BENEFICIAL NON-BENEFICIAL

GRANTS/OPTIONS
AS AT 31-DEC-07 AS AT 8-MAY-08

484,003

216,169

484,003

216,169

Nil

DAVID W. ALLAN
Age 70 / Citizen of Barbados / Director since December 2002 / Independent Director

David Allan is a former President and Chief Executive Ofﬁ cer of The Mutual Group, now Sagicor, a position he held
for 23 years. He joined the Group in 1956 and was elected Director of The Mutual, now Sagicor Life Inc, in 1986.
Mr Allan retired as President and Chief Executive Ofﬁ cer in 1995. He also serves as a Director of Life of Jamaica
Limited 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
BOARD OF DIRECTORS
AUDIT COMMITTEE
RISK MANAGEMENT COMMITTEE

POSITION
Director
Member
Member

ATTENDANCE RECORD
33%
2 of 6
40%
2 of 5
33%
1 of 3

DIRECTOR’S INTEREST
SHARES AS AT 31-DEC-07
BENEFICIAL NON-BENEFICIAL

SHARES AS AT 8-MAY-08
BENEFICIAL NON-BENEFICIAL

GRANTS/OPTIONS
AS AT 31-DEC-07 AS AT 8-MAY-08

1,705

Nil

1,705

Nil

SIR HILARY BECKLES, K.A.
Age 52 / Citizen of Barbados / Director since June 2005 / Independent Director

Sir Hilary 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
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. Sir Hilary 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 was elected a Director of Sagicor Life Inc in 2005 and is
also a Director of Life of Jamaica Limited.

BOARD/BOARD COMMITTEES
BOARD OF DIRECTORS
HUMAN RESOURCE COMMITTEE

DIRECTOR’S INTEREST
SHARES AS AT 31-DEC-07
BENEFICIAL NON-BENEFICIAL

POSITION
Director
Member

ATTENDANCE RECORD
66%
4 of 6
50%
3 of 6

SHARES AS AT 8-MAY-08
BENEFICIAL NON-BENEFICIAL

GRANTS/OPTIONS
AS AT 31-DEC-07 AS AT 8-MAY-08

9,579

Nil

9,579

Nil

MARJORIE M. CHEVANNES-CAMPBELL
Age 56 / Citizen of Jamaica / Director since June 2005 / Independent Director

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 a former President and Chief Executive Ofﬁ cer of the Urban Development Corporation (the UDC Group),
Jamaica, a large property-owning company that is involved in development and manages several entities such as
hotels, attractions, a maintenance company, a water supply company, a shopping centre, a conference centre and
a golf course. Mrs Chevannes-Campbell is a Director of Life of Jamaica Limited, and of several other private sector
companies within Jamaica. She is currently pursuing a Doctorate in Business Administration.

BOARD/BOARD COMMITTEES
BOARD OF DIRECTORS

DIRECTOR’S INTEREST
SHARES AS AT 31-DEC-07
BENEFICIAL NON-BENEFICIAL

POSITION
Director

ATTENDANCE RECORD
83%
5 of 6

SHARES AS AT 8-MAY-08
BENEFICIAL NON-BENEFICIAL

GRANTS/OPTIONS
AS AT 31-DEC-07 AS AT 8-MAY-08

1,087

Nil

1,087

Nil

DR L. JEANNINE COMMA
Age 57 / Citizen of Trinidad and Tobago / Director since June 2007 / Independent Director

Dr Jeannine Comma holds a PhD from George Washington University, Washington, DC, USA, and is also a graduate
of the University of the Virgin Islands. She is a member of The American Society for Training and Development and
the Commonwealth Association of Public Administration and Management (CAPAM). Dr Comma is CEO/Director
of the Cave Hill School of Business of the University of the West Indies, where she specialises in organisational
development, strategy and leadership development, and has made signiﬁ cant contributions to the sustainable
development of human capital within the regional business community. Dr Comma has extensive experience in
Total Quality Management, Leadership Development, Organisational Strategic Planning and Change Management.
She has also taught at the undergraduate and graduate levels at George Washington University, Howard University,
Washington, DC, and the University of the West Indies. Dr Comma was elected a Director of Sagicor Life Inc in 2006.

BOARD/BOARD COMMITTEES
BOARD OF DIRECTORS
HUMAN RESOURCE COMMITTEE

DIRECTOR’S INTEREST
SHARES AS AT 31-DEC-07
BENEFICIAL NON-BENEFICIAL

POSITION
Director
Member

ATTENDANCE RECORD
100%
2 of 2*
50%
1 of 2*

SHARES AS AT 8-MAY-08
BENEFICIAL NON-BENEFICIAL

GRANTS/OPTIONS
AS AT 31-DEC-07 AS AT 8-MAY-08

11,523

Nil

11,523

Nil

* Dr Comma was appointed to the Board on June 26, 2007 and was appointed as a Member of the Human Resource Committee on September 18, 2007.

JOYCE E. DEAR
Age 64 / Citizen of Barbados / Director since August 2006 / Independent Director

Joyce Dear is a Fellow of the Association of Chartered Certiﬁ ed 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 ﬁ nancial
services to a wide variety of industries, including public companies, tourism and hospitality entities, manufacturing
companies, statutory corporations and international funding agencies/government-ﬁ nanced programmes 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
BOARD OF DIRECTORS
AUDIT COMMITTEE

DIRECTOR’S INTEREST
SHARES AS AT 31-DEC-07
BENEFICIAL NON-BENEFICIAL

POSITION
Director
Member

ATTENDANCE RECORD
83%
5 of 6
80%
4 of 5

SHARES AS AT 8-MAY-08
BENEFICIAL NON-BENEFICIAL

GRANTS/OPTIONS
AS AT 31-DEC-07 AS AT 8-MAY-08

5,000

Nil

5,000

Nil

CHRISTOPHER D. DECAIRES
Age 52 / Citizen of Barbados / Director since June 2005 / Independent Director

Christopher deCaires is a Chartered Accountant and holds an MBA from Henley Management College, United
Kingdom. 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 ﬁ nance, international taxation, ﬁ nancial management, mergers and acquisitions,
information systems, organisational design and business planning. Mr deCaires is Chairman of World Cup Barbados
and is a former Partner of PricewaterhouseCoopers, Barbados, where he was responsible for corporate ﬁ nance,
business advisory, corporate secretarial and trust services. He was elected a Director of Sagicor Life Inc in 2005.

BOARD/BOARD COMMITTEES
BOARD OF DIRECTORS
HUMAN RESOURCE COMMITTEE

DIRECTOR’S INTEREST
SHARES AS AT 31-DEC-07
BENEFICIAL NON-BENEFICIAL

POSITION
Director
Chairman

ATTENDANCE RECORD
50%
3 of 6
100%
6 of 6

SHARES AS AT 8-MAY-08
BENEFICIAL NON-BENEFICIAL

GRANTS/OPTIONS
AS AT 31-DEC-07 AS AT 8-MAY-08

22,368

Nil

22,368

Nil

DR OSCAR W. JORDAN, G.C.M.
Age 69 / Citizen of Barbados / Director since December 2002 / Independent Director

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 the 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
BOARD OF DIRECTORS
CORPORATE GOVERNANCE COMMITTEE

POSITION
Director
Member

ATTENDANCE RECORD
33%
2 of 6
100%
5 of 5

DIRECTOR’S INTEREST
SHARES AS AT 31-DEC-07
BENEFICIAL NON-BENEFICIAL

SHARES AS AT 8-MAY-08
BENEFICIAL NON-BENEFICIAL

GRANTS/OPTIONS
AS AT 31-DEC-07 AS AT 8-MAY-08

18,381

Nil

18,381

Nil

WILLIAM P. LUCIE-SMITH
Age 56 / Citizen of Trinidad and Tobago / Director since June 2005 / Independent Director

William Lucie-Smith holds an MA 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 was elected a Director of Sagicor Life Inc in
2005 and is also a Director of a number of other subsidiaries within the Group. Since his retirement, Mr Lucie-Smith
has been an independent Consultant.

BOARD/BOARD COMMITTEES
BOARD OF DIRECTORS
AUDIT COMMITTEE
RISK MANAGEMENT COMMITTEE

POSITION
Director
Chairman
Member

ATTENDANCE RECORD
100%
6 of 6
100%
5 of 5
66%
2 of 3

DIRECTOR’S INTEREST
SHARES AS AT 31-DEC-07
BENEFICIAL NON-BENEFICIAL

SHARES AS AT 8-MAY-08
BENEFICIAL NON-BENEFICIAL

GRANTS/OPTIONS
AS AT 31-DEC-07 AS AT 8-MAY-08

22,000

Nil

22,000

Nil

DODRIDGE D. MILLER
Age 50 / Citizen of Barbados / Director since December 2002 / President and Chief Executive Ofﬁ cer

Dodridge Miller is a Fellow of the Association of Certiﬁ ed Chartered 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 Ofﬁ cer 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 Ofﬁ cer and Chief
Operating Ofﬁ cer. Mr Miller joined the Group in 1989. He was elected a Director of Sagicor Life Inc 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 ﬁ nancial services industries.

BOARD/BOARD COMMITTEES
BOARD OF DIRECTORS
AUDIT COMMITTEE
CORPORATE GOVERNANCE COMMITTEE
HUMAN RESOURCE COMMITTEE
RISK MANAGEMENT COMMITTEE

POSITION
Director
By invitation
By invitation
By invitation
By invitation

ATTENDANCE RECORD
100%
6 of 6
100%
5 of 5
100%
5 of 5
100%
5 of 5
100%
3 of 3

DIRECTOR’S INTEREST
AS AT 31-DEC-07
SHARES

BENEFICIAL
576,395*

NON-BENEFICIAL
Nil

AS AT 8-MAY-08
SHARES

BENEFICIAL
576,395

NON-BENEFICIAL
Nil

RESTRICTED STOCK GRANTS

VESTED & ISSUED
563,077

UNVESTED
98,994

VESTED & ISSUED
563,077

UNVESTED
98,994

STOCK OPTIONS

VESTED
42,282

EXERCISED
NIL
* Includes vested and issued restricted stock

UNVESTED
422,784

VESTED
42,282

EXERCISED
NIL

UNVESTED
422,784

CORPORATE GOVERNANCE REPORT

Board of Directors

The Board consists of twelve Directors, eleven of whom are independent non-executive Directors, including the
Chairman. The twelfth Director is the President and Chief Executive Ofﬁ cer. Biographical information on the
Directors and details of their interests in the Company as at December 31, 2007 and as at the record date, May 8,
2008, are set out earlier in this Report.

Rotation and Re-election of Directors

The Company’s Bylaws provide for the appointment of a Director by the Board to ﬁ ll the vacancy on the Board,
and the Companies Act Chapter 308 of the Laws of Barbados provides that the appointee shall hold ofﬁ ce for the
unexpired term of his or her predecessor. Dr Jeannine Comma was appointed on June 26, 2007 to ﬁ ll the vacancy
occasioned by the resignation of Arthur Bethell, which followed immediately after the 2007 annual meeting.

The Bylaws also provide that a Director shall retire from ofﬁ ce at the annual meeting following the attainment of age
70 and shall not be eligible for re-election. David Allan, having attained the age of 70 on November 5, 2007, will retire
at the ﬁ fth annual meeting and is not eligible for re-election.

The Bylaws provide further that at least one third of the Board shall retire by rotation each year. Professor Sir Hilary
Beckles, Andrew Aleong and Christopher deCaires will also retire at the ﬁ fth annual meeting and have offered
themselves for re-election. John F Shettle, Jr, has been proposed as a new Director. The Corporate Governance
and Ethics Committee considered the candidates who are standing for election or re-election at the ﬁ fth annual
meeting of shareholders and recommends to Shareholders that all the nominees be elected or re-elected. Proﬁ les
of the nominees are contained in the Management Proxy Circular at the back of the Annual Report. In making this
recommendation, the Committee had regard to the core competency requirements of the Board as a whole, the skills
and experience of each nominee, their independence as deﬁ ned by the Board and their willingness and ability to
devote the time necessary to fulﬁ l their role as Directors.

Building a Corporate Governance Architecture

During 2007, the Board gave its unanimous approval to the adoption of a Group-wide risk-based corporate
governance architecture that conforms to international best practice. The project was sponsored by the Corporate
Governance and Ethics Committee, which remains responsible for its implementation. Corporate Governance has
been deﬁ ned as the task of a company’s board of directors in providing entrepreneurial leadership, guidance and
oversight with a view to maximising shareholder wealth within the bounds of law and community standards of ethical
behaviour.

The Corporate Governance project was designed to create a formal structure for the establishment, operation and
monitoring of Corporate Governance standards and practices throughout the Group. Implementation commenced
towards the end of 2007. When fully implemented, the architecture will provide the Group with a comprehensive,
consistent and integrated governance model. The governance framework and reporting philosophy are linked to the
Group’s Enterprise Risk Management discipline, currently being developed to achieve a more rational allocation of
economic capital and to mitigate unexpected adverse effects of ﬁ nancial, business and operating risks. This focus on
risks will re-shape the internal control framework for the ultimate purpose of enhancing shareholder value.

A Group level Internal Audit function was created to manage and coordinate the various internal audit activities
throughout the Group. Internal Audit’s purpose is to provide a risk-based, independent, objective assurance
regarding adequacy of the system of internal controls for managing risk both at subsidiary and Group levels.
More speciﬁ cally, the Internal Audit activity evaluates the adequacy and effectiveness of controls relating to the
organisation’s governance, operations, and information systems, including (a) reliability and integrity of ﬁ nancial
information; (b) effectiveness and efﬁ ciency of operations; (c) safeguarding of assets; and (d) compliance with laws,
regulations and contracts.

The Board also approved a Sarbanes-Oxley Internal Controls compliance certiﬁ cation program for the Group,
which forms part of the overarching Corporate Governance architecture. The objective of the program is to create a
framework for identifying and correcting internal control weaknesses.

The Corporate Governance architecture reﬂ ects the legal and regulatory external environment that governs
Sagicor entities and deals with (a) the ethical and business values that shape and guide Sagicor; (b) policies
and procedures governing essential undertakings and operations, in particular the management of risk; (c) the
structure, composition and internal operation of the Board; (d) the respective roles and responsibilities of Board
and Management in supervising and running Sagicor entities; (e) plans and programmes that form the essential
subject matter for the operating relationship between Board and Management; and (f) issues of accountability and
performance for both the Board and Management in the way they discharge their respective responsibilities.

The principles governing composition of the Board of Directors are (a) size, which reﬂ ects a balance between the
need for industry, professional and other representation on the one hand, and the need to be small enough to
facilitate effective dialogue and decision making on the other; (b) membership structure, which is determined by
core competency requirements of the Board as a whole (reviewed annually); and (c) Directors, who are chosen for
their individual core competencies, knowledge, experience, skills, personal qualities and independence.

Roles have been deﬁ ned for the Board, specifying items reserved for Board decision which cannot be delegated to
Board Committees or Management, as well as the role of the Chairman, Board Committees, Chairman of a Board
Committee, President and other functional corporate executive positions. Performance evaluation of each of the
above roles is to be done annually to ensure effective execution.

Corporate Values

The Group’s corporate value system embraces legal, moral and ethical conduct, accountability, corporate social
responsibility and leadership. The Code of Business Conduct and Ethics:

governs the behaviour of Directors, Management and Employees;

gives assurances to various stakeholders of how business is conducted;

guides the management of conﬂ icts of interest;

deters corporate opportunity; and

addresses issues of conﬁ dentiality, fair dealing, protection and use of assets and compliance with legal and
regulatory requirements.

The Code is based on the concept of the moral, ethical and legal obligation owed by Directors, Management and
Employees to:

Self - to act with personal integrity, professionalism and loyalty to the Group in the performance of business
responsibilities;

Uphold the Law – to comply with the law both in letter and spirit;

the Company - to act honestly and in good faith with a view to the best interests of the Company above all other
persons;

Investors - to maximise the wealth of the Company for their ultimate beneﬁ t;

Customers - to provide transparent service solutions that address their real needs and service entitlements, within
an institutional environment that protects their conﬁ dentiality and privacy;

Employees - to respect the human and civic rights of colleagues and to enhance their business well-being;

Society - to harmonise the operation of the Company with the aims of the communities in which it operates.

The business management values are also identiﬁ ed in the values framework and comprise nine pillars for guiding
behaviour, namely:

Values and Standards;

Corporate Governance;

Strategic and Business Planning;

Enterprise Risk Management;

Market Management;

Human Resource Management;

Performance and Accountability Management;

Internal Controls Management; and

Investor Relations.

Board Mandate and Governance

The role of the Board is to provide entrepreneurial leadership, guidance and oversight to the Company within a
framework of prudent and effective controls that enable risk to be assessed and managed, with a view to maximising
shareholder wealth within the bounds of law and community standards of ethical behaviour. The Board has six main
responsibilities:

Strategic Planning;

Enterprise Risk Management;

Succession Planning and Performance Evaluation for Executives;

Oversight of shareholder communications and public disclosure;

Internal controls; and

Corporate Governance.

The Board performs its role essentially through decision-making and oversight. The decision-making function is
exercised through formulating with Management and approving corporate policies and strategic goals. The oversight
function is executed by (a) the review of management decisions; (b) ongoing monitoring of corporate business
performance, plans and strategies, corporate governance, internal controls, risk assessment, Management’s
compliance with legal requirements and corporate policies; (c) the review of the quality of ﬁ nancial and other reports
to Shareholders; (d) succession planning and performance evaluation of Executive Management; and (e) oversight of
shareholder communications and public disclosures.

An important aspect of oversight extends to subsidiary governance, and a number of steps have been identiﬁ ed to
ensure adequate stewardship. These include fostering corporate governance policies, procedures and practices in
the subsidiaries, which are aligned to the Group, ensuring subsidiary boards contain a sufﬁ cient number of Directors
who lead and oversee subsidiary affairs within the context of Group objectives and plans, selecting Executives
with the ability and willingness to operate with a Group perspective, and establishing an oversight relationship for
managing risk. All this is to be achieved without compromising the subsidiary’s long-term viability and in recognition
of the subsidiary’s legal obligations to its own regulators and minority shareholders, as the case may be.

To assist the new Directors in expediting his or her effectiveness as a Director, an induction program is being
designed to enhance institutional, boardroom and interpersonal comfort.

Board Operations

During 2007, the Board met 6 times and also approved a number of items by round robin. The attendance record of
Directors is set out under their respective proﬁ les. The principal business at meetings was to:
· approve the listing of the Company’s shares on the London Stock Exchange and the prospectus issued in

connection therewith, and approve the amendment of Bylaw No 1 to facilitate the listing;

· approve the Corporate Governance architecture;
· approve the internal controls compliance certiﬁ cate program;
· consider and approve the Strategic Plan and Projections of the Group for the period 2007 to 2009;
· consider and approve strategic acquisitions and divestments in furtherance of Group strategy;
· receive and consider various reports and presentations from Management on the performance of various

subsidiaries in the Group and the Group on a consolidated basis;

· review the strategic and business development initiatives forming part of the Strategic Plan;
· review and approve unaudited interim and audited annual consolidated ﬁ nancial statements;
· approve interim and ﬁ nal dividends; and
· receive reports on work being carried out by Board Committees, and consider and approve their recommendations

as required.

Committee Reports

The four Committees of the Board, (1) Audit, (2) Corporate Governance and Ethics, (3) Human Resource and
(4) Risk Management, play an integral role in the governance process, in that they assist the Board with the
proper discharge of its functions by providing an opportunity for more in-depth discussions on areas not reserved
speciﬁ cally for the Board. The mandates of all the Committees have been revised to accord with best practice.

2007 Report of Corporate Governance and Ethics Committee

Role of Committee

Under the revised charter of the Corporate Governance and Ethics Committee, its mandate is to:
·

develop and recommend to the Board policies and procedures to establish and maintain best practice standards
of corporate governance;

manage the process for director succession, nomination and recommendation to Shareholders for election or re-
election as Directors;

establish and direct the processes for assessing the performance of the Board, its Committees and individual
Directors;

supervise the operation of the President and CEO;

recommend the composition of Committees and Committee Chairs;

review and approve any amendments to the Company’s Code of Business Conduct and Ethics;

obtain reasonable assurance that the Company has processes to ensure adherence to its standards of business
conduct and ethical behaviour;

assess procedures to resolve conﬂ icts of interest and ensure procedures are established to deal with insider
dealing; and

oversee the processes relating to Shareholder communications and public relations and the enhancement of the
Company’s corporate image.

Membership

The Committee meets the independence requirements of the Group’s Corporate Governance Policy. The current
members are Terrence Martins (appointed Chairman on August 24, 2005), Dr Oscar Jordan (appointed a Member
on March 9, 2004), and Stephen McNamara (appointed a Member on March 9, 2004). All Members had a perfect
attendance record during 2007. With effect from January 1, 2007, the Chairman and Members were paid fees for
serving on the Committee.

2007 Activities

In order to ensure that the Group was capable of meeting the highest corporate standards, the Committee
sponsored the project to build a Group-wide comprehensive Corporate Governance architecture and considered
in detail every proposal forming part of the framework. In addition to this project, the Committee attended to
the following business during the year: (a) approval of the Corporate Governance Policy; (b) Director nomination
for the parent and subsidiary boards; (c) Committee appointments; (d) Director and Ofﬁ cer liability cover; and
(e) Management of conﬂ icts of interest.

2007 Report of Audit Committee

Role of Committee

The mandate of the Audit Committee is to oversee the audit process, including recommending the appointment or
reappointment of the external auditors, ﬁ xing their audit fees, being satisﬁ ed with their independence, evaluating
their internal quality-control procedures and approving non-audit services provided by the Auditors. The Committee
is required to review the annual audit plan and the audited and interim ﬁ nancial statements and International
Financial Reporting Standards having a signiﬁ cant impact on the statements. It also reviews actuarial reports and
recommendations. The Committee oversees the internal audit function, reviewing internal audit’s assessment of
the adequacy and effectiveness of the Group’s internal controls, compliance with legal, statutory and regulatory
requirements, and management of risk.

Membership

The Committee meets the independence and skill requirements of the Group’s Corporate Governance Policy. All
members are ﬁ nancially literate and two members, William Lucie-Smith and Joyce Dear, both Chartered Accountants,
have recent and relevant accounting expertise. The current members are William Lucie-Smith (appointed Chairman
on June 28, 2006 and a Member on August 24, 2005), Andrew Aleong (appointed a Member on June 28, 2006),
David Allan (appointed a Member on November 23, 2005) and Joyce Dear (appointed a Member on August 11,
2006). The Chairman and one other Member had a perfect attendance record during 2007, while overseas business
commitments resulted in the remaining two Members having an 80% and 40% record respectively. With effect from
January 1, 2007, the Chairman and Members were paid fees for serving on the Committee.

2007 Activities

The 2007 activities of the Committee involved approving non-audit services to be carried out by the External
Auditors and reviewing and approving the external audit plan and timetable, the External Auditors’ 2006
management letter and 2007 audit engagement letter. The Committee also considered and approved interim and
annual audited ﬁ nancial statements, the valuation of intangible assets, and dividend recommendations. It reviewed
new International Financial Reporting Standards having a signiﬁ cant impact on the Company, goodwill impairment
tests, actuarial reports and reports from the External Auditors on key audit issues. The Committee also approved the
2007 Internal Audit Plan and exercised oversight of the implementation of an enterprise-wide internal audit program.

2007 Report of Human Resource Committee

Role of Committee

The role of the Human Resource Committee, under its revised mandate, is to advise the Board with respect to
(a) compensation policies, programmes and plans to motivate and align the interests of all Employees with those of
the Group’s; (b) Human Resource policies and practices to attain Group strategic goals; (c) Executive Management
succession plans; (d) Executive Management’s compensation and performance evaluation; and (e) Management of
pension plans.

Membership
The Committee meets the independence requirements of the Group’s Corporate Governance Policy. The current
members are Christopher deCaires, (appointed Chairman on June 28, 2006 and a Member on October 26, 2005),
Sir Hilary Beckles (appointed a Member on June 28, 2006), Dr Jeannine Comma (appointed September 18, 2007)
and Terrence Martins (a former Committee Chairman appointed a Member on October 26, 2005). The Chairman and
one other member had a perfect attendance record during 2007 while overseas business commitments resulted in
the remaining two members having a 50% record. With effect from January 1, 2007,
the Chairman and Members were paid fees for serving on the Committee.

2007 Activities

During 2007 the Committee’s main activities were centred around monitoring progress on the implementation
of a comprehensive Human Resource development strategy. The main aspects of the strategy were the structure,
composition, recruitment, compensation and succession planning at the Group Executive level. The Committee
also made awards to qualiﬁ ed participants under the annual cash incentive, long-term incentive and employee share
ownership plans.

2007 Report of Risk Management Committee

Role of Committee

The former Board Investment Committee has been re-designated the Risk Management Committee and a new
charter has been approved with the objective of ensuring the Group manages risk within its deﬁ ned philosophy
and appetite, and in compliance with policy risk parameters. The Committee’s speciﬁ c mandate is to (a) ensure an
appropriate Enterprise Risk Management framework is implemented throughout the Group; (b) approve risk policies,
with emphasis on insurance, liquidity, credit, market, capital management and operational risks; (c) approve risk
undertakings and exposures reserved for Board decision; (d) continually monitor the effectiveness with which risks
are managed, including asset/liability coordination; and, (e) regularly monitor the effectiveness of the system of
internal controls for managing risk. Committee Members are foremost required to understand the enterprise’s
signiﬁ cant inherent risks and the policies and controls used by Management to assess, manage and report these
risks. The Committee regularly reviews the Group risk proﬁ le and assesses Management’s plans for maintaining a
sound risk proﬁ le.

Membership

The Committee meets the independence requirements of the Group’s Corporate Governance Policy. The current
members are Terrence Martins (appointed Chairman on June 24, 2005 and a Member on January 9, 2004), David
Allan (appointed a Member on October 26, 2005), William Lucie-Smith (appointed a Member on October 26, 2005)
and Stephen McNamara (appointed a Member on November 26, 2003). The Chairman and one other member
had a perfect attendance record during 2007 while overseas business commitments resulted in the remaining two
members having a 66% and 33% record respectively. With effect from January 1, 2007, the Chairman and Members
were paid fees for serving on the Committee.

2007 Activities

In 2007 the Committee considered and approved (a) recommendations for signiﬁ cant business acquisitions and
divestments; (b) a Group Risk Assessment Model for identifying and diagnosing inherent risks and internal controls;
and (c) an Enterprise Risk Management Policy.

By Order of the Board of Directors.

Sandra Osborne, QC
Corporate Secretary

May 30, 2008

“ WE ALL HAVE THE MEANS
TO BECOME PROSPEROUS.
WE JUST HAVE TO FIND THE BALANCE
BETWEEN OUR WEALTH AND OUR NEEDS.”

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

04 Financial

Statements

Sagicor Annual Report and Accounts 2007
Index to Financial Statements

NOTE

PAGE

INDEPENDENT AUDITORS’ REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 - 51

APPOINTED ACTUARY’S REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

CONSOLIDATED BALANCE SHEET. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

CONSOLIDATED INCOME STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY . . . . . . . . . . . . . . . . . . . . . 55 - 56

CONSOLIDATED CASH FLOW STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

INCORPORATION AND PRINCIPAL ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . 58 - 61

ACCOUNTING POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 - 81

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS . . . . . . . . . . . . . . . . . . . . . 82 - 84

SEGMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 - 86

INVESTMENT PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 - 87

PROPERTY, PLANT AND EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 - 90

INVESTMENT IN ASSOCIATED COMPANIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

INTANGIBLE ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 - 94

FINANCIAL INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 - 96

REINSURANCE ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

INCOME TAX ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

MISCELLANEOUS ASSETS AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 - 98

ACTUARIAL LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 - 102

OTHER INSURANCE LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 - 104

INVESTMENT CONTRACT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

NOTES AND LOANS PAYABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

DEPOSIT AND SECURITY LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

INCOME TAX LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

SHARE CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

RESERVES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 - 108

PARTICIPATING ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

PREMIUM REVENUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 - 111

FEES AND OTHER REVENUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

POLICY BENEFITS AND CHANGE IN ACTUARIAL LIABILITIES . . . . . . . . . . . . . . . . . . . . 112

INTEREST EXPENSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112

EMPLOYEE COSTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

EMPLOYEE EQUITY COMPENSATION BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . 113 - 117

Sagicor Annual Report and Accounts 2007
Index to Financial Statements

NOTE

PAGE

EMPLOYEE RETIREMENT BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 - 119

INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

EARNINGS PER COMMON SHARE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

DIVIDENDS PER COMMON SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

CASH FLOWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 - 124

ACQUISITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 - 127

EVENTS AFTER THE BALANCE SHEET DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 - 128

COMMITMENTS AND CONTINGENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . 129 - 130

RELATED PARTY TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 - 131

FINANCIAL RISK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 - 148

INSURANCE RISK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 - 152

SENSITIVITY ANALYSIS OF ACTUARIAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . 152 - 154

DEVELOPMENT OF PROPERTY AND CASUALTY CLAIMS . . . . . . . . . . . . . . . . . . . . 154 - 155

CAPITAL MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 - 158

STATUTORY RESTRICTIONS ON ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158

FIDUCIARY RISK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159

As of December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Consolidated Balance Sheet

Notes

2007

2006

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

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

Total equity and liabilities

97,522

92,938

30,334

138,524

2,683,007

320,155

23,622

171,459

92,140

90,578

80,528

26,836

112,708

2,524,822

321,689

18,333

100,101

87,682

3,649,701

3,363,277

1,364,304

1,373,584

313,915

242,376

1,920,595

152,719

790,565

23,542

15,107

160,466

152,701

220,855

1,747,140

160,488

745,435

20,565

18,678

128,666

3,062,994

2,820,972

231,695

21,735

201,744

455,174

9,396

122,137

586,707

230,235

48,106

135,509

413,850

9,902

118,553

542,305

3,649,701

3,363,277

These ﬁ nancial statements have been approved for issue by the Board of Directors on March 31, 2008.

Director

Year Ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Consolidated Income Statement

Notes

2007

2006

37.1

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 acquisition

Total revenue

BENEFITS

Policy beneﬁ ts and change in actuarial liabilities

Policy beneﬁ ts and change in actuarial liabilities reinsured

Net policy beneﬁ ts and change in actuarial liabilities

Interest expense

Total beneﬁ ts

EXPENSES

Administrative expenses

Commissions and related compensation

Premium taxes

Finance costs

Depreciation and amortisation

Total expenses

535,871

468,703

(105,485)

430,386

(91,081)

377,622

261,212

238,379

4,224

50,734

26,398

2,727

43,602

772,954

662,330

333,601

293,390

(33,028)

(29,698)

300,573

263,692

84,063

82,277

384,636

345,969

142,190

125,371

77,932

7,269

12,276

20,101

57,066

6,620

9,420

17,350

259,768

215,827

INCOME FROM ORDINARY ACTIVITIES

128,550

100,534

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

(19,824)

(13,909)

108,726

86,625

86,289

(226)

22,663

108,726

67,663

(303)

19,265

86,625

32.3 cents

25.4 cents

32.3 cents

25.4 cents

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Consolidated Statement of Changes in Equity

Year ended December 31, 2007

Share
capital

Reserves

Retained
earnings

Par (1)
accounts

Minority
interest

Total

Note 21

Note 22

Note 23

Balance, beginning of year

230,235

48,106

135,509

9,902

118,553

542,305

Net gains / (losses) recognised
directly in equity

Net income / (loss) for the year

Total recognised gains and income
for the year

(30,777)

(78)

(20)

(10,171)

(41,046)

86,289

(226)

22,663

108,726

(30,777)

86,211

(246)

12,492

67,680

Issue of shares

484

Value of employee services
rendered (net)

1,705

Net disposal of treasury shares

976

Disposal of equity interest

Dividends declared (note 35)

Other movements

(17,321)

2,675

3,159

1,792

976

(3,593)

(8,167)

(25,488)

2,701

(2,655)

(260)

(124)

Balance, end of year

231,695

21,735

201,744

9,396

122,137

586,707

1,460

(26,371)

66,235

(506)

3,584

44,402

(1) Participating

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Consolidated Statement of Changes in Equity

Year ended December 31, 2006

Share
capital Reserves

Retained
earnings

Par (1)
accounts

Minority
interest

Total

Note 21 Note 22

Note 23

Balance, beginning of year

229,226

53,264

82,665

10,460

100,754

476,369

Net gains / (losses) recognised
directly in equity

Net income / (loss) for the year

Total recognised gains and income
for the year

(5,938)

(22)

3,960

(1,999)

67,663

(303)

19,265

86,625

(5,938)

67,641

(302)

23,225

84,626

Issue of shares

Value of employee services
rendered (net)

2,826

1,472

Purchase of treasury shares

(1,817)

Dividends declared
(note 35)

Other movements

(15,991)

2,061

4,887

1,472

(1,817)

(7,241)

(23,232)

(692)

1,194

(256)

(246)

Balance, end of year

230,235

48,106

135,509

9,902

118,553 542,305

1,009

(5,158)

52,844

(558)

17,799

65,936

(1) Participating

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Consolidated Cash Flow Statement

CASH FLOWS FROM OPERATING ACTIVITIES

Income from ordinary activities

128,550

100,534

Adjustments for non-cash items, interest and dividends

(138,815)

(73,271)

Notes

2007

2006

Interest and dividends received

Interest paid

Income taxes paid

Changes in operating assets

Changes in operating liabilities

Net cash (used in) / from operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

207,016

192,160

(95,857)

(86,366)

(17,023)

(13,524)

(275,300)

(115,856)

119,673

(71,756)

52,293

55,970

Property, plant and equipment, net

(10,532)

(11,345)

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

Common shares issued

Net disposal / (purchase) of treasury shares

Dividends paid to shareholders

Shares issued to minority interest

Dividends paid to minority interest

Notes and loans payable, net

Net cash (used in) / from ﬁ nancing activities

Effects of exchange rate changes

Net (decrease) / increase in cash
and cash equivalents

Cash and cash equivalents, beginning of year

(1,315)

(4,120)

310

(2,228)

(2,289)

(18,256)

(13,263)

898

(1,817)

(17,137)

(15,797)

2,348

(8,157)

(7,952)

(29,973)

1,767

(7,269)

79,150

56,034

8,803

(11,238)

(111,182)

224,674

87,503

137,171

Cash and cash equivalents, end of year

113,492

224,674

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

1. INCORPORATION AND PRINCIPAL ACTIVITIES

Sagicor Financial Corporation was incorporated on December 6, 2002 under the Companies Act of Barbados as a

public limited liability holding company. On December 6, 2002, Sagicor Life Inc was formed following its conversion

from The Barbados Mutual Life Assurance Society (The Society). On December 30, 2002, Sagicor Financial

Corporation allotted common shares to the eligible policyholders of The Society and became the holding company of

Sagicor Life Inc.

The principal activities of the Sagicor Group are as follows:

(cid:129)

Insurance

Annuities

Pensions

Pension fund management

Mutual fund management

Corporate trust services

Securities dealing

Currency dealing

Merchant banking

Loan ﬁ nance and deposit taking

The Group operates across the Caribbean, in the United States of America (USA) and in the United Kingdom (UK).

The table below identiﬁ es 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

Country of
Incorporation

Effective
Shareholders’
Interest

Sagicor Life Inc

Life and health insurance, annuities and
pension administration services

Barbados

100%

Life of Jamaica Limited

Life and health insurance and annuities

Jamaica

59%

Sagicor Life Insurance Company

Life insurance and annuities

Texas, USA

100%

Sagicor Capital Life Insurance
Company Limited

Life and health insurance, annuities and
pension administration services

The Bahamas

100%

Capital Life Insurance Company
Bahamas Limited

Life insurance

The Bahamas

100%

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

1. INCORPORATION AND PRINCIPAL ACTIVITIES (continued)

Subsidiary Companies

Principal Activities

Country of
Incorporation

Effective Share-
holders’ Interest

Sagicor Panamá, SA (formerly Capital
de Seguros, SA)

Life and health insurance

Panamá

Nationwide Insurance Company Limited

Life insurance

Sagicor Life of the Cayman Islands Limited Life insurance

Laurel Life Insurance Company

Life insurance

Sagicor Allnation Insurance Company

Health insurance

Sagicor Corporate Capital
Limited (formerly Gerling Corporate
Capital Limited) (1)

Trinidad &
Tobago

The Cayman
Islands

Texas, USA

Delaware,
USA

- Lloyd’s of London corporate underwriting
member participating in Syndicate 1206

Property and casualty
insurance

Sagicor General Insurance Inc

Sagicor Re Insurance Limited

Sagicor General Insurance
(Cayman) Limited (2)

Property and casualty
insurance

Property, casualty and
health insurance

Barbados

The Cayman
Islands

LOJ Pooled Investment Funds Limited

Pension fund management

Jamaica

Employee Beneﬁ ts Administrator Limited

Pan Caribbean Financial Services Limited

Pension administration
services

Development banking and
investment management

Jamaica

Pan Caribbean Merchant Bank Limited

Merchant banking

Jamaica

Pan Caribbean Asset Management Limited Investment management

Jamaica

Manufacturers Investments Limited

Investment management

Jamaica

Sagicor Merchant Limited

Globe Finance Inc

Mutual Finance Inc

Investment management

Loan and lease ﬁ nancing,
and deposit taking

Trinidad &
Tobago

Barbados

St. Lucia

100%

59%

100%

90%

53%

59%

45% (2)

59%

64%

100%

51%

70%

Sagicor Asset Management Inc

Investment management

Barbados

100%

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

1. INCORPORATION AND PRINCIPAL ACTIVITIES (continued)

Subsidiary Companies

Principal Activities

Country of
Incorporation

Effective
Shareholders’
Interest

LOJ Property Management Limited

Property management

Jamaica

59%

Sagicor Insurance Managers Limited (2)

Captive insurance management
services

The Cayman
Islands

45% (2)

Sagicor International Management
Services, Inc

Management and business devel-
opment services

Florida, USA

100%

Sagicor Finance Limited (3)

Group ﬁ nancing vehicle

The Cayman
Islands

LOJ Holdings Limited

Insurance holding company

Jamaica

100%

Sagicor USA Inc

Insurance holding company

Delaware, USA

100%

Sagicor Europe Limited (4)

Insurance holding company

The Cayman
Islands

Sagicor Syndicate Holdings Limited
(formerly Gerling Syndicate Holdings
Limited) (1)

Holding company

Sagicor at Lloyd’s Limited (formerly
Gerling at Lloyd’s Limited) (1)

Managing agent of Lloyd’s of
London syndicate

Sagicor Syndicate Services Limited
(formerly Gerling Syndicate Services
Limited) (1)

Property and casualty
insurance agency

Byrne & Stacey Underwriting Limited (5)

Property and casualty insurance
agency

The Mutual Financial Services Inc

Financial services
holding company

Barbados

90%

73%

Sagicor Funds Incorporated

Mutual fund holding company

Barbados

100%

(1) Acquired September 1, 2007.
(2) Through control of Life of Jamaica Limited, the Group has a voting interest of 75% (2006 – 51%)

in the subsidiary. The effective equity interest was increased from 31% in October 2007.

(3) Incorporated March 30, 2006.
(4) Incorporated June 28, 2007.
(5) Acquired October 4, 2007.

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

1. INCORPORATION AND PRINCIPAL ACTIVITIES (continued)
The associated companies of the Group are as follows:

Associated Companies

Principal Activities

RGM Limited

Property ownership and
management

Country of
Incorporation

Trinidad
& Tobago

FamGuard Corporation Limited

Investment holding company

Bahamas

Family Guardian Insurance
Company Limited

Family Guardian General
Insurance Agency Limited

Life and health insurance and
annuities

Bahamas

General insurance brokerage

Bahamas

BahamaHealth Insurance Brokers
and Beneﬁ t Consultants Limited

Insurance brokers and beneﬁ t
consultants

Primo Holding Limited (6)

Property investment

Bahamas

Barbados

Effective
Shareholders’
Interest

33%

20%

38%

(6) Acquired March 30, 2007.

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.

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

2. ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these consolidated ﬁ nancial 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 ﬁ nancial 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 speciﬁ c 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
modiﬁ cation required by IFRS 4 that rights under reinsurance contracts are measured separately. The consolidated
ﬁ nancial statements are prepared under the historical cost convention except as modiﬁ ed by the revaluation of
investment property, owner-occupied property, available for sale investment securities and ﬁ nancial assets held at
fair value through income.

The preparation of ﬁ nancial 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 signiﬁ cant to the consolidated ﬁ nancial statements, are disclosed in Note 3.

All amounts in these ﬁ nancial statements are shown in thousands of United States dollars, unless otherwise stated.
Where necessary, comparative ﬁ gures have been reclassiﬁ ed to conform to changes in presentation in the current year.

(a) Amendments to IFRS

New and revised IFRSs and revised International Accounting Standards (IASs) are effective from the
2007 reporting year.

A new standard has been introduced and is as follows:

IFRS 7 Financial Instruments: Disclosures

The standards which have amendments for the 2007 reporting year are as follows:

IFRS 4 Insurance Contracts

IAS 1 Presentation of Financial Statements

IAS 32 Financial Instruments: Presentation

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

2. ACCOUNTING POLICIES (continued)

2.1 Basis of Preparation (continued)

IAS 30 – Disclosures in the Financial Statements of Banks and Similar Financial Institutions has been withdrawn
and has been superseded by IFRS 7. The disclosure requirements of IAS 32 also have been withdrawn and have been
superseded by IFRS 7.

The amendments have affected the note disclosures of ﬁ nancial and insurance risk, and have introduced new
disclosures for managing capital. The disclosures set out in notes 41, 42 and 45 reﬂ ect the new requirements.
Comparative disclosures have been made except in instances where it is impractical to do so.

(b) Amendments to International Financial Reporting Interpretations

The International Financial Reporting Interpretations Committee (IFRIC) has issued new or revised interpretations
which are effective from the 2007 reporting year. The new interpretations are as follows:

IFRIC 7 Applying the Restatement Approach under IAS 29 (Financial Reporting in Hyperinﬂ ationary Economies)

IFRIC 8 Scope of IFRS 2 (Share-based Payment)

IFRIC 9 Reassessment of Embedded Derivatives

IFRIC 10 Interim Financial Reporting and Impairment

IFRIC 7, IFRIC 8 and IFRIC 9 have no signiﬁ cant effect on these ﬁ nancial statements.

IFRIC 10 requires that impairment of goodwill and equity investments recorded at interim reporting dates should not
be reversed at balance sheet date if the impairment test had been conducted at balance sheet date and resulted in a
lower amount of impairment. The impact of this interpretation on Sagicor is not likely to be signiﬁ cant since Sagicor
tests goodwill impairment during the fourth quarter of the ﬁ nancial year, and impairment of equity instruments is
relatively infrequent.

The interpretation, IFRIC 11 - Group and Treasury Share Transactions, has been issued with an effective date for
accounting periods beginning on or after March 1, 2007. Sagicor has early adopted this interpretation for the 2007
year, because of its applicability to equity compensation granted to employees of subsidiaries. The application of
the interpretation affects the equity of the subsidiaries and does not directly affect these consolidated ﬁ nancial
statements.

For the 2007 reporting year, the Group has changed the ﬁ nancial statement presentational currency to thousands of
United States dollars. Prior to this year, the presentational currency was thousands of Barbados dollars. Accordingly,
the 2006 comparative amounts have been restated in thousands of United States dollars. Throughout 2006 and
2007, the Barbados dollar was pegged to the United States dollar at a rate of 2 to 1.

2.2 Basis of consolidation

(a) Subsidiaries

Subsidiaries are entities over which the Group has the power to govern the ﬁ nancial 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.

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

2. ACCOUNTING POLICIES (continued)

2.2 Basis of consolidation (continued)

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. Identiﬁ able 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.

(b) Investment in associated companies

The investments in associated companies, which are not majority owned or controlled but where signiﬁ cant inﬂ uence
exists, are included in these consolidated ﬁ nancial statements under the equity method of accounting. Investments
in associated companies are originally recorded at cost and include intangible assets identiﬁ ed 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 identiﬁ ed 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.

Interests in the assets, liabilities and earnings of jointly controlled ventures are included in these consolidated
ﬁ nancial 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 ﬁ nancial 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 ﬁ nancial statements.

(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. All dividends received by the Trust shall be applied towards the purchase of additional Company shares.

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

2. ACCOUNTING POLICIES (continued)

2.3 Foreign currency translation

(a) Functional and presentational currency

Items included in the ﬁ nancial statements of each reporting unit of the Group are measured using the currency of
the primary economic environment in which the entity operates (the functional currency). A reporting unit may be
an individual subsidiary, a branch of a subsidiary or an intermediate holding company group of subsidiaries.

The consolidated ﬁ nancial statements are presented in thousands of United States dollars, which is the Group’s
presentational currency.

(b) Reporting units

The results and ﬁ nancial position of reporting units that have a functional currency other than the Group’s
presentational currency are translated as follows:

(i) Income statements, movements in equity and cash ﬂ ows 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 pegged to
the United States dollar are converted dollars at the pegged rates. Currencies which ﬂ oat are converted to the United
States dollar by reference to the average of buying and selling rates quoted by the respective central banks or in the
case of pounds sterling, according to prevailing market rates.

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

December 2007
closing rate

2007
average rate

December 2006
closing rate

2006
average rate

Barbados dollar

Jamaica dollar

Trinidad & Tobago dollar

Pounds sterling

2.0000

70.4430

6.3114

0.5024

2.0000

68.7285

6.3110

0.4964

2.0000

66.9482

6.2946

n/a

2.0000

65.6514

6.2900

n/a

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.

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

2. ACCOUNTING POLICIES (continued)

2.3 Foreign currency translation (continued)

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 ﬁ nancial assets measured at fair value are included in
foreign exchange gains and losses. Translation differences on non-monetary items such as equities held at fair value
through income are reported as part of the fair value gain or loss.

Translation differences on non-monetary items such as equities held available for sale are included in the fair value
reserve in equity.

2.4 Segment reporting

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

Geographical segments are determined by the location of the subsidiary or branch initiating the business. Except for
the Sagicor at Lloyd’s Syndicate 1206 business, this segmentation is not materially different from the segmentation
by location of the customers.

The Group’s business segments reﬂ ect 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 speciﬁ c 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 ﬁ nance 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. Otherwise, this type of property is
accounted for as an owner-occupied property.

Rental income is recognised on an accruals basis.

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

2. 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 cumulative
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 beneﬁ ts 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

Estimated useful life

40 to 50 years

Furnishings and leasehold improvements

10 years or lease term

Computer and ofﬁ ce equipment

Vehicles

Leased equipment and vehicles

3 to 10 years

4 to 5 years

5 to 6 years

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

2. ACCOUNTING POLICIES (continued)

2.7

Intangible assets

(a) Goodwill

Goodwill (deﬁ ned 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 identiﬁ ed on acquisitions are recognised only if future economic beneﬁ ts attributable to the
asset will ﬂ ow 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 deﬁ nite, 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 indeﬁ nite, the asset is tested annually for impairment.

The estimated useful lives of recognised intangible assets are as follows:

Class of intangible asset

Asset

Estimated useful life

Customer related

Customer relationships

Broker relationships

4 - 20 years

10 years

Marketing related

Trade names

4 years, indeﬁ nite

Contract based

Technology based

Syndicate capacity

Licences

Software

Indeﬁ nite

15 years

2 – 10 years

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

2. ACCOUNTING POLICIES (continued)

2.8 Financial assets

(a) Classiﬁ cation

The Group classiﬁ es its ﬁ nancial assets into four categories:

· held to maturity ﬁ nancial assets;

· available for sale ﬁ nancial assets;

· ﬁ nancial assets at fair value through income;

loans and receivables.

Management determines the appropriate classiﬁ cation of these assets at initial recognition.

Financial assets with ﬁ xed maturities and for which management has both the intent and ability to hold to maturity
are classiﬁ ed as held to maturity.

Loans and receivables are ﬁ nancial assets with ﬁ xed or determinable payments that are not quoted in an active market.

Financial assets in the category at fair value through income comprise:

assets designated by management on acquisition, since the assets form part of managed portfolios whose
performance is evaluated on a fair value basis in accordance with documented investment strategies and comprise
investment portfolios backing deposit administration and unit linked policy contracts for which the full return on
the portfolios accrue to the contract-holders;

held for trading securities which are acquired principally for the purpose of selling in the short-term or if it forms
part of a portfolio of ﬁ nancial assets in which there is evidence of short-term proﬁ t taking.

Other ﬁ nancial assets are classiﬁ ed 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 net gains in investment income. Interest and dividend income are recorded under their
respective heads in 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.

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.

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

2. ACCOUNTING POLICIES (continued)

2.8 Financial assets (continued)

The estimated fair values of ﬁ nancial assets are based on quoted bid prices of securities as at December 31 where
available. In estimating the fair value of non-traded ﬁ nancial assets, the Group uses a variety of methods such as
obtaining dealer quotes and using discounted cash ﬂ ow techniques. Where discounted cash ﬂ ow techniques are
used, estimated future cash ﬂ ows are discounted at market derived rates for government securities in the same
country of issue as the security; for non-government securities, an interest spread is added to the derived rate for a
similar government security rate according to the perceived additional risk of the non-government security.

(d) Impaired ﬁ nancial assets

A ﬁ nancial 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 ﬂ ows discounted at the original effective interest rate. The carrying value of
impaired ﬁ nancial assets is reduced by impairment losses.

The recoverable amount for available for sale ﬁ nancial assets is the present value of expected future cash ﬂ ows
discounted at the current market interest rate for a similar ﬁ nancial 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.

(e) Securities purchased under agreements to resell

Securities purchased under agreements to resell are treated as collateralised ﬁ nancing 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.

(f) Finance leases

The Group, as lessor, enters into ﬁ nance 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 ﬁ nance lease, net of unearned
ﬁ nance income, is recorded as a receivable and the ﬁ nance income is recognised over the term of the lease using the
effective yield method.

(g) Derivative ﬁ nancial 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 ﬁ nancial asset at fair value through income.

(h) Financial assets held in trust under modiﬁ ed 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. The income statement
includes the interest income from these assets and a corresponding interest expense due to the reinsurer.

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

2. ACCOUNTING POLICIES (continued)

2.9 Real estate developed or held for resale

Lands being made ready for resale along with the cost of infrastructural works are classiﬁ ed as real estate held for
resale and are valued at the lower of cost and net realisable value.

Real estate acquired through foreclosure is classiﬁ ed 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 indeﬁ nite 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 ﬂ ow statement, cash and cash equivalents comprise:

· cash balances,
· call deposits,
· other liquid balances with maturities of three months or less from the acquisition date,
·
·
have maturities of three months or less from origination,

less bank overdrafts which are repayable on demand,
less other borrowings from ﬁ nancial institutions made for the purpose of meeting cash commitments and which

Cash equivalents are subject to an insigniﬁ cant risk of change in value. Cash and cash equivalents exclude balances
held to meet statutory requirements.

2.12 Policy contracts

(a) Classiﬁ cation

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

The Group deﬁ nes insurance risk as an insured event that could cause an insurer to pay signiﬁ cant additional
beneﬁ ts in a scenario that has a discernable effect on the economics of the transaction.

Insurance contracts transfer insurance risk and may also transfer ﬁ nancial risk. Investment contracts transfer
ﬁ nancial risk and no insurance risk. Financial risk includes credit risk, liquidity rate risk and market risk.

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

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

2. 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 beneﬁ t, additional beneﬁ ts or bonuses:

· that are likely to be a signiﬁ cant portion of the total contractual beneﬁ ts;
· whose amount or timing is contractually at the discretion of management; and
· that are contractually based on

· the performance of a speciﬁ ed pool of contracts;
· investment returns on a speciﬁ ed pool of assets held by the insurer; or
· the proﬁ t or loss of a fund or insurer issuing the contract.

Policy bonuses and policy dividends constitute discretionary participation features which the Group
classiﬁ es as liabilities.

Residual gains in the participating accounts constitute discretionary participation features which the Group
classiﬁ es 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. If
alternative earnings patterns have been established over the term of the policy coverage, then premium revenue is
recognised in accordance with that earnings pattern. 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 are established for both reported
and un-reported claims. Claim reserves represent estimates of future payments of claims and related expenses less
anticipated recoveries with respect to insured events that have occurred up to balance sheet date.

Reserving involves uncertainty and the use of statistical techniques of estimation. These techniques generally involve
projecting from past experience of the development of claims over time to form a view of the likely ultimate claims to
be experienced, having regard to variations in business written and the underlying terms and conditions. The claim
reserve is not discounted and is included in other insurance liabilities.

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 and are computed on a basis which is consistent with the computation of the claim liability. Proﬁ t 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.

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

2. ACCOUNTING POLICIES (continued)

2.12 Policy contracts (continued)

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 recorded as deferred policy acquisition
costs. Proﬁ t sharing commission payable by the Group arises from contracts between an insurer and a broker; it is
accrued on an aggregate basis and it is adjusted to actual in respect of each individual contract when due.

(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 ceded premium
is expensed on a pro-rata basis over the term of the respective policy coverage or of the reinsurance contract
as appropriate.

(iii) Long-term traditional insurance contracts

Long-term traditional insurance contracts are generally issued for ﬁ xed terms of ﬁ ve years or more, or for the
remaining life of the insured. Beneﬁ ts are typically a death or critical illness beneﬁ t, a cash value on termination
and/or a monthly annuity. Annuities are generally payable until the death of the beneﬁ ciaries 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 beneﬁ ts 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 ﬁ xed 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.

Policy beneﬁ ts are recognised on notiﬁ cation 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 beneﬁ t 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
notiﬁ cation.

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

ACCOUNTING POLICIES (continued)

2.12 Policy contracts (continued)

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 ﬁ xed terms or for the remaining life of
the insured. Beneﬁ ts are typically a death or critical illness beneﬁ t, a cash value on termination and/or a monthly
annuity. Annuities are generally payable until the death of the beneﬁ ciaries with a proviso for a minimum number of
payments. Beneﬁ ts 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 ﬁ xed at the inception of the contract or periodically thereafter but additional non-recurring premiums
may be paid.

Policy beneﬁ ts are recognised on notiﬁ cation 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 beneﬁ t 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 notiﬁ cation.

Commissions and premium taxes payable are generally recognised only on settlement of premiums.

(v) Reinsurance contracts assumed

Reinsurance contracts assumed by an insurer are accounted for in a similar manner as if the insurer has issued the risk.

Reinsurance contracts assumed include blocks of life and annuity policies assumed from third party insurers.
In some instances, the Group also administers these policies.

(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 modiﬁ ed coinsurance
bases. The Group records as a receivable the reinsurer’s share of the insurer’s liabilities on these policies.

The beneﬁ ts 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.

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

2. ACCOUNTING POLICIES (continued)

2.12 Policy contracts (continued)

(vii) Deposit administration and other investment contracts

Deposit administration contracts are issued by an insurer to registered pension schemes for the deposit of pension
plan assets with the insurer.

Deposit administration liabilities are recognised initially at fair value and are subsequently stated at:

· amortised cost where the insurer is obligated to provide investment returns to the pension scheme in the

form of interest;

· fair value through income where the insurer is obligated to provide investment returns to the pension scheme in

direct proportion to the investment returns on speciﬁ ed 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. Interest guarantees which
may adversely affect the Group are recorded in actuarial liabilities.

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.

Other investment contracts are recognised initially at fair value and are subsequently stated at amortised cost and
are accounted for as deposit administration contracts which are similarly classiﬁ ed.

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 deﬁ nition of an insurance contract. Options to surrender an insurance contract for a ﬁ xed 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 ﬂ ows. If a test indicates that the carrying value of
insurance contract liabilities is inadequate, then the liabilities are adjusted to correct the deﬁ ciency. The deﬁ ciency is
included in the income statement under beneﬁ ts.

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 beneﬁ ts, expenses and taxes on insurance and annuity contracts.

The process of calculating life insurance and annuity actuarial liabilities for future policy beneﬁ ts 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 beneﬁ ts, expenses and taxes are based on Group and industry
experience and are updated annually.

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

2. ACCOUNTING POLICIES (continued)

2.13 Actuarial liabilities (continued)

CALM is based on an explicit projection of cash ﬂ ows using best estimate assumptions for each material cash
ﬂ ow 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 ﬁ nancial 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.

(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 ﬁ nancial
liabilities that expose the Group to ﬁ nancial risk. The recognition and measurement of the Group’s principal types of
ﬁ nancial 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 recognised initially at fair value and are subsequently stated at
amortised cost. Securities sold under agreements to repurchase are treated as collateralised ﬁ nancing 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 classiﬁ ed as notes or loans payable and the
associated cost is classiﬁ ed as ﬁ nance costs. Borrowings undertaken for the purposes of providing funds for on-
lending, leasing or portfolio investments are classiﬁ ed as other funding instruments and are included in deposit and
security liabilities and the associated cost is included in interest expense.

(d) Fair value

The estimated fair values of ﬁ nancial liabilities are based on market values of quoted securities as at December 31
where available. In assessing the fair value of non-traded ﬁ nancial liabilities, the Group uses a variety of methods
including obtaining dealer quotes for speciﬁ c or similar instruments and the use of internally developed pricing
models, such as the use of discounted cash ﬂ ows.

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

2. 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 outﬂ ow 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
and accrued discount and premium on ﬁ nancial 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 beneﬁ ts

(a) Pension beneﬁ ts

Group companies have various pension schemes in place for their employees. Some schemes are deﬁ ned beneﬁ t
plans and others are deﬁ ned contribution plans.

The liability in respect of deﬁ ned beneﬁ t plans is the present value of the deﬁ ned beneﬁ t 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 deﬁ ned beneﬁ t obligation is computed using the projected unit credit method. The present value
of the deﬁ ned beneﬁ t obligation is determined by the estimated future cash outﬂ ows 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 beneﬁ ts become vested. Past service costs are recognised immediately if the beneﬁ ts vest immediately.

For deﬁ ned contribution plans, the Group pays contributions to the pension schemes on a mandatory or contractual
basis. Once paid, the Group has no further payment obligations. The regular contributions constitute net periodic
costs for the year in which they are due and as such are included in expenses in the income statement.

(b) Other retirement beneﬁ ts

Certain Group subsidiaries provide supplementary health, dental and life insurance beneﬁ ts to qualifying employees
upon retirement. The entitlement to these beneﬁ ts 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 beneﬁ ts are accrued
over the period of employment, using an accounting methodology similar to that for deﬁ ned beneﬁ t pension plans.

The Group recognises a liability and an expense for bonuses and proﬁ t sharing, based on various proﬁ t 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.

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

2. ACCOUNTING POLICIES (continued)

2.18 Employee beneﬁ ts (continued)

(d) Equity compensation beneﬁ ts
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 reserve 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.

(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 the Black-Scholes valuation model, which incorporates factors and assumptions that
knowledgeable, willing market participants would consider in setting the price of the equity instruments.

(e) Termination beneﬁ ts

Termination beneﬁ ts 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 beneﬁ ts. The Group recognises
termination beneﬁ ts 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 beneﬁ ts as a result
of an offer made to encourage voluntary redundancy. Beneﬁ ts falling due more than twelve (12) months after the
balance sheet date are discounted to present value.

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

2. ACCOUNTING POLICIES (continued)

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:

Life insurance and
non-registered annuities

Health insurance

Barbados

Jamaica

Trinidad and Tobago

United Kingdom

3% - 5%

Nil

n/a

United States of America

0.75% - 3.5%

Nil

n/a

Nil

Property and
casualty insurance

3.75% - 5%

Nil

(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 2007 are as follows:

Barbados

Jamaica

Life insurance and
non-registered annuities

5% of gross investment
income
15% of investment income
(1)

Trinidad and Tobago

15% of investment income

United Kingdom

n/a

Registered annuities

Nil

n/a

Other lines
of business

25% of net income

331/3 % of net income

25% - 30% of net
income

28% of net income

United States of America

35% of net income

(1) applicable also to health insurance

(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 proﬁ ts 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.

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

2. ACCOUNTING POLICIES (continued)

2.20 Participating Accounts

(a) “Closed” participating account

For participating policies of Sagicor Life Inc in force at de-mutualisation, Sagicor Life Inc established a closed
participating account in order to protect the guaranteed beneﬁ ts and future policy dividends, bonuses and other
non-guaranteed beneﬁ ts of the afore-mentioned policies. The rules of this account require that premiums, beneﬁ ts,
actuarial reserve movements, investment returns, expenses and taxes, attributable to the said policies, are recorded
in a closed participating fund. Policy dividends and bonuses of the said policies are paid from the participating fund
on a basis substantially the same as prior to de-mutualisation. The participating account 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.

(b) “Open” participating account

Sagicor Life Inc also established an open participating account for participating policies it issues after de-
mutualisation. The rules of this account require that premiums, beneﬁ ts, actuarial reserve movements, investment
returns, expenses and taxes, attributable to the said policies are recorded in an open participating account.

The open participating account was established at de-mutualisation. 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 account. Accordingly, the liabilities of these participating policies and matching assets were transferred
to the open participating account. 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 proﬁ t
distribution to shareholders (see below) were also transferred to the account.

Distributable proﬁ ts of the open participating account are shared between participating polices and shareholders in
a ratio of 90:10. Proﬁ ts are distributed to the participating policies in the form of declared bonuses and dividends.
Proﬁ ts which are distributed to shareholders are included in the allocation of Group net income to shareholders.
Undistributed proﬁ ts remain in the participating account.

The assets and liabilities of the participating accounts are not presented separately in the ﬁ nancial statements. The
revenues, beneﬁ ts and expenses of the participating accounts are also not presented separately in the ﬁ nancial
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.

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

2. 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 proﬁ ts or when
an appropriation of retained earnings is required or permitted by law to protect policyholders, insureds or depositors.

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The development of estimates and the exercise of judgment in applying accounting polices may have a material
impact on the Group’s reported assets, liabilities, revenues, beneﬁ ts and expenses. The items which may have the
most effect on the Group’s ﬁ nancial statements are set out below.

3.1

Impairment of ﬁ nancial 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 ﬁ nancial condition and ﬁ nancial viability of the borrower.

An available for sale equity investment is considered impaired when there is a signiﬁ cant or prolonged decline in
the fair value below cost. Determination of what is signiﬁ cant or prolonged requires judgement which includes
consideration of the volatility of the fair value, and the ﬁ nancial condition and ﬁ nancial viability of the investee.

The determination of impairment may either be considered by individual asset or by a grouping of assets with similar
relevant characteristics.

3.2 Recognition and measurement of intangible assets

The recognition and measurement of intangible assets, other than goodwill, in a business combination involve
the utilisation of valuation techniques which may be very sensitive to the underlying assumptions utilised. These
intangibles may be marketing related, consumer related, contract based or technology based.

For signiﬁ cant 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
ﬂ ows 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 ﬁ nancial projections annually and applies discounted cash ﬂ ow 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 ﬂ ows generated as a result of
holding the asset.

3.4 Actuarial liabilities

(a) Canadian asset liability method (CALM)

The objective of the valuation of policy liabilities is to determine the amount of the insurer’s assets that, in the
opinion of the Appointed Actuary (AA) and taking into account the other pertinent items on the balance sheet, will
be sufﬁ cient without being excessive to provide for the policy liabilities over their respective terms. The amounts
set aside for future beneﬁ ts are dependent on the asset and liability cash ﬂ ows, as well as any mismatch during the
valuation period.

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)

3.4 Actuarial liabilities (continued)

The actuarial liabilities are determined by the amount of assets required to ensure that sufﬁ cient monies are available
to meet the policy liabilities as they become due, even under adverse economic circumstances.

The AA identiﬁ es 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 sufﬁ cient 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 beneﬁ ts.

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. The assumption
for operating expenses and taxes is in some instances split by participating, non-participating or universal life / unit
linked business.

Provisions for adverse deviations are established in accordance with the risk proﬁ les of the business, and are, as far
as is practicable, standardised across the major geographical segments. Provisions are determined within a speciﬁ c
range established by the Canadian Standards of Practice.

The principal assumptions and margins used in the determination of actuarial liabilities are summarised in note 13.3.
However, the liability resulting from the application of these assumptions can never be deﬁ nitive as to the ultimate
timing or the amount of beneﬁ ts payable and is therefore subject to future re-assessment.

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)

3.5 Property and casualty insurance contracts

(a) Policy beneﬁ ts in the course of settlement

The estimation of the ultimate liability arising from claims incurred under property and casualty insurance contracts
is subject to several sources of uncertainty that need to be considered in determining the amount that the insurer
will ultimately pay for such claims.

Claim liabilities are based on estimates due to the fact that the ultimate disposition of claims incurred prior to the
balance sheet date, whether reported or not, is subject to the outcome of events that may not yet have occurred.
Signiﬁ cant delays are experienced in the notiﬁ cation and settlement of certain types of claims, particularly in respect
of casualty contracts. Events which may effect the ultimate outcome of claims include inter alia, jury decisions, court
interpretations, legislative changes and changes in the medical condition of claimants.

Any estimate of future losses is subject to the inherent uncertainties in predicting the course of future events. The
two most critical assumptions made to determine claim liabilities are that the past is a reasonable predictor of the
likely level of claims development and that the statistical estimation models used are fair reﬂ ections of the likely
level of ultimate claims to be incurred. Consequently, the amounts recorded in respect of unpaid losses may change
signiﬁ cantly in the short term.

Management engages independent actuaries, either to assist in making or to conﬁ rm the estimate of claim liabilities.

The ultimate liability arising from claims incurred under property and casualty insurance contracts may be mitigated
by recovery arising from reinsurance contracts held.

(b) Premium income

Sagicor at Lloyd’s insurance syndicate writes some of its premium by delegated authority to insurance
intermediaries. Due to delays in the notiﬁ cation of complete and accurate premium income written, premium
income earned may have to be estimated. Accordingly, premium income written has to be re-assessed in future
periods and adjustments made to earned premium.

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

4. SEGMENTS

4.1 Geographical Segments

Year ended December 31, 2007

Total assets

Total liabilities

Total revenue

Income from
ordinary
activities

Total cash
ﬂ ows

Barbados

Jamaica

606,486

571,037

131,563

13,513

(23,659)

1,105,410

861,875

298,195

58,194

(20,889)

Trinidad & Tobago

441,316

333,040

101,656

15,053

(13,681)

United Kingdom

248,929

154,158

59,283

30,107

13,135

USA

798,664

719,016

50,106

111

6,889

Other Caribbean

442,187

258,741

129,836

36,191

13,175

Not allocated to segments

6,709

165,127

2,315

(24,619)

(86,152)

3,649,701

3,062,994

772,954

128,550

(111,182)

Year ended December 31, 2006

Total assets

Total liabilities

Total revenue

Income from
ordinary
activities

Total cash
ﬂ ows

Barbados

Jamaica

Trinidad & Tobago

USA

Other Caribbean

Not allocated to segments

578,045

1,057,299

399,475

840,034

410,594

77,830

539,982

805,878

279,618

769,398

259,732

166,364

126,215

280,162

83,565

56,062

116,288

19,546

51,907

25,826

6,943

16,051

(19,739)

3,363,277

2,820,972

662,330

100,534

23,880

(6,628)

(13,539)

(1,890)

(5,676)

91,356

87,503

Other balances by geographical segment are disclosed in notes 6, 7, 8, 13, 41 and 47.

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

4. SEGMENTS (continued)

4.2 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

Total assets

Total revenue

2007

2006

2007

2006

1,974,500

1,957,228

379,433

365,107

451,853

416,359

186,909

163,581

Property and casualty insurance

377,419

115,020

92,190

29,268

Banking, investment management and other
ﬁ nancial services

812,647

774,944

110,660

103,549

Not allocated to segments (1)

33,282

99,726

3,762

825

3,649,701

3,363,277

772,954

662,330

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

5. 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

2007

90,578

1,744

(2,532)

(582)

9,332

(1,018)

97,522

2006

90,793

1,522

(1,275)

(4,509)

(4,489)

9,301

(765)

90,578

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

5. INVESTMENT PROPERTY (continued)

Investment property includes $20,276 (2006 - $18,651) 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%

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 ﬁ nancial 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

2007

908

195

2,358

2006

1,042

443

2,246

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

6. PROPERTY, PLANT AND EQUIPMENT

Year ended December 31, 2007

Net book value,
beginning of year

Additions at cost

Assumed on acquisitions

Transfers from
investment property

Disposals

173

2,532

Appreciation in fair values

7,715

Depreciation charge

Effects of exchange
rate changes

(820)

(309)

Owner-
occupied
properties

Furnishings
& leasehold
improvements

Ofﬁ ce
equipment &
vehicles

Operating lease
vehicles &
equipment

Total

50,374

8,896

12,017

9,241

80,528

2,944

4,236

5,115

12,468

234

(5)

480

714

2,532

(122)

(1,501)

(1,628)

7,715

(1,174)

(4,079)

(2,702)

(8,775)

(89)

(218)

(616)

Net book value, end of year

59,665

10,806

12,314

10,153

92,938

Represented by:

Cost or valuation

60,741

23,735

43,817

15,613

143,906

Accumulated depreciation

(1,076)

(12,929)

(31,503)

(5,460)

(50,968)

59,665

10,806

12,314

10,153

92,938

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

6. PROPERTY, PLANT AND EQUIPMENT (continued)

Year ended December 31, 2006

Net book value,
beginning of year

Owner-
occupied
properties

Furnishings
& leasehold
improvements

Ofﬁ ce
equipment
& vehicles

Operating lease
vehicles &
equipment

Total

45,632

5,018

13,612

9,863

74,125

Additions at cost

490

5,100

4,068

3,645

13,303

Transfers from investment
property

Transfers to intangible assets

Disposals

Appreciation in fair values

Depreciation charge

Effects of exchange
rate changes

4,509

(131)

790

(724)

(192)

(21)

(1,135)

4,509

(1,135)

(333)

(1,567)

(2,052)

790

(1,141)

(4,045)

(2,700)

(8,610)

(60)

(150)

(402)

Net book value, end of year

50,374

8,896

12,017

9,241

80,528

Represented by:

Cost or valuation

51,396

20,727

41,042

14,077

127,242

Accumulated depreciation

(1,022)

(11,831)

(29,025)

(4,836)

(46,714)

50,374

8,896

12,017

9,241

80,528

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

6. PROPERTY, PLANT AND EQUIPMENT (continued)
Additions to and depreciation of property, plant and equipment by geographical segment are as follows:

Barbados

Jamaica

Trinidad & Tobago

United Kingdom

USA

Other Caribbean

Not allocated to segments

Additions

Depreciation

2007

7,109

2,019

979

933

1,064

340

2006

8,296

885

1,645

629

1,814

2007

4,978

1,534

832

388

941

12,468

13,303

8,775

2006

4,997

1,585

633

359

1,031

8,610

Owner-occupied property includes $2,460 (2006 - $1,486) which represents the Group’s proportionate interest in
joint ventures set out below.

Description of property

Belize:

Percentage
owned by the Group

Belize Insurance Centre, North Front Street, Belize City

Grenada:

The Mutual / Trans-Nemwil Ofﬁ ce Complex, The Villa, St George’s

50%

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

7. INVESTMENT IN ASSOCIATED COMPANIES

Investment, beginning of year

Additions

Income from ordinary activities

Amortisation of and other charges to intangible assets
which were identiﬁ ed on acquisition

Income taxes

Dividends received

Other movements in equity

Effects of exchange rate changes

Investment, end of year

2007

26,836

2,653

4,224

(2,457)

(3)

(1,338)

462

(43)

2006

24,915

664

2,727

(494)

(8)

(974)

30,334

26,836

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

Investment in
associated companies

Income from
ordinary activities

Barbados

Jamaica

Trinidad & Tobago

Other Caribbean

2007

1,903

16,896

11,496

30,334

2006

125

14,064

12,606

26,836

2007

260

2,519

1,445

4,224

The aggregate balances and results in respect of associated companies for the period are set out below.

Total assets

Total liabilities

Total revenue

Net income for the year

2007

327,887

218,166

95,308

16,979

2006

(2)

1,687

1,042

2,727

2006

293,024

203,368

88,264

10,976

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

8. INTANGIBLE ASSETS

(a) Analysis and changes for the year

Year ended December 31, 2007 Goodwill

Customer
& broker
relationships

Trade
names

Syndicate
capacity
& licences

Software

Total

Net book value,
beginning of year

Additions at cost

Assumed on acquisitions

Identiﬁ ed on acquisitions:

Sagicor at Lloyd’s
(note 37.1)

Byrne & Stacey
Underwriting (note 37.2)

Sagicor General Insurance
(Cayman) (note 37.4)

Disposals

Amortisation and other
charges

Effects of exchange
rate changes

Net book value,
end of year

Represented by:

59,148

44,328

3,536

4,853

439

(63)

842

754

5,696

112,708

4,120

491

544

25,178

1,147

27,167

499

6,106

439

(63)

(2,998)

(3,444)

(34)

(2,394)

(8,870)

(1,127)

(1,977)

(92)

(302)

(129)

(3,627)

63,250

40,949

24,895

9,430

138,524

Cost

65,065

48,956

7,037

24,929

17,301

163,288

Accumulated charges and
amortisation

(1,815)

(8,007)

(7,037)

(34)

(7,871)

(24,764)

63,250

40,949

24,895

9,430

138,524

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

8. INTANGIBLE ASSETS (continued)

Year ended December 31, 2006

Goodwill

Customer
relationships

Trade names

Software

Total

Net book value, beginning of year

60,703

49,038

5,832

4,521

120,094

Transfer from property,
plant and equipment

Additions at cost

1,135

2,228

Amortisation and other charges

(983)

(3,046)

(2,119)

(2,099)

(8,247)

Effects of exchange rate changes

(572)

(1,664)

(177)

(89)

(2,502)

Net book value, end of year

59,148

44,328

3,536

5,696

112,708

Represented by:

Cost

Accumulated charges
and amortisation

(b) Geographical segment information

Barbados

Jamaica

Trinidad & Tobago

United Kingdom

USA

Other Caribbean

11,514

11,188

Not allocated to segments

60,131

49,637

7,389

11,016

128,173

(983)

(5,309)

(3,853)

(5,320)

(15,465)

59,148

44,328

3,536

5,696

112,708

Goodwill

Additions to
intangible assets

Amortisation of
intangible assets

2007

2006

2007

2006

2007

2006

22,633

2,022

19,406

20,411

4,902

4,916

4,795

743

693

761

1,109

703

133

606

724

6,828

5,260

196

724

506

1,457

803

63,250

59,148

4,120

2,228

8,870

8,247

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

8. INTANGIBLE ASSETS (continued)

Goodwill arising on past acquisitions is reviewed by cash generating unit (CGU). The recoverable amount of a 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 ﬂ ow projections prepared by management. Detailed cash ﬂ ow
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 ﬂ ow discount factors, residual growth rates and earnings multiples utilised in the assessment of recoverable
amounts as of December 31, 2007 were as follows:

Barbados

Jamaica

Trinidad & Tobago

Other Caribbean

Cash ﬂ ow
discount factor

Cash ﬂ ow residual
growth rate

13.3% - 15.3%

4.0% – 4.5%

21.2%

n/a

11.2%- 14.6%

7.0%

n/a

3.5%

Earnings
multiples

8.7

4.8 – 5.3

8.0

8.5 – 9.0

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

9. FINANCIAL INVESTMENTS

9.1 Analysis of ﬁ nancial 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 ﬁ nance leases

December 31, 2007

December 31, 2006

Carrying
value

Fair value

Carrying
value

Fair value

3,441

3,394

3,251

3,225

1,309,824

1,230,746

162,052

163,334

1,471,876

1,394,080

85,392

26,662

85,392

26,662

112,054

351,793

293,998

126,403

145,764

344,269

291,273

131,247

145,764

15,980

161,698

87,719

23,774

111,493

329,144

247,893

125,891

122,888

22,320

167,862

87,719

23,774

111,493

330,739

247,150

125,891

122,888

22,320

167,863

Securities purchased under agreements to resell

15,980

Deposits

161,698

Total ﬁ nancial investments

2,683,007

2,677,555

2,524,822

2,525,649

1,095,636

1,090,231

1,015,998

1,016,851

Securities at fair value through income comprise:

Securities designated at fair value upon initial recognition

Securities held for trading

Debt securities comprise:

Government debt securities

Corporate debt securities

Collateralised mortgage obligations

Other securities

2007

2006

90,706

21,348

112,054

88,889

22,604

111,493

1,074,471

1,029,059

394,871

229,436

51,672

328,590

240,226

52,985

1,750,450

1,650,860

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

9. FINANCIAL INVESTMENTS (continued)

9.1 Analysis of ﬁ nancial investments (continued)

Debt securities include $7,168 (2006 - $7,447) that contain options to convert to common shares of the issuer.

Corporate debt securities include:

(i)

convertible loans totalling $6,785 (2006 - $4,772) issued to the Group by an associated company. These loans
can be converted into equity or bonds issued by the associated company.

(ii) $13,670 (2006 - $11,917) in bonds issued by an associated company.

Equity securities include $6,705 (2006 - $6,252) in mutual funds managed by the Group.

9.2 Pledged assets

As of December 31, 2006, debt securities included $39,220 held in trust supporting reinsurance liabilities assumed.
As of December 31, 2007, the trust was unwound and the related assets were transferred to the Group’s general
investment portfolio. The Group manages these investments and bears the investment risk.

Debt securities include $23,182 (2006 - $23,450) and policy loans include $29,932 (2006 - $30,412) in assets held in
trust for a reinsurer (note 20). The income from these assets accrues to the reinsurer.

Debt and equity securities include $17,825 (2006 - $20,497) as collateral for loans payable.

Collateral for the obligation to the Federal Home Loan Bank of Dallas (FHLB) which is included in other funding
instruments (note 17), consists of an equity holding in the FHLB with a market value of $5,158 (2006 - $5,311), and
mortgages and mortgage backed securities having a total market value of $121,514 (2006 - $123,896).

Debt securities are pledged as collateral under repurchase agreements with customers and other ﬁ nancial
institutions and for security relating to overdraft and other facilities with other ﬁ nancial institutions. As of December
31, 2007, these pledged assets totalled $514,838 (2006 - $474,831). Of these assets pledged as security $237,012
(2006 – $189,075) 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.

Deposits include $49,236 (2006 – nil) pledged as collateral for a letter of credit facility obtained by the Group.

9.3 Returns accruing to the beneﬁ t 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

2007

63,844

23,730

47,824

311

2006

65,150

22,044

43,659

2,452

135,709

133,305

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

10. REINSURANCE ASSETS

Reinsurers’ share of:

Actuarial liabilities (note 13.1)

Policy beneﬁ ts in the course of settlement (note 14.2)

Provision for unearned premiums (note 14.3)

Other items

11. INCOME TAX ASSETS

Deferred income tax assets (note 33)

Income and withholding taxes recoverable

12. MISCELLANEOUS ASSETS AND RECEIVABLES

Pension plan assets (note 31)

Real estate developed or held for resale

Deferred policy acquisition costs

Premiums in the course of collection

Amounts due from managed funds

Other accounts receivable

2007

2006

247,760

34,658

31,686

6,051

320,155

2007

11,645

11,977

23,622

2007

2,048

6,116

25,917

78,299

3,709

55,370

276,471

21,001

17,943

6,274

321,689

2006

4,226

14,107

18,333

2006

1,004

12,901

3,747

27,926

3,014

51,509

171,459

100,101

(a) Real estate developed or held for resale

Real estate developed for resale includes $3,964 (2006 - $8,837) which is expected to be realised after one year.

Real estate developed for resale includes $2,020 (2006 - $3,161) which represents the Group’s proportionate interest
in the joint ventures set out below.

Description of property

Barbados:

Percentage owned by the Group

Land at Fort George Heights, Upton, St Michael

Rolling Hills Development, Byde Mill, St George

50%

81% (2006 only)

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

12. MISCELLANEOUS ASSETS AND RECEIVABLES (continued)

(b) Deferred policy acquisition costs

The movement in deferred acquisition costs for the year is as follows:

Balance, beginning of year

Assumed on acquisitions

Expensed

Additions

Effect of exchange rate changes

Balance, end of year

Gross amount

2007

3,747

20,802

(23,590)

25,449

(491)

25,917

2006

3,088

(9,240)

9,897

3,747

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

13. ACTUARIAL LIABILITIES

13.1 Analysis of actuarial liabilities

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

Gross liability

Reinsurers’ share

2007

2006

2007

2006

288,081

279,539

2,805

3,277

795,574

817,992

199,714

220,831

4,156

3,951

1,721

1,590

93,061

89,490

2,370

6,057

1,183,242

1,197,029

204,240

225,698

28,640

25,280

2,369

2,395

131,660

133,467

40,627

47,929

20,762

17,808

524

449

181,062

176,555

43,520

50,773

Total actuarial liabilities

1,364,304

1,373,584

247,760

276,471

The following notes are in respect of the above:

Life insurance includes coverage for disability and critical illness.
Actuarial liabilities include $144,958 (2006 - $152,710) in assumed reinsurance.
Liabilities for reinsurance contracts held occur because the reinsurance premium costs exceed the mortality costs
assumed in determining the gross liability of the policy.

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

13. ACTUARIAL LIABILITIES (continued)

13.2 Movement in actuarial liabilities

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

Gross amount

Reinsurers’ share

2007

2006

2007

2006

Balance, beginning of year

1,373,584 1,395,599

276,471

302,998

Transfers

902

Change in actuarial liabilities (note 27)

(925)

(17,568)

(28,709)

(26,531)

Effect of exchange rate changes

(8,355)

(5,349)

(2)

Balance, end of year

1,364,304 1,373,584

247,760

276,471

The change in liability by geographical segment is as follows:

Barbados

Jamaica

Trinidad & Tobago

USA

Other Caribbean

Gross amount

2007

2006

16,579

4,085

21,389

12,660

21,646

3,603

(45,891)

(45,897)

(14,648)

7,981

(925)

(17,568)

13.3 Assumptions – life insurance and annuity contracts

(a) Process used to set actuarial assumptions and margins for adverse deviations

At each date for valuation of actuarial liabilities, the Appointed Actuary (AA) of each insurer reviews the assumptions
made at the last valuation date. The AA tests the validity of each assumption by reference to current data, and where
appropriate, changes the assumptions for the current valuation.

A similar process of review and assessment is conducted in the determination of margins for adverse deviations.

Recent changes in actuarial standards and practice are also incorporated in the current valuation.

(b) Assumptions for mortality and morbidity

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 2007 valuation, insurers conducted studies of their own recent mortality experience. The resulting experience
was measured against an industry standard (Canadian Institute of Actuaries (CIA) 1986 – 1992 tables) and resulted
in the assignment of probabilities of death by policy duration. Appropriate modiﬁ cation factors were selected
and applied to underwritten and non-underwritten business respectively. Annuitant mortality was determined by
reference to CIA tables or to other established scales.

100

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

13. ACTUARIAL LIABILITIES (continued)

13.3 Assumptions – life insurance and annuity contracts (continued)

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

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 2007 valuation, to determine the most recent experience
of persistency. Appropriate rates of termination by policy duration were determined and applied in the actuarial
valuations.

(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

2007

URR

5.0%

7.0%

5.5%

4.0%

5.0 – 5.25%

2006

URR

5.0%

7.0%

5.0%

4.0%

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 reﬂ ected in the actuarial
valuation after adjusting for expected inﬂ ation. Costs were updated for the 2007 valuations and were applied on
a per policy basis.

(f) Asset defaults

The AA of each insurer includes a provision for asset default in the modelling of the cash ﬂ ows. The provision is
based on industry and Group experience and includes a speciﬁ c margin for equity securities and a combined margin
for debt securities, mortgage loans and deposits.

101

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

13. ACTUARIAL LIABILITIES (continued)

13.3 Assumptions – life insurance and annuity contracts (continued)

(g) Margins for adverse deviations

Margins for adverse deviations are determined for the assumptions in the actuarial valuations. 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

2007

27,024

21,797

61,975

12,772

2006

23,240

18,451

54,286

10,488

123,568

106,465

(h) 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 signiﬁ cant 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

2007

2006

(44,722)

(51,603)

There have been no speciﬁ c changes in assumptions and actuarial modelling which represent more than 5% of
actuarial liabilities at the beginning of the year.

13.4 Assumptions – health insurance contracts

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.

102

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

14. OTHER INSURANCE LIABILITIES

14.1 Analysis of other insurance liabilities

Dividends on deposit and other policy balances

Policy beneﬁ ts in the course of settlement

Provision for unearned premiums

14.2 Policy beneﬁ ts in the course of settlement

(a) Analysis of policy beneﬁ ts in the course of settlement

2007

63,411

141,860

108,644

313,915

2006

60,875

56,540

35,286

152,701

Gross liability

Reinsurers’ share

2007

2006

2007

2006

Life insurance and annuity beneﬁ ts

40,792

35,268

11,390

10,850

Health claims

1,166

1,009

2,947

1,315

Property and casualty claims

99,902

20,263

20,321

8,836

141,860

56,540

34,658

21,001

Health claims include $797 (2006 - $824) in provisions for claims incurred but not yet reported. Property and
casualty claims include $32,463 (2006 – $4,105) in provisions for claims incurred but not yet reported.

(b) Movement in policy beneﬁ ts in the course of settlement

Balance, beginning of year

Assumed on acquisitions

Policy beneﬁ ts incurred

Policy beneﬁ ts paid

Gross amount

Reinsurers’ share

2007

2006

2007

2006

56,540

54,798

21,001

21,742

79,442

10,629

334,526 310,958

61,737

56,229

(326,800) (308,339)

(58,112)

(56,604)

Effect of exchange rate changes

(1,848)

(877)

(597)

(366)

Balance, end of year

141,860

56,540

34,658

21,001

103

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

14. OTHER INSURANCE LIABILITIES (continued)

14.3 Provision for unearned premiums

(a) Analysis of provision for unearned premiums

Gross liability

Reinsurers’ share

2007

2006

2007

2006

Property and casualty insurance

107,383

34,013

31,686

17,943

Health insurance

1,261

1,273

108,644

35,286

31,686

17,943

(b) Movement in provision for unearned premiums

Balance, beginning of year

Assumed on acquisitions

Premiums written

Premium revenue

Effect of exchange rate changes

Balance, end of year

Gross amount

Reinsurers’ share

2007

2006

2007

2006

35,286

28,484

17,943

12,331

65,681

5,415

135,852

95,266

68,183

53,921

(126,557)

(88,457)

(59,523)

(48,318)

(1,618)

(7)

(332)

108,644

35,286

31,686

17,943

15. INVESTMENT CONTRACT LIABILITIES

Deposit administration liabilities

Other investment contracts

December 31, 2007

December 31, 2006

Carrying Value

Fair Value

Carrying Value

Fair Value

180,882

61,494

242,376

180,882

61,405

242,287

176,194

44,661

220,855

175,836

44,103

219,939

104

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

16. NOTES AND LOANS PAYABLE

7.5% senior notes due 2016

Bank loans

December 31, 2007

December 31, 2006

Carrying Value

Fair Value

Carrying Value

Fair Value

146,883

5,836

152,719

151,875

5,836

157,711

146,514

13,974

152,977

13,974

160,488

166,951

The Group issued ten year US$150 million senior notes which are repayable in 2016 and carry a 7.5% rate of interest
ﬁ xed for the period. 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.

17. DEPOSIT AND SECURITY LIABILITIES

Other funding instruments:

Loans from banks and other ﬁ nancial institutions
Deposits:

Customer deposits
Securities:

December 31, 2007

December 31, 2006

Carrying Value

Fair Value

Carrying Value

Fair Value

163,719

168,065

161,556

165,057

136,641

123,157

Securities sold under agreements to repurchase

487,306

Bank overdrafts

2,899

790,565

487,306

2,899

794,911

457,741

2,981

457,741

2,981

745,435

748,936

Loans from banks and other ﬁ nancial institutions include balances of $118,376 (2006 - $120,655) due to the Federal
Home Loan Bank of Dallas (FHLB). The Group participates in the FHLB program in which funds received from the
Bank are invested in mortgages and mortgage backed securities.

The collateral for other funding instruments and securities sold under agreements to resell is set out in note 9.2.

Un-disbursed facilities in respect of other funding instruments and bank overdrafts total approximately
$ nil (2006 – $1,779).

18. PROVISIONS

Pension plans and other retirement beneﬁ ts (note 31)

Other

2007

2006

21,648

1,894

23,542

17,963

2,602

20,565

105

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

19. INCOME TAX LIABILITIES

Deferred income tax liabilities (note 33)

Income taxes payable

20. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Amounts due to policyholders

Amounts due to reinsurers

Amounts due to managed funds

Other accounts payable and accrued liabilities

2007

6,635

8,472

15,107

2007

7,718

82,351

2,105

68,292

2006

7,434

11,244

18,678

2006

1,649

67,767

3,609

55,641

160,466

128,666

Amounts due to reinsurers include $53,114 (2006 – $53,862) due to a reinsurer in respect of assets held in trust by
the Group (see note 9.2).

21. 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.

Year ended December 31, 2007

Year ended December 31, 2006

Number of shares ‘000

$000

Number of shares ‘000

$000

Issued and fully paid common
shares of no par value:

Balance, beginning of year

266,187

230,235

265,553

229,226

Allotments

238

484

1,432

2,826

Balance, end of year

266,425

230,719

266,985

232,052

Treasury shares:
Net shares disposed / (ac-
quired) by ESOP trustees

429

976

(798)

(1,817)

Total share capital

266,854

231,695

266,187

230,235

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

106

Year ended December 31, 2007
Amounts expressed in US $000

22. RESERVES

Sagicor Financial Corporation
Notes To The Financial Statements

Fair value reserves

Year ended
December 31, 2007

Available
for sale
assets

Owner
occupied
property

Currency
translation
reserve

Share based
payment
reserves

Statutory
reserves

Total

Balance, beginning of year
Unrealised (losses)/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)

55,815

9,531

(22,811)

1,472

4,099

48,106

(10,847)

6,693

(17,524)

(9,099)

(28,371)

6,693

(9,099)

1,705

(4,154)

(17,524)

(9,099)

(30,777)

1,705

Other movements

873

(203)

215

1,816

2,701

(27,498)

6,490

(8,884)

1,705

1,816

(26,371)

Balance, end of year

28,317

16,021

(31,695)

3,177

5,915

21,735

107

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

22. RESERVES (continued)

Fair value reserves

Year ended
December 31, 2006

Available
for sale
assets

Owner
occupied
property

Currency
translation
reserve

Share based
payment
reserves

Statutory
reserves

Total

Balance, beginning of year
Unrealised (losses)/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)

Other movements

56,007

8,886

(16,439)

4,689

645

(4,900)

(6,372)

(211)

645

(6,372)

1,472

4,810

53,264

5,334

(4,900)

(6,372)

(5,938)

1,472

(711)

(692)

(192)

645

(6,372)

1,472

(711)

(5,158)

Balance, end of year

55,815

9,531

(22,811)

1,472

4,099

48,106

108

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

23. PARTICIPATING ACCOUNTS
The movements in the participating accounts during the year were as follows:

Balance, beginning of year
Net unrealised (losses) / gains arising on

available for sale investment securities
Return of transfer to support proﬁ t

distribution to shareholders

Net income / (loss) for the year

Balance, end of year

Closed participating account

Open participating account

2007

7,158

(20)

1,372

8,510

2006

5,270

1,887

7,158

2007

2006

2,744

5,190

(260)

(256)

(1,598)

(2,190)

886

2,744

The amounts in the ﬁ nancial statements relating to participating accounts are as follows:

Assets

Liabilities

Revenues

Beneﬁ ts

Expenses

Income taxes

Closed participating account

Open participating account

2007

2006

2007

2006

94,761

92,409

227,604

212,121

86,251

10,548

7,356

1,633

187

85,251

10,929

7,285

1,568

189

226,718

209,376

35,684

35,150

29,851

27,830

6,747

684

8,669

841

109

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

24. PREMIUM REVENUE

Life insurance

Annuities

Health insurance

Property and casualty insurance

Gross revenue

Reinsurance expense

2007

2006

2007

2006

249,534

231,602

39,271

37,508

53,423

56,091

123,190

113,548

109,724

67,462

535,871

468,703

240

5,312

60,662

105,485

365

5,662

47,546

91,081

Gross revenue includes $22,260 (2006 - $19,188) in reinsurance assumed.

25. NET INVESTMENT INCOME

Investment income:

Interest income

Dividend income

Rental income from investment property

Net investment gains

Foreign exchange gains

Other investment income

Investment expenses:

Allowances for impairment losses

Direct operating expenses of investment property

Other direct investment expenses

2007

2006

206,618

194,612

6,719

5,629

38,377

3,836

1,655

6,275

5,345

29,579

2,870

2,965

262,834

241,646

(421)

1,155

888

1,622

183

1,305

1,779

3,267

Net investment income

261,212

238,379

The Group manages its ﬁ nancial investments by the type of ﬁ nancial instrument (i.e. debt securities, equity
securities, mortgage loans etc) and the income there-from is presented accordingly.

110

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

25. NET INVESTMENT INCOME (continued)

(a) Interest income

Debt securities

Mortgage loans

Policy loans

Finance loans and ﬁ nance leases

Securities purchased under agreements to resell

Deposits

Other balances

2007

148,325

20,183

9,091

15,285

3,477

9,845

412

2006

143,735

17,921

9,185

13,212

4,028

6,395

136

206,618

194,612

Interest from debt securities includes $1,678 (2006 - $1,324) from an associated company.

(b) Net investment gains / (losses)

Debt securities

Equity securities

Investment property

Other ﬁ nancial investments

26. 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

2007

9,051

19,730

9,512

38,377

2007

12,520

3,075

11,144

10,758

13,237

50,734

2006

9,487

10,502

9,314

276

29,579

2006

11,895

2,676

11,340

7,706

9,985

43,602

111

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

27. POLICY BENEFITS AND CHANGE IN ACTUARIAL LIABILITIES

Policy beneﬁ ts:

Life insurance beneﬁ ts

Annuity beneﬁ ts

Health insurance claims

Gross amount

Reinsurers’ share

2007

2006

2007

2006

130,074

129,422

25,725

23,936

84,414

82,410

24,567

22,669

89,182

82,803

3,845

3,353

Property & casualty insurance claims

30,856

16,323

7,600

6,271

Total policy beneﬁ ts

334,526

310,958

61,737

56,229

Change in actuarial liabilities (note 13.2)

Total policy beneﬁ ts and change
in actuarial liabilities

(925)

(17,568)

(28,709)

(26,531)

333,601

293,390

33,028

29,698

Gross policy beneﬁ ts include $22,263 (2006 - $21,171) arising from reinsurance assumed.

28. INTEREST EXPENSE

Insurance contracts

Investment contracts

Other funding instruments

Deposits

Securities

Other Items

2007

2,457

17,044

9,448

9,528

42,804

2,782

84,063

2006

2,659

17,501

8,654

8,082

41,397

3,984

82,277

The Group manages its interest-bearing obligations by the type of obligation (i.e. investment contracts, securities
etc) and the interest there-to is presented accordingly.

112

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

29. EMPLOYEE COSTS
Included in administrative expenses, commissions and related compensation are the following:

Administrative staff salaries, directors’ fees and other short-term beneﬁ ts

Employer contributions to social security schemes

Equity compensation beneﬁ ts

Employer contribution to deﬁ ned contribution pension schemes

Costs – deﬁ ned beneﬁ t pension schemes

Costs – other retirement beneﬁ ts

2007

63,890

4,863

2,413

654

3,132

1,178

2006

55,770

4,270

1,718

344

2,489

878

76,130

65,469

The total number of administrative staff at December 31 was 1,807 persons (2006 – 1,764 persons).

30. EMPLOYEE EQUITY COMPENSATION BENEFITS

30.1 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.

(a) LTI plan – restricted share grants

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 proﬁ tability of the Group as compared to a number of peer companies. Relative proﬁ tability is measured with
reference to the ﬁ nancial year preceding the vesting date.

The movement in restricted share grants during the year is as follows. B$ represents Barbados $.

2007

2006

Number of
grants ‘000

Weighted average
exercise price

Number of
grants ‘000

Weighted average
exercise price

Balance, beginning of year

Grants issued

Grants vested

Balance, end of year

214

425

(218)

421

B$ 3.81

B$ 3.87

B$ 3.84

B$ 3.85

305

(91)

214

B$ 3.81

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 $2,647.

113

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

30. EMPLOYEE EQUITY COMPENSATION BENEFITS (continued)

30.1 The Company (continued)

(b) LTI plan – share options

Share options 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 ﬁ rst,
second, third and fourth anniversaries of the grant date. Options are exercisable up to 10 years from the grant date.

The movement in share options during the year is as follows. B$ represents Barbados $.

2007

2006

Number of
options ‘000

Weighted average
exercise price

Number of
options ‘000

Weighted average
exercise price

Balance, beginning of year

Options granted

Options exercised

Balance, end of year

Exercisable at the end of the year

932

2,050

(14)

2,968

219

B$ 3.95

B$ 4.01

B$ 3.95

B$ 3.99

B$ 3.95

932

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

2007 options

2006 options

B$ 4.01

B$ 0.82

19.3%

B$ 3.95

B$ 1.38

35.8%

7.0 years

3.0%

4.8%

3.0%

6.0%

The expected volatility is based on statistical analysis of monthly share prices over the two years prior to grant date.

During 2007 and 2006, the Company approved awards under the ESOP in respect of permanent administrative
employees and sales agents of the Company and certain subsidiaries. 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 ﬁ ve years from the award date in order to
qualify as a beneﬁ ciary. Shares are distributed to beneﬁ ciaries upon their retirement or termination of employment.

During the year, 429,000 common shares were disposed of by the Trustees (2006 - 798,000 common shares acquired).

(d) Expense

The expense recorded in the income statement in respect of the LTI plan and ESOP totalled $2,000 (2006 - $1,197).

114

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

30. EMPLOYEE EQUITY COMPENSATION BENEFITS (continued)

30.2 Life of Jamaica Limited (LOJ)

(a) Long-term incentive plan

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

LOJ introduced a new Long Term Incentive (LTI) plan effective January 2007. This plan replaced the previous
Stock Option plan. Under the LTI plan executives are entitled but not obliged, to purchase the company stock at
a pre-speciﬁ ed price at some future date, once a pre-determined performance objective is met. The options are
granted each year on the date of the LOJ Board of Directors Human Resources Committee meeting, following
the performance year, at which the stock option awards are approved. Stock options vest in 4 equal installments
beginning the ﬁ rst December 31 following the grant date and for the next three December 31st dates thereafter
(25% per year). Options are not exercisable after the expiration of 7 years from the date of grant. The number of
stock options in each stock option award is calculated based on the LTI opportunity via stock options (percentage of
applicable salary) divided by the Black-Scholes value of a stock option on LOJ stock on the date of grant. The exercise
price of the options is the closing bid price on the grant date.

Under the previous Stock Option plan, options were granted on December 31, of each year. The strike price was the
closing bid price on the grant date. The number of stock options in each stock option award was calculated based on
a percentage of applicable salary divided by the strike price. Options were exercisable beginning one year from the
date of grant and had a contractual term of six years from the date of grant.

Details of the share options outstanding are as follows. J$ represents Jamaica $.

2007

2006

Number of
options ‘000

Weighted average
exercise price

Number of
options ‘000

Weighted average
exercise price

Balance, beginning of year

23,866

J$ 6.54

Options granted

Options exercised

Balance, end of year

Exercisable at the end of the year

(4,533)

19,333

13,286

J$ 5.50

J$ 6.79

J$ 6.45

19,470

4,396

23,866

13,185

J$ 5.99

J$ 9.00

J$ 6.54

J$ 4.48

Further details of share options outstanding at December 31, 2007 are as follows:

Fair value of options outstanding

Share price at grant date

Exercise price

Standard deviation of expected share price returns

Weighted average remaining contractual term

Risk-free interest rate

Options

J$ 21,615,000

J$ 3.90 – 11.30

J$ 2.70 – 11.30

34.0%

2 years

12.0% - 26.1%

The expected volatility is based on statistical analysis of daily share prices over three years.

The total expense recorded in the income statement in respect of the share option plan totalled $271 (2006 – $90).

115

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

30. EMPLOYEE EQUITY COMPENSATION BENEFITS (continued)

30.2 Life of Jamaica Limited (LOJ) (continued)

(b) Employee share purchase plan

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 $1,502 (2006 - $1,623).

30.3 Pan Caribbean Financial Services Limited (PCFS)

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)

17,220,000 share options on 8 March 2004. These options expired on 31 December 2007. The exercise price for
the options is J$10. The options were vested 31 December 2006. 12,668,000 of these options were vested and
exercised. The balance of the 4,552,000 vested options was exercised in 2007.

(ii) 1,200,000 share options on 1 March 2005. These options expire on 28 February 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 shares were forfeited and contracts for 525,000 were cancelled. 75,000 of the share options vested
on 1 March 2006.

(iii) 1,200,000 share options on 1 March 2006. These options expire on 28 February 2010. The exercise price for the

options is J$21.75. These options vest over four years – 25% each anniversary date of the grant.

(iv) 600,000 share options on 1 March 2007. These options expire on 28 February 2011. The exercise price for the

options is J$19.29. These options vest over four years – 25% each anniversary date of the grant.

(v) 4,074,246 share options on 1 April 2007. These options expire on 31 March 2011. The exercise price for the

options is J$18.00. These options vest over four years – 25% each anniversary date of the grant.

The movement in share options was as follows. J$ represents Jamaica $.

2007

2006

Number of
options ‘000

Weighted average
exercise price

Number of
options ‘000

Weighted average
exercise price

Balance, beginning of year

Options granted

Options exercised

Options lapsed / forfeited

Balance, end of year

Exercisable at the end of the year

5,902

4,674

(4,552)

(75)

5,949

375

J$ 16.20

J$ 21.27

J$ 20.68

J$ 36.50

J$ 16.49

J$ 24.70

11,210

1,200

(5,458)

(1,050)

5,902

4,702

J$ 12.70

J$ 19.29

J$ 9.71

J$ 36.50

J$ 16.20

J$ 10.85

116

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

30. EMPLOYEE EQUITY COMPENSATION BENEFITS (continued)

30.3 Pan Caribbean Financial Services Limited (PCFS) (continued)

Further details of share options outstanding at December 31, 2007 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

Options

J$ 42,178,000

J$ 16.84

J$ 18.00 - 36.50

10.0%

5 years

13.3%

The expected volatility is based on statistical analysis of daily share prices over one year.

The total expense recorded in the income statement in respect of the share option plan totalled $142 (2006 – $ 182).

31. EMPLOYEE RETIREMENT BENEFITS
Certain Group subsidiaries have contributory deﬁ ned beneﬁ t pension schemes in place for eligible administrative
staff. Some subsidiaries also offer medical and life insurance beneﬁ ts that contribute to the health care and life
insurance coverage of retirees and beneﬁ ciaries.

(a) Amounts recognised in the balance sheet

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

Fair value of retirement plan assets

Present value of retirement obligations

Unrecognised actuarial losses

Pension beneﬁ ts

Other retirement beneﬁ ts

2007

2006

75,229

65,340

(96,016)

(81,796)

(20,787)

(16,456)

5,869

3,303

2007

1,052

(8,063)

(7,011)

2,329

2006

970

(7,211)

(6,241)

2,435

Amounts recognised in the balance sheet

(14,918)

(13,153)

(4,682)

(3,806)

Represented by:

Asset balances

Liability balances

2,048

1,004

(16,966)

(14,157)

(4,682)

(3,806)

(14,918)

(13,153)

(4,682)

(3,806)

Included in liability balances are interest bearing deposit administration fund balances totalling $18,929 (2006 -
$16,845) representing employee pension plan funds on deposit with the Group.

117

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

31. EMPLOYEE RETIREMENT BENEFITS (continued)
(b) Amounts recognised in the income statement

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

Curtailment gain

Pension beneﬁ ts

Other retirement beneﬁ ts

2007

2006

2007

2006

3,348

2,804

7,351

6,349

1,168

1,048

174

665

928

1,242

(1,591)

436

555

(3)

Expected return on retirement plan assets

(8,800)

(7,886)

(134)

(110)

Total cost

3,132

2,489

1,178

878

The movement in the fair value of retirement plan assets is as follows:

Plan assets, beginning of year

Expected return on plan assets

Actuarial gains and losses

Contributions made by the Group

Contributions made by plan participants

Beneﬁ ts paid

Other

Effects of exchange rate changes

Plan assets, end of year

Pension beneﬁ ts

Other retirement beneﬁ ts

2007

2006

2007

2006

65,340

60,504

8,800

7,886

(1,080)

3,912

2,139

2,748

1,970

(2,716)

(4,165)

119

(877)

(2,462)

(1,646)

75,229

65,340

970

134

(52)

1,052

110

989

(110)

(19)

970

The actual return on retirement plan assets was $9,896 (2006 – $7,244).

118

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

31. EMPLOYEE RETIREMENT BENEFITS (continued)

(d) Retirement obligations

The movement in the retirement obligations are as follows:

Pension beneﬁ ts

Other retirement beneﬁ ts

Retirement obligations, beginning of year

81,796

70,986

2007

2006

Current service cost

Interest cost

Contributions made by employees

Actuarial gains and losses

Beneﬁ ts paid

Past service cost

Curtailments

Other

Effects of exchange rate changes

Retirement obligations, end of year

3,348

7,351

2,175

4,805

2,804

6,349

2,043

5,362

(2,744)

(3,245)

519

1,238

(2,472)

96,016

455

(1,367)

(1,591)

81,796

2007

7,211

665

928

926

(142)

1,242

(2,334)

(78)

(355)

8,063

2006

4,559

436

555

1,973

(80)

(232)

7,211

(e) Principal assumptions

The principal actuarial assumptions used were as follows:

Pension beneﬁ ts

Jamaica

Trinidad &
Tobago

Barbados &
other countries

Discount rate

13.0%

8.0%

7.75%

Expected return on plan assets

13.0%

8.0%

Future salary increases

10.0%

6.5%

Future pension increases

Portion of employees opting for
early retirement

Future changes in National Insurance
Scheme Ceilings

4.5%

1.5%

0.0%

2.5%

Long term increase in health costs

n/a

8.0%

6.5%

2.5%

0.0%

3.5%

n/a

Other retirement
beneﬁ ts

Jamaica

13.0%

10.0%

n/a

12.0%

119

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

32. 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

2007

15,861

3,960

2006

13,783

118

19,824

13,909

2007

67,323

15,504

82,827

2006

62,426

14,714

77,140

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 write down
(reversal of a write down) of a deferred tax asset

Tax on distribution of proﬁ ts from policyholder funds

Other taxes

2007

2006

82,827

77,140

16,096

14,399

(5,319)

(4,299)

(143)

(724)

6,227

130

(56)

1,729

325

1,559

982

(102)

663

(49)

(979)

1,501

1,788

19,824

13,909

120

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

33. DEFERRED INCOME TAXES
Deferred income tax assets and liabilities are attributable to the following items:

Deferred income tax assets:

Pensions and other retirement beneﬁ ts

Unused tax losses

Other items

Total (note 11)

Deferred income tax liabilities:

Accelerated tax depreciation

Policy reserves taxable in the future

Pensions and other retirement beneﬁ ts

Accrued interest

Unrealised gains on available for sale investments

Other items

Total (note 19)

Deferred income tax balances include the following:

Assets to be settled after one year

Liabilities to be settled after one year

2007

2006

353

11,134

158

11,645

706

3,718

(198)

4,226

2,053

1,672

247

661

820

2,854

6,635

11,153

3,273

186

686

3,500

1,323

7,434

3,767

5,918

The Group has not recognised potential deferred income tax assets of $29,055 (2006 – $22,474) arising from
unrecognised tax losses of $99,490 (2006 - $74,447). Deferred income taxes have not been provided for income
taxes that would be payable on the distribution of retained earnings of certain subsidiaries because either there is no
intention to distribute those earnings or they are not subject to tax on receipt.

121

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

34. 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 (see note 30.1).

Net income for the year attributable to shareholders

2007

86,289

2006

67,663

Weighted average number of shares in issue in thousands

266,810

266,514

LTI restricted share grants

LTI share options

ESOP shares

Adjusted weighted average number of shares in issue

Basic earnings per common share

Fully diluted earnings per common share

333

159

267,325

266,590

32.3 cents

25.4 cents

32.3 cents

25.4 cents

35. DIVIDENDS PER COMMON SHARE

Dividends declared and paid:

A ﬁ nal dividend in respect of the prior year

An interim dividend in respect of the current year

Dividends declared after balance sheet date:

2007

2006

Barbados
cents per share

$000

Barbados
cents per share

7.0

6.0

13.0

9,317

8,004

17,321

6.0

12.0

$000

8,007

7,984

15,991

A ﬁ nal dividend in respect of the current year

8.0

11,087

7.0

9,317

122

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

36. CASH FLOWS

36.1 Operating activities

Adjustments for non-cash items, interest and dividends:

Interest and dividend income

Net investment gains

Gain arising on acquisition

Net increase in actuarial liabilities

Interest expense and ﬁ nance costs

Depreciation and amortisation

Other items

Changes in operating assets:

Investment property

Debt securities

Equity securities

Mortgage loans

Policy loans

Finance loans and ﬁ nance leases

Securities purchased under agreement to resell

Deposits

Other assets and receivables

2007

2006

(213,337)

(200,887)

(38,377)

(26,398)

27,784

96,339

20,101

(4,927)

(29,579)

8,963

91,697

17,350

39,185

(138,815)

(73,271)

2007

2006

(982)

(125,710)

4,958

(46,620)

(959)

(27,590)

(1,301)

(69,944)

(7,152)

2,999

(89,100)

28,084

(36,188)

(586)

(8,454)

1,751

(15,105)

743

(275,300)

(115,856)

The gross changes in investment property, debt securities and equity securities are as follows.

Investment property

Debt securities

Equity securities

2007

2006

2007

2006

2007

2006

Disbursements

(1,744)

(1,522)

(544,296)

(860,567)

(59,985)

(29,477)

Disposal proceeds

762

(982)

4,521

2,999

418,586

771,467

(125,710)

(89,100)

64,943

4,958

57,561

28,084

123

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

36. CASH FLOWS (continued)

36.1 Operating activities (continued)

Changes in operating liabilities:

Insurance liabilities

Investment contract liabilities

Other funding instruments

Deposits

Securities

Other liabilities and payables

36.2 Investing activities

Property, plant and equipment

Purchases

Disposal proceeds

36.3 Financing activities

Notes and loans payable

Proceeds

Repayments

36.4 Cash and cash equivalents

Cash resources
Call deposits and other liquid balances with maturities of three
months or less from acquisition date

Bank overdrafts
Other borrowings for cash purposes with maturities of three months
or less from origination

124

2007

2006

15,071

26,039

4,332

17,100

42,946

14,185

119,673

5,449

9,933

14,608

12,699

11,296

(1,692)

52,293

2007

2006

(12,468)

(13,303)

1,936

1,958

(10,532)

(11,345)

2007

2006

6,113

159,985

(14,065)

(80,835)

(7,952)

79,150

2007

89,771

46,305

(2,899)

2006

81,539

156,194

(2,981)

(19,685)

(10,078)

113,492

224,674

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

37. ACQUISITIONS

37.1 Sagicor at Lloyd’s

Effective September 1, 2007, Sagicor Europe Limited acquired Gerling Corporate Capital Limited, the sole corporate
member participating in Lloyd’s of London Syndicate 1206. Sagicor Europe also acquired the Syndicate’s managing
agency Gerling at Lloyd’s Limited and its afﬁ liated entities Gerling Syndicate Holdings Limited and Gerling Syndicate
Services Limited. Upon acquisition, the acquired entities were re-branded with ‘Sagicor’ replacing ‘Gerling’ in each of
their names. The Syndicate and acquired entities constitute an ‘Integrated Lloyd’s Vehicle’ (ILV).

Sagicor Europe Limited was incorporated for the purpose of being the immediate holding company of the ILV.
Sagicor has a 90% interest in Sagicor Europe, with management and employees of the ILV holding the remaining
10%. Sagicor Europe intends to issue additional shares to the employees of the ILV resulting in an ultimate 85:15
ownership ratio.

The Syndicate writes property and casualty insurance business in the Lloyd’s insurance market. It engages mainly in
the sub-classes of personal accident and non-marine property insurances.

The fair values of the net assets acquired, the purchase consideration, and the gain arising are set out below.

Total fair value

Acquiree’s carrying value

Net assets acquired:

Property, plant and equipment

Intangible assets (note 8)

Financial investments

Reinsurance assets

Miscellaneous assets and receivables

Cash resources

Other insurance liabilities

Accounts payable and accrued liabilities

Total net assets

Share of net assets acquired by the Group

Purchase consideration and related costs:

Cash

Gain arising on acquisition

The gain arising on acquisition is attributable to:

Shareholders

Minority interest

550

27,671

54,510

16,044

85,498

9,218

(145,123)

(17,316)

31,052

4,654

26,398

23,719

2,679

26,398

550

504

54,510

16,044

85,498

9,218

(145,123)

(17,316)

3,885

The gain arising on the acquisition reﬂ ects the willingness of the ILV management and Sagicor to combine their
resources to pursue a common strategy, and the desire of the vendor to exit the Lloyd’s market. As a result, the
purchase consideration may not have been representative of an open market price for the Syndicate.

(a) Details of acquiree’s net income

Acquiree’s net income for the year ended December 31, 2007
Acquiree’s net income consolidated by the Group for the period September 1 to
December 31, 2007

2007

3,137

1,728

125

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

37. ACQUISITIONS (continued)

37.2 Byrne & Stacey Underwriting

On October 4, Sagicor Syndicate Holdings Limited acquired Byrne & Stacey Underwriting Limited (BSU), an
insurance agency placing business with Syndicate 1206.
The fair values of the net assets acquired, the purchase consideration, and the goodwill arising are set out below.

Total fair value

Acquiree’s carrying value

Net assets acquired:

Property, plant and equipment

Intangible assets (note 8)

Miscellaneous assets and receivables

Cash resources

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 and deferred compensation

Goodwill arising on acquisition (note 8)

The goodwill arising on acquisition is attributable to:

Shareholders

Minority interest

163

1,293

1,307

820

(224)

(2,050)

1,309

6,162

4,853

4,361

492

4,853

163

1,307

820

(224)

(2,050)

BSU was acquired from its management who continue to manage the business on a day to day basis. It is common
in such circumstances for the purchase consideration to compensate the vendors for the stream of future revenue
which is expected from a going concern.

(a) Details of acquiree’s net income

Acquiree’s net loss for the year ended December 31, 2007

Acquiree’s net income consolidated by the Group for the period October 4 to
December 31, 2007

2007

(8)

37.3 Effect of acquisitions on Group results

Assuming the Sagicor at Lloyd’s and Byrne & Stacey Underwriting acquisitions were effective at the beginning of
2007, the additional total revenue of the Group would be $59,663 and the additional net income to the Group would
be $1,314.

126

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

37. ACQUISITIONS (continued)

37.4 Sagicor General Insurance (Cayman) Limited

On October 22, 2007, Life of Jamaica Limited took its interest in Sagicor General Insurance (Cayman) Limited (SGIC)
to 75% by acquiring an additional 24% of SGIC’s issued shares from a minority interest. As a result, the Sagicor
Group’s equity interest in SGIC increased by 14% to 45%.

The net assets acquired, the purchase consideration, and the goodwill arising are set out below.

Share of net assets acquired

Purchase consideration:

Cash

Goodwill arising on acquisition (note 8)

2007

3,593

4,032

439

Post-acquisition net income for the additional 14% of $44 has been included in the net income attributable to
shareholders.

37.5 Primo Holding Limited

On March 30, 2007, the Group and a managed fund subscribed for new shares in Primo Holding Limited. After the
subscription, the Group and the managed fund each had a 37.5% shareholding in Primo Holding Limited.

The net assets acquired, the purchase consideration, and the goodwill arising are set out below.

Share of net assets on acquisition

Purchase consideration:

Cash

Gain arising on acquisition

2007

1,681

1,519

162

Primo Holding Limited is a property investment company in Barbados. Post-acquisition net income of $155 has been
consolidated in these ﬁ nancial statements.

38. EVENTS AFTER THE BALANCE SHEET DATE

38.1 Acquisition of insurance portfolio

Sagicor Capital Life Insurance Company Limited acquired from the Canadian company, Industrial Alliance Insurance
and Financial Services Inc. (IA) insurance business in the Netherland Antilles, Aruba, Barbados and Cayman Islands,
which was previously owned by National Life of Canada, before that company’s business operations were combined
with the business operations of IA.

The acquisition was effective January 18, 2008. The liabilities assumed are estimated at $44,384 which is matched by
an equivalent amount of assets. The purchase consideration was $3,463 approximately.

The insurance portfolio comprises approximately 9,000 inforce life and annuity contracts issued to individuals and
groups. The assets consist mainly of ﬁ nancial investments.

Management intends to assess the fair value of the assets and liabilities assumed after which a deﬁ nitive disclosure
can be made.

127

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

38. EVENTS AFTER THE BALANCE SHEET DATE (continued)

38.2 Acquisition of Barbados Farms Limited

On December 7, 2007, the Company made an offer to purchase any and all of the outstanding common shares of
Barbados Farms Limited (BFL), not already owned or controlled by Sagicor. The offer was at BBD 5.00 per share to
be satisﬁ ed 65% by the issue of shares of the Company and 35% by cash.

The offer closed on January 9, 2008, at which time a total of 77% of the issued shares of BFL had been tendered to
and accepted by Sagicor. The acquisition was completed in February 2008 for a total consideration of $39,692, which
was satisﬁ ed by the issue of 10,319,819 new Sagicor shares and by cash of $13,892.

The common shares of BFL are listed on the Barbados Stock Exchange. BFL engages in agriculture, primarily the
production of sugar cane. BFL also owns the lands which are utilised for agriculture along with other lands which are
either leased, being developed for resale or not in use. The audited ﬁ nancial statements of BFL for the year ended
June 30, 2007 disclosed that its assets totalled $26,689, its annual revenue totalled $3,202 and its income after tax
totalled $800.

Management intends to engage independent valuers to assist in the determination of the fair value of the net assets
acquired, after which a deﬁ nitive disclosure can be made.

38.3 Issue of preference shares

Pan Caribbean Financial Services Limited issued a prospectus dated January 18, 2008 in the Jamaica market for the
issue of up to 10 million 12.5% cumulative redeemable preference shares at a ﬁ xed price of J$ 200 per share. The
offer closed on February 29, 2008 with a total subscription of 6.3 million shares.

38.4 Cancellation of insurance policies

On December 20, 2007, an agreement was entered into whereby health insurance policies issued by Sagicor Allnation
Insurance Company would be cancelled and new policies for the unexpired periods of and under the same terms
as the cancelled policies would be issued by another insurance carrier. Sagicor Allnation’s policies were cancelled
effective February 1, 2008 when the approximate gross unearned premium on these policies totalled $1,420. The net
cost to the Group of completing this transaction was minimal, and will be included in the 2008 ﬁ nancial statements.
During 2007, these policies generated gross premium revenue of $5,469.

128

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

39. COMMITMENTS AND CONTINGENT LIABILITIES

39.1 Commitments

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 ﬁ nancial statements. Commitments for loan disbursements, real estate
expenditure, operating lease and rental payments are disclosed in note 41.2(a).

(a) Participation in Lloyd’s Syndicate 44

On December 18, 2007, Sagicor Europe Limited entered into an agreement to acquire the sole corporate member
participating in Syndicate 44 with effect from underwriting year 2008. In addition Sagicor at Lloyd’s Limited entered
into an agreement to assume the responsibility as managing agent of Syndicate 44. These agreements are subject to
the receipt of regulatory approvals by March 31, 2008.

The principal activity of Syndicate 44 is the transaction of term life insurance business, issuing contracts to
individuals and to groups, predominately in the United Kingdom.

39.2 Contingent liabilities

Guarantee and ﬁ nancial facilities at balance sheet date for which no provision has been made in these ﬁ nancial
statements include the following:

Customer guarantees and letters of credit

Letter of credit facility (note 45.2 (c) )

2007

8,030

80,016

88,046

2006

4,591

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.

(a) Legal proceedings

During the normal course of business, the Group is subject to legal actions which may affect the reported amounts
of liabilities, beneﬁ ts 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 ﬁ nancial statements for such potential tax
assessments.

129

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

39. COMMITMENTS AND CONTINGENT LIABILITIES (continued)

39.2 Contingent liabilities (continued)

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 reﬂ ects 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 master ﬁ le as at November 2003 revealed that approximately 17,000 Universal Life policies were
affected by fund values which were insufﬁ cient to cover these costs through the life of the policies.

Once the problem was recognised, the Group 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. 95% of these policyholders agreed to
adjustments to their policies.

The Group estimated that less than 1% of the affected policyholders have ﬁ led 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 quantiﬁ ed
at this time.

40. RELATED PARTY TRANSACTIONS

(a) Key management

Key management comprises directors and senior management of the Company and of Group subsidiaries. Key
management includes those persons at or above the level of Vice President or its equivalent. Compensation of and
loans to these individuals were as follows:

Compensation:

Salaries, directors’ fees and other short-term beneﬁ ts

Equity compensation beneﬁ ts

Pension and other retirement beneﬁ ts

2007

2006

13,301

2,139

694

16,134

12,172

1,362

555

14,089

130

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

40. RELATED PARTY TRANSACTIONS (continued)

Balance, beginning of year

Assumed on acquisitions

Advances

Repayments

Effects of exchange rate changes

Balance, end of year

Mortgage loans

Other loans

Total loans

3,555

502

(334)

3,723

174

209

(31)

(10)

352

3,729

711

(365)

(10)

4,075

Mortgage loans bear interest at rates from 4.5% to 8.5%. Other loans bear interest at rates from 5% to 10%.

(b) Employee pension plans

Certain Group subsidiaries have employee pension plans which are administered by the Group as segregated
pension plans. The assets of the segregated pension plans at December 31, 2007 amounted to $74,789 (2006 -
$66,499) and are included in the assets under administration referred to in note 47.

First Jamaica holds a 25% interest in LOJ and is a signiﬁ cant minority interest. Because of the size of this
shareholding, First Jamaica is considered to be a related party of the Group. As of December 31, the Group has the
following balances with First Jamaica:

Financial investments

Accounts receivable

Accounts payable

2007

2006

4,445

1,500

3,181

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

Financial risks include credit, liquidity and market risks. Market risks arise from changes in interest rates, equity
prices, currency exchange rates or other market factors. The effects of these risks are disclosed in the sections below
and in note 43.

41.1 Credit risk

Credit risk is the exposure that the counterparty to a ﬁ nancial instrument is unable to meet an obligation, thereby
causing a ﬁ nancial loss to the Group. Credit risks are primarily associated with ﬁ nancial investments and reinsurance
contracts held.

Credit risk from ﬁ nancial investments is minimised through holding a diversiﬁ ed portfolio of investments,
purchasing securities and advancing loans only after careful assessment of the borrower, obtaining collateral before
advancing loans, and placing deposits with ﬁ nancial institutions with a strong capital base. Limits may be placed on
the amount of risk accepted in relation to one borrower.

131

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

41. FINANCIAL RISK (continued)

41.1 Credit risk (continued)

The maximum exposures of the Group to credit risk without taking into account any collateral or any credit
enhancements are set out in the following table.

Debt securities

Mortgage loans

Policy loans

Finance loans and ﬁ nance leases

Securities purchased under agreements to resell

Deposits

Reinsurance assets

Deferred policy acquisition costs

Premiums in the course of collection

Other accounts receivable

Cash resources

Total balance sheet exposures

Loan commitments

Customer guarantees and letters of credit

Total off balance sheet exposures

Total

2007

2006

$000

1,750,450

55.8

1,650,860

57.3

293,998

126,403

145,764

15,980

161,698

9.4

4.0

4.7

0.5

5.2

247,893

125,891

122,888

22,320

167,862

8.6

4.4

4.3

0.8

5.8

320,155

10.3

321,689

11.2

25,917

78,299

55,370

92,140

0.8

2.5

1.9

3.0

3,747

27,926

51,509

87,682

0.1

1.0

1.7

3.0

3,066,174

98.1

2,830,267

98.2

48,931

8,030

56,961

1.6

0.3

1.9

47,373

4,591

51,964

1.6

0.2

1.8

3,123,135

100.0

2,882,231

100.0

The amounts in respect of customer guarantees and letters of credit represent potential claims against customers in
the event of a call on customer guarantees and letters of credit issued by the Group.

132

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

41. FINANCIAL RISK (continued)

41.1 Credit risk (continued)

The Group’s exposures to individual counterparty credit risks exceeding 2.5% of total exposures are set out below.

Debt securities:

Government of Jamaica debt securities denominated in Jamaica dollars
(long-term issue credit rating B by Standard & Poor’s)

Government of Jamaica debt securities denominated in United States
dollars (long-term issue credit rating B by Standard & Poor’s)

Federal government of USA debt securities
(long-term issue credit rating AAA by Standard & Poor’s)

Government of Barbados debt securities denominated in Barbados
dollars (long-term issue credit rating A - by Standard & Poor’s)

Government of Barbados debt securities denominated in United States
dollars (long-term issue credit rating BBB+ by Standard & Poor’s)

Deposits & cash:

The Bank of Nova Scotia
(long-term issue credit rating AA - by Standard & Poor’s)

FirstCaribbean International Bank
(long-term issue credit rating A - by Standard & Poor’s)

Reinsurance assets:

Scottish Re (U.S.) Inc
(ﬁ nancial strength rating B (Fair) by A.M. Best)

Washington National Insurance Company
(ﬁ nancial strength rating B+ (Good) by A.M. Best)

2007

2006

446,087

445,547

298,359

271,572

299,560

292,158

72,320

73,819

8,012

8,584

72,697

23,861

34,337

97,627

152,472

168,721

80,749

95,261

The reinsurers’ share of liabilities held by Scottish Re is secured by assets held in trust by a third party totalling
$143,580 (2006 - $ 148,372) and by the Group (see note 9.2).

Exposure to credit risk is also managed in part by obtaining collateral and guarantees for mortgage loans and ﬁ nance
loans and ﬁ nance leases. For mortgage loans, the collateral is real estate property, and the approved loan limit is
75% to 95% of collateral value. For ﬁ nance loans and ﬁ nance leases, the collateral often comprises a vehicle or other
form of security and the approved loan / lease limit is 80% to 100% of the collateral value. Unsecured ﬁ nance loans
and ﬁ nance leases are only granted when the initial amount is less than $15.

133

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

41. FINANCIAL RISK (continued)

41.1 Credit risk (continued)

The Group’s exposure to mortgage loans and ﬁ nance loans and ﬁ nance leases by geographic segment are as follows.

Barbados

Jamaica

Trinidad & Tobago

USA

Other Caribbean

2007

148,133

126,214

100,172

27,531

37,712

2006

126,588

105,467

85,406

22,087

31,233

439,762

370,781

Policy loans are advanced on the security of the underlying insurance policy cash values. Cash loans are advanced
to a maximum of 80% to 100% of the cash surrender value. Automatic premium loans are advanced to the extent of
available cash surrender value.

For securities purchased under agreement to resell, title to the securities are transferred to the Group for the
duration of the agreement.

(a) Past due and impaired ﬁ nancial investments

A ﬁ nancial asset is past due when a counterparty has failed to make payment when contractually due. The Group
is most exposed to the risk of past due assets with respect to its ﬁ nancial investments namely, its debt securities,
mortgage loans, ﬁ nance loans and ﬁ nance leases.

Debt securities are assessed for impairment when amounts are past due, when the borrower is experiencing cash
ﬂ ow difﬁ culties, or when the borrower’s credit rating has been downgraded. Mortgage loans less than 90 to 120 days
past due and ﬁ nance loans and ﬁ nance leases less than 90 days past due are not assessed for impairment unless
other information is available to indicate the contrary.

The assessment for impairment includes a review of the collateral. If the past due period is less than the trigger for
impairment review, the collateral is not normally reviewed and re-assessed but is included in the totals for collateral
in the following tables.

The tables below summarise the carrying value of ﬁ nancial investments which are past due, but are not considered
to be impaired and the estimated fair value of collateral.

As of December 31, 2007

Debt securities

Mortgage loans

Finance loans
and ﬁ nance leases

Carrying values:

With amounts past due up to 3 months

11,352

With amounts past due up to 12 months

With amounts past due up to 5 years

With amounts past due over 5 years

Total

Estimated fair value of collateral

813

594

12,834

101

35,052

6,978

11,801

5,252

59,083

135,042

33,531

328

183

244

34,286

76,538

134

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

41. FINANCIAL RISK (continued)

41.1 Credit risk (continued)

As of December 31, 2006

Debt securities

Mortgage loans

Finance loans
and ﬁ nance leases

Carrying values:

With amounts past due up to 3 months

With amounts past due up to 12 months

With amounts past due up to 5 years

With amounts past due over 5 years

Total

Estimated fair value of collateral

29,503

3,965

1,454

35,018

3,060

27,067

8,395

9,256

2,022

46,740

128,296

32,555

590

185

244

33,574

53,762

Balances relating to impaired ﬁ nancial investments are summarised in the following tables. The accumulated allowance
for impairment reﬂ ects the Group’s assessment of total individually impaired investments at balance sheet date.

As of December 31, 2007

Debt securities

Mortgage loans

Finance loans and ﬁ nance leases

Total

As of December 31, 2006

Debt securities

Mortgage loans
Finance loans and ﬁ nance

leases

Total

Gross carrying
value

Accumulated
allowance for
impairment

Net carrying
value

Estimated fair
value of collateral

9,977

6,514

2,847

19,338

(4,094)

(1,823)

(1,793)

(7,710)

5,883

4,691

1,054

11,628

7,666

4,792

12,488

Gross carrying
value

Accumulated
allowance for
impairment

Net carrying
value

Estimated fair
value of collateral

34,773

14,264

3,379

52,416

(7,277)

(3,229)

(1,897)

(12,403)

27,496

11,035

1,482

40,013

13,707

19,266

5,754

38,727

Interest of $1,480 (2006 - $3,987) has been accrued on impaired ﬁ nancial investments.

(b) Repossessed assets

The Group may foreclose on overdue mortgage loans and ﬁ nance loans and ﬁ nance leases by repossessing the
pledged asset. The pledged asset may consist of real estate, equipment or vehicles which the Group will seek to
dispose of by sale. In some instances, the Group may provide re-ﬁ nancing to a new purchaser on customary terms.

The Group may renegotiate the terms of any ﬁ nancial investment to facilitate borrowers in ﬁ nancial difﬁ culty.
Arrangements to waive, adjust or postpone scheduled amounts due may be entered into. The Group classiﬁ es these
amounts as past due, unless the original agreement is formally revised, modiﬁ ed or substituted, in which case, the
ﬁ nancial investment is classiﬁ ed as renegotiated. The carrying value of ﬁ nancial investments at balance sheet date
which were renegotiated during the year totalled $482 (2006 - $814).

135

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

41. FINANCIAL RISK (continued)

41.2 Liquidity risk

Liquidity risk is the exposure that the Group may encounter difﬁ culty in meeting obligations associated with ﬁ nancial
or insurance liabilities. Liquidity risk also arises when excess funds accumulate resulting in the loss of opportunity to
increase investment returns. Group companies monitor cash inﬂ ows and outﬂ ows in each operating currency. Through
experience and monitoring, the Group is able to maintain sufﬁ cient liquid resources to meet current obligations.

Asset liability matching is a tool used by the Group to mitigate liquidity risks particularly in operations with
signiﬁ cant maturing short-term liabilities.

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.

Investment property may be held to back insurance liabilities. As these assets are relatively illiquid, the insurers hold
less than 10% of their total assets in investment property.

(a) Financial liabilities and commitments

Cash ﬂ ows payable by the Group in respect of its ﬁ nancial liabilities and commitments are summarised in the
following tables. Maturity proﬁ le amounts are analysed by their earliest contractual maturity dates and consist of
the contractual un-discounted cash ﬂ ows. Where the interest rate of an instrument for a future period has not been
determined as of balance sheet date, it is assumed that the interest rate then prevailing continues until ﬁ nal maturity.

As of December 31, 2007

Financial liabilities:

Investment contract liabilities

Notes and loans payable

Deposit and security liabilities:

Other funding instruments

Deposits

Securities

Bank overdrafts

Due within
1 year or on
demand

Due between
1 and 5 years

Due after
5 years

Total

210,022

11,250

93,784

99,196

494,263

2,899

13,650

51,670

37,835

37,349

358

21,695

245,367

189,375

252,295

75,331

11,803

206,950

148,348

494,621

2,899

Accounts payable and accrued liabilities

115,208

13,696

31,562

160,466

Total ﬁ nancial liabilities

1,026,622

154,558

329,766

1,510,946

Off balance sheet commitments:

Loan commitments

Expenditure on real estate
Operating lease agreements and rental
payments

Total off balance sheet commitments

Total

136

42,914

6,276

3,084

52,274

2,690

2,215

11,613

14,303

2,215

47,819

6,276

14,697

68,792

1,078,896

168,861

331,981

1,579,738

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

41. FINANCIAL RISK (continued)

41.2 Liquidity risk (continued)

As of December 31, 2006

Financial liabilities:

Due within
1 year or on
demand

Due between
1 and 5 years

Due after
5 years

Total

Investment contract liabilities

201,380

6,992

13,817

222,189

Notes and loans payable

19,378

52,087

200,625

272,090

Deposit and security liabilities:

Other funding instruments

Deposits

Securities

Bank overdrafts

Accounts payable and accrued liabilities

95,210

80,622

458,580

2,981

81,013

35,270

41,333

416

63,963

194,443

12,071

134,026

459,000

2,981

15,839

31,814

128,666

Total ﬁ nancial liabilities

939,164

151,937

322,294

1,413,395

Off balance sheet commitments:

Loan commitments

Expenditure on real estate
Operating lease agreements and rental

payments

Total off balance sheet commitments

39,373

2,740

1,512

43,625

4,957

3,656

8,613

1,841

46,171

2,740

478

2,319

5,646

54,557

Total

982,789

160,550

324,613

1,467,952

(b) Insurance liabilities

The maturity proﬁ les of the Group’s insurance liabilities are summarised in the following tables. Maturity proﬁ le
amounts are stated at their carrying values recognised in the balance sheet and are analysed by their expected
maturity dates, which have been estimated by actuarial or other statistical methods.

As of December 31, 2007

Due within 1 year

Due between
1 and 5 years Due after 5 years

Total

Actuarial liabilities

131,967

269,048

963,289

1,364,304

Other insurance liabilities

210,099

47,377

56,439

313,915

Total

342,066

316,425

1,019,728

1,678,219

137

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

41. FINANCIAL RISK (continued)

41.2 Liquidity risk (continued)

As of December 31, 2006

Due within 1 year

Due between
1 and 5 years Due after 5 years

Total

Actuarial liabilities

126,162

273,100

974,322

1,373,584

Other insurance liabilities

86,071

12,962

53,668

152,701

Total

212,233

286,062

1,027,990

1,526,285

The maturity proﬁ les of the Group’s ﬁ nancial assets are summarised in the following tables. Maturity proﬁ le
amounts are stated at their carrying values recognised in the balance sheet and are analysed by their contractual
maturity dates.

As of December 31, 2007

Due within
1 year

Due between
1 and 5 years

Due after
5 years

Total

Debt securities

Mortgage loans

Policy loans

Finance loans and ﬁ nance leases
Securities purchased under agreements
to resell

320,831

506,243

923,376

1,750,450

11,203

33,343

249,452

293,998

4,530

16,044

105,829

126,403

57,748

51,926

36,090

145,764

15,980

Deposits

158,798

2,379

521

161,698

Reinsurance assets

91,081

85,404

143,670

320,155

Deferred policy acquisition costs

Premiums in the course of collection

Other accounts receivable

Cash resources

Total

25,917

77,425

53,049

92,140

874

596

25,917

78,299

1,725

55,370

92,140

908,702

696,809

1,460,663

3,066,174

138

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

41. FINANCIAL RISK (continued)

41.2 Liquidity risk (continued)

As of December 31, 2006

Due within
1 year

Due between
1 and 5 years

Due after
5 years

Total

Debt securities

Mortgage loans

Policy loans

Finance loans and ﬁ nance leases
Securities purchased under
agreements to resell

Deposits

Reinsurance assets

Deferred policy acquisition costs

Premiums in the course of collection

Other accounts receivable

Cash resources

Total

269,508

532,602

848,750

1,650,860

6,437

5,086

48,530

22,320

153,569

68,169

3,747

27,926

48,957

87,682

23,295

15,889

46,859

12,709

93,251

764

218,161

247,893

104,916

125,891

27,499

122,888

22,320

1,584

167,862

160,269

321,689

1,788

3,747

27,926

51,509

87,682

741,931

725,369

1,362,967

2,830,267

41.3 Interest rate risk

The Group is exposed to interest rate risks. Cash ﬂ ow interest rate risk is the risk that future cash ﬂ ows of a ﬁ nancial
instrument will ﬂ uctuate because of changes in market interest rates. Fair value interest rate risk is the risk that
the fair value of a ﬁ nancial instrument will ﬂ uctuate because of changes in market interest rates. The occurrence
of an adverse change in interest rates on invested assets may result in ﬁ nancial loss to the Group in fulﬁ lling the
contractual returns on insurance and ﬁ nancial liabilities.

The return on investments may be variable, ﬁ xed for a term or ﬁ xed to maturity. On reinvestment of a matured
investment, the returns available on the new investment may be signiﬁ cantly different from the returns formerly
achieved. This is known as reinvestment risk.

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.
Where the returns credited exceed the guaranteed minima, the insurer usually has the option to adjust the return
from period to period. For other ﬁ nancial liabilities, returns are usually contractual and may only be adjusted on
contract renewal or contract re-pricing.

The Group is therefore exposed to the effects of ﬂ uctuations in the prevailing levels of market interest rates on its ﬁ nancial
position and cash ﬂ ows. 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 ﬂ ows are not closely matched with respect to timing and amount.

139

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

41. FINANCIAL RISK (continued)

41.3 Interest rate risk (continued)

The Group is exposed to risk under embedded derivatives contained in a host insurance contract. These risks
include exposures to investment returns which may produce losses to the insurer arising from the following contract
features:

minimum annuity rates which are guaranteed to be applied at some future date;

minimum guaranteed death beneﬁ ts which are applicable when the performance of an interest bearing or unit
linked fund falls below expectations;

minimum guaranteed returns in respect of cash values and universal life investment accounts.

The Group manages its interest rate risk by a number of measures, including where feasible the selection of assets
which best match the maturity of liabilities, the offering of investment contracts which match the maturity proﬁ le
of assets, the re-pricing of interest rates on loans receivable, policy contracts and ﬁ nancial 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 ﬁ xed rate debt securities to maturity and therefore mitigates the transient interest rate
changes in these markets.

Asset liability matching is a tool used by the Group to mitigate fair value risk by using ﬁ xed income securities to back
insurance and ﬁ nancial liabilities. In addition, by holding ﬁ xed income securities to maturity, the Group is able to
mitigate fair value risk relating to these assets.

The Group’s ﬁ nancial assets and ﬁ nancial liabilities as disclosed in the balance sheet approximate their fair value,
except as disclosed in notes 9, 15, 16 and 17.

The table below summarises the exposures to interest rate risks of the Group’s insurance and ﬁ nancial liabilities
(excluding actuarial liabilities which are disclosed in note 43). It includes liabilities at carrying amounts, categorised
by the earlier of contractual re-pricing or maturity dates. Insurance and investment contract liabilities are categorised
by their expected maturities.

As of December 31, 2007

Due within
1 year

Due between
1 and 5 years

Due after
5 years

Non-interest
bearing

Total

Other insurance liabilities

22,236

3,101

55,707

232,871

313,915

Investment contract liabilities

209,727

31,007

1,642

Notes and loans payable

1,515

5,836

145,368

Deposit and security liabilities:

Other funding instruments

89,439

24,001

Deposits

Securities

95,840

26,205

487,012

294

Bank overdrafts

Accounts payable and accrued
liabilities

2,899

227

50,279

14,596

242,376

152,719

163,719

136,641

487,306

2,899

160,239

160,466

Total

908,895

90,444

267,592

393,110

1,660,041

140

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

41. FINANCIAL RISK (continued)

41.3 Interest rate risk (continued)

As of December 31, 2006

Due within
1 year

Due between
1 and 5 years

Due after
5 years

Non-interest
bearing

Total

Other insurance liabilities

18,686

3,097

Investment contract liabilities

200,245

16,900

53,139

3,710

Notes and loans payable

9,689

5,808

144,991

Deposit and security liabilities:

Other funding instruments

85,194

Deposits

Securities

Bank overdrafts

Accounts payable and accrued
liabilities

74,069

457,386

2,981

430

18,467

35,422

352

57,895

13,666

77,779

152,701

220,855

160,488

161,556

123,157

457,741

2,981

128,236

128,666

Total

848,680

80,046

273,404

206,015

1,408,145

The table below summarises the exposures to interest rate risks of the Group’s ﬁ nancial assets. It includes assets
at carrying amounts, categorised by the earlier of contractual re-pricing or maturity dates. Reinsurance assets and
policy loans are categorised by their expected maturities.

As of December 31, 2007

Due within
1 year

Due between
1 and 5 years

Due after
5 years

Non-interest
bearing

Total

Debt securities

Mortgage loans

Policy loans

Finance loans and ﬁ nance leases
Securities purchased under
agreements to resell

Deposits
Reinsurance assets (excluding
share of actuarial liabilities)

Deferred policy acquisition costs
Premiums in the course of
collection

Other accounts receivable

Cash resources

Total

752,168

282,246

715,914

122

1,750,450

85,118

4,530

57,105

15,980

27,954

16,044

51,828

158,590

2,709

180,926

105,829

36,090

196

741

203

293,998

126,403

145,764

15,980

161,698

2,532

239

51,985

239

489

448

4,830

64,794

72,395

25,917

78,212

78,299

54,602

39,707

55,370

92,140

1,128,247

382,044

1,043,825

264,298

2,818,414

141

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

41. FINANCIAL RISK (continued)

41.3 Interest rate risk (continued)

As of December 31, 2006

Due within
1 year

Due between
1 and 5 years

Due after
5 years

Non-interest
bearing

Total

510,328

448,079

692,335

118

1,650,860

Debt securities

Mortgage loans

Policy loans

Finance loans and ﬁ nance leases
Securities purchased under
agreements to resell

80,610

4,207

48,075

22,320

17,299

15,920

46,812

Deposits
Reinsurance assets (excluding
share of actuarial liabilities)

153,569

12,709

3,123

287

Deferred policy acquisition costs
Premiums in the course of
collection

Other accounts receivable

Cash resources

Total

383

44,634

524

149,984

105,764

27,498

1,584

5,103

175

247,893

125,891

503

122,888

22,320

167,862

36,705

45,218

3,747

27,874

50,564

42,873

27,926

51,509

87,682

867,249

541,630

982,533

162,384

2,553,796

The table below summarises the average interest yields on ﬁ nancial assets and liabilities held during the year.

Financial assets

Debt securities

Mortgage loans

Policy loans

Finance loans and ﬁ nance leases

Securities purchased under agreements to resell

Deposits

Financial liabilities

Investment contract liabilities

Notes and loans payable

Deposit and security liabilities:

Other funding instruments

Deposits

Securities

142

2007

2006

9.4%

7.8%

9.6%

12.1%

15.0%

5.7%

8.3%

8.1%

6.3%

7.6%

9.3%

9.4%

8.2%

8.3%

11.6%

11.4%

4.8%

7.8%

7.4%

6.1%

7.1%

9.3%

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

41. FINANCIAL RISK (continued)

41.3 Interest rate risk (continued)

(a) Sensitivity

Sensitivity to interest rate risk is considered by operating subsidiaries. The effects of changes in interest rates of
assets backing actuarial liabilities are disclosed in note 43.2.

The sensitivity of the Group’s principal operating subsidiaries engaged in property and casualty insurance and in
banking, investment management and other ﬁ nancial services are considered below.

(i) Sagicor Europe Limited and its subsidiaries

The effect of an increase of 1% in interest rates of interest bearing ﬁ nancial assets and ﬁ nancial liabilities at balance
sheet date to income from ordinary activities is as follows.

As of December 31, 2007

Total interest bearing assets

Revenue effect of a 1% increase in interest rates

Total interest bearing liabilities

Expense effect of a 1% increase in interest rates

Effect on income from ordinary activities of an increase in interest rates of

A 1% decrease in interest rates would have an equal and opposite effect to that disclosed above.

(ii) Pan Caribbean Financial Services Limited and its subsidiaries (PCFS)

124,266

1,243

144

1,242

The following table indicates the sensitivity to a reasonable possible change in interest rates, with all other variables
held constant, on net income and equity.

The sensitivity of income is the effect of the assumed changes in interest rates on net income based on the ﬂ oating
rate of ﬁ nancial assets and ﬁ nancial liabilities. The sensitivity of equity is calculated by revaluing ﬁ xed rate available-
for-sale ﬁ nancial assets for the effects of the assumed changes in interest rates. The correlation of a number of
variables will have an impact on market risk. It should be noted that movements in these variables are non-linear and
are assessed individually.

Change in interest rate:

-2%

+2%

2007

2006

Effect on
net income

Effect on
equity

Effect on
net income

Effect on
equity

(20)

555

(501)

(27)

618

(542)

143

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

41. FINANCIAL RISK (continued)

41.4 Foreign exchange risk

The Group is exposed to foreign exchange risk as a result of ﬂ uctuations in exchange rates since its ﬁ nancial 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 sufﬁ cient 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 other operating currencies. Management considers that these assets diversify the range
of investments available in the Caribbean, and in the long-term are likely to either maintain capital value and/or
provide satisfactory returns.

Assets and liabilities at balance sheet date by currency are summarised in the following table.

As of December 31, 2007

Balances denominated in

Barbados
$

Jamaica
$

Trinidad
$

UK
£

US
$

Other
currencies

ASSETS

Financial investments

346,181

556,418

280,301

54,765

1,194,160

251,182

Reinsurance assets

14,638

820

11,373

962

267,962

24,400

Receivables and
deferred policy
acquisition costs

Cash resources

Other assets

Total assets

LIABILITIES

27,089

9,876

20,369

9,125

11,203

3,811

25,069

4,592

47,172

45,207

32,393

19,529

397,784

586,732

306,688

85,388

1,554,501

327,504

136,582

103,640

59,311

42,043

5,095

44,433

534,366

690,372

365,999

127,431

1,559,596

371,937

Actuarial liabilities

359,953

149,234

205,875

550,657

98,560

71,310

15,781

26,941

34,341

111,750

53,792

Other insurance
liabilities

Investment contract
liabilities

Deposit and security
liabilities

Accounts payable and
accrued liabilities

Notes and loans payable

51,748

277,399

54,398

63,693

74,563

16,181

33,541

152,719

233

442,524

18,620

24,234

14,057

9,866

7,779

88,804

15,726

561,643

520,164

317,286

42,378

1,362,635

220,239

Other liabilities

11,970

11,191

7,300

293

7,895

Total liabilities

573,613

531,355

324,586

42,378

1,362,928

228,134

Net position

(39,247)

159,017

41,413

85,053

196,668

143,803

144

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

41. FINANCIAL RISK (continued)

41.4 Foreign exchange risk (continued)

As of December 31, 2006

Balances denominated in

Barbados
$

Jamaica
$

Trinidad
$

US
$

Other
currencies

ASSETS

Financial investments

Reinsurance assets

Receivables and deferred
policy acquisition costs

Cash resources

Other assets

Total assets

LIABILITIES

339,901

6,237

23,697

14,552

384,387

122,971

507,358

547,028

1,058

17,275

11,727

577,088

115,112

692,200

239,850

1,203,865

7,065

6,459

9,102

262,476

52,009

314,485

285,214

31,837

23,933

1,544,849

8,755

194,178

22,115

6,928

28,368

251,589

44,041

1,553,604

295,630

Actuarial liabilities

343,419

136,516

184,646

600,561

108,442

Other insurance liabilities
Investment contract
liabilities

Notes and loans payable
Deposit and security
liabilities
Accounts payable and ac-
crued liabilities

60,923

32,169

14,851

20,601

24,157

55,080

52,360

65,800

21,726

25,889

49,716

266,213

160,488

414,630

14,832

14,444

22,624

7,579

65,431

18,588

523,582

509,882

272,920

1,283,437

191,908

Other liabilities

10,036

16,010

7,360

510

5,327

Total liabilities

533,618

525,892

280,280

1,283,947

197,235

Net position

(26,260)

166,308

34,205

269,657

98,395

(a) Sensitivity

The Group is exposed to currency risk in its operating currencies whose values have noticeably ﬂ uctuated against the
United States dollar (USD).

The exposure to currency risk may result in three types of risk, namely:

· Currency risk relating to the future cash ﬂ ows of a ﬁ nancial instrument

This occurs when a ﬁ nancial instrument is denominated in a currency other than the functional currency of the
reporting unit to which it belongs. In this instance, a change in currency exchange rates results in the ﬁ nancial
instrument being retranslated at balance sheet date and the exchange gain or loss is taken to income (note 25).

145

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

41. FINANCIAL RISK (continued)

41.4 Foreign exchange risk (continued)

· Currency risk of reported results of foreign operations

· Currency risk of the Group’s investment in foreign operations

This occurs when a reporting unit’s functional currency depreciates or appreciates in value when retranslated to the
USD, which is the Group’s presentational currency. In this instance, the conversion of the reporting unit’s assets
and liabilities at a different rate of exchange results in a currency loss or gain which is recorded in the currency
translation reserve (note 22). If the reporting unit was disposed of, either wholly or in part, then the corresponding
accumulated loss or gain in the currency translation reserve would be transferred to income.

The operating currencies whose values noticeably ﬂ uctuate against the USD are the Jamaica dollar (JMD) and the
Pounds Sterling (GBP). The theoretical impact of JMD and GBP currency risk on reported results and of the Group’s
investment in foreign operations is considered below.

The effects of a 5% depreciation in the JMD relative to the USD arising from JMD reporting units as of December 31,
2007 and for the year then ended are considered in the following tables.

Balances
denominated in JMD

Balances
denominated in USD

Total balances

Effect of a 5%
depreciation

Balance sheet:

Assets

Liabilities

Net position

Represented by:

693,552

531,179

162,373

406,511

326,034

80,477

1,100,063

857,213

242,850

Currency risk of the Group’s investment in foreign operations

(33,027)

(25,295)

(7,732)

Amounts
denominated in JMD

Amounts
denominated in USD

Total amounts

Effect of a 5%
depreciation

Income statement:

Revenue

Beneﬁ ts

Expenses

Income taxes

Net income

Represented by:

232,003

(115,514)

(80,997)

(12,970)

22,522

41,781

(18,730)

(2,065)

20,986

273,784

(134,244)

(83,062)

(12,970)

43,508

Currency risk relating to the future cash ﬂ ows of a ﬁ nancial instrument

Currency risk of reported results of foreign operations

(7,120)

5,501

3,857

618

2,856

3,928

(1,072)

2,856

A 5% appreciation in the JMD relative to the USD would have equal and opposite effects to those disclosed above.

146

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

41. FINANCIAL RISK (continued)

41.4 Foreign exchange risk (continued)

The effects of a 5% depreciation in the GBP relative to the USD arising from GBP reporting units as of December 31,
2007 and for the year then ended are considered in the following tables.

Balances
denominated in GBP

Balances
denominated in USD

Total balances

Effect of a 5%
depreciation

Balance sheet:

Assets

Liabilities

Net position

Represented by:

126,206

42,285

83,921

99,660

97,775

1,885

225,866

140,060

85,806

Currency risk of the Group’s investment in foreign operations

(6,005)

(2,012)

(3,993)

Amounts
denominated in GBP

Amounts
denominated in USD

Total amounts

Effect of a 5%
depreciation

Income statement:

Revenue

Beneﬁ ts

Expenses

Income taxes

Net income

Represented by:

39,724

(7,059)

(11,336)

(451)

20,878

15,665

(5,697)

(5,197)

4,771

55,389

(12,756)

(16,533)

(451)

25,649

Currency risk relating to the future cash ﬂ ows of a ﬁ nancial instrument

Currency risk of reported results of foreign operations

(1,799)

336

539

(903)

(993)

(903)

A 5% appreciation in the GBP relative to the USD would have equal and opposite effects to that disclosed above.

147

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

41. FINANCIAL RISK (continued)

41.5 Other price risk

The Group is exposed to other price risk arising from changes in equity prices. The group mitigates this risk
by holding a diversiﬁ ed portfolio and by minimising the use of equity securities to back its insurance and
ﬁ nancial liabilities.

(a) Sensitivity

The effects of an across the board 5% change in equity prices of the Group’s available for sale equity securities at
balance sheet date are set out below.

Carrying value

Effect of a 5% change
at Dec 31, 2007

Available for sale equity securities:

Listed on Caribbean stock exchanges and markets

Listed on US stock exchanges and markets

Listed on other exchanges and markets

99,865

50,756

11,431

4,993

2,538

572

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

Risks arising from insurance contracts include credit, liquidity and market risks which have been disclosed in note
41. The effects of other risks arising from insurance contracts are disclosed in note 43 and in the sections below.

42.1 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 beneﬁ ts payable. This is the process of
underwriting, which establishes appropriate pricing guidelines, and may include speciﬁ c 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 beneﬁ ts 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 beneﬁ ts is expected generally within one
year. However, some beneﬁ ts are settled over a longer duration.

The principal insurance risks arising from short-term contracts are premium risk, claims risk and reinsurance risk
(see note 42.4).

Premium risk is the risk that the premium rate has been set too low for the risk being assumed. Premium risk
may arise from

· the use of inadequate experience and statistical data in deriving premium rates;

· market softening conditions.

148

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

42. INSURANCE RISK (continued)

42.1 Short term insurance contracts (continued)

Claims risk is the risk that incurred claims may exceed expectations. Claim risk may arise from

· the frequency of incurred claims;

· the severity of incurred claims;

· the development of incurred claims.

For the Group’s property and casualty insurance contracts, signiﬁ cant risk exposures arise from low frequency high
severity events such as hurricanes, windstorms and earthquakes. Single events, such as major ﬁ res and accidents
may also generate signiﬁ cant claims. The development of incurred claims may also be a signiﬁ cant factor in the class
of insurance (see note 44).

For the Group’s life and health insurance contracts, signiﬁ cant risk exposures arise from mortality and morbidity experience.

42.2 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 beneﬁ ts which may be payable under the contract, the
insurer has to assess the cash ﬂ ows which may be attributable to the contract. The process of underwriting may also
be undertaken and may include speciﬁ c medical tests and other enquiries which affect the insurer’s assessment of
the risk. The insurer assesses the likely beneﬁ ts and cash ﬂ ows 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 ﬂ ow characteristics
that closely match the cash ﬂ ow characteristics of its policy liabilities. The primary purpose of this matching is to
ensure that cash ﬂ ows from these assets are synchronised with the timing and the amounts of payments that must
be paid to policyholders.

Policy beneﬁ ts payable under long-term contracts may be triggered
· by an insurable event, i.e. a death, disability or critical illness claim;
· at a speciﬁ ed 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 beneﬁ ts 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 beneﬁ t cash outﬂ ows.

Signiﬁ cant 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 liability may be
inadequate to cover future policy maintenance expenses, thereby requiring the insurer to increase the associated
policy reserve.

The sensitivity of actuarial liabilities to insurance risk is disclosed in note 43.2.

149

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

42. INSURANCE RISK (continued)

42.3 Concentrations of insurance risk

The Group carries signiﬁ cant 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.

Signiﬁ cant concentration of life insurance, annuity, and health risks occurs in Antigua, Barbados, Cayman Islands,
Jamaica, Netherlands Antilles, St Lucia and Trinidad and Tobago. Signiﬁ cant concentration of property and casualty
risks occurs in Barbados, Cayman Islands and Trinidad and Tobago.

Total insurance coverage on insurance policies quantiﬁ es 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, gross and net of reinsurance are summarised below.

Gross amount insured

Net amount insured

2007

2006

2007

2006

Contracts issued to individuals – life insurance

12,491,143

11,602,510

9,435,236

8,472,839

Contracts issued to groups – life insurance
Property and casualty insurance –
Caribbean operations

7,978,419

6,697,013

5,628,106

4,825,703

8,459,278

7,601,220

3,405,222

3,906,426

Concentration of insurance risk per policy is mitigated by obtaining reinsurance coverage. Levels of reinsurance cover
are summarised in note 42.4.

The Group’s property and casualty UK operations assess its exposures by modelling realistic disaster scenarios of
potential catastrophic events. The most severe realistic disaster scenario which has been modelled is the occurrence
of an earthquake in San Francisco triggering $69,000,000 in losses, resulting in an estimated gross loss to the
Group’s property and casualty UK operations of $29,900 and a net loss of $10,600 after reinsurance recoveries.

42.4 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.

For its property risks, insurers use quota share and excess of loss catastrophe reinsurance treaties to obtain
reinsurance cover. Catastrophe reinsurance is obtained for multiple claims arising from one event or occurring within
a speciﬁ ed time period. However, treaty limits may apply and may expose the insurer to further claim exposure.
Under some treaties, when treaty limits are reached, the insurer may be required to pay an additional premium to
reinstate the reinsurance coverage.

For other insurance risks, insurers limit their exposure by event or per person by excess of loss or quota share treaties.

Retention limits represent the level of risk retained by the insurer. Coverage in excess of these limits is ceded to
reinsurers up to the treaty limit.

150

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

42. INSURANCE RISK (continued)

42.4 Reinsurance risk (continued)

The principal features of retention programmes used by insurers are summarised in the tables below:

Type of insurance contract

Retention by insurers

Property & casualty insurance – Caribbean operations

Property risks

Motor and liability risks

Miscellaneous accident risks

Engineering business risks

Marine risks

Property, motor, liability, and
engineering risk

· maximum retention of $10,000 for a single event;
· maximum retention of $5,000 for a catastrophic event;
· quota share retention to maximum of 40% in respect

of the treaty limits;

· quota share retention is further reduced to a maximum

of $500 per event.

· maximum retention of $500 for a single event;
· treaty limits apply.
· maximum retention of $108 for a single event;
· treaty limits apply.
· maximum retention of $150
· treaty limits apply for material damage and for liability claims.
· maximum retention of $75 for a single event;
· treaty limits apply.
· 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.

Property & casualty insurance – UK operations

All property and accident risks – syndicate
underwriting years 2005 and 2006

· 0% retention

Property risks – syndicate underwriting
year 2007

Miscellaneous accident risks –
syndicate underwriting year 2007

· underwritten risks limited to a maximum of $1,250 per risk

in non-catastrophe prone areas

· underwritten risks limited to a maximum of $1,250 per risk

in catastrophe prone areas

· maximum retention of $7,500 per loss for catastrophe

exposed risks

· treaty limits apply to catastrophic excess of loss coverage
· underwritten risks limited to a maximum of $1,250 per risk
· maximum retention of $14,928 for a single event
· maximum retention of $3,981 per individual life

Health insurance contracts with individuals

Retention per individual to a maximum of $400

Health insurance contracts with groups

Retention per individual to a maximum of $200

Life insurance contracts with individuals

Retention per individual life to a maximum of $350

Life insurance contracts with groups

Retention per individual life to a maximum of $100

Life insurance and annuity blocks of contracts

0% to 37.5% retention on policy liabilities

Certain insurers of the Group have ceded to a re-insurer further amounts representing 50% of the retentions above
$5 for individual life contracts.

151

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

42. INSURANCE RISK (continued)

42.4 Reinsurance risk (continued)

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.

The effects of reinsurance ceded are disclosed in the notes 13, 14, 24 and 27. Information on reinsurance balances
are disclosed in notes 10, 20 and 41.

43. SENSITIVITY ANALYSIS OF ACTUARIAL LIABILITIES
Actuarial liabilities comprise 81% of total insurance liabilities at balance sheet date (2006 – 90%). The determination
of actuarial liabilities is sensitive to a number of assumptions, and changes in those assumptions could have a
signiﬁ cant effect on the valuation results. These factors are discussed below.

43.1 Sensitivity arising from the valuation of life insurance and annuity contracts

The valuation of actuarial liabilities of life insurance and annuity contracts is sensitive to:
· the economic scenario used in CALM,
· the investments allocated to back the liabilities,
· the underlying assumptions used, and
· the margins for adverse deviations.

Under the CALM methodology, the AA is required to test the actuarial liability under 7 economic scenarios. These
tests have been done and the results of the valuation provide adequately for liabilities derived from the worst of
these different scenarios.

The assumption for future investment yields has a signiﬁ cant impact on actuarial liabilities. The different scenarios
tested under CALM reﬂ ect the impact of different yields.

The other assumptions which are most sensitive in determining the actuarial liabilities of the Group, are:
· Operating expenses and taxes
· Lapse
· Mortality and morbidity

43.2 Dynamic capital adequacy testing (DCAT)

DCAT is a technique used by the Group to assess the adequacy of the insurer’s ﬁ nancial position and ﬁ nancial
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 ﬁ nancial position and ﬁ nancial condition under speciﬁ c scenarios.

The ﬁ nancial position of an insurer is reﬂ ected by the amounts of assets, liabilities and equity in the balance sheet at
a given date.

The ﬁ nancial 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 beneﬁ ts and to its shareholders.

The purpose of the DCAT is
· to develop an understanding of the sensitivity of the total equity of the insurer and future ﬁ nancial condition to

changes in various experience factors and management policies;

· to alert management to material, plausible and imminent threats to the insurer’s solvency; and
· to describe possible courses of action to address these threats.

152

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

43. SENSITIVITY ANALYSIS OF ACTUARIAL LIABILITIES (continued)

43.2 Dynamic capital adequacy testing (DCAT) (continued)

Full DCAT or limited sensitivity tests have been conducted by insurers. The scenarios developed and tested by
insurers operating in the Caribbean region are as follows.

(i)

Worsening rate of lapse. 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 decreased.

(ii) High interest rate. Assumed increases in the investment portfolio yield rates of 1% per year for 5 years (or 0.5%

for 10 years) were tested in this scenario.

(iii) Low interest rate. Assumed decreases in investment portfolio yield rates of 0.25% per year for 5 years (or 0.5%

per year for 10 years) were tested in this scenario.

(iv) Worsening mortality and morbidity. To test this scenario, mortality and morbidity rates were increased for

insurance and critical illness products were increased by 3% of the base rate per year for 5 years. For annuity
products, the mortality and morbidity rates were decreased by 3% of the base rate for 5 years.

(v) Higher expenses. To test this scenario, policy unit maintenance expense rates were increased by 5% for 5 years

above those reﬂ ected in the base scenario.

The DCAT conducted has not tested any correlation that may exist between assumptions.

The following table represents the estimated sensitivity of each of the above scenarios to net actuarial liabilities at
balance sheet date for insurers in the Caribbean region.

Caribbean operations

As of December 31, 2007

As of December 31, 2006

Base net actuarial liability

Scenario

(i) Worsening rate of lapse

(ii) High interest rate

(iii) Low interest rate

(iv) Worsening mortality / morbidity

(v) Higher expenses

$000

847,647

100.0

$000

809,666

100.0

(Increase) / decrease

(31,892)

152,475

(74,486)

(29,092)

(21,109)

(3.8)

18.0

(8.8)

(3.4)

(2.5)

(29,189)

164,242

(79,586)

(26,780)

(37,547)

(3.6)

20.3

(9.8)

(3.3)

(4.6)

The use of differing sensitivity rates by insurers reﬂ ects differences in the insurers’ environment. The scenarios
developed and tested by insurers operating in the USA are as follows:

(vi)

(vii)

(viii)

Adverse lapse. For business which produces higher valuation reserves with an increase in lapse rates, the
lapse rate margins for adverse deviation (MfADs) were doubled. For business which produces higher valuation
reserves with a decrease in lapse rates, the lapse rate MfADs were halved.

Increasing interest rate. A 1% ﬂ at increase was applied to the statutory and pricing interest rate MfADs in this
scenario. Inﬂ ation rates on inforce business are keyed to the risk free 10-year U.S. Treasury Bond rate in order
to maintain a dynamic relationship between inﬂ ation rates and interest rates.

Decreasing interest rate. A 1% ﬂ at decrease was applied to the statutory and pricing interest rate MfADS in
this scenario. Inﬂ ation rates on inforce business are keyed to the risk free 10-year U.S. Treasury Bond rate in
order to maintain a dynamic relationship between inﬂ ation rates and interest rates.

(ix) Adverse mortality. To test this scenario, base mortality MfADs were doubled.

(x)

Higher expenses. To test this scenario, base expense MfADs were doubled.

153

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

43. SENSITIVITY ANALYSIS OF ACTUARIAL LIABILITIES (continued)

43.2 Dynamic capital adequacy testing (DCAT) (continued)

Correlations that may exist between assumptions were not explicitly taken into account. For term products in the
new business projections, the adverse lapse scenario has a ripple effect of worsening mortality due to selective
lapsation at the end of the level term period. Also, dynamic lapse rates interact with changing market interest rates
on interest sensitive life and annuity products in the DCAT model. The effect of these correlative activities is not
explicitly broken out.

The following table represents the estimated sensitivity of each of the above scenarios to net actuarial liabilities at
balance sheet date for insurers in the USA.

USA operations

Base net actuarial liability

Scenario

(vi) Adverse lapse

(vii) Increasing interest rate

(viii) Decreasing interest rate

(ix) Adverse mortality

(x) Higher expenses

As of December 31, 2007

$000

268,897

100.0

(Increase) / decrease

(642)

20,001

(24,176)

(3,766)

(1,240)

(0.2)

7.4

(9.0)

(1.4)

(0.5)

44. DEVELOPMENT OF PROPERTY AND CASUALTY CLAIMS
The development of an insurer’s claims in the course of settlement provides a measure of its ability to estimate the
ultimate value of claims incurred. In the table below, the estimate of total claims incurred for each year is provided at
successive year ends. The most recent estimate is then reconciled to the liability recognised in the balance sheet.

Gross

2005

2006

2007

Total

Estimate of ultimate claims incurred:

At the end of the reporting year

One year later

Two years later

Most recent year

Cumulative payments to date

Liability recognised in the balance sheet

Liability in respect of prior years

Liability in respect of UK operations (1)

Total liability

12,870

14,446

13,407

(11,806)

1,601

12,626

11,670

(7,967)

3,703

23,553

49,049

23,553

(8,031)

15,522

48,630

(27,804)

20,826

7,885

71,191

99,902

154

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

44. DEVELOPMENT OF PROPERTY AND CASUALTY CLAIMS (continued)
The reinsurers’ share of the amounts in the foregoing table is set out below.

Reinsurers’ share

2005

2006

2007

Total

Estimate of ultimate claims incurred:

At the end of the reporting year

One year later

Two years later

Most recent year

Cumulative payments to date

Recoverable recognised in the balance sheet

Recoverable in respect of prior years

Recoverable in respect of UK operations(1)

Total recoverable from reinsurers

(1) Acquired during 2007

3,822

3,195

3,013

(2,902)

111

2,730

2,319

2,327

(1,297)

1,030

11,258

17,810

11,258

(2,366)

8,892

16,598

(6,565)

10,033

4,251

6,037

20,321

45. CAPITAL MANAGEMENT
The Group manages its capital resources according to the following objectives:

· To comply with capital requirements established by insurance, banking and other ﬁ nancial intermediary

regulatory authorities;

· To comply with internationally recognised capital requirements for insurance, where local regulations do not

meet these international standards;

· To safeguard its ability as a going concern to continue to provide beneﬁ ts and returns to policyholders,

depositors, note-holders and shareholders;

· To provide adequate returns to shareholders by pricing insurance, investment and other contracts commensurately

with the level of risk;

· To maintain a strong capital base to support the future development of Group operations.

45.1 Capital resources

The principal capital resources of the Group at balance sheet date were as follows:

Shareholders’ equity

Minority interest

Notes and loans payable

Total balance sheet capital resources

Letter of credit facility

Total off balance sheet resources

Total capital resources

2007

455,174

122,137

152,719

730,030

80,016

2006

413,850

118,553

160,488

692,891

810,046

692,891

155

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

45. CAPITAL MANAGEMENT (continued)

45.1 Capital resources (continued)

The Group deploys its capital resources through its operating activities. These operating activities are carried out by
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 operating subsidiaries is discussed in the following section.

45.2 Capital adequacy

(a) Sagicor Life Inc Group (1)

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 seeks to maintain
internal capital adequacy at levels higher than the regulatory or internationally recognised(2) requirements. To assist
in evaluating the current business and strategy opportunities, a risk-based capital approach is a core measure of
ﬁ nancial performance. The risk-based assessment measure which has been adopted is the Canadian Minimum
Continuing Surplus and Capital Requirement (MCCSR) standard. The minimum standard recommended by the
Canadian regulators for companies is an MCCSR of 150%. The estimated MCCSR for the Sagicor Life Inc Group as of
December 31, 2007 (2006 – actual MCCSR) is set out below.

Sagicor Life Inc Group

2007
MCCSR
300%

2006
MCCSR
263%

(1) Comprises Sagicor Life Inc, Life of Jamaica Limited, Sagicor Capital Life Insurance Company Limited and Nationwide Insurance

Company Limited.

(2) It is to be noted that many of the jurisdictions in which the Sagicor Life Inc Group operates have no capital adequacy requirements, and

in accordance with its objectives for managing capital, the Group has adopted the Canadian MCCSR standard.

(b) 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) which 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,
2007 and 2006 are set out in the table below.

156

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

45. CAPITAL MANAGEMENT (continued)

45.2 Capital adequacy (continued)

Sagicor Life Insurance Company

2007
RBC
350%

2006
RBC
360%

The Financial Services Authority (FSA) Lloyd’s sourcebook requires Lloyd’s syndicates to comply with an Individual
Capital Adequacy Standards regime. A key objective of the regime is that syndicate management focuses on risk
management in that there is a clearly deﬁ ned link between risk and capital setting.

Sagicor at Lloyd’s Syndicate 1206 has adopted an approach whereby risks identiﬁ ed as having a material effect on
the capital requirements are documented within a risk register and shown as prime risks. It is recognised that this
register is dependent on both the identiﬁ cation and subsequent analysis of individual risks by management. The
risk register is subject to regular review and is updated to reﬂ ect the changes in the syndicate’s risk proﬁ le. The risk
classes comprise insurance, credit, market, liquidity, Group and operational risks.

The Individual Capital Assessment (ICA) is calculated using “stress and scenario” methodology for prime risk
categories except for reserving risk where a stochastic model is used. Prime risks have been correlated to minimise
potential aggregation of risks.

Each year, an ICA is prepared based on a one year event horizon and capital requirements are based on the 99.5%
conﬁ dence level over the next year. The ICA provides for all losses modelled to ultimate. An overall ICA number is
computed. To this is added a premium and the resulting total, known as the Funds at Lloyd’s requirement (FaL) is
placed at the disposal of Lloyd’s of London. The FaL may consist of cash, securities or banker’s irrevocable standby
letter of credit. The FaL is put into effect before the start of the underwriting year and remains in place until the
underwriting year closes and its proﬁ ts are distributed or its losses are assumed by the participating member. An
underwriting year is normally held open for a period of three years. The FaL for Syndicate 1206 is as follows:

Syndicate 1206

2008 underwriting year
FaL - £000
41,407

2007 underwriting year
FaL - £000
33,125

The Group has satisﬁ ed the 2008 underwriting FaL by the provision of a banker’s letter of credit in the amount of
£40,200,000 ($80,016) at balance sheet date, which was up-stamped to £41,407,000 in January 2008.

(d) Pan Caribbean Financial Services Group

Capital adequacy and the use of regulatory capital are monitored monthly by the PCFS Group management
employing techniques based on the guidelines developed by the Financial Services Commission (FSC), the Bank of
Jamaica (BOJ), Basel II and the Risk Management and Compliance Unit. The required information is ﬁ led with the
respective Regulatory Authorities at stipulated intervals.

The BOJ and the FSC require each regulated entity to:

· Hold the minimum level of regulatory capital;
· Maintain a minimum ratio of total regulatory capital to the risk-weighted assets.

157

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

45. CAPITAL MANAGEMENT (continued)
45.2 Capital adequacy (continued)

The risk-weighted assets are measured by means of a hierarchy of ﬁ ve risk weights classiﬁ ed according to the
nature of each asset and counterparty, taking into account any eligible collateral or guarantees. A similar treatment
is adopted for off- balance sheet exposure, with some adjustments to reﬂ ect the more contingent nature of the
potential losses.

The table below summarises the ratios of the regulated companies within the Group for the years ended December
31, 2007 and 2006. During those two years, the individual entities within the Group complied with all of the externally
imposed capital requirements to which they are subject.

The regulated companies within the PCFS Group are Pan Caribbean Financial Services Limited (PCFS), Pan
Caribbean Merchant Bank Limited (PCMB) and Pan Caribbean Asset Management Limited (PCAM).

Actual capital base to risk weighted
assets
Required capital base to risk weight-
ed assets

PCFS

PCMB

PCAM

2007

2006

2007

2006

2007

2006

77%

10%

79%

10%

20%

10%

23%

323%

204%

10%

46. 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. In general, these requirements do not restrict the ability of the
insurer to trade investments.

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 $735,000 (2006 - $660,000) 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.

158

Year ended December 31, 2007
Amounts expressed in US $000

Sagicor Financial Corporation
Notes To The Financial Statements

47. FIDUCIARY RISK
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 ﬁ duciary capacity and are not included in
these ﬁ nancial statements. These services give rise to ﬁ duciary risk that may expose the Group to claims for mal-
administration or under-performance of these funds.

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

2007

401,641

1,074,724

7,251

23,491

2006

362,123

940,773

10,052

21,932

1,507,107

1,334,880

159

“ DO NOT GO WHERE THE PATH
MAY LEAD, BUT GO INSTEAD
WHERE THERE IS NO PATH AND
LEAVE A TRAIL.”

05 Executive

Management

161

EXECUTIVE MANAGEMENT

DODRIDGE D. MILLER, FCCA, MBA, LLM
President and Chief Executive Ofﬁ cer

Mr Dodridge Miller was appointed President and Chief Executive Ofﬁ cer of the Mutual
Group of Companies, now Sagicor Group of Companies, on July 1, 2002, having previously
held the positions of Treasurer and Vice President, Finance and Investments and Deputy
Chief Executive Ofﬁ cer and Chief Operating Ofﬁ cer. Mr Miller joined the Group in 1989.
He was elected Director of The Mutual Group in 2001. He is the Chairman of the Group’s
main operating subsidiaries, Sagcior Life Inc, Life of Jamaica Limited and Sagicor Life

Insurance Company. Mr Miller is a Fellow of the Association of Chartered Certiﬁ ed 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 ﬁ nancial services industries.

RICHARD BYLES, BSc, MSc
President and Chief Executive Ofﬁ cer, Life of Jamaica

Mr Richard Byles was appointed President and CEO of Life of Jamaica Limited (LOJ), a
member of the Sagicor Group, in March 2004. He is the Chairman of the Board of Pan
Caribbean Financial Services, LOJ Property Management, Sagicor Reinsurance Limited
(Cayman), Sagicor Insurance Managers (Cayman) and Desnoes and Geddes. He also
serves on the boards of several subsidiary and associated companies as well as Air
Jamaica and RBA Limited. He has earned valuable experience and expertise within the

ﬁ nancial sector spanning the areas of Life, Health and General Insurance, Asset and Investment Management,
Banking, Pension Administration, Property Development and Reinsurance Management. Mr Byles holds a BSc in
Economics from the University of the West Indies and an MSc in National Development from the University of
Bradford, England.

J. EDWARD CLARKE FCCA, CIA
Group Chief Internal Auditor

Mr Edward Clarke was appointed to the position of Group Chief Internal Auditor on
June 1, 2007. Mr Clarke is a Fellow of the Association of Chartered Certiﬁ ed Accountants
and is a Certiﬁ ed Internal Auditor with more than 25 years’ experience in the ﬁ eld of
auditing and ﬁ nance. Mr Clarke began his accounting career at Pannell FitzPatrick &
Company Chartered Accountants (now Ernst & Young). He later joined Texaco and
served as a senior member of its ﬁ nance team in Barbados, Nigeria and the USA. Prior
to joining Sagicor, Mr Clarke was the Chief Finance Ofﬁ cer of Goddard Enterprises
Limited.

162

M. PATRICIA DOWNES-GRANT, BA, MA, MBA, DBA
President and Chief Executive Ofﬁ cer, Sagicor Life Inc

Dr Patricia Downes-Grant was appointed President and Chief Executive Ofﬁ cer of Sagicor
Life Inc on January 1, 2006, having served as Group Chief Operating Ofﬁ cer, 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 Ofﬁ cer. She holds
an MBA in Finance, an MA in Economics, and a Doctorate in Business Administration

(Finance). Prior to joining Sagicor, Dr Patricia Downes-Grant was a Senior Manager in the Management, Consulting
and Insolvency Division of Coopers & Lybrand (now PricewaterhouseCoopers). Dr Downes-Grant has also had
signiﬁ cant 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 the Sagicor Group and within the
private sector of Barbados.

GEORGE J. ESTOCK, BSc, MBA
President, Sagicor International Management Services Inc

Mr George Estock was appointed as President of the US-based subsidiary, Sagicor
International Management Services in 1996. He also holds the position of President
and CEO of Sagicor Allnation Insurance Company. He has over 20 years’ experience
in the Life Insurance and Property & Casualty business. Prior to joining Sagicor,
Mr Estock spent several years with CIGNA; the US-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 Helath Operations for the United Kingdom and, on his return to
the US, he served as Regional Vice President - Americas, responsible 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.

J. ANDREW GALLAGHER, FSA, FCIA
Chief Risk Ofﬁ cer

Mr Andrew Gallagher joined Sagicor in August 1997 as Resident Actuary. He holds a
Bachelor of Mathematics degree from the University of Waterloo, and is both a Fellow
of the Canadian Institute of Actuaries and a Fellow of the Society of Actuaries. Prior to
joining Sagicor, Mr Gallagher worked with Eckler Partners in Toronto in their ﬁ nancial
institutions practice. He has over 20 years of experience in the industry.

163

MAXINE MacLURE, BSc, MEd, MBA
Executive Vice President, Corporate Services

Ms Maxine MacLure was appointed Executive Vice President, Corporate Services for
Sagicor Financial Corporation in February 2007. She is responsible for acquisitions in the
US, Group-wide Compliance and Regulatory Liaison. Prior to this position she served as
President and CEO, Sagicor USA where in September 2005, she successfully completed
the Group’s acquisition of its ﬁ rst US life insurance subsidiary, Sagicor Life Insurance
Company (formerly American Founders Life) and oversaw its integration into the Sagicor

Group. Ms MacLure joined Sagicor in December 2001 as President and CEO of Life of Jamaica (LOJ). 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 ﬁ nancial sector crisis. She also spent seven years as a Senior Government
Financial Sector Regulator in Canada. Ms MacLure has an MBA from the Richard Ivey School of Business at the
University of Western Ontario, Canada, a Masters degree in Education from Western Washington University in the
United States, and a BSc from the University of Manitoba, Canada, with a major in Mathematics.

KEN A. MARSHALL
President & CEO, Sagicor Life Insurance Company

Mr Kendrick “Ken” Marshall was appointed President and Chief Executive Ofﬁ cer of
Sagicor Life Insurance Company in February 2007. He is responsible for the growth and
development of Sagicor Life’s operations, and leads the US strategy for the Group. Prior
to his current position, Mr Marshall was General Manager of the Trinidad and Tobago
Operations of Sagicor Life Inc. He joined the Group in 1968 as an insurance agent and
held several positions, including Executive Vice President responsible for Barbados and the
Eastern Caribbean, and Chief Executive Ofﬁ cer of Capital Life, another Group subsidiary. A former President of the Life
Underwriters’ Association of Barbados, he successfully completed numerous Sales and Marketing Management
programmes sponsored by LIMRA as well as an Executive Development Programme under the auspices of LOMA.

PHILIP N. W. OSBORNE, BSc, ACA, FCA
Chief Financial Ofﬁ cer

Mr Philip Osborne was appointed Chief Financial Ofﬁ cer for the Group in 2003. He has
held senior ﬁ nance positions in life insurance for over 18 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 is currently a director
of a number of 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 ﬁ rms in London and Barbados over a ten-year period. He also holds a BSc in Mathematics with
Computer Science from the University of London.

164

SANDRA OSBORNE, S.C.M., QC, BSc, LLB, FCIS
Executive Vice President, General Counsel and Secretary

Ms Sandra Osborne was appointed General Counsel and Secretary for the Sagicor
Group in April 1989. An Attorney-at-Law and Chartered Secretary, Ms Osborne has 30
years’ experience in the legal ﬁ eld, having previously practiced as a Crown Counsel and
at the private Bar in civil practice in Barbados. For the last 20 years, her focus has been
in the corporate area, both as Corporate Counsel and Corporate Secretary. She has also
contributed to legislative reform in Barbados in the area of securities. Ms Osborne holds

a BSc (Hons) in Political Science and an LLB (Hons) both from the University of the West Indies, and a Certiﬁ cate
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 has completed an Executive Development
Program at Kellogg Graduate School of Management, Northwestern University, United States. She was appointed
a Queen’s Counsel of Barbados in 2007.

RAVI RAMBARRAN, BSc, MSc, FIA
Executive Vice President, International Division

Mr Ravi Rambarran was appointed Executive Vice President, Strategy in 2006. His work
experience includes Pensions Actuary of Life of Jamaica (LOJ), Appointed Actuary of
Global Life Bahamas and Global Life Cayman, Chief Financial & Investment Ofﬁ cer 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 Rambaran has a BSc (Hons) in Actuarial Science
from City University, London, and an MSc in Finance 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.

MELBA SMITH, BA
Vice President, Corporate Communications

Mrs Melba Smith was appointed Vice President Corporate Communications for
the Sagicor Group in January 2002. Prior to joining Sagicor, she was the General
Manager of the Caribbean Broadcasting Corporation. During her 7-year tenure, she
managed television, radio and cable services. She was also a Board member of the
Caribbean Broadcasting Union and became that Institution’s ﬁ rst female President in
2000. She was elected Caribbean Representative on the Board of the Commonwealth
Broadcasters Association. Mrs Smith, a graduate of the University of the West Indies, holds a BA (Hons), and a
Post Graduate diploma in Mass Communications, and is a member of the International Association of Business
Communicators. Over the last 25 years, Mrs Smith has worked in all areas of mass communication and in addition,
has gained valuable experience and expertise in the areas of business communication, public relations and
management.

165

“ THE BEST WAY TO PREDICT THE
FUTURE IS TO CREATE IT.”

06 Advisors and
Bankers

167

APPOINTED ACTUARY

Sylvain Goulet, FCIA, FSA, MAAA,
Afﬁ liate 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

Butterﬁ eld Bank (Barbados) Limited

FirstCaribbean International Bank Limited

RBTT Bank Limited

The Bank of Nova Scotia

168

07 Sagicor Ofﬁ ces

169

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

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

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 Ofﬁ ce 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

170

SAGICOR PANAMÁ, SA
Ave Samuel Lewis y Calle Santa Rita
Ediﬁ cio Plaza Obarrio
3er Piso Oﬁ cina 201Panama City, Panama
Tel: (507) 223-1511
Fax: (507) 264-1949
Email: capital1@sinfo.net

SAGICOR CAPITAL LIFE INSURANCE
COMPANY LIMITED
Registered Ofﬁ ce
MB&H Corporate Services Limited
Mareva House
4 George Street
PO Box N-3937
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

Curaçao
Schottegatweg
Oost #11
Tel: (599) 9 736-8558
Fax: (599) 9 736-8575
Email: capital.life@curinfo.an

SAGICOR CAPITAL LIFE AGENCIES
Curaçao
Guillen Insurance Consultants
PO Box 4929
Kaya E. Salas No 34
Tel: 011-5999-461-2081
Fax: 011-5999-461-1675
Email: chris-guillen@netlinks.an

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

SAGICOR CAPITAL LIFE SERVICE OFFICE
CAPITAL LIFE BAHAMAS
C/o Colina Insurance Company Limited
56 Collins Avenue, P O Box 4937
Nassau,
Tel: (242) 393-9518
Fax: (242) 393-9523

SAGICOR LIFE ARUBA NV
Fergusonstraat #106
AHMO Plaza Building, Suites 1 and 2
Oranjestad
Tel: (297) 823967
Fax: (297) 826004
Email: calico@setarnet.aw

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 AT LLOYD’S
1 Great Tower Street
London, UK
EC3R 5AA
Tel: 44 020 3003 6800
Fax: 44 020 3003 6999

BYRNE & STACEY UNDERWRITING LIMITED
The Old Building
Bishops College
Churchgate
Cheshunt
Hertfordshire
EN8 9XH
Tel: 44 (0) 1992 630830
Fax: 44 (0) 1992 620090

171

GLOBE FINANCE INC
6 Rendezvous Court,
Rendezvous Main Road
Christ Church, Barbados
Tel: (246) 426-4755
Fax: (246) 426-4772
Website: www.globeﬁ nanceinc.com

SAGICOR FINANCE INC
(FORMERLY 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
4010 West Boy Scout Boulevard
Suite 800, Tampa
Florida, 33607-5735
USA
Tel: (813) 287-1602
Fax: (813) 287-7420
Website: www.globalsure.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

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 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

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: barbadosﬁ re@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

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

172

08 Shareholder
Information

173

SHAREHOLDER INFORMATION

No Shareholder owns more than 5% of the capital of the Company. The following Shareholders own more than 3%
of the capital of the company:
· Republic Bank Limited – 1162: 9,998,300 shares (3.6%)

· T&T Unit Trust Corporation – FUS: 8,598,579 shares (3.1%)

424,610 grants of restricted stock at a value of US $2.01/Bds $4.01 each were granted over the four-year period
commencing March 31, 2007 to Participants under the Long-term Incentive Plan (“LTI”) approved for Executives.
Of the 424,610 grants, 127,384 were fully vested and were issued as common shares during the year. A further 97,148
grants at a value of US $1.98/Bds $3.95 each, being part of the grant made in 2006, became fully vested, and were
also issued as common shares. As at December 31, 2007, 419,193 grants were unvested.

During 2007, 2,049,598 stock options were granted at an exercise price of US$2.01/Bds $4.01 each. These options
vest evenly over the four-year period commencing March 31, 2008 and expire on March 31, 2017.

As at December 31, 2007, the total number of options granted was:
·

932,387 granted at an exercise price of US $1.98/Bds $3.95 each, of which 233,097 were fully vested and of which
13,710 were exercised during the year

· 2,049,598 at an exercise price of US$2.01/Bds $4.01 each, all of which were unvested.

The total number of common shares issued under the LTI during 2007 was 238,242 – 97,148 in respect of the 2006
grant, 127,384 in respect of the 2007 grant and 13,710 being options exercised, bringing the total number of shares in
issue as at December 31, 2007 to 267,223,578 (2006: 266,985,336).

On February 8, 2008, following a successful take-over bid for Barbados Farms Limited, a further 10,319,819 common
shares were issued to Shareholders of Barbados Farms Limited to satisfy part of the consideration under the bid.
The total number of issued common shares as at May 8, 2008 was 277,543,397.

DIVIDENDS

A ﬁ nal dividend of Bds 8 cents (US 4 cents) per share, payable on May 16, 2008, was approved for the ﬁ nancial year
ended December 31, 2007 to the holders of common shares and depositary interests whose names were registered
on the books of the Company at the close of business on April 25, 2008. An interim dividend of Bds 6 cents
(US 3 cents) per share, approved for the half year ended June 30, 2007, was paid on October 10, 2007 to the holders
of common shares and depositary interests whose names were registered on the books of the Company at the
close of business on September 10, 2007. The total dividend for the 2007 ﬁ nancial year amounted to Bds 14 cents
(US 7 cents) per share.

174

ANALYSIS OF SHAREHOLDING

Number of Shareholders by Size of Holding as at December 31

Size of Holding

Number of
Shareholders

Percentage of
Shareholders

Total Shares Held

Percentage
Shares Held

2007

2006

2007

2006

2007

2006

2007

2006

1 - 1,000

6,073

6,015

15.91

15.43

3,875,580

3,917,331

1.45

1.47

1,001 - 2,500

16,188

16,618

42.40

42.64

26,904,075

27,634,402

10.07

10.35

2,501 - 5,000

7,619

7,817

19.96

20.06

26,394,625

27,081,522

9.88

5,001 - 10,000

4,330

4,460

11.34

11.44

30,919,270

31,920,923

11.57

10,001 - 25,000

3,114

3,212

25,001 - 100,000

100,001 - 1,000,000

1,000,001 & above

642

191

651

189

8.16

1.68

0.50

0.05

8.24

1.67

0.48

0.04

44,581,193

45,979,406

16.68

30,010,574

30,457,612

11.23

50,869,515

50,692,562

19.04

18.99

53,668,746

49,301,578

20.08

18.46

Total

38,177

38,979

100.00 100.00

267,223,578 266,985,336

100.00

Number of Shareholders by Country of Residence and by Type as at December 31, 2007

Country

Trinidad and Tobago

Barbados

Eastern Caribbean

Other Caribbean

Other

Total

Directors,
Management,
Staff, Agents

Companies

Individuals

Total

Shareholders % Shareholders % Shareholders %

63.96

16,164

43.50

Shareholders
16,725

155

17.53

79.90

1.03

1.54

0.00

527

204

24.76

12,246

32.96

12,605

4.25

6.55

0.48

7,390

19.89

7,427

365

994

0.98

2.67

422

998

194

100.00

824

100.00

37,159

100.00

38,177

100.00

10.14

11.96

17.22

11.41

%
43.81

33.02

19.45

1.10

2.61

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

Country

Directors,
Management,
Staff, Agents

Companies

Individuals

Total

Shareholders % Shareholders % Shareholders %

Shareholders

Trinidad and Tobago

Barbados

Eastern Caribbean

Other Caribbean

Other

Total

129

33.66

63.86

1.48

0.50

536

190

65.93

23.37

4.18

6.15

0.37

16,593

12,464

7,558

366

983

43.71

32.83

19.91

0.96

2.59

17,197

12,783

7,595

417

987

44.12

32.80

19.48

1.07

2.53

202

100.00

813

100.00

37,964

100.00

38,979

100.00

175

Number of Shares Held by Country of Residence and by Type as at December 31, 2007

Country

Directors,
Management,
Staff, Agents

Companies

Individuals

Total

Trinidad and Tobago

186,454

6.79

49,374,790

67.74

101,781,559

53.13

151,342,803 56.64

Barbados

2,505,070

91.28

16,964,657

23.27

61,755,185 32.23

81,224,912

Eastern Caribbean

Other Caribbean

Other

Total

2,884

50,115

0.10

1.83

0.00

947,628

3,740,209

1,867,513

1.30

5.13

2.56

21,258,654

11.10

22,209,166

2,607,447

4,181,413

1.36

2.18

6,397,771

6,048,926

2.26

2,744,523 100.00

72,894,797 100.00

191,584,258 100.00

267,223,578 100.00

30.4

8.31

2.39

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

57.60

Barbados

2,224,473

67.51

15,686,559

22.56

62,509,406

32.19

80,420,438

30.12

Eastern Caribbean

Other Caribbean

Other

Total

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

11.21

22,222,589

8.32

2,519,460

1.30

6,323,439

4,217,766

2.17

4,230,092

2.37

1.59

3,295,123 100.00

69,518,056 100.00

194,172,157 100.00

266,985,336 100.00

176

SAGICOR FINANCIAL CORPORATION

NOTICE OF ANNUAL MEETING

NOTICE is hereby given that the Fifth Annual Meeting of Shareholders of Sagicor Financial Corporation (“the
Company”) will be held at Hilton Barbados, Needham’s Point, St Michael, Barbados, on Thursday June 26, 2008 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, 2007

and the Auditors’ Report thereon.

2. To elect Directors.

3. To re-appoint the incumbent Auditors for the ensuing year and to authorise Directors to ﬁ x their remuneration.

4. To transact such other business as may properly come before the Meeting.

By Order of the Board of Directors.

Sandra Osborne, QC
Corporate Secretary

May 30, 2008

PROXIES:

Shareholders who are unable to attend the Meeting in person may complete and return the enclosed form of proxy
at least 48 hours before the appointed time of the Meeting or adjourned Meeting to either:
· 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.

DOCUMENTS AVAILABLE FOR INSPECTION:

There are no service contracts granted by the Company, or its subsidiaries, to any Director of the Company.

177

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 Fifth Annual Meeting of Shareholders of
Sagicor Financial Corporation (“the Company”) to be held on June 26, 2008 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, 2008.

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 authorised in writing, or, if the Shareholder is a body corporate, partnership,
estate, trust, or association, by any ofﬁ cer or attorney thereof duly authorised, at any time up to and including the
last business day preceding the day of the Meeting or any adjournment thereof with:

· the Corporate Secretary at the registered ofﬁ ce 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.

The persons named in the enclosed form of proxy are Directors of the Company. If you wish to appoint some other
person 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 ﬁ xed May 8, 2008 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 and the re-appointment of the incumbent Auditors
and Directors’ authorisation to ﬁ x their remuneration.

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 8, 2008, there were 277,543,397 common shares of the Company outstanding.

PRESENTATION OF FINANCIAL STATEMENTS AND AUDITORS’ REPORT

The Financial Statements of the Company for the year ended December 31, 2007 and the Auditors’ Report thereon
are included in the 2007 Annual Report.

178

ELECTION OF DIRECTORS

The Board of Directors consists of twelve members. The number of Directors to be elected at the Meeting is four.
Professor Sir Hilary Beckles and Messrs Andrew Aleong, David Walter Allan and Christopher Dennis deCaires will
retire at the end of the Meeting. The retiring Directors, with the exception of David Walter Allan who has reached the
age of compulsory retirement, will be seeking re-election. Following are the names of the qualiﬁ ed 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:
ANDREW ALEONG
SIR HILARY BECKLES, K.A.
CHRISTOPHER DENNIS DECAIRES
JOHN FRANCIS SHETTLE, JR.

Andrew Aleong, MBA, aged 47, is a Citizen of Trinidad and Tobago and has been an independent Director since June
2005. He holds an MBA from the Richard Ivey School of Business, University of Western Ontario, Canada, and 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. He was elected a Director of
Sagicor Life Inc in 2005.

Sir Hilary Beckles, K.A., PhD, is 52 years of age and is a Citizen of Barbados. He has been an independent Director
since June 2005. Sir Hilary 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 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. Sir Hilary 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 was elected a Director of
Sagicor Life Inc in 2005 and is also a Director of Life of Jamaica Limited.

Christopher Dennis deCaires, FCCA, MBA, aged 52, is a Chartered Accountant and holds an MBA from Henley
Management College, United Kingdom. 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 ﬁ nance, international taxation, ﬁ nancial
management, mergers and acquisitions, information systems, organisational design and business planning.
Mr deCaires is Chairman of World Cup Barbados and is a former partner of PricewaterhouseCoopers, Barbados,
where he was responsible for corporate ﬁ nance, business advisory, corporate secretarial and trust services. He has
been an independent Director since June 2005 and was also elected a Director of Sagicor Life Inc in 2005.

John Francis Shettle, Jr, is 53 years of age and is a citizen of the United States. He received his undergraduate degree
from Washington & Lee University and holds an MBA from the Sellinger School of Business at Loyola College,
Maryland. He is Senior Advisor, Lightyear Capital, a private equity investment ﬁ rm providing buyout and growth capital
to companies in the ﬁ nancial services industry. He has over 20 years’ experience in senior management positions in
the property/casualty, health and insurance-related services industry. Most recently, he served as President and Chief
Executive Ofﬁ cer of the Victor O Schinnerer Company. Prior to that, he was the Chief Executive Ofﬁ cer of Tred Avon
Capital Advisors, Inc, a ﬁ rm providing advisory services to companies and private equity ﬁ rms focused on the insurance
sector. He previously held senior management positions at Securitas Capital, Swiss Reinsurance Company and
Frederick, the Maryland-based AVEMCO Corporation (NYSE). Mr Shettle was appointed a Director of the Group’s US
subsidiaries, Sagicor USA Inc, Laurel Life Insurance Company and Sagicor Life Insurance Company in 2006.

Sir Hilary Beckles and Messrs Aleong and deCaires each brings a wealth of relevant 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. Mr Shettle, with over 20 years’ experience in the
property/casualty, health and insurance-related services industry, will bring to the Board a US and international
perspective on insurance. 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.

179

Having regard to the core competency requirements of the Board as a whole, the skills and experience of each
nominee, their independence as deﬁ ned by the Board and their willingness and ability to devote the time necessary
to fulﬁ l their role as Directors, the Board of Directors recommends that Shareholders vote FOR the election of the
above-named nominees.

RE-APPOINTMENT OF INCUMBENT AUDITORS

PricewaterhouseCoopers, Chartered Accountants, of The Financial Centre, Bishop’s 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 ofﬁ ce until the next Annual Meeting of Shareholders.

The Directors recommend that Shareholders vote FOR the re-appointment of PricewaterhouseCoopers and the
authorisation of Directors to ﬁ x the Auditors’ remuneration.

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:

· The election as Directors of Andrew Aleong, Sir Hilary Beckles, Christopher Dennis deCaires and

John Francis Shettle, Jr.

· The re-appointment of the incumbent Auditors, PricewaterhouseCoopers, and the authorisation of Directors

to ﬁ x their remuneration.

The enclosed form of proxy confers discretionary authority upon the persons named with respect to amendments
to or variations in matters identiﬁ ed in the Notice of Meeting or other matters that may properly come before the
Meeting. The Management of the Company knows of no matter to come before the Meeting other than the matters
referred to in the Notice of Meeting. If any other matters which are not now known to Management should properly
come before the Meeting, the persons named in the accompanying form of proxy will vote on such matters in
accordance with their best judgement.

Unless otherwise noted, a simple majority of the votes cast at the Meeting, whether by proxy or otherwise, will
constitute approval of any matter submitted to a vote.

The contents of this Management Proxy Circular and the sending thereof to the holders of the common shares of the
Company have been approved by the Directors of the Company.

No Directors’ statement is submitted pursuant to Section 71(2) of the Act.

No Auditors’ statement is submitted pursuant to Section 163(1) of the Act.

Dated May 30, 2008.

Sandra Osborne, QC
Corporate Secretary

180

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