ANNUAL REPOR T
201 4
O U R J O U R N E Y • O U R S U C C E S S • O U R F U T U R E
175 YEARS
OUR VISION
To be a great company,
committed to improving
the lives of people
in the communities
in which we operate.
TABLE OF CONTENTS
Trust
Stability
About Sagicor
Chairman’s Statement
Financial Highlights
Community
Corporate & Social Responsibility
Service
Innovative
Vision
Human Capital Report
Operating & Financial Review
Board of Directors
Responsibility
Corporate Governance
Leadership
Executive Management
Wisdom
Index of Financial Statements
Financial Statements
Notes
Commitment
Shareholder Information
Advisors & Bankers
Offices
6
10
12
17
36
42
58
64
78
84
88
93
198
205
206
175 years of trust
We have 175 years of trust placed in us. Those
who look to Sagicor for service, advice and
help need to know that we will always honour
that trust, and we will never let them down.
ABOUT SAGICOR
Sagicor is a dynamic, indigenous Group which has been redefining
financial services in the Caribbean. Following a carefully crafted business
strategy, the company transformed from a local single-line life insurance
company to a financial services group with a solid regional base, before
expanding into the international financial services market.
After the company demutualised in 2002, Sagicor Financial Corporation
was formed as a publicly-listed holding company. Sagicor, the company
name, means “wise judgment”, and reflects the nature of the financial
advice and services we offer. Sagicor now operates in 23 countries in the
Caribbean, the USA, the UK and Latin America.
For 175 years, Sagicor’s business has been based on long-term
relationships with its employees, communities and customers, who
entrust us with their future financial well-being. Our name and identity
draw on the strength, stability and financial prudence that are our
heritage, and this identity also defines the flexibility that wise financial
thinking can bring to our customers throughout their lives. Local
expertise and partnerships with world-class asset managers, reinsurers,
and sound risk management, ensure that Sagicor is truly able to improve
peoples’ lives through “wise judgment”, and will continue to meet their
financial needs now and in the future.
It is Sagicor’s view that the entire business of wealth-creation and
protection is about social investment. For many decades, Sagicor
has provided financial support and voluntary assistance, primarily in
the areas of health, education, youth development and sports, to a
number of organisations and institutions. Sagicor continues to provide
significant support for the prevention of non-communicable diseases,
by promoting healthy living, and improving access to and facilities for
health-care in the region. Sagicor supports education at the primary,
secondary and tertiary level, and sponsors a number of adult education
and development activities.
As we continue to move forward through these challenging times in
the economic life of our region and the rest of the world, Sagicor’s core
business strategies will continue to provide a wide range of financial
products and services, while we continue to be committed to our vision,
“To be a great company, committed to improving the lives of people in
the communities in which we operate.”
6
2014 Annual Report
The Mutual Building, on Lower Broad Street in Barbados,
was the first purpose-built Head Office constructed by the
Barbados Mutual Life Assurance Society in 1894/95.
Sagicor Financial Corporation 175 years of stability
175 years is a long time. With every year,
we get stronger, wiser and better. The base
we have formed in the communities we
serve can never be shaken, so long as
we remember how it was built.
CHAIRMAN’S STATEMENT
translated premiums in US dollars in 2014. Net investment income closed
the period at US $307.2 million, and was an improvement over the prior
year amount, which stood at US $279.4 million. Fees and other revenue
amounted to US $83.3 million, compared to US $103.1 million in 2013,
and was impacted by the lower reinsurance commissions earned as a
result of lower new annuity business written in the USA segment.
On June 27, 2014, the Group completed the acquisition of RBC Royal
Bank’s Jamaica banking operations, and rebranded the business as
Sagicor Bank. After determining the fair value of acquired assets and
liabilities of the business, the Group recorded negative goodwill on
acquisition of US $29.1 million. At the same time, the Jamaica segment
incurred US $10.5 million in integration, restructuring and re-branding
costs associated with the acquisition. These non-recurring costs have
been included in Administrative Expenses.
Total benefits incurred from continuing operations totalled
US $542.2 million, and is a reduction from the comparative amount
in 2013 of US $592.8 million. This reduction is the result of the lower
annuity business written in the USA segment, together with the impact
of the deterioration of the Jamaica dollar to the US dollar on the Jamaica
segment.
Expenses (including agents’ and brokers’ commissions) closed the year at
US $385.9 million, compared to US $348.1 million for the prior year. The
increase of US $37.8 million included restructuring and rebranding costs,
along with operating expenses now incurred within the banking division,
following the acquisition of RBC Royal Bank’s Jamaica banking operations.
Total comprehensive income was significantly improved when compared
to the prior year. Other comprehensive income showed a positive
result of US $6.7 million, compared to a loss of US $54.6 million for
2013. Included in comprehensive income were net gains on financial
assets of US $15.6 million and net gains on defined benefit plans of
US $13.2 million. A decline in the Jamaica dollar against the US dollar
contributed to currency retranslation losses of US $22.0 million. The
Jamaica dollar depreciated against the US dollar by 7.8% during 2014,
compared to 14% during 2013. With the continued improvement in the
Jamaican economy, we expect the currency to stabilise against the US
dollar and further depreciation to be lower than previous years.
Stephen McNamara
Chairman
I am pleased to report to you on the 2014 performance of the Sagicor
Group. The Group’s financial statements in 2014, consistent with
2013 and 2012, have been presented with continuing operations being
separated from the discontinued Sagicor Europe run-off operations.
The Sagicor Group had a solid year’s performance, recording net income
for the year of US $73.9 million, compared to US $4.1 million for 2013.
The continuing operations, comprising our businesses in the Caribbean
and in the USA, continued to perform well, recording net income of
US $100.3 million for 2014, compared to US $79.6 million for 2013, an
increase of US $20.7 million.
Net income from continuing operations attributable to shareholders was
US $53.7 million, compared to the prior year result of US $39.1 million,
an improvement of US $14.6 million. Earnings per common share from
continuing operations was US 17.3 cents, and represented an annualised
return on common shareholders’ equity of 11.2%.
Total revenue closed the year at US $1,045.2 million, compared to the
prior year amount of US $1,039.5 million. Net premium revenue stood
at US $625.6 million, compared to US $657.0 million for the prior year.
When compared to 2013, the lower premium income resulted from
lower new annuity business written in our USA segment, together with
the impact of the deterioration of the Jamaica dollar to the US dollar on
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2014 Annual Report
Sagicor Financial Corporation The discontinued operation represents our UK business, which was
sold on December 23, 2013. The terms of the sale required the Sagicor
Group to retain an interest in the 2011, 2012 and 2013 underwriting
years of account. Although actuarial reserves are established to cover
best estimates of this liability, exposure to any fluctuations in experience
continues until 2018. During 2014, the discontinued business experienced
a net loss of US $26.4 million, resulting from adverse movements in our
claims provisioning for 2013 and prior years. As part of the 2014 review
of the discontinued business, we have decided to explore the purchase
of reinsurance to cover this residual exposure. This would effectively
transfer any retained risk to the reinsurer, and would effectively close
this discontinued operation at the end of 2014. Subsequent to year-end,
management completed the negotiation of the reinsurance, at a cost of
US $12.2 million. The cost of this reinsurance will be accounted for during
the 2015 financial year.
In the statement of financial position as at December 31, 2014, assets
amounted to US $6.2 billion, an increase of US $0.9 billion over the
amount of US $5.3 billion at December 2013. Similarly, liabilities closed
at US $5.4 billion, compared to US $4.6 billion, an increase of US $0.8
billion. The increase in assets and liabilities largely reflects the acquisition
of RBC Royal Bank’s Jamaica banking operations. Sagicor’s Group
equity totalled US $773.5 million (2013, US$725.2 million). The Group’s
debt, which is included in other liabilities, totalled US $298.9 million
(2013, US $290.2 million). The resulting debt to equity ratio was 38.7%
compared to 40.0% for the prior year.
The Board has declared dividends of US 3.25 cents per preference share
and US 2.0 cents per common share, payable on May 15.
On behalf of the Board of Sagicor, I wish to thank our Shareholders and
Customers for their continued support.
Stephen McNamara
Chairman
March 27, 2015.
2014 Annual Report
11
Sagicor Financial Corporation FINANCIAL HIGHLIGHTS
Amounts in US$ millions unless otherwise stated
NET INCOME 1
54
39
60
45
30
15
0
15
10
5
0
SHAREHOLDER RETURNS
DIVIDENDS
12
12
BOOK VALUE PER SHARE
Amounts in US cents
173
165
300
200
100
0
2014
2013
2014
2013
2014
2013
1 from continuing operations
NET INCOME
100
80
125
100
75
50
25
0
GROUP RESULTS 1
REVENUE
1,045
1,039
1500
1000
500
0
2013
Earnings per share 1 17.3¢ 12.5¢
Return on shareholder’s equity 1 11.2% 7.7%
2014
BENEFITS
1000
500
542
593
0
2014
2013
2014
2013
2014
2013
12
2014 Annual Report
1 from continuing operations
Sagicor Financial Corporation
Amounts in US$ millions unless otherwise stated
GROUP FINANCIAL POSITION
ASSETS
OPERATING LIABILITIES
EQUITY & DEBT CAPITAL
7000
6,180
5,298
3500
0
6000
3000
0
5,108
4,283
1500
1000
500
0
1,073
1,015
2014
2013
2014
2013
2014
2013
2014
2013
Debt to Equity 38.6% 40.0%
273% 259%
MCCSR
SAGICOR LIFE INC - NET INCOME
SAGICOR JAMAICA- NET INCOME
SAGICOR USA - NET INCOME
SEGMENT RESULTS
51
45
60
40
20
0
78
65
100
50
0
20
10
0
12
8
2014
2013
2014
2013
2014
2013
Revenue
Assets
2014
362
2013
351
1,773 1,706
Revenue
Assets
2014
486
2013
464
2,495 1,880
Revenue
Assets
2014
153
2013
185
1,743 1,484
2014 Annual Report
13
Sagicor Financial Corporation
175 years of
community
We pride ourselves on giving back to
our community, because it is in the
community that we forge our strongest
connection. Our initiatives continue to
build upon this valuable link, helping in
the present to create a better future.
I N O U R C O M M U N I T I E S -
Education
As one of the four pillars outlined in
the Sagicor Vision, we consider the
value of education to be immeasurable.
We offer strong support across the region
to learning institutions from primary
to tertiary, catering to traditional studies
and education for those with special needs.
1
3
6
2
4
5
1 Students of Holy Innocents Primary School in Barbados performing a short skit about healthy eating at the launch
of the EduDrama programme.
2 Jai Patel, accepting the award from SLIC President and COO Bart Catmull, on behalf of Walker Middle School, for
their winning Sagicor Visionaries Project, “Higher or Lower, Which angle is the best?”
3 Sagicor GSAT scholar, Alex Knibb, receives his award from SLJ’s President and CEO, Richard Byles, at the
company’s annual GSAT Awards Ceremony.
4 SLI President & CEO, Dr Patricia Downes-Grant, and CEO & Director of Cave Hill School of Business, Dr Jeannine
Comma, at the signing of the CHSB-UWI MOU. Dexter Moe, Vice President, Sagicor Asset Management Inc, and
Dr Charmaine Gardner, Chairperson of the Board of Directors, Cave Hill School of Business, UWI, look on.
5 Students of the Abram Zuil Secondary School, Guyana, pictured with their winning Sagicor Visionaries project,
“Paddy Husk Particle Board”.
6 Students of the Bishop Martin High School, Belize, demonstrating their winning Sagicor Visionaries project,
“Chaya-Mayan Power for Modern Times”.
CORPORATE AND SOCIAL RESPONSIBILITY
In addition to a commitment to deliver quality products and services,
Sagicor is also committed to improving the lives of people within its
communities. In strengthening its role as a good corporate citizen,
Sagicor supports various initiatives that provide financial and voluntary
assistance, primarily in the areas of education, health, community and youth
development and sports. These areas of investment have become the four
pillars of Sagicor’s corporate and social responsibility programme, as they,
individually and collectively, lend a hand in maintaining and improving
societal attitudes and values conducive to quality living.
Dominica
Winner: St Martin Secondary School - Techno Gardener
1st Runner Up: Dominica State College - Asphalt Emission Filtration System
2nd Runner Up: Isaiah Thomas Secondary School - Biogas Generator
St Lucia
Winner: St Mary’s College - Biodegradable Plastic
1st Runner Up: Sir Arthur Lewis Community College - Rhizo Bacteria
2nd Runner Up: St Joseph’s Convent - Expenergies
Sagicor takes this opportunity to commend its staff members across the
Group who were very active throughout 2014, giving of their time to work with
a number of organisations to provide support and assistance to those in need.
Guyana
Winner: Abram Zuil Secondary School - Paddy Husk Particle Board
1st Runner Up: Queen’s College - Amazing Algenol
2nd Runner Up: St Stanislaus College - D.A.R.A.I.C.O. Drainage Project
EDUCATION
Secondary school students from the Caribbean region were once again
invited to participate in the second Sagicor Visionaries Challenge to
showcase their talents in Science, Technology, Engineering and Mathematics
(STEM) subjects. Students worked with their teachers at their educational
institutions, identified a problem facing their school or community, and
used STEM to develop effective, innovative and sustainable solutions.
The winning schools and their respective projects in the National
competitions are listed below:
Antigua & Barbuda
Winner: Christ the King High School - Nova Oven
1st Runner Up: Antigua Girls’ High School - Air Purifier
2nd Runner Up: Antigua Girls’ High School - Solar Powered Fans
Barbados
Winner: Queen’s College - The Green Way to Get Styrofoam Away
1st Runner Up: Harrison College - Daytime Lighting System
2nd Runner Up: Harrison College - Traffic Monitoring and Alert
Belize
Winner: Bishop Martin High School - Chaya-Mayan Power for Modern
Times
1st Runner Up: St Catherine Academy - StyroNOam
2nd Runner Up: St Catherine Academy - Female vs Female
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2014 Annual Report
Trinidad & Tobago
Winner: Five Rivers Secondary School - Cardboard Box Pallet
1st Runner Up: El Dorado West Secondary School - Life After Plastics
2nd Runner Up: St Joseph’s Convent (Port of Spain) - Waving Goodbye to
Microwaves
USA
Winner: Walker Middle School - Higher or Lower, Which Angle is Best?
The winners will be rewarded with a prize for one student and teacher to
attend the Sagicor Visionaries Ambassadors Programme, arranged as part
of the Museum of Science and Industry’s (MOSI) Summer Science Camp,
in Tampa, Florida, in July, 2015.
Special Prizes were also awarded to schools who demonstrated particular
competencies in the categories of:
• Best Plan and Project Design;
• Most Creative and Innovative;
• Best Presentation;
• Best Use of STEM;
• Most Relevant to Sustainable Caribbean Communities, and Best
Innovation.
Sagicor Financial Corporation In collaboration with the Caribbean Science Foundation (CSF) and the
Caribbean Examinations Council (CXC), the Sagicor Visionaries Challenge
aims to:
the financial sector, and Mr John believes his studies in computer science
will play a role in the development of St Vincent & the Grenadines. He looks
forward to returning home to either teach or open his own business.
• Ignite an interest in innovation among secondary school students,
through STEM, to help build and integrate sustainable communities
throughout the Caribbean.
• Integrate knowledge gained from formal and informal education to
enable tomorrow’s leaders to build a more sustainable Caribbean.
• Encourage and boost institutional capacity in STEM in secondary
schools within the region.
In July 2014, Sagicor Financial Corporation (SFC) and the Cave Hill School
of Business, UWI (CHSB-UWI) in Barbados, finalised a Memorandum
of Understanding to facilitate capacity building at the institution. The
funding, to be disbursed annually over a five year period, will provide
necessary resources for the School’s Professional/Executive Education
and developmental initiatives, as well as research in the field of business
education. CHSB-UWI will be re-branded to reflect Sagicor’s endowment.
The institution will offer scholarships for the Executive Diploma in
Management and Executive Masters in Business Administration
programmes. Additionally, research will be conducted on best practices and
leadership in the region. SFC will also draw on the expertise of the Cave Hill
School of Business-UWI to develop their leaders through a custom-designed
Corporate University, which will offer a High Potential Leaders’ Programme,
along with Management and Leadership Development and Performance
Management Initiatives.
In Barbados, Sagicor Life Inc(SLI) continued its Academic Scholarship
Programme with the University of the West Indies, Cave Hill Campus. Each
year, Sagicor opens the programme to nationals of the Bahamas, Barbados,
the OECS, Jamaica and Trinidad and Tobago, who have gained admission
to the University and are majoring in the field of Business Studies. Eligible
students must be majoring in the field of Accounting, Computer Science or
Business Administration, and must have completed at least one academic
year leading to a degree in one of those disciplines. Following several
Interviews conducted by a Sagicor panel in February 2014, two scholarships
were awarded: the first to Shaneka Greene, a Barbadian student studying
Accounting and Finance, and the second to Tracey John, a Vincentian
enrolled in the Computer Science Programme. Ms Greene is a civic-minded
young woman who aims to contribute to her country through her work in
During 2014, SLI, the Ministry of Education and the Barbados National
Non-Communicable Diseases (NCD) Commission (a division of the
Ministry of Health) joined forces on an initiative to educate children about
chronic diseases and the importance of healthy lifestyles at an early age. The
Edu-Drama Programme, launched in September 2014, uses dramatisation
to convey the wellness message to students. Using a format known as “a
play-in-a-day”, Class 3 students in seven primary schools learned about the
dangers of chronic diseases and the health benefits of indigenous Caribbean
foods. At the end of the school day, this information was presented to
their teachers, peers and parents in the form of a dramatic performance.
It is hoped that the children will share what they have learned with family
and friends. In the long-term, this programme can have a major impact
on reducing the instances of chronic non-communicable diseases in our
society.
SLI and Sagicor Finance Inc in St Lucia assisted the St Lucia School of
Music (SLSM) with the acquisition of a grand piano. This purchase has
enabled the school to offer courses with higher levels of certification. The
St Lucia School of Music was founded in 1988, and currently has a role of
500 students in eight locations. Programmes include education in a variety
of music disciplines, as well as social inclusion projects for at-risk children.
In recognition of Autism Awareness Month, the staff of SLI in Antigua and
Barbuda presented a donation to the parents, students and staff of the
Victory Center, a non-profit school catering to children with special needs.
This funding assisted the school with activities such as swimming, music
and speech therapy, all of which enhance motor and communication skills of
special needs children. The Victory Center, founded in 2012, currently caters
to 19 students with Autism and other special needs profiles. The school
offers an adapted Antigua & Barbuda School Curriculum from kindergarten
to 5th form level, in order to help students with varying abilities achieve their
full potential.
Sagicor Life Trinidad and Tobago (SLI TT) also supported Autism Month
by raising funds through a raffle and the sale of pins and bookmarks, with
many departments and branches also choosing different fundraisers to aid
the effort for the LIFE Centre. The LIFE Centre is a non-profit organisation
2014 Annual Report
19
Sagicor Financial Corporation devoted to providing a school environment dispensing special education
to children with medium-to-severe Autism and related communication
disorders, while helping their families to better cope with the significant
challenges of having an autistic family member.
Sagicor Life Jamaica (SLJ) donated scholarship funds to more than
220 students at all levels of education as part of the Sagicor Education
Scholarships Programme. 14 recipients received awards in this year’s GSAT,
and prizes were also awarded to the Champion Boy and Girl from the JTA/
Sagicor Primary and Junior High Athletic Championships. Those children
will receive their full scholarships upon entering high school. In total,
84 students are presently benefitting from full scholarships throughout
Jamaica. A further 119 successful applicants at both the primary and
secondary level received awards at the Corporate Staff Education Function.
The recipients were children of staff members. An additional 19 students at
the University of the West Indies and the University of Technology in Jamaica
benefitted from scholarship grants through the Sagicor Scholar Programme,
a programme that has been active for over eight years.
Sagicor Life Insurance Company (SLIC) in the USA supported “Step Up For
Students”, a Florida-based non-profit corporation created to alleviate the
enormous educational challenges faced by children in Florida who live in or
near poverty. The organisation provides Tax Credit Scholarships to students
in K-12 from low-income families. These scholarships allow students to
enroll in a private school or an out-of-district public school that better suits
their needs. The Programme recognises that children learn in different
ways, and seeks to help students who are greatly disadvantaged in modern
education. Step Up for Students’ mission is to be a partner in the larger
solution of giving disadvantaged families the best learning options for their
children.
1 (L - R) Suzy de Verteuil of the LIFE Centre, accepting a donation from SLI Trinidad and
Tobago Staff members Teona Evans, Melissa Frederick, Melissa Agard and Corporate
Communications Manager, Marlene Chin.
2 (L – R) Piano teacher, Natalie McAllister of the SLSM, with student, Shan Lucien, and
Administrative Manager, Joan Michel, along with Rae Atkinson, General Manager and
Principal Representative of SLI St Lucia, and Richard Payne, Executive Director, SLSM, at the
presentation of a Grand Piano.
20
2014 Annual Report
1
2
Sagicor Financial Corporation 1
3
2
4
1 GSAT Scholarship awardees proudly displaying their certificates with SLJ’s Chairman, Hon. R. Danny Williams (L) and SLJ President and CEO,
Richard Byles (R).
2 Students of St Mary’s College, St Lucia, with their winning Sagicor Visionaries project, “Biodegradable Plastic”.
3 Recipients of SLIC’s “Step Up for Students” Tax Credit Scholarship Programme, Florida.
4 Students of the Five Rivers Secondary School, Trinidad and Tobago, demonstrating their winning Sagicor Visionaries project, “Cardboard Box Pellet”.
2014 Annual Report
21
Sagicor Financial Corporation I N O U R C O M M U N I T I E S -
Health
The Sagicor Vision outlines our commitment to
initiatives and developments which will enhance
the long-term quality of life in the communities
in which we operate. From this perspective,
we have made health a priority area of our
corporate support. As a regional leader in the
industry, we lead by example, both within and
outside of the organisation.
1
1 An aerial view of the start of the 2014 Sagicor Sigma Corporate Run in Jamaica.
2 Participants in the Sagicor Globe-athon Walk to End Women’s Cancers in Barbados.
3 Branded steps with messages to raise awareness of ‘Below-the-Belt’ Cancers at an SLI
Barbados office.
2
3
HEALTH
During 2014, several wellness and weight management programmes took
place across the Group. Activities such as Fitness Road Shows, 10,000
Step Challenges, Wellness Days, Lunch and Learn Wellness seminars and
Hikes and Biking events dominated Sagicor’s annual calendar. These
programmes were targeted to staff and clients in an effort to improve the
appreciation of lifestyle changes that reduce chronic lifestyle diseases, and
so reduce national costs for medical care and health insurance costs.
The ongoing partnership between SLI in Barbados and the regional entity,
the Healthy Caribbean Coalition (HCC), produced a landmark initiative on
chronic non-communicable diseases (CNCDs). The HCC is a non-profit
organisation, established with a mission to harness the power of civil
society in collaboration with government, private enterprise, academia,
and international partners as appropriate, in the development and
implementation of plans for the prevention and management of chronic
diseases among Caribbean people. In March 2014, at the NCD Child
Conference in Trinidad & Tobago, the HCC launched the Caribbean NCD
Regional Status Report. The Report is a compilation of data detailing the
status of national NCD activities from the perspective of civil societies.
This data will serve as a roadmap for the necessary actions needed to be
undertaken by governments, as well as civil societies, as they continue their
work in combating these diseases. In 2012, SLI and the HCC signed an
MOU, which provides the HCC with core funding for capacity building, and
increased support of regional CNCD civil society organisations.
In September 2014, SLI made a greater commitment to efforts to reduce
the instances of ‘below-the-belt’, or gynaecological cancers, by taking title
sponsorship of the Barbados Globe-athon Walk to End Women’s Cancers.
This annual event saw a 75% increase in participants with approximately
2,000 persons participating, including over 300 runners. SLI’s contribution
will go a long way towards assisting in awareness of and access to affordable
screening and effective prevention and control measures such as Pap tests,
human papilloma virus (HPV) testing and vaccinations against HPV, all of
which can help reduce the number of incidents of gynaecological cancer. The
funds raised through the Globe-athon event are managed by the Barbados
Cancer Society, and donated to improve various aspects of the Gynae-
Oncology services at the Queen Elizabeth Hospital. Messages of support
and awareness were displayed for customers of SLI through special designs
on building steps of offices and decals along the route of the Walk and Run.
In February, 2014, Sagicor Life Jamaica (SLJ) invited Jamaica’s business
community, groups and individuals to come together to participate in one
of the Group’s largest sponsorships and the largest race in the Caribbean –
the Sigma Run. A major event on the Jamaican calendar, the Sagicor
Sigma Corporate Run is a unique road-running event designed to inspire
fun, fitness and camaraderie among all participants. More than 22,000
walkers, runners and wheelchair participants came together and raised
over JMD $21.7 million for the Sickle Cell Unit TMRI at the University of the
West Indies; the Sickle Cell Trust, Mandeville; The Special Care Nursery at
the UHWI and The Jamaica Kidney Kids Foundation. Since 1999, SLJ has
donated JMD $140 million to charities through the Sigma Run. The Run
was held under the patronage of Her Excellency Lady Patricia Allen, World
and Olympic Champion, Shelly-Ann Fraser-Pryce, OD, and NBC’s The Voice
winner - Tessanne Chin.
SLJ was title sponsor for the Keeping Abreast Luncheon, an annual event
hosted by the Jamaica Cancer Society. Cancer survivors and supporters in
attendance had the opportunity to hear specially-invited guest and President
of Reach to Recovery International, Catherine Brice-Hirsch, who shared how
her experience equipped her to help other cancer victims in the fight against
the disease.
The Tampa Bay Lightning of the USA National Hockey League held its 13th
annual Bolt Run, partly sponsored by SLIC, at the Tampa Bay Times Forum
in Tampa. The St Patrick’s Day-themed event consisted of 5K, 5-mile and
1-mile fun runs that featured pre and post-race parties on the Forum’s plaza.
All proceeds went to the Leukemia and Lymphoma Society, and more than
2400 runners came out to enjoy the day and support the cause.
Members of SLIC staff volunteered their time in support of the Phoenix
Children’s Hospital (PCH) in Arizona. Each year, PCH partners with a
television station to host a telethon, along with a radio station to host a
radiothon. While SLIC made a monetary donation, staff from the Scottsdale
office volunteered to work at the phone bank, answering calls and taking
pledges.
For the second time, SLIC’s Plantation office sponsored the Vital Flight’s
“Special Day for Special Kids” event. During this event, volunteer pilots
provided the opportunity for seriously ill children to enjoy a free airplane
ride, entertainment and refreshments. The goal was to share the thrill of
flying, and children from Palm Beach, Broward and Miami-Dade counties
24
2014 Annual Report
Sagicor Financial Corporation were invited to participate. Vital Flight is a non-profit, volunteer pilot
organisation that coordinates air transportation for medical, compassionate
and humanitarian needs. Federal Aviation Administrators and licensed pilots
provide their time and aircraft at no charge to those seeking assistance.
SLIC staff in Arizona participated in the “Relay for Life” event, sponsored by
the American Cancer Society (ACS) to raise money for the fight against all
forms and types of cancer. 56 SLIC staff joined together to form 4 teams for
the cause - Happy Feet; Sagicor Walks the Walk; Hope without Wavering and
the Sagicor Steppers. Participants were also able to purchase luminaries in
memory of someone who fought, or is currently fighting cancer.
Staff from SLIC’s Scottsdale office took part in the City of Hope’s Walk
for Hope to Cure Breast Cancer event at the Phoenix Zoo. The occasion
attracted 1,860 participants, of which 40 were members of the SLIC team:
20 were employees, while the others were friends and families of employees.
Walk for Hope is a national movement that unites survivors and supporters
in the fight against breast and women’s cancers, and raises necessary funds
to continue ground-breaking research, treatment and education at the City
of Hope Organisation.
1 (L-R) Karlene Mason and Professor Graham Serjeant of the Sickle Cell Trust in Mandeville,
Jamaica, receiving a donation from the proceeds of the 2014 Sagicor Sigma Corporate Run,
from SLJ’s Willard Brown, Executive Vice President, Employee Benefits Division, and Suzette
Shaw-Reid, Assistant Manager, Public Relations.
2 SLIC staff in Arizona volunteer at the Phoenix Children’s Hospital’s Telethon.
1
2
2014 Annual Report
25
Sagicor Financial Corporation I N O U R C O M M U N I T I E S -
Community and Youth Involvement
Sagicor’s footprint spans over 23 countries
worldwide. As we grow and develop, our presence
is mirrored in each local community. Our support
for the growth and development of people and
social infrastructure is unwavering. This is a legacy
of which we are proud.
1
2
1 Parish Ambassadors with Barbadian community stalwart, Marseta Walcott,
illuminating Bridgetown at the Sagicor Life Inc Lighting Ceremony.
2 SLIC staff dispatching items collected and donated for the School Supply Drive.
3 SLIC staff at the Tampa office with their “Boxes of Hope” collected for a food drive.
3
COMMUNITY AND YOUTH INVOLVEMENT
SLI in Barbados once again sponsored the Sagicor Life Inc Lighting
Ceremony, a cultural festival which embraces and encourages nationalism
among Barbadians. The theme of the 2014 celebration was “Uniting a
Nation, One Community at a Time”. The festival featured local artistes and
talented performers who showcased Barbadian culture through dance,
music and theatre performances. The Ceremony marked the beginning of a
month of celebrations leading up to Independence Day on November 30th,
when several buildings in Bridgetown, roundabouts along the highways and
various parks and landmarks are illuminated.
SLI staff in Barbados supported Sagicor’s Mornings at the Breakfast Club.
This programme is organised by the Young Women’s Christian Association
(YWCA), and provides breakfast for children who need assistance during
the school term. Sagicor employees volunteer their time to this programme,
which now caters to approximately 300 children per day.
The Sagicor Sports and Social Club in Barbados hosted its Children’s
Christmas Party. Among the 450 guests, the Club catered for 33 children
from Government-managed homes, and a total of 316 gifts were distributed
to children at special government-run homes and institutions at the end of
this Christmas programme.
SLIC’s Plantation office sponsored the Palm Beach Zoo’s inaugural “Save
the Panther” 5k Run. This event coincided with the Zoo’s debut of its newest
Florida Panther, “Mira”. After the race was completed, a special “Panther
Talk” officially welcomed Mira to the Zoo and provided participants and race
attendees with the opportunity to ask questions about the Florida Panther.
SLIC was also sponsor of the Florida Panther Exhibit, which was on display
during the course of 2014.
on the outfield wall and behind home plate for all 81 home games during
the season, but it also provides SLIC with the opportunity to partner with
the Rays on important community initiatives. In 2014, SLIC continued
its popular “Kids Spirits Day” hospital visits with the Tampa Bay Rays.
During the season, SLIC and the Rays conducted a series of visits to the
All Children’s Hospital in St Petersburg, Florida. Rays’ players, the Rays’
mascot, Raymond, along with SLIC staff, interacted with the young patients
and their parents. Players donated Sagicor-branded baseball-shaped pillows
to the children, posed for pictures and signed autographs.
SLIC implemented a social responsibility programme to encourage
greener practices within its offices. This resulted in practices such as
mandatory dual-sided printing, and the use of water-filtering systems
to eliminate the use of plastic water bottles, and to eliminate/reduce
use of plastic and paper cups. The programme included a “Clean
Air Programme,” which encompassed a Vanpool system, whereby
employees shared transportation to and from the workplace; offered
incentives for carpooling, and discounts for the use of the public bus
system.
Another activity was SLIC’s “Corporate Giving” programme. Features of
this programme included:
• The establishment of Business Resource Groups in Arizona, Florida,
Oklahoma and South Florida.
• Providing employees with 8 hours of annual paid time for
volunteering to a selection of organisations. (Volunteering has
been incorporated into each job description, and is a mandatory
requirement for all SLIC employees)
• “Dollar for Dollars” – a system whereby the company matches funds
donated by SLIC employees to select organisations.
The All Children’s Hospital Development Council hosted its 26th Annual VIP
Auction in April, 2014, with many Tampa Bay area residents and businesses
supporting the Auction by purchasing tickets for the evening and donating
items for sale. SLIC donated a Martin acoustic/electric guitar and case for
the event, and the final bid was more than double its original cost. The
Auction was a huge success, and raised over USD $200,000 for the Hospital.
In August 2014, SLIC in Tampa completed a very successful school
supply drive. The items collected were presented to the offices of the
Hillsborough County Education Foundation in downtown Tampa. In
addition to personally donating towards the drive, staff members also
conducted in-office fundraising events.
28
2014 Annual Report
SLIC’s sponsorship of the Tampa Bay Rays Major League Baseball team
not only provides SLIC with significant in-stadium promotional signage
In December 2014, SLIC staff came together for the Annual Holiday
Party. In addition to preparing a delicious buffet dinner, staff and
their guests, in conjunction with the organisation “Feeding Children
Sagicor Financial Corporation Everywhere,” were tasked with assembling approximately 14,000 meals
for the less fortunate. The meals were donated to a local charity that
distributed them to the less fortunate within the Tampa Bay area.
SLIC staff at the Tampa Corporate Office and the Tampa Sales Office held
a food drive challenge for families in need. Employees skipped a lunch
and used their lunch money to buy items of food and gift cards. Each
“Box of Hope” provided a complete holiday meal for a family of 4.
1 Representatives from SLIC and the All Children’s Hospital at the presentation of funds raised
by SLIC Staff.
2 SLIC staff preparing Christmas meals to be donated to “Feeding Children Everywhere”.
3 Tampa Bay Rays’ team member with the Tampa Bay Rays’ mascot, Raymond, on a “Kids
Spirit Day” visit to the All Children’s Hospital in St Petersburg, Florida.
1
2
3
2014 Annual Report
29
Sagicor Financial Corporation I N O U R C O M M U N I T I E S -
Sports
Nations and companies alike are built on
teamwork and sportsmanship. Sagicor
views these traits as character-building,
and through our support of sporting
events, seeks to nurture their importance
across all genders, races and ages.
1
1 One of the children participating in a
“Sagicor Kids on the Greens” practice
session at the St Andrew’s Golf Club in
Trinidad & Tobago.
2 SGI Twenty 20 Spartan team celebrating
their win in Barbados.
2
SPORT
Sagicor General Insurance (SGI) in Barbados has long been associated
with cricket throughout the region, and 2014 welcomed the successful
hosting of the Sagicor General Insurance Twenty 20 Competition and the
Sagicor General Shield. The T20 Competition opened the 2014 Barbados
Cricket Association season with 18 teams divided into three zones playing
5 preliminary series, Quarter and Semi Finals and Finals. The Finals, held
in June 2014, saw Spartan team emerge as the victors with a prize purse of
BBD $20,000. The Sagicor General Shield Tournament attracted several local
Barbadian teams, with the Barbados Fire Service defeating the team from
the Psychiatric Hospital by eight wickets in the Finals at Kensington Oval.
SGI, as a keen sports sponsor, supports a wide range of sports, as well as
sportsmen and women in their individual endeavours. For example, 2014
saw SGI playing a role in assisting Barbadian body builders to attend the
2014 Central American and Caribbean Championships (CAC) in St Maarten.
In years past, Barbadian body builders have made their mark in international
body building, and SGI’s sponsorship further supported the country’s legacy
in hemispheric body building at the highest level.
The Sagicor Sports and Social Club of SLI TT participated in the 23rd
CariFin Games, hosted by the CariFin Health and Fitness Club. The Games,
designed to promote health and fitness among workers in the financial
sector, were staged as a series of events over several months, and included a
Torch Run, the Urban Challenge, a Fitness Burnout, a Cross Fit Qualifier and
a Cross Country Run.
Golf featured in several sponsorships across the Sagicor Group during 2014.
In September, SLI TT sponsored a team in the St Augustine Rotary Club
Golf Tournament. The Rotary Club is part of an international organisation
that unites businesses and professionals to work together for humanitarian
goals. In this case, proceeds from the Tournament were donated to
“Heartbeat International Trinidad and Tobago”, an organisation which works
to help people in need of cardiovascular treatment and implantable devices.
SLI TT also hosted the Sagicor St Andrew’s Golf Invitational, one of Trinidad
and Tobago’s most popular golf tournaments. 132 golfers from six golf clubs
played in support of the Autism Society of Trinidad and Tobago.
Both SGI Barbados and SLI TT hosted family-oriented golf tournaments
during 2014. In Trinidad and Tobago, “Sagicor Kids on the Greens” invited
staff members and their children to tee off, after some practice sessions on
the putting green with the coach from St Andrew’s Golf Club. SGI Barbados
hosted the Sagicor General Family Championship at the Barbados Golf
Club. 72 players, comprising 36 two-member teams, contested in several
divisions, such as Parent and Child, Husband and Wife and the Open
Division.
SLI TT hosted the Sagicor Junior Lawn Tennis Tournament at the Nelson
Mandela Park. 150 contenders vied for top trophies and cash prizes
in the six-day event, which has been a staple feature of SLI TT’s event
calendar. 2014 also heralded the first ever edition of the “Red Star Under-10
Tournament”. This introductory beginner’s Tournament is open to all
children interested in taking up the sport of tennis.
SLJ is synonymous with sports sponsorships and has, over the years,
forged several long-standing relationships with key stakeholders within its
communities, as well as various athletic associations and clubs. One such
relationship is that with the Jamaica Teachers’ Association, with which SLJ
partnered to host the National Primary, All-Age and Junior High School
Athletic Championships. This partnership staged the two-day track and field
event held at the National Stadium, benefitting over 1,200 young athletes
from across the island. Sagicor has supported this event for over 20 years.
SLJ is well-known among the Guild of Students at the University of the
West Indies, Mona Campus, through the sponsorship of the Sagicor/UWI
Guild Champions League. During 2014, teams formed by UWI students
competed in football matches for a chance to win a cash prize, as well as
the associated bragging rights. Teams were fully subscribed, and over 1,500
students came to each game, while the Finals attracted several thousand
students.
SLJ donated valuable computer equipment to the Manchester High School,
which assisted students at the CXC, GCE and ‘A’ Levels. SLJ’s Knutsford
Branch gave their adopted school, Evangelistic Basic School, a much-
needed facelift, while the Ocho Rios Branch donated stationery to the Ocho
Rios Primary School in the Special Education Unit. The Sagicor/UTECH
National Debating Championships, hosted by SLJ, established UTECH as
the undisputed leader in British Parliamentary Debating in Jamaica, beating
a record 60 teams.
32
2014 Annual Report
Sagicor Financial Corporation In conjunction with the Tampa Bay Rays’ sponsorship, the “Sagicor Junior
Announcer Sweepstakes” and “Sagicor Salute to Education” both enjoyed
another successful year. The Junior Announcement Sweepstakes provided
children aged 8 to 16 years with the chance to be an announcer for one
inning, announcing the batter’s name as they came up to bat. Junior
Announcers were selected for every Sunday home game throughout the
season. The Salute to Education Programme was developed to recognise
outstanding Tampa Bay area educators. For every other home game, 40 in
total, an educator and guest were provided with VIP seating to watch a Rays’
game, during which the honoured teacher was recognised on the stadium’s
video scoreboard as SLIC’s Outstanding Educator.
The George Estock Baseball Scholarship sent its second child to the Rays’
Baseball Camp for a week. The 10-year Scholarship programme was set up
in 2013 in honour of George Estock, a former Sagicor President and CEO
of SLIC, at retirement. Each year a deserving child will attend a week-long
baseball camp with the Tampa Bay Rays, free of charge. The Rays’ Baseball
Camp operates during the summer, and 2014’s scholarship recipient was
the son of a military veteran who, without the scholarship, would not have
been able to attend the Camp.
1 Walkers and runners from SLI TT at the CariFin Green Mile Event.
2 (L to R) Huit Johnson, Chairman of the JTA National Sports Committee & Dr Mark Nicely, President
of the JTA, receiving a sponsorship cheque from SLJ’s Alysia White, Public Relations & Promotions
Manager & Barrington Groves, Brand Manager.
3 Winners at the Sagicor Junior Lawn Tennis tournament in Trinidad & Tobago, with their Coach,
Tournament Director, President of the Tennis Association of Trinidad & Tobago, and members of the
SLI TT management team.
1
2
3
2014 Annual Report
33
Sagicor Financial Corporation 175 years of service
No matter how big we grow, how much
we change, or how far we go, we must
never forget that our most important
purpose is to serve.
HUMAN CAPITAL REPORT
TALENT MANAGEMENT AND WORKFORCE PLANNING
• Mr Anthony Bowen - Executive Vice President, Sales and Marketing -
EMPLOYEE DEPLOYMENT
In March 2014, Group President and Chief Executive Officer of Sagicor
Financial Corporation, Mr Dodridge Miller, announced a strategic
initiative, the Sagicor PRO (Process Review and Optimisation) Project
to review operating systems and procedures. The Project is expected to
reduce complexity and enhance management efficiency with appropriate
metrics for measurement, analysis and continuous improvement. This
Project, which is ongoing, is expected to deliver a better and more
efficient work environment and enhance customer engagement.
In January 2014, Sagicor Life Jamaica (SLJ) welcomed approximately
500 employees into the Sagicor family, through the acquisition of RBC
Royal Bank (Jamaica) Limited. This acquisition significantly expanded the
banking division of SLJ’s local operations.
EXECUTIVE APPOINTMENTS
During 2014, there were several key executive appointments throughout
the Group. The appointments were:
• Mr Willard Brown, Executive Vice President, Employee Benefits
Division, Sagicor Group Jamaica
• Mrs Althea Hazzard, General Counsel and Corporate Secretary &
Chief Compliance Officer, Sagicor Financial Corporation and Sagicor
Life Inc
• Mr Rohan Miller, President & Chief Executive Officer, Sagicor
Investments Jamaica Limited
Sagicor Life Inc
• Mr Errol McKenzie - Executive Vice President, Employee Benefits
Division - Sagicor Group Jamaica
• Ms Maxine MacLure - Executive Vice President, Corporate Services
& Chief Compliance Officer - Sagicor Financial Corporation.
The Board, Management and Staff at Sagicor thank these individuals for
their sterling contribution over the years.
SUCCESSION PLANNING
Group Companies reviewed and updated succession plans to ensure
that there are adequate people with the capabilities required to match
the Group’s ambitions. The Human Resources Committee of the
Board of Directors continuously reviews the bench strength at the top
tiers of the Group, while the HR Department, working with Heads of
Departments, reviews bench strengths for all other key roles. Evergreen
succession plans inform recruitment and training and development
programmes.
Sagicor Life Jamaica, through its Sagicor Experience Internship
Programme, gave recent university graduates an opportunity to gain
valuable work experience, build business confidence, and introduce
them to the insurance and financial services industry. It provided the
company with a talent incubator, supporting its succession plan. The
Internship Programme has grown from 16 interns in 2013 to 60 in 2014.
Since the Programme’s inception, 27 of these interns have successfully
transitioned to become members of the SLJ team.
• Mr Donovan Perkins, President & Chief Executive Officer, Sagicor
TRAINING AND DEVELOPMENT
Bank Jamaica Limited
• Mr Juan Carlos Martinelli Remond, General Manager, Sagicor
LEADERSHIP TRAINING
Panama, S.A.
RETIREMENTS
Sagicor Group bid farewell to the following individuals who retired at the
end of 2014.
36
2014 Annual Report
LIMRA facilitated the second phase of the Executive Development
Programme with two workshops for senior managers in Sagicor Life
Inc in June 2014. Workshop topics included Executive Development,
Innovation Advantage, and Creating a Culture of Achievement.
Sagicor Financial Corporation Sagicor Life Insurance in the USA (SLIC) implemented a Leadership
Development Training programme for key resources as part of the
company’s succession planning process.
Provisions under the Deed of Covenant provide for a number of exciting
developmental opportunities for Senior Managers, high-potential
employees and for institutional strengthening, including:
SLI Trinidad and Tobago continued the Leadership Development
Programme started in 2013, with the successful completion
of the 12-month Management Development Programme,
HarvardManagementor11. A 6-month comprehensive supervisory
development programme provided training for 26 Sagicor Supervisors.
• A corporate University exclusive for Sagicor Life Inc, which will target
the company’s senior level high achievers who are on the track for
promotion within the next 3 to 5 years. The selected employees will
work with coaches to improve their leadership skills and to make the
most of identified areas of strength.
Product training for administrative staff continued during 2014, with a
view to improving customer service by enhancing understanding and
appreciation of the Sagicor product suite, and providing support to the
sales strategy.
COMPETENCY-BASED TRAINING FUND
In December 2014, SLI in Barbados was informed of its successful bid to
access training through the Competency-Based Training Fund, an Inter-
American Bank initiative in Barbados. Through this arrangement, SLI
Barbados will have access to US$400,000 for certification in a number of
business competencies in Management, Leadership, Customer Service,
Sales, Business Communication, Conflict, Time and Stress Management
under the National Vocational Qualifications (NVQ) Occupational
Standards.
The Barbados Institute of Management and Productivity (BIMAP) will
deliver the training to develop Sagicor’s employees’ competencies.
Workshops commenced February 2015, and will be followed by the
formal assessment of skills to ensure that participants have achieved the
Barbados (NVQ) Occupational Standards.
CORPORATE UNIVERSITY & MENTORSHIP PROGRAMME
SLI Barbados and the Cave Hill School of Business (CHSB), University of
the West Indies, announced a collaborative agreement between the two
organisations for the provision of a US$2.5m endowment to the CHSB
in Barbados.
• A Management Skills Certificate Programme, which will target
new and more experienced Managers and Senior Supervisors.
The selected employees will be equipped with skills which will be
developed into a competitive advantage.
• Performance Management Initiatives, which will develop the
mentoring and coaching skills of the company’s Managers and
leaders. There will also be a Personal Mastery Programme, which
will develop key competencies required by employees in executing
the company’s business strategies.
CUSTOMER SERVICE
Several customer service improvement projects drove the strategic
decision to differentiate Sagicor from its competitors:
“Priority You” - a customer-care project in SLI in Trinidad and Tobago
redefined the customer-care vision; developed customer-care standards
and trained employees and advisors in the delivery of exceptional
service.
“Creating Memorable Experiences” - a customer-service philosophy
which was launched in 2014 in Barbados and the Eastern Caribbean,
following the roll-out of the service standards in 2013.
Online product training, as well as classroom workshops, continued in
2014, to enhance the customer-service experience at Sagicor.
CODE OF ETHICS AND AML TRAINING
The Sagicor Group continues to reinforce its corporate standards and
business ethics through compulsory training, using an online platform
2014 Annual Report
37
Sagicor Financial Corporation for employees and advisors across the SLI Group, using an online
platform, as well as the annual disclosure process.
FATCA
Administrative employees and Brokers throughout Barbados, the Eastern
Caribbean and Capital Life offices attended sessions on the new Foreign
Account Tax Compliance Act (FATCA). The workshops were facilitated by
the consulting firm, Deloitte.
FATCA, which took effect on July 1, 2014, addresses tax abuse by US
persons, and the new regulations will ensure that they report financial
accounts held outside of the USA.
Most Group companies reported incremental improvements in their
survey results for 2014. Positive trends on all dimensions for Morale,
Employee Engagement, Leadership, Recognition and Rewards and
Quality of Work Life, the latter recording 3% improvement on the
previous year, is an important indicator that Sagicor is experiencing
some success in providing a work environment where employees feel
engaged and can excel.
Management reviews survey results and recommendations, and
develops programmes which support initiatives and addresses concerns
within the business plans of the entities.
NATIONAL AWARDS
PERFORMANCE MANAGEMENT
The Sagicor Group of Companies proudly celebrated national and other
awards conferred in 2014:
Having completed the pilot project for 360 degree feedback during 2014,
we will roll out this element of our performance management process on
the Sagicor Success – HR Technology platform in 2015.
Group companies will upgrade to the updated Success Factors platform
used to manage performance in 2015.
EMPLOYEE ENGAGEMENT
While USA business reports indicated that the USA markets were
making a strong recovery with promising gains in the job markets,
negative economic forecasts in the Caribbean continued to stifle
merit pay and cost-of-living adjustments (COLA) increases across the
region. Group Companies focused on their Performance Management
Programmes and Employee Rewards and Recognition Programmes to
recognise and reward star performers, while keeping a close eye on the
metrics that monitor employee engagement.
EMPLOYEE OPINION SURVEYS
Group companies continued to monitor employee engagement using
the Life Office Management Association (LOMA). This survey seeks
to measure the state of emotional and intellectual commitment of
employees, and is composed of a series of 29 opinion statements.
• Dr Pat Downes-Grant: President and Chief Executive Officer of
Sagicor Life Inc, was one of nine outstanding Barbadian citizens
honoured in the Queen’s 2014 Birthday Honours List. She received
the Commander of the Order of the British Empire (CBE) for service
to the financial sector. Dr Downes-Grant was also awarded an
Honorary Doctorate of Laws from the University of the West Indies
for outstanding leadership in the financial sector.
• Mr Richard Byles: President and Chief Executive Officer, Sagicor
Group Jamaica, was awarded the 2014 Business & Civic Leadership
Award for Excellence from the American Chamber of Commerce.
• Mr Timar Jackson, Actuarial Analyst, Corporate Actuarial Services at
Sagicor Life Jamaica was a 2014 Rhodes Scholarship recipient.
• Mr Ricardo Allen, Structured Product Analyst, Treasury & Capital
Markets Department at Sagicor Group Jamaica was a 2014 Fulbright
Scholarship recipient.
• Sagicor Group Jamaica received the Jamaica Bureau of Standards -
“National Quality Awards” for ‘Excellence in Human Resource
Focus’.
38
2014 Annual Report
Sagicor Financial Corporation CORPORATE STRUCTURE
The following organisational changes in Sagicor Life Inc were
implemented with a view to improving efficiency and complying with
new regulatory requirements.
• Sagicor Life Inc and Sagicor Capital Life Inc were amalgamated on
December 31, 2014.
• Sagicor Life (Eastern Caribbean) Inc was registered in St Lucia on
October 10, 2014.
2014 Annual Report
39
Sagicor Financial Corporation 175 years of innovation
Our corporate footsteps show where we’ve
been, and where we are going. With reliable
information, we can ensure the best quality
in service for today and tomorrow.
OPERATING AND FINANCIAL REVIEW
OVERVIEW
The Sagicor Group is a leading provider of insurance products and
related services in the Caribbean region. It also provides insurance
products in the United States of America (USA) and banking services in
Jamaica.
The main insurance lines are life insurance, annuities and pension
management, health insurance and property and casualty insurance.
The customer base is predominately individuals, but certain lines are
marketed to employers to provide employee benefits and to commercial
enterprises to provide property and casualty products.
EXTERNAL ENVIRONMENT
The external environment impacts the operating and financial
performance of the Sagicor Group.
Economic factors, such as economic growth, employment levels and
disposable income, impact the levels of both new business and renewal
life insurance and annuity products offered by the Group. Interest rates
and investment yields affect the level of savings and investment returns
offered for life insurance, annuities and banking products, and ultimately
the profit margins that the Group can generate from these product lines.
The health and mortality of insured customers and beneficiaries impacts
the levels of death, disability and health benefits the Group is required to
meet.
Property and casualty insurance products offer policyholders financial
protection against loss or damage to property, accidents, and liability to
third parties.
The Group’s operating units are all regulated by insurance, banking and
securities regulations. The Group therefore has to meet statutory and
reporting requirements to governments and government agencies.
Economic Environment
42
2014 Annual Report
The 2014 financial year saw variability in the pace of economic
recovery across the developed world, as evidenced through relatively
moderate growth of 2.4% in the United States of America (USA),
while the economies of Europe and Japan experienced growth of
0.8% and 0.1% respectively. Despite the positive signs in the USA,
global growth remained tenuous as recessionary headwinds stagnated
growth in Europe and Japan. This necessitated the prolongation of
the accommodative fiscal and monetary policies, particularly within
developed economies throughout 2014. Furthermore, the unexpectedly
sharp and extended decline in oil prices negatively impacted oil-
exporting emerging market countries, namely Russia. In light of the
general anaemic economic conditions which prevailed in the broader
developed and emerging market economies, the International Monetary
Fund revised downward its projections for global growth by 0.3% to
3.5% for 2015.
In the USA, economic indicators showed improvement. Consumer
spending increased during the fourth quarter of 2014, while the
unemployment rate declined to 5.6% in December, the lowest level since
2008. Against the backdrop of encouraging economic data, the Federal
Reserve concluded its bond repurchase programme in October 2014.
However, the protracted decline of global oil prices further constrained
the already subdued level of inflation, which stood at 1.3% in November
2014, and prompted the continuance of near zero interest rates for the
foreseeable future. In Europe, the low level of inflation, coupled with the
generally weak investment climate and persistently high unemployment,
continued to weigh on economic growth. Therefore, the European
Central Bank (ECB) maintained its relaxed fiscal policy stance and held
interest rates constant at an unprecedentedly low level.
Regionally, economic growth across the majority of Caribbean islands
trended positively, albeit at relatively low levels. However, the protracted
economic challenges of burdensome fiscal deficits, increasing debt levels
as well as dwindling foreign direct investment, remained hindrances to
the economic stability of the region.
Conversely, there was an incipient recovery in the tourism sector which
generally showed moderate improvement, but remained well below the
pre-crisis levels prior to 2008.
The Barbados economy experienced modest expansion of 0.3% in 2014,
which was supported by growth within the tourism and construction
sectors. Trinidad & Tobago and Jamaica experienced real GDP growth
Sagicor Financial Corporation for 2014 of 2.0% and 0.9%, respectively. The level of unemployment
remained high across the region, while the level of inflation trended
lower and remained positively correlated with the decline in global
oil prices. In Jamaica, areas of expansion were in tourism, services,
transportation, mining and telecommunications, while the growth in the
Trinidad & Tobago economy was underpinned by positive contributions
from the energy and non-energy sectors. Given the dampening impact
of the decline of global energy prices on the performance of Trinidad &
Tobago’s economy as an exporter of oil, the budgetary price assumptions
for oil have been revised downwards for 2015. In tandem with an
anticipated increase in short-term interest rates in the USA, Trinidad &
Tobago’s Repo rate increased to 3.25% by year-end, relative to 2.75%
in 2013, with an additional 25 basis points increase to 3.5% in January
2015. Throughout 2014, the US dollar rallied against major international
currencies. In the region, the Jamaica dollar depreciated relative to the
US dollar by an annualised 7.8%.
Insurance Regulation
There has been no significant legislative change in the insurance sphere
in the Caribbean. Governments and regulators either have initiated, or
are contemplating enhancements to insurance regulation, as a response
to the recent failure of insurance subsidiaries of CL Financial in the
region.
GROUP RESULTS
Revenues from continuing operations in 2014 totalled US $1,045 million,
and were US $6 million higher than the prior year amount of
US $1,039 million, and included US $29.1 million in negative goodwill
on the acquisition of a banking operation in Jamaica. Revenues were also
impacted by lower annuity premiums written in the United States, when
compared with 2013.
Insurance and other benefits also decreased in 2014 to a total of
US $542 million, compared to a total of US $593 million in 2013. This
reduction was largely as a result of lower annuity business written in
the United States of America as indicated above. Expenses and taxes
increased and reached US $403 million in 2014, as compared to a total
of US $366 million in 2013. Expenses now include 6 months of operating
costs on the banking business acquired in Jamaica, as well as non-
recurring restructuring and rebranding costs.
Total comprehensive income from continuing operations increased
significantly to US $107 million in 2014, compared to US $6 million in
2013.
CONSOLIDATED INCOME 1 - $ millions
Revenue
Benefits
Expenses & taxes
Net income
2014
1,045
(542)
(403)
100
2013
1,039
(593)
(366)
80
COMPREHENSIVE INCOME
2014
2013
Other comprehensive (loss)
Total comprehensive income
1 from continuing operations
7
107
(74)
6
Other comprehensive income was US $7 million, compared to a loss of
US $74 million in 2013. Comprehensive income in 2014 was impacted by
US $16 million in net movements related to investment assets, gains on
defined benefit plans of US $13 million, and losses on foreign currency
retranslation of US $22 million.
In December 2012, the Board and Management made a decision
to dispose of Sagicor Europe, which owned the Sagicor at Lloyd’s
operations. In accordance with International Financial Reporting
Standards, the results of Sagicor Europe have been separated from
the Group’s continuing operations and presented as a discontinued
operation. Sagicor Europe was sold on December 23, 2013. The results
of the Group’s continuing operations are further analysed under the
next several sub-headings. The results of the discontinued operation are
discussed and analysed in the Operating Segments section.
2014 Annual Report
43
Sagicor Financial Corporation Shareholder Returns
Revenue
The Group’s net income and comprehensive income are allocated to the
equity owners of the respective Group companies in accordance with
their results. As some Group companies have minority shareholders,
particularly in the Sagicor Jamaica operating segment, the Group’s net
income is allocated accordingly between holders of Sagicor’s common
shares and the minority interest shareholders. There is also an allocation
to Sagicor Life Inc’s policyholders who hold participating policies, an
arrangement which was established at the demutualisation of Barbados
Mutual Life Assurance Society (now Sagicor Life Inc).
For the 2014 financial year, US $54 million of net income from
continuing operations was allocated to the holders of common shares
of Sagicor Financial Corporation, which corresponded to earnings
per share of US 17.3 cents. The comparative amounts for 2013 were
US $39 million of net income and earnings per share of US 12.5 cents.
The respective annual returns on shareholders’ equity were 11.2% for
2014 and 7.7% for 2013.
Dividends declared to common shareholders in respect of 2014 totalled
US $12 million, and represented US 4 cents per share. The same
amounts were declared for 2013.
COMMON SHAREHOLDER RETURNS 1
2014
2013
Net income - $ millions
Dividends - $ millions
Earnings per share - cents
Dividends per share - cents
Return on equity - %
54
12
17.3
4.0
11.2
39
12
12.5
4.0
7.7
1 from continuing operations except for dividends.
The sources of the Group’s revenue are insurance premiums from
customers, investment income, fee income and other revenues. The
following table summarises the main items of revenue.
REVENUE - $ millions
2014
2013
Net insurance premiums:
Life and annuity
Health
Property & casualty
Net investment income
Fees and other revenues
Gain arising on acquisition
461
146
19
626
307
83
29
498
141
18
657
279
103
-
1,045
1,039
Premium revenue from life insurance and annuity was US $461 million,
and represented 74% of total premium revenue. The comparative
amounts for 2013 were US $498 million and 76%. The reduction in
revenue occurred largely as a result of lower new annuity business
written in the USA, when compared to 2013, and the impact of the
deterioration of the Jamaica dollar to the US dollar on conversion of
the premiums. The Group markets a range of life and annuity products,
most of which are long-term contracts for which a monthly premium is
paid by the customer.
For some long-term contracts, however, a single premium (usually
a lump sum) is paid at the beginning of the contract. There are also
annual renewable contracts which are marketed largely to employers to
provide coverage to their employees on a group basis.
The Group also markets annual renewable health insurance contracts
to employers and associations. These provide benefits against medical
costs incurred by insured persons. Premium revenue from health
44
2014 Annual Report
Sagicor Financial Corporation insurance totalled US $146 million, an increase of US $5 million over the
2013 total.
Benefits
The Group also markets property and casualty insurance contracts in
the Caribbean region. These are marketed to individuals and commercial
enterprises. Premium revenue from these classes of insurance totalled
US $19 million, up from US $18 million in 2013.
Income is generated from the investments made by the Group. The
annual yields achieved on financial investments were as follows.
INTEREST YIELDS
Debt securities
Mortgage loans
Policy loans
2014
6.3%
6.6%
7.5%
2013
6.6%
7.5%
7.1%
Finance loans & finance leases
11.4%
10.0%
Securities purchased for resale
Deposits
5.6%
1.7%
3.7%
1.8%
Income from fees and other revenues totalled US $83 million, as
compared to the 2013 level of US $103 million. The reduction in revenue
occurred largely as a result of lower commissions income on lower new
annuity business written in the USA.
On June 26, 2014, the Group completed the acquisition of RBC Royal
Bank’s Jamaica banking operation, and rebranded the business as
Sagicor Bank. After determining the fair value of acquired assets and
liabilities of the business, the Group experienced negative goodwill on
acquisition of US $29 million.
The table below summarises the expense incurred by the Group in
providing benefits.
BENEFITS - $ millions
Net insurance benefits:
Life and annuity
Health
Property and casualty
Interest expense
2014
2013
363
108
8
479
63
542
415
113
7
535
58
593
Insurance benefits comprise amounts payable to policyholders and
beneficiaries in accordance with the contract terms of insurance policies
issued or assumed by the Group. Interest payable to investment
contract-holders or financial institutions which have placed funds with
the Group are treated as interest benefits. Current life insurance and
annuity benefits are recognised on the notification of death, disability
or critical illness of an insured person; on the maturity or surrender of
a policy; on the declaration of a policy bonus or dividend; or an annuity
payment date. Future life insurance and annuity benefits are recognised
in the financial statements on in-force long-term insurance contracts,
based on reserving methodologies adopted by the Group in accordance
with established Canadian accepted actuarial standards (recognising
local conditions).
Life and annuity benefits totalled US $363 million in 2014, of which
US $322 million related to current benefits, and US $41 million related
to future benefits. The corresponding amounts for 2013 were a total of
US $415 million, of which US $305 million were for current benefits,
and US $110 million were in respect of future benefits. The reduction in
2014 Annual Report
45
Sagicor Financial Corporation benefits occurred as a result of lower new annuity business written in the
USA, when compared to 2013.
Expenses in 2014 includes restructuring and rebranding costs, together
with 6 months of operating expenses relating to the acquired RBC Royal
Bank’s Jamaica banking operations.
The amount of future benefits recorded in the statement of income is a
function of the policy contracts in-force, and of the appropriate actuarial
assumptions which are made to value them.
Health, property and casualty insurance benefits are recognised either
on the notification or settlement (for short notification periods) of a
claim from policyholders. In addition, incurred but not reported (IBNR)
benefits are recognised in accordance with established or expected
trends for claims incurred.
Total health insurance benefits were US $108 million, representing an
overall claims to premium ratio of 74%. The comparative 2013 amounts
were US $114 million, and an overall claims to premium ratio of 80%.
Property and casualty claims amounted to US $8 million in 2014, an
increase of US $1 million from the 2013 comparative figure.
The interest returns the Group has provided to investment contract-
holders and financial institutions which have advanced funds are
summarised in the following table.
INTEREST YIELDS
Investment contracts
Other funding instruments
Customer deposits
Securities sold for repurchase
Expenses and taxes
2014
5.4%
2.0%
2.6%
5.0%
2013
5.3%
2.2%
3.6%
4.8%
Expenses and taxes totalled US $403 million for 2014, up from
US $366 million for 2013.
Expenses of administration represent the largest expense category and
totalled US $234 million in 2014, compared to US $204 million in 2013.
46
2014 Annual Report
Commissions represents compensation and benefits payable to
insurance agents and brokers who generate new and renewal premium
revenue for the Group. Commissions totalled US $98 million for 2014
compared to US $100 million for 2013.
EXPENSES & TAXES - $ millions
Administrative expenses
Commissions
Finance costs, depreciation and
amortisation
Premium, asset and income taxes
2014
234
98
43
28
403
2013
204
100
32
30
366
The Group is subject to a variety of direct taxes, with premium and
income taxes comprising the main types of tax. Taxes are incurred
in the jurisdiction in which the income is generated. Premium tax is
customarily a percentage of gross premium revenue, while income tax
is usually either a percentage of investment income or a percentage of
profits.
Comprehensive income
Gains and losses recorded within other comprehensive income arise
from fair value changes of certain classes of assets, and from the
retranslation of foreign currency operations.
For 2014, fair value changes in assets accounted for a net gain of
US $16 million. There was also a gain of US $13 million relating to
defined benefit plans. Retranslation of foreign currency operations
accounted for a loss of US $22 million. The latter arose largely from the
depreciation of the Jamaica dollar. The corresponding amounts for 2013
were a loss of US $32 million arising from fair value changes in assets,
Sagicor Financial Corporation Invested assets and cash balances as of December 31 are summarised
in the table below.
INVESTMENTS & CASH - $ millions
2014 1
2013 1
and a loss of US $36 million from the retranslation of foreign currency
operations.
Assets
Net income and other comprehensive income together result in
total comprehensive income. Summarising the Group’s results from
continuing operations, total comprehensive income was US $107 million
for 2014, compared to US $6 million for 2013.
GROUP FINANCIAL POSITION
Sagicor’s activities of issuing insurance contracts; of accepting funds
from depositors; of banking and securities dealing result in the Group
receiving significant funds which are held as liabilities and are invested
in a variety of assets.
The Group’s sources of capital are equity contributions from
shareholders, retained earnings and reserves, and borrowings.
Debt securities
Mortgage loans
Policy loans
Finance loans and finance leases
Securities purchased for re-sale
Deposits
Cash
The table below summarises the consolidated financial position of
Sagicor as of December 31, 2014 and 2013.
Investment property and other items
3,448
3,192
294
133
411
32
127
403
347
258
134
165
41
161
226
382
5,195
4,559
STATEMENT OF FINANCIAL POSITION - $
millions
2014
2013
1 continuing operations
Assets
Liabilities arising from operations
Borrowings
Equity
6,180
5,107
299
774
5,298
4,283
290
725
Debt securities are the largest class of invested assets, and represented
66% of total investments and cash as of December 31, 2014 (70% as of
December 31, 2013). These securities are very suitable instruments to
back long-term insurance liabilities because of their medium to long-
term duration, the regular interest payments received, and the relatively
low credit risk.
6,180
5,298
Debt instruments are issued primarily by Governments, state-sponsored
agencies and corporate entities. The Group acquires and holds these
instruments usually in the country where the funding arose. The Group
also invests in debt instruments of short duration as a way of earning
investment returns with minimal risk, and of providing opportunities for
investment contract-holders to earn safe returns.
Other invested assets are spread across various asset classes such as
mortgages, loans, deposits and property.
2014 Annual Report
47
Sagicor Financial Corporation The increase in debt securities, finance loans and leases and cash,
when compared to 2013, largely reflects the acquisition of the banking
operation in Jamaica.
Liabilities arising from operations
The Group issues life insurance and annuity contracts either to
individuals or to employers in respect of their employees. Insurance
liabilities are summarised in the following table.
FINANCIAL LIABILITIES - $ millions
2014
2013
Investment contracts
Securities sold for re-purchase
Customer deposits
Other funding instruments and other items
361
665
571
369
367
524
237
344
1,966
1,472
INSURANCE LIABILITIES - $ millions
2014 1
2013 1
Future benefits - individual contracts
2,137
1,907
Future benefits - group contracts
Current benefits and other payables
1 continuing operations
426
242
417
234
2,805
2,558
Investment contracts may be issued to pension funds to hold pension
plan assets or to individual customers to provide savings vehicles.
Securities sold for repurchase provide specific security to depositors
who place funds with the Group for investment return. Deposits and
other funding provide monies to the Group to invest in loans and related
securities.
Other liabilities include general provisions, accruals and payables which
arise in the ordinary course of business.
Future benefits represent amounts recognised at the date of the financial
statements for liabilities not yet due. These liabilities may become due
in the near, medium or long-term and are estimated using established
actuarial techniques.
The discontinued operation (Sagicor at Lloyds) was sold on
December 23, 2013. There is a liability of US $46 million (2013,
US $55 million) relating to future price adjustments on the run off of
the 2011, 2012, and 2013, underwriting years of account.
Current benefits and other payables represent amounts which are
currently due and are in the course of settlement. These include benefits
in respect of all classes of insurance written - life, annuity, health,
property and casualty.
The Group’s liabilities, which arise from issuing investment contracts,
accepting deposits and funding, are as follows.
Capital
The Group has issued equity and debt instruments to provide capital
for its operations. The amounts recognised in the statement of financial
position in respect of these instruments are summarised below.
48
2014 Annual Report
Sagicor Financial Corporation A measure used to determine the capital adequacy of a life insurance
group, which is the predominant activity within Sagicor, is the Canadian
Minimum Continuing Capital and Surplus Requirement (MCCSR).
The consolidated MCCSR ratio for the Sagicor Group was 273% as of
December 31, 2014, compared to 259% at December 31, 2013, both of
which are significantly in excess of the minimum recommended ratio of
150%. These ratios include risk factors for the potential credit default
of debt instruments of Caribbean Governments held by life insurance
subsidiaries.
EQUITY & BORROWINGS - $ millions
2014
2013
Common shareholders’ equity
Preference shareholders’ balances
Minority interest shareholders’ balances
7.5% senior notes due 2016
4.6% notes due 2015
Participating accounts & other
Classified as:
Equity
Borrowings
522
118
242
147
43
1
495
117
219
145
43
(4)
1,073
1,015
774
299
725
290
1,073
1,015
303,917,020 common shares of Sagicor Financial Corporation are
outstanding, and are tradable on the Barbados, Trinidad & Tobago and
London stock exchanges. 120 million convertible redeemable 5-year
6.5% preference shares were issued by the Company in 2011, and
these are also tradable on the Barbados and Trinidad & Tobago stock
exchanges. Common shares of certain subsidiaries are held by minority
interests, primarily in Jamaica, where those shares are tradable on the
local stock exchange. In 2006, a subsidiary issued US $150 million
10-year 7.5% notes due 2016. On December 18, 2013 the Company
issued 18-month US $43 million notes, which are repayable in 2015.
Participating accounts were established by a subsidiary to provide
additional policyholder protection on participating policies which pay
policy bonuses and dividends.
A measure of financial stability is the debt (borrowings) to equity ratio
which, for the Sagicor Group, was 38.7% as of December 31, 2014,
(December 31, 2013: 40%).
2014 Annual Report
49
Sagicor Financial Corporation SAGICOR GROUP
SUMMARY ORGANISATIONAL CHART
SAGICOR FINANCIAL CORPORATION
- HOLDING COMPANY & GROUP FINANCING
SAGICOR LIFE
SAGICOR JAMAICA
SAGICOR
USA
OTHER
OPERATING COMPANIES
SAGICOR
EUROPE
(Discontinued
Operation)
SAGICOR LIFE
- LIFE & HEALTH INSURANCE
SAGICOR LIFE
JAMAICA -
LIFE &
HEALTH
INSURANCE
SAGICOR
BANK
JAMAICA -
COMMERCIAL
BANKING
SAGICOR
INVESTMENTS
JAMAICA
- INVESTMENTS
SAGICOR LIFE
INSURANCE
COMPANY
- LIFE
INSURANCE
SAGICOR
GENERAL
- P&C
INSURANCE
INVESTMENT,
FINANCE &
REAL ESTATE
ENTITIES
SAGICOR AT
LLOYD’S
- P&C
INSURANCE
OPERATING IN
OPERATING IN
OPERATING IN
OPERATING IN
OPERATING IN
OPERATING IN
BARBADOS, TRINIDAD &
TOBAGO, EASTERN CARIBBEAN ,
ARUBA, CURAÇAO, BELIZE, PANAMA,
ST. MAARTEN
JAMAICA,
CAYMAN ISLANDS
JAMAICA
JAMAICA
USA
& COSTA RICA
BARBADOS,
BARBADOS,
TRINIDAD &
TRINIDAD &
TOBAGO,
EASTERN
TOBAGO,
EASTERN
CARIBBEAN
CARIBBEAN
U.K.
&
WORLDWIDE
50
2014 Annual Report
Sagicor Financial Corporation OPERATING SEGMENTS
SAGICOR LIFE INC
The Group’s principal reportable operating segments, as defined by
International Financial Reporting Standards, are Sagicor Life Inc, Sagicor
Jamaica, Sagicor USA, and Sagicor Europe. The Sagicor Europe segment
was disposed of on December 23, 2013. The performance of these
segments in 2014 is discussed under the following sub-headings.
Sagicor Life Inc Segment
The Sagicor Life Inc segment consists of the life insurance subsidiaries
which conduct business in Barbados, Trinidad and Tobago, the Eastern
and Dutch Caribbean islands, Belize, Bahamas and Panama. The main
activities of this segment are the provision of life insurance, annuities,
health insurance, pension investment and pension administration
services.
In 2014, this segment generated revenue of US $362 million. This was
an increase of US $12 million over the previous year. The main revenue
component was premium income, which totalled US $266 million.
Investment income totalled US $71 million, while other items totalled
US $25 million.
Benefits totalled US $195 million, and closed at the same level as the
prior year. Current insurance benefits were US $175 million, while
amounts recognised for future insurance benefits were US $9 million.
Total expenses and taxes in 2014 closed the year at US $116 million,
compared to US $110 million in 2013.
INCOME - $ millions
Revenue
Benefits
Expenses and taxes
Segment income
Segment income attributable to
shareholders
FINANCIAL POSITION - $ millions
Assets
Liabilities
Net assets
2014
362
(195)
(116)
51
44
2014
1,773
2013
350
(195)
(110)
45
40
2013
1,706
(1,309)
(1,280)
464
426
Net segment income for the year was US $51 million, compared to
US $45 million for the prior year. After accounting for income allocated
to policyholders, the net income attributable to shareholders for the
segment totalled US $44 million in 2014, compared to US $40 million in
2013.
Financial investments comprised 71% of segment assets, and policy
liabilities comprised 91% of segment liabilities at the end of 2014.
Sagicor Jamaica Segment
This segment comprises subsidiaries in Jamaica and Cayman Islands.
The principle activities of the segment are the provision of life, critical
illness and health insurance, annuities, pensions administration,
investment management, securities dealing and commercial banking.
This segment generated revenue of US $486 million in 2014, an increase
of US $22 million over the 2013 total. The main revenue component
was premium income, which totalled US $264 million, compared to
US $293 million in 2013. Investment income totalled US $134 million
2014 Annual Report
51
Sagicor Financial Corporation compared to US $118 million in the prior year. Revenue in 2014 also
included negative goodwill of US $29 million on the acquisition of the
RBC Royal Bank’s Jamaica banking operations in Jamaica.
Financial investments comprised 81% of the segment’s assets at the end
of 2014. The liabilities of this segment were distributed 30% to policy
liabilities and 70% to deposit and security liabilities at the end 2014.
Benefits totalled US $250 million, as compared to US $272 million in
2013.
Sagicor USA Segment
Expenses and taxes incurred totalled US $158 million in 2014, increasing
by US $31 million over the prior year. The increase is attributed
mainly to restructuring and rebranding costs, in addition to incurred
administration costs on the RBC Royal Bank’s operations acquired on
June 27, 2014.
SAGICOR JAMAICA
INCOME - $ millions
Revenue
Benefits
Expenses and taxes
Segment income
Segment income attributable to
shareholders
FINANCIAL POSITION - $ millions
Assets
Liabilities
Net assets
2014
486
(250)
(158)
78
38
2014
2,495
2013
464
(272)
(127)
65
32
2013
1,880
(2,083)
(1,521)
412
359
Net segment income for the year was US $78 million, compared to
a total of US $65 million recorded for 2013. As the Sagicor Jamaica
segment is owned 49% by the Group (51% up to May 7, 2014), the
resulting net income attributable to shareholders was US $38 million in
2014 (US $32 million in 2013).
This segment consists of the USA operations of Sagicor, which market
life insurance and annuity products to individuals.
Segment revenue totalled US $153 million in 2014, decreasing by
US $32 million over the 2013. Premium revenue recorded in 2014 was
US $75 million, and was reduced from the 2013 total by US $13 million.
The reduction in revenue occurred as a result of lower new annuity
business written in the USA, when compared to 2013. Investment
income for 2014 totalled US $50 million, and was in line with the prior
year.
SAGICOR USA
INCOME - $ millions
Revenue
Benefits
Expenses and taxes
Segment income
Segment income attributable to
shareholders
FINANCIAL POSITION - $ millions
Assets
Liabilities
Net assets
2014
153
(83)
(58)
12
12
2014
1,743
2013
185
(114)
(63)
8
8
2013
1,484
(1,535)
(1,296)
208
188
Commensurate with the lower new annuity business in the USA in 2014,
total benefits decreased to US $83 million in 2014 from US $114 million
in 2013. The expense for future insurance benefits in 2014 showed a
52
2014 Annual Report
Sagicor Financial Corporation DISCONTINUED OPERATION
DISCONTINUED OPERATION
INCOME - $ millions
2014
Revenue
Benefits
Expenses
Net operating loss
Write down of carrying value of investment
Currency translation
Other expenses
Movement in price adjustment
Net loss
-
-
-
-
-
-
-
(26)
(26)
2013
266
(181)
(118)
(33)
(21)
(18)
(4)
-
(76)
FINANCIAL POSITION - $ millions
2014
2013
Assets
Liabilities
Net assets
-
(46)
(46)
-
(55)
(55)
reduction of US $43 million, decreasing from US $24 million in 2013.
The 2014 expense for future insurance benefits reflects the lower annuity
business written.
Expenses and taxes totalled US $58 million in 2014, compared to
US $63 million in 2013. Administrative and commissions expenses
decreased in 2014, commensurate with the lower annuity premium
income.
Net income of the segment for 2014 was US $12 million, compared to
the US $8 million recorded for 2013.
As of December 31, 2014, financial investments comprised 72% of the
segment assets, and policy liabilities comprised 81% of the segment
liabilities.
DISCONTINUED OPERATION
The discontinued operation comprises the Sagicor at Lloyd’s business,
and consists primarily of property and casualty insurance business
written through Lloyd’s of London Syndicate 1206. The Lloyd’s of
London franchise enables the syndicate to write international business
outside of the United Kingdom.
As stated in a foregoing section, the Group made a decision to
dispose of these operations. The disposal of this segment occurred on
December 23, 2013. In accordance with International Financial Reporting
Standards, the Sagicor at Lloyd’s operation is defined as a discontinued
operation
The terms of the sale included:
• Future price adjustments to the sale consideration represented
adjusted syndicate profit in the run-off of the 2011, 2012 and
2013 underwriting years. During 2014, future price adjustments
amounted to US $26 million.
Sagicor Europe made a net loss of US $26 million in 2014, compared to
a net loss of US $76 million in 2013.
2014 Annual Report
53
Sagicor Financial Corporation LOOKING FORWARD
Growth in the global economy is expected to remain relatively stable
for 2015. The IMF has forecasted global growth of 3.5% in 2015,
following 3.3% in 2014. The net positive impact of the extended decline
in global oil prices is expected to be outweighed by various downside
risks, including a reduced level of investment and persistently modest
economic recovery across the developed world. Additional effects are
the decline in commodity prices and the associated downward trend in
the level of growth in key emerging market countries. In 2015, advanced
economies are projected to expand moderately by 2.4%, led by the USA,
while emerging markets are expected to experience relatively flat growth
of 4.3%.
The economic recovery of the Caribbean economies remains fragile
and heavily reliant upon the economic improvement of developed
economies. Generally, the tourism sector is expected to show modest
improvement. However, rising public debt levels, fiscal imbalances and
high unemployment challenges will continue to impede the region’s
competitiveness. The IMF has forecasted regional growth of 1.3% in
2015.
During 2015, Sagicor will continue to focus on reducing operating costs,
improving process efficiency and improving customer service through
the rationalisation of its major operating centres.
54
2014 Annual Report
Sagicor Financial Corporation 175 years of vision
Our loyal and experienced team makes us the
trusted financial institution we are today. We
have been there for you for 175 years, and we
will continue to be there for the next 175.
BOARD OF DIRECTORS
STEPHEN MCNAMARA, 64, was appointed Non-
Executive Chairman on January 1, 2010, having formerly
served as Vice-Chairman since June 2007. He has been
an independent Director since December 2002, and
is a citizen of St Lucia and Ireland. He is a British-
trained Attorney-at-law, and is the Senior Partner of
McNamara & Company, Attorneys-at-Law of St Lucia.
Mr McNamara was elected to the Board of Sagicor
Life Inc in 1997. He is Chairman of the Group’s main
operating subsidiary, Sagicor Life Inc, Sagicor USA,
and Sagicor Finance Inc. He serves as a Director of
Sagicor Group Jamaica Limited and a number of other
subsidiaries within the Group.
ANDREW ALEONG, 54, has been an independent
Director since June 2005, and is a citizen of Trinidad
and Tobago. He holds an MBA from the Richard Ivey
School of Business, University of Western Ontario,
Canada. Mr Aleong is Group Managing Director of the
Albrosco Group of Companies, Trinidad and Tobago,
and has served the Trinidad and Tobago manufacturing
industry for over 25 years. He is a former President of
the Trinidad and Tobago Manufacturers’ Association.
Mr Aleong also serves as a Director of a number
of private companies. 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.
PROFESSOR SIR HILARY BECKLES, K.A, 59, has
been an independent Director since June 2005, and
is a citizen of Barbados. 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
Sagicor Life Jamaica and a number of other subsidiaries
within the Group. He is a member of the Secretary
General of the UN, Ban Ki Moon’s Advisory Board
on Science and Sustainable Development; and Vice
President of the Commonwealth Ministers’ Advisory
Board on Sport.
58
2014 Annual Report
Sagicor Financial Corporation PETER CLARKE, 60, has been an independent Director
since June 2010, and is a citizen of Trinidad and
Tobago. He obtained a Bachelor of Arts degree from
Yale University and a Law degree from Downing
College, Cambridge University. He was called to the
Bar as a member of Grays Inn, London, in 1979 and
to the Bar of Trinidad and Tobago in 1980. Mr Clarke
is a Financial Consultant, who formerly practised
as a Barrister-at-Law before embarking on a 22-year
career in stockbroking. From 1984 to 2000, he was the
Managing Director of Money Managers Limited, and
Chief Executive of West Indies Stockbrokers Limited
from 2001 until his retirement in 2005.
DR JEANNINE COMMA, 64, has been an independent
Director since June 2007, and is Chairman of the
Human Resources Committee. She is a citizen of
Trinidad and Tobago. She holds a PhD from George
Washington University, Washington, DC, USA, and is
also a graduate of the University of the Virgin Islands.
Dr Comma is CEO/Director of the Cave Hill School
of Business of The University of the West Indies,
Cave Hill Campus. She specialises in organisational
development, strategy and leadership development.
She has made significant contributions to the
sustainable development of human capital within the
regional business community.
Mr Clarke, is a Director of a number of companies in
Trinidad and Tobago, including the Trinidad and Tobago
Stock Exchange. He is also a member of the University
of the West Indies Development and Endowment
Fund, and the Finance Council of the Roman Catholic
Archdiocese of Port of Spain. From 2002 to 2005, he
was a Director of the Trinidad and Tobago Chamber
of Industry and Commerce. Mr Clarke also serves as
a Director of Sagicor Life Inc, Sagicor Group Jamaica
Limited and Sagicor Life Jamaica Limited.
Dr Comma has extensive experience in Leadership
Development, Organisational Strategic Planning,
Transformation Management and Corporate
Governance. 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. She is a member of The American
Society for Training and Development and the
Commonwealth Association of Public Administration
and Management (CAPAM), and serves on the boards
of the Barbados Tourism Inc, the National Initiative for
Service Excellence and the Barbados Entrepreneurship
Foundation. Dr Comma was elected a Director of
Sagicor Life Inc in 2006.
MONISH DUTT, 56, has been an independent Director
since 2012 and is a citizen of India and a permanent
resident of the United States of America. He holds an
MBA with a concentration in Finance from the London
Business School, London University, and a BA in
Economics from the University of Delhi. He is a Fellow
of the Institute of Chartered Accountants, London,
England. Currently a Consultant on Emerging Markets,
Mr Dutt is a seasoned investment professional who,
for the 25 years preceding 2011, was employed with
International Finance Corporation (IFC), a member of
the World Bank Group.
While at IFC, he held various positions, the most recent
of which was Chief Credit Officer for Global Financial
Institutions & Private Equity Funds. He was formerly
the Head of IFC’s Private Equity Advisory Group; the
Head of the Baltics, Central Europe, Turkey and Balkans
Group; Principal Investment Officer for Asia; Senior
Investment Officer for Central & Eastern Europe, and
an Investment Officer for Africa, Latin America and
Asia. Mr Dutt has extensive experience evaluating
investment proposals in financial institutions and
private equity funds globally, structuring investments,
tracking global investment portfolios, and providing
quality control guidance to private equity fund
investments. Mr Dutt has also represented IFC on
boards of investee companies. Mr Dutt serves as a
Director of Sagicor Bank Jamaica Limited.
2014 Annual Report
59
Sagicor Financial Corporation RICHARD KELLMAN, 63, was elected as a Director in
June 2009, and was appointed Group Chief Operating
Officer on November 1, 2009. He is a citizen of
Guyana and of the United Kingdom. He holds a BSc in
Statistics from University College, London University,
and is a Fellow of the Institute of Actuaries and an
Associate of the Society of Actuaries.
He has also attended training programmes at Harvard
Business School and has completed other financial,
investment and management training courses.
Mr Kellman is a financial services professional with
wide knowledge regionally in the areas of finance,
pensions, insurance and investments.He has also held
senior actuarial and management positions and served
on several Boards.
WILLIAM LUCIE-SMITH, 63, has been an independent
Director since June 2005, and is a citizen of Trinidad
and Tobago. He 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.
He was elected a Director of Sagicor Life Inc in 2005,
and is also a Director of Sagicor USA, and a number of
other subsidiaries within the Group.
MARJORIE FYFFE-CAMPBELL, 63, has been an
independent Director since June 2005, and is a citizen
of Jamaica. She is a Management Consultant and
holds an MSc in Accounting from the University
of the West Indies, is a Fellow of the Institute of
Chartered Accountants of Jamaica and a member of the
Hospitality, Financial and Technology Professionals.
She is a former President and Chief Executive Officer
of the Urban Development Corporation, Jamaica, a
large development and property-owning company that
manages several entities such as hotels, attractions,
a maintenance company, a water supply company, a
shopping centre, a conference centre and a golf course.
Mrs Fyffe-Campbell is an Adjunct Lecturer in Financial
and Management Accounting and Enterprise Risk
Management Governance at the Mona School of
Business and Management of the University of the
West Indies, where she is also pursuing a Doctorate in
Business Administration with emphasis on corporate
governance. She was elected a Director of Sagicor
Life Jamaica in 2002, and is also a Director of other
subsidiaries within the Group.
60
2014 Annual Report
Sagicor Financial Corporation DODRIDGE MILLER, 57, was appointed Group
President and Chief Executive Officer in July 2002, and
has been a Director since December 2002. A citizen of
Barbados, Mr Miller is a Fellow of the Association of
Chartered Certified Accountants (ACCA), and obtained
his MBA from the University of Wales and Manchester
Business School. He holds an LLM in Corporate and
Commercial Law from the University of the West
Indies and, in October 2008, he was conferred with an
Honorary Doctor of Laws degree by the University of
the West Indies. He has more than 30 years’ experience
in the banking, insurance and financial services
industries.
Prior to his appointment as Group President and Chief
Executive Officer, he held the positions of Treasurer
and Vice President – Finance and Investments, Deputy
Chief Executive Officer and Chief Operating Officer.
Mr Miller joined the Group in 1989. He is a Director of
Sagicor Life Inc, Sagicor USA, Sagicor Group Jamaica
Limited, Sagicor Life Jamaica, Sagicor Investments
Jamaica Limited (formerly Pan Caribbean Financial
Services) and a number of other subsidiaries within the
Group.
JOHN SHETTLE, JR, 60, has been an independent
Director since June 2008, and is a citizen of the United
States of America. He received his undergraduate
degree from Washington & Lee University, and holds an
MBA from the Sellinger School of Business at Loyola
College, Maryland. Mr Shettle is an Operating Partner
of Stone Point Capital, a private equity firm in the
global financial services industry. He has over 20 years’
experience in senior management positions in the
property/casualty, health and insurance-related services
industry.
More recently, he served as Senior Advisor to Lightyear
Capital, a private equity firm, and President and Chief
Executive Officer of the Victor O Schinnerer Company.
Prior to that, he was the Chief Executive Officer of
Tred Avon Capital Advisors, Inc, a firm providing
advisory services to companies and private equity firms
focused on the insurance sector. He has held senior
management positions at Securitas Capital, Swiss
Reinsurance Company and Frederick, the Maryland-
based AVEMCO Corporation (NYSE). Mr Shettle is also
a Director of Sagicor USA and a number of subsidiaries
within the Group.
RICHARD P YOUNG, 64, a citizen of Trinidad and
Tobago, was appointed an independent Director of
the Company in January, 2014. He is a Chartered
Accountant by profession, and has had a distinguished
career in accounting, auditing, insurance and banking.
He has over forty years’ experience in the regional
financial services sector, the last seventeen of which he
spent as the Managing Director of Scotiabank Trinidad
& Tobago Limited and a Senior Vice President of The
Bank of Nova Scotia, before retiring in 2012.
Prior to joining Scotiabank, he was the Managing
Director of NEM (West Indies) Insurance Ltd.
(NEMWIL). Mr Young also served as Chairman and
Deputy Chairman of other Scotia Group subsidiaries,
as well as Deputy Chairman of the National Housing
Authority. He is a former President of the Council
of the Institute of Chartered Accountants of Trinidad
and Tobago; President of the Bankers Association
of Trinidad and Tobago; Chairman of the Trinidad &
Tobago Stock Exchange and Committee Member of
the Association of Insurance Companies of Trinidad
& Tobago. In July 2013, Mr Young was appointed
Chairman of the Economic Development Board of
Trinidad and Tobago. He is also Chairman of Catholic
Media Services Limited and Youth Business Trinidad
and Tobago.
2014 Annual Report
61
Sagicor Financial Corporation 175 years of
responsibility
Over the years we have grown strong.
But if we are to truly fulfill our promise,
we must resolve that with strength comes
the greatest responsibility.
CORPORATE GOVERNANCE
Directors’ Interests
Directors’ interests as at December 31, 2014 and as at the record date, March 19, 2015, are as follows:
Shares as at 31-Dec-14
Shares as at 19-March-15
Common Shares
Preference Shares
Common Shares
Preference Shares
Stephen McNamara
Andrew Aleong
Professor Sir Hilary Beckles
Peter Clarke
Dr Jeannine Comma
Monish Dutt
Marjorie Fyffe-Campbell
Richard Kellman
William Lucie-Smith
Dodridge Miller
John Shettle, Jr
Richard P. Young
Beneficial
23,993
533,358
9,579
10,000
16,023
1,000
49,927
213,363
120,000
1,379,293
1,000
34,266
Non-
Beneficial
Beneficial
Non-
Beneficial
0
0
0
0
0
0
0
0
0
0
0
0
0
55,000
0
0
5,000
0
0
150,000
0
15,000
0
10,000
0
0
0
0
0
0
0
0
0
0
0
0
Beneficial
23,993
533,358
9,579
10,000
22,300
1,000
50,850
213,363
120,000
1,379,293
1,000
34,266
Non-
Beneficial
Beneficial
Non-
Beneficial
0
0
0
0
0
0
0
0
0
0
0
0
0
55,000
0
0
5,000
0
0
150,000
0
15,000
0
10,000
0
0
0
0
0
0
0
0
0
0
0
0
Restricted Stock Grants
Stock options
As at 31-Dec-14
As at 19-Mar-15
As at 31-Dec-14
As at 19-Mar-15
Vested
Unvested
Vested
Unvested
Vested
Exercised Unvested
Vested
Exercised Unvested
Richard Kellman
290,831
142,363
290,831
142,363
187,547
Dodridge Miller
910,789 1,254,771
910,789 1,254,771 1,760,495
0
0
372,765
187,547
1,479,562 1,760,495
0
0
372,765
1,479,562
64
2014 Annual Report
Sagicor Financial Corporation 1 Board Composition and Structure
The maximum number of Directors permitted by the Restated Articles
of Incorporation of the Company is 12, and the minimum is 7. The
Board of Directors presently consists of 12 Members, 10 of whom are
independent Non-Executive Directors. The remaining 2 are the Group
President and Chief Executive Officer, and the Group Chief Operating
Officer. Biographical information on the Directors and details of their
interests in the Company as at December 31, 2014 and as at the record
date, March 19, 2015, are set out earlier in this Report.
The Board of Directors considers that the quality, skills and experience
of Directors enhances the Board’s effectiveness and the collective Board
is required to have the core set of skills identified in the Board Core
Competency Matrix on the following page.
2014 Annual Report
65
Sagicor Financial Corporation a
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Directors’ Skills and Experience
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Banking
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Property Management and Development
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Corporate Governance
Other: Education
66
2014 Annual Report
Sagicor Financial Corporation
In addition, individual Directors must also possess specific knowledge
and experience commensurate with the business requirements of the
Company, and are also expected to have a style of operation which
comprises:
(a)
high personal standards consistent with the Company’s Code
of Business Conduct and Ethics
commitment to business leadership
(b)
courage to express and defend a position
(c)
decisiveness and willingness to be held accountable
(d)
effective intervention and decision-making style
(e)
(f)
willingness to contribute to team synergy
(g) mature and thoughtful perspective on business.
The Company is also mindful that the Board must reflect the business,
social, economic and cultural jurisdictions from which the Company
draws customer patronage, and that Directors must have sufficient
time available to devote to performance of their Board duties. Finally,
Directors are required to undergo annually a rigorous self-assessment.
This assessament is designed to ensure that appropriate standards of
independence and objectivity are maintained. All non-executive Directors
have satisfied the 2014 independence self-assessment.
2 Rotation and Re-election of Directors
The Company’s Bylaws provide that at least one-third, or the number
nearest thereto, of the Directors must retire every year, but a Director
shall not be required to retire unless he has been in office for three years.
Stephen McNamara, Marjorie Fyffe-Campbell, Richard Kellman, William
Lucie-Smith and Monish Dutt retire at the Twelfth Annual Meeting,
and all being qualified, have offered themselves for re-election. Profiles
of the nominees are contained in the Management Proxy Circular
accompanying the Notice of the Meeting. The Board recommends
that all the nominees be re-elected. In making this recommendation,
the Board has been guided by the nomination process overseen by the
Corporate Governance and Ethics Committee, which requires a review
of the core competency requirements of the Board as a whole; the skills
and experience of each nominee; their independence as defined by
our Corporate Governance Policy; and their performance as Directors,
including their willingness and ability to devote the time necessary
to fulfil their role as Directors. It is intended that Directors who have
served on the Board for 9 or more years will be subject to enhanced due
diligence by the Corporate Governance and Ethics Committee, to ensure
that their performance over the period of their tenure is such as to justify
the Committee’s recommendation to the Board that they be nominated
for re-election.
3 New Director Orientation
The Company’s Corporate Governance Manual expressly recognises
the importance of an efficient and effective new Director on-boarding
process. To this end, the Manual establishes a New Director Orientation
Programme whose objective it is to assist the new Director in developing
a high level of institutional, boardroom and interpersonal comfort in
order to expedite his/her effectiveness as a Director. The induction
of a new Director consists of two levels, one involving Company
documentary information, and the other interpersonal induction.
In the first level, the new Director receives a package containing key
documentation about the Sagicor Group, to assist the new Director
in settling into his/her new role with the Company. These documents
include the Corporate Governance Manual; current and previous two
years’ Annual Reports; Group Strategic and Business Plans; Group Risk
Profile; Group Organisational Chart and copies of the Minutes of at least
the previous six Board and Committee Meetings. To complete the formal
orientation process, in the second phase, a series of interviews with
Board and Committee Chairmen, as well as key Management personnel,
is set up for the new Director. The Company has established an online
Board Portal for the distribution and housing of Board Meeting materials
and other corporate information. All Directors therefore have immediate
and constant access to all necessary company materials and documents.
4 On-going Director Education
During the year, on-going Director education included sessions on
changes in the regional and international regulatory environment;
International Financial Reporting Standards (IFRS); proposed changes
in Investment Accounting and Insurance Contracts; as well as Board
Room dynamics. The Board is committed to continuing these sessions
to ensure Director effectiveness is optimised by enhancing Director
knowledge.
2014 Annual Report
67
Sagicor Financial Corporation 5 Board Responsibilities
5.1 Board of Directors
The Board of Directors is collectively responsible for providing
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’s six main responsibilities, which it executes through
decision-making and oversight, are strategic planning; enterprise
risk management; executive succession planning and performance
evaluation; Shareholder communications and public disclosures; internal
controls and Corporate Governance.
The respective roles of the Chairman of the Board, the Board,
Committee Chairmen, Committees and Management are clearly defined.
Position descriptions explaining the roles, responsibilities and desired
competencies have been developed for the Chairman of the Board, the
Chairmen of each Board Committee, as well as the President & CEO. The
Group CEO and the Executive Committee (ExCom) are responsible for
the day-to-day management of the Group. Their role is to formulate and
implement strategy, operational plans, policies, procedures and budgets;
monitor operating and financial performance; assess and control
risk; prioritise and allocate resources and monitor competitive and
environmental forces in each area of operation. The roles of functional
Group Executives, who form part of ExCom, are also specifically defined.
5.2 Board Committees
The four Standing Committees of the Board - Audit; Corporate
Governance and Ethics; Human Resources and Investment and Risk -
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
specifically for the Board. The mandates of all the Committees comply
with best practice.
The mandate of the Audit Committee is to oversee the external audit
process, and manage all aspects of the relationship with the External
Auditors. The Committee is also required to review the annual audit
plan, interim and audited financial statements, and international
financial reporting standards having a significant impact on the financial
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, regulatory and other
requirements, and management of risk. The Committee’s composition
meets the independence and skill requirements of the Group’s Corporate
Governance Policy. The Members are financially literate, and in 2014,
three Members, William Lucie-Smith, Monish Dutt and Marjorie Fyffe-
Campbell, all Chartered Accountants, had recent and relevant accounting
expertise. The current Members are William Lucie-Smith (appointed
a Member on August 24, 2005 and Chairman on June 28, 2006), Peter
Clarke (appointed a Member on March 21, 2014), Marjorie Fyffe-
Campbell (appointed a Member on September 11, 2008), Dr Jeannine
Comma (appointed a Member on September 11, 2008) and Monish Dutt
(appointed a Member on March 18, 2014.
The role of the Corporate Governance and Ethics Committee is
principally to develop and recommend to the Board policies and
procedures to establish and maintain best practice standards of
Corporate Governance and Corporate Ethics. It also manages the
process for Director succession, Director performance, the operation
of the President, the composition of Board and Committees,
Shareholder communications, and corporate image. The Committee’s
composition meets the independence requirements of the Group’s
Corporate Governance Policy. The current Members are Stephen
McNamara (appointed a Member on March 9, 2004 and Chairman
on February 17, 2010), Professor Sir Hilary Beckles (appointed a
Member on March 18, 2009), Marjorie Fyffe-Campbell (appointed a
Member on March 18, 2009), John Shettle, Jr (appointed a Member
on August 18, 2010) and Richard P. Young (appointed a Member on
March 18, 2014).
The mandate of the Human Resources Committee is to advise the Board
with respect to compensation policies, programmes and plans; human
resources policies and practices to attain the Company’s strategic goals;
executive management recruitment; succession plans; performance
evaluation and compensation. The Committee’s composition meets
68
2014 Annual Report
Sagicor Financial Corporation 7
Interlocking Directorships
The Corporate Governance Recommendations of the Barbados Stock
Exchange require that the Company make certain disclosures relating
to Director Interlocks. In addition to their service on the Board of the
Company and the Boards of various Group subsidiaries, the following
Company Directors also serve together on the Boards of the publicly-
listed companies appearing next to their names:
Directors
Company
Dodridge D Miller
Professor Sir Hilary Beckles
Richard P Young
William Lucie-Smith
8 Board Operations
Cable & Wireless Barbados Ltd
Massy Holdings Ltd
During 2014, Management engaged the Board of Directors (BOD) 19
times, either in formal meetings or by requests for round-robin decisions
in between meetings. In relation to the engagement of the Standing
Committees of the Board, the Audit Committee (AC) met 5 times; the
Corporate Governance and Ethics Committee (CGC) met 6 times; the
Human Resources Committee (HRC) met 4 times; and the Investment
and Risk Committee (IRC) met 2 times. Directors’ record of attendance
was as follows:
the independence requirements of the Group’s Corporate Governance
Policy. The current Members are Dr Jeannine Comma (appointed a
Member on September 18, 2007, and Chairman on August 24, 2011),
Stephen McNamara (appointed a Member on August 18, 2010), Andrew
Aleong (appointed a Member on March 23, 2012) and Monish Dutt
(appointed a Member on March 18, 2014).
The Investment and Risk Committee is charged with ensuring generally
that the Group manages risk within its defined philosophy and appetite,
and in compliance with policy risk parameters. Its specific mandate is
to ensure that an appropriate enterprise risk management framework
is implemented throughout the Group, approve risk policies and risk
undertakings and exposures reserved for Board decision. It continually
monitors exposures relating to certain risks. Committee Members are
required to understand the enterprise’s significant inherent risks and
the policies and controls used by Management to assess, manage
and report these risks. The Committee regularly reviews the Group
risk profile, and assesses Management’s plans for ensuring financial
stability and capital soundness. The Committee’s composition meets
the independence requirements of the Group’s Corporate Governance
Policy. The current Members are Stephen McNamara (appointed a
Member on November 26, 2003 and Chairman on February 17, 2010),
Andrew Aleong (appointed a Member on March 18, 2009), John Shettle,
Jr (appointed a Member on March 18, 2009), Peter Clarke (appointed a
Member on August 18, 2010), Richard P. Young (appointed a Member
on March 18, 2014), and William Lucie-Smith (appointed a Member on
March 21, 2014).
6 Board Evaluation
In 2014, the Board undertook its annual performance evaluation
to assess the effectiveness of the Board’s performance as a whole.
The evaluation took the form of a self-assessment and peer-review
questionnaire, and an evaluation of the Corporate Governance system
as a whole. Findings continue to reveal ongoing opportunities for the
enhancement of our Corporate Governance practices. The Corporate
Governance and Ethics Committee continued to manage Director
independence and potential conflicts of interest, and the Committee
concluded that Directors continued to meet the independence
requirements under our Corporate Governance Policy.
2014 Annual Report
69
Sagicor Financial Corporation HRC
4 of 4
4 of 4
4 of 4
4 of 4
IRC
2 of 2
2 of 2
2 of 2
1 of 2
2 of 2
Total
31 of 31
30 of 30
23 of 25
21 of 21
25 of 28
26 of 26
30 of 30
19 of 19
24 of 24
19 of 19
21 of 27
23 of 24
%
100%
100%
92%
100%
89%
100%
100%
100%
100%
100%
77%
95%
Stephen McNamara
Andrew Aleong
Prof Sir Hilary Beckles
Peter Clarke
Dr Jeannine Comma
Monish Dutt
Marjorie Fyffe- Campbell
Richard Kellman
William Lucie-Smith
Dodridge Miller
John Shettle, Jr
Richard Young
BOD
19 of 19
19 of 19
18 of 19
19 of 19
17 of 19
19 of 19
19 of 19
19 of 19
19 of 19
19 of 19
17 of 19
17 of 18
AC
5 of 5
4 of 5
3 of 3
5 of 5
5 of 5
CGC
6 of 6
5 of 6
6 of 6
3 of 6
4 of 4
The Board manages an annual schedule of critical agenda items
designed to ensure that it fulfils its recurring obligations, and that Board-
reserved items are routinely considered. The principal business at Board
meetings in 2014 was to:
• consider and approve the Group strategic plan, capital plan and
projections for the period 2015 to 2017;
• review periodically the Group capital and liquidity plan, strategic and
business development initiatives forming part of the Strategic Plan,
and other key initiatives;
• receive and consider periodic reports and presentations from
Management on the performance of various subsidiaries within the
Group and the Group, on a consolidated basis;
• review and approve unaudited interim and audited annual
consolidated financial statements;
• approve interim and final dividends;
• review and approve actuarial reports of the Appointed Actuary; and
• receive reports on work being carried out by Board Committees, and
consider and approve their recommendations as required.
70
2014 Annual Report
Sagicor Financial Corporation 9 Committee Operations
• overseeing the management of independence requirements and
Audit Committee Report:
The 2014 activities of the Audit Committee included:
• reviewing and approving the external audit plan and timetable;
• evaluating the performance of the External Auditors for Group
entities and approving their audit fees;
• reviewing the External Auditors’ 2013 Management Letter and
Report on the 2013 audit;
• approving the 2014 Audit Engagement Letter;
• commencing audit tender process;
• generally reviewing the circumstances and conditions under which a
conflicts of interest;
• reviewing the adequacy of Director and Officer liability insurance
cover;
• overseeing the Director self and peer performance evaluation
process;
• monitoring Director attendance;
• reviewing investor relations plans and programs;
• conducting its annual review of the adequacy of the Code of
Business Conduct and Ethics;
• generally monitoring the operation of Corporate Governance
policies and practices; and
• assessing the adequacy of the Committee’s mandate, and evaluating
rotation of External Auditors should be considered;
its effectiveness in fulfilling the same.
• reviewing and recommending for approval by the Board interim and
annual audited financial statements;
• making dividend recommendations to the Board;
• reviewing actuarial reports of the Appointed Actuary;
• reviewing reports of the External Auditors on key audit issues;
• reviewing the financial performance of the Group and key
Human Resources Committee Report:
During 2014, the Human Resources Committee:
• reviewed executive performance, compensation and terms of
engagement;
subsidiaries;
• monitored succession planning and leadership and development
• examining the implications of changes to International Financial
plans at the executive level;
Reporting Standards;
• approving the 2014 Internal Audit Plan, reviewing Internal Audit
reports and monitoring Management action on open Internal Audit
items;
• reviewing compliance with various financial covenants;
• reviewing reports on pending material litigation and claims, and
pending regulatory issues;
• reviewing regulatory compliance and other compliance reports;
• assessing the adequacy of the Committee’s mandate, and evaluating
• granted awards to qualified participants under the annual cash
incentive, long-term incentive plan (LTI) and employee share
ownership plan (ESOP), based on performance against established
benchmarks;
• reviewed aspects of the rules of the Company’s annual long-term
incentive plans;
• reviewed ESOP financial statements;
• reviewed plans for corporate re-structuring and re-organisation; and
• assessed the adequacy of the Committee’s mandate, and evaluated
its effectiveness in fulfilling the same.
its effectiveness in fulfilling the same.
Corporate Governance and Ethics Committee Report:
The Committee’s principal business during 2014 included:
• reviewing Board and Director core competencies and identifying
gaps to inform the nomination process;
• overseeing Director nominations, Board Committee, subsidiary and
outside Board appointments;
Investment and Risk Committee Report:
In 2014, the Investment and Risk Committee’s work included monitoring
key risks to which the Group is exposed:
• reviewing in detail interest rate, credit, liquidity and foreign exchange
risk dashboards for the Company as a whole, and for its major
subsidiaries;
2014 Annual Report
71
Sagicor Financial Corporation breakdown of the non-cash component of the compensation of the top 5
members of the Executive Management team.
• monitoring of risk exposures and reviewing mitigation strategies
designed to manage risk, and generally overseeing the enterprise
risk management process;
• reviewing investment performance as required; and
• assessment of the adequacy of the Committee’s mandate, and an
evaluation of its effectiveness in fulfilling the same.
10 Sagicor’s Compensation Philosophy
Employees
The Sagicor Group’s compensation strategy for all employees including
Executive Management, aims to achieve an efficient and competitive
position for the Company as an Employer of Choice in the markets we
serve; while supporting our efforts to attract, motivate and retain the
best candidates for all positions across the Group. The compensation
strategy seeks to strike a balance between the needs of the employee
and the strategic objectives of the Company, while ensuring that all
employees are treated fairly, recognised and rewarded for team as well as
individual performance. Factors such as market competition; supply and
demand of critical skills and competencies; and strategic issues are all
considered in determining a position’s competitive market value.
Base salaries are reviewed annually for all staff and, in determining
whether to approve salary increases, the Board of Directors considers
various factors, including: the ability to pay; local labour market statistics
e.g. cost of living and compensation trend data; merit budget; and the
performance of the Company and business units. All employees must
meet a minimum performance standard each year to be considered for a
salary increase.
The quantum of annual incentive compensation, once earned, is
calculated using a methodology called the Balance Score Card. This
methodology takes into account financial as well as non-financial
measures, including revenue, profitability, efficiency and customer
satisfaction. For the financial year under review, salaries paid in cash to
the top 5 members of the Executive Management team of the Company,
including the President & CEO and Chief Operating Officer, amounted
in aggregate to US $4,433,749. The table immediately below shows a
72
2014 Annual Report
Sagicor Financial Corporation Restricted Stock Grants
Stock options
As at 31-Dec-14
As at 19-Mar-15
As at 31-Dec-14
As at 19-Mar-15
Vested
Unvested
vested
Unvested
Vested
Exercised Unvested
Vested
Exercised Unvested
2,020,876
1,830,024
2,020,876
1,830,024
3,192,594
0
2,505,518
3,192,594
0
2,505,518
Top 5 Members of
the Group Executive
Management Team
Board of Directors
The Company’s compensation philosophy for the Board of Directors
has objectives akin to that for employees. It is designed to attract, retain
and motivate Directors of the quality required to ensure the efficient
oversight of the Company’s business. In 2006, the Board commissioned
the independent firm of Ernst & Young of Atlanta, to review Directors’
compensation and make compensation recommendations. After
examination of international best practice in the area, and consideration
of various factors, including the level of responsibility, potential liability,
and the time and commitment required for the role, Ernst & Young
made certain recommendations to the Board regarding the levels and
structure of compensation for Directors. These recommendations were
approved by shareholders at the 2007 Annual Meeting, and remain
unaltered to-date. Non-Executive Directors do not participate in any
performance-based incentive plans, and their remuneration consists
solely of cash. The Board Chairman and Directors are paid fees, and
Committee Chairmen and Members are paid an additional fee for each
Committee on which they serve. Non-Executive Directors’ fees for the
financial year under review amounted in aggregate to US $562,000.
Directors receive no additional benefits, but are reimbursed reasonable
and customary out-of-pocket expenses associated with their attendance
at Meetings, and the performance of their role as Directors. Executives
who are Directors are not paid fees.
2014 Annual Report
73
Sagicor Financial Corporation 11 Fees Paid to External Auditors
PricewaterhouseCoopers SRL are the Company’s external auditors.
Following is a statement of the fees paid to the external auditors for
audit and non-audit services during 2013 and 2014:
Services
Fees Paid US$ ‘000
Audit
Non-Audit
Statutory Returns
Other
Total
2013
3,450
188
588
88
4,314
2014
3,398
179
580
383
4,540
12 Enterprise Risk Management
The Group’s enterprise risk management framework comprises
articulation of risk philosophy and appetite; risk structures and
processes; risk policies and a regime of monitoring risk exposures, both
at the enterprise and subsidiary levels. The Group’s activities of issuing
insurance contracts, accepting funds from depositors, and investing
insurance premium and deposit receipts in a variety of financial and
other assets expose the Group to various insurance, financial and
operational risks. Insurance risks include pricing, claims and lapse
risks. Financial risks include credit, liquidity, interest rate and market
risks. Operational risks include fraud; damage to physical assets;
improper business practices; improper employment practices; business
interruption and system failures, and execution and process errors.
Exposure and sensitivity to financial and insurance risks are disclosed in
[Notes 41 and 42] respectively to the 2014 audited financial statements
contained in this Annual Report.
13 Internal Audit
based audit methodology across the Group. It helps the organisation
accomplish its objectives by bringing a systematic, disciplined approach
to the evaluation and improvement of risk management, control
and governance processes. The scope of work of Internal Audit is to
determine whether the organisation’s network of risk management,
controls, and governance processes, as designed and represented
by Management, is adequate and functioning in a manner to ensure,
among other things, that risks are appropriately identified and
managed, and that employees’ actions are in compliance with policies,
standards, procedures, applicable laws and regulations. The work of
Internal Audit also seeks to give assurance that resources are acquired
economically, used efficiently, and adequately protected, and that quality
and continuous improvement are fostered in the organisation’s control
process, and significant legislative or regulatory issues impacting the
organisation are recognised and addressed appropriately.
14 Compliance
Sagicor continues to strengthen and streamline its compliance function,
in response to the increasing complexity of regulatory and other risks,
with the Audit Committee continuing to exercise oversight of all aspects
of compliance.
The Group Compliance Committee’s mandate is to ensure that
compliance is managed on a formal and proactive basis, as opposed
to an ad hoc and reactive basis; is governed by appropriate policy,
and is implemented and administered in accordance with policy. The
Committee is also charged with ensuring that risk management practices
are developed, implemented and administered for identifying, assessing,
managing, reporting and monitoring compliance risk, and with lending
value-added support for the administration of and compliance with
Sagicor’s Code of Business Conduct and Ethics. The Committee, whose
membership includes the Group Chief Compliance Officer as Chair, and
the Chief Compliance Officer of each major operating subsidiary, the
Group Chief Risk Officer and Group General Counsel, continued to be
active in 2014.
15 Code of Business Conduct and Ethics
74
2014 Annual Report
The mission of Group Internal Audit is to provide independent,
objective assurance and consulting services, designed to add value and
improve the organisation’s operations by utilising an appropriate risk-
Sagicor’s Code of Business Conduct and Ethics (which codifies our
corporate value system embracing legal, moral and ethical conduct,
Sagicor Financial Corporation accountability, corporate social responsibility and leadership) requires
Directors, Management, Staff and Advisors to acknowledge, on an
annual basis, that they have read the Code, and to indicate whether or
not they are in compliance. Mechanisms through which code violations
can be reported and channelled to the appropriate parties operated
satisfactorily, including widely available anonymous whistle-blowing
facilities. These enabled Management to take timely corrective action.
The Corporate Governance and Ethics Committee carried out its annual
review of the Code to ensure its adequacy.
16 Investor Relations and Communications
During 2014, the Company continued to execute its investor relations
communications program with periodic briefings to the Media, Analysts
and Brokers. The Company continues to ensure that price-sensitive
information is released across markets at the same time, and to manage
its Insider Trading Policy as an integral part of the Code of Business
Conduct and Ethics. The annual Shareholders’ briefing was held in
Trinidad, where the majority of Shareholders reside, for the benefit of
Shareholders who were unable to travel to Barbados for the Annual
Meeting of Shareholders.
By Order of the Board of Directors.
Althea C Hazzard
Corporate Secretary
March 31, 2015
2014 Annual Report
75
Sagicor Financial Corporation 175 years of leadership
Each of us has the skill, the wisdom,
and the dedication to be great today,
but we look to our leaders to ensure that we’ll
be great tomorrow.
EXECUTIVE MANAGEMENT
DODRIDGE D MILLER
FCCA, MBA, LLM, LLD (Hon)
Group President and Chief Executive Officer
Dodridge Miller was appointed Group President and Chief Executive Officer in July 2002, and has been a Director since
December 2002. A citizen of Barbados, Mr Miller is a Fellow of the Association of Chartered Certified Accountants (ACCA),
and obtained his MBA from the University of Wales and Manchester Business School. He holds an LLM in Corporate and
Commercial Law from the University of the West Indies and, in October 2008, he was conferred with an Honorary Doctor of
Laws degree by the University of the West Indies. He has more than 30 years’ experience in the banking, insurance and financial services industries.
Prior to his appointment as Group President and Chief Executive Officer, he held the positions of Treasurer and Vice President – Finance and
Investments, Deputy Chief Executive Officer and Chief Operating Officer. Mr Miller joined the Group in 1989. He is a Director of Sagicor Life Inc,
Sagicor USA, Sagicor Group Jamaica Limited, Sagicor Life Jamaica Limited, Sagicor Investments Jamaica Limited and a number of other subsidiaries
within the Group.
RICHARD M KELLMAN
BSc, FIA, ASA
Group Chief Operating Officer
Richard Kellman was elected as a Director in June 2009, and was appointed Group Chief Operating Officer on
November 1, 2009. He is a citizen of Guyana and of the United Kingdom. He holds a BSc in Statistics from University
College, London University, is a Fellow of the Institute of Actuaries and an Associate of the Society of Actuaries. He has also
attended training programmes at Harvard Business School and has completed other financial, investment and management
training courses. Mr Kellman is a financial services professional with wide knowledge regionally in the areas of finance, pensions, insurance and
investments. He has also held senior actuarial and management positions, and served on several Boards.
RONALD B BLITSTEIN
BA, MBA
Group Chief Information Officer
Ronald Blitstein joined Sagicor Financial Corporation in September 2013. He holds a BA in Political Science and a MBA
in Finance from Syracuse University. He has attended various training programmes at Harvard Business School and
Massachusetts Institute of Technology. Mr Blitstein is an IT professional, with broad and deep knowledge in all areas of
information technology and its application to driving improved business outcomes. He has previously served as Director,
Business Technology and Strategies Practice for the global advisory firm, Cutter Consortium, supporting Fortune 500 clients, as well as national
governments and various United Nations agencies. Mr Blitstein has also held CIO or other key executive leadership positions at Revlon, Pitney
Bowes, BOC Group, and Xerox Corporation. He has served as a Six Sigma Champion for firms pursuing enterprise operational excellence.
78
2014 Annual Report
Sagicor Financial Corporation RICHARD BYLES
BSc, MSc
President and Chief Executive Officer, Sagicor Group Jamaica Limited
Richard Byles was appointed President and CEO of Sagicor Life Jamaica Limited in March 2004. He is Chairman of the
Board of Sagicor Bank Jamaica Limited, Sagicor Property Services Limited, Sagicor Reinsurance Limited (Cayman), Sagicor
Insurance Managers (Cayman) and Desnoes and Geddes Limited. He also serves on the Boards of several subsidiary and
associated companies, and is a Director of Pan-Jamaican Investment Trust Ltd. Mr Byles is the Co-chair of the Economic
Programme Oversight Committeee (EPOC), a private/public sector committee established to oversee the Implementation of the IMF Programme
in Jamaica. He has earned valuable experience within the financial 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.
BART F CATMULL
BSc, CPA
President and Chief Operating Officer, Sagicor USA, Inc
Bart Catmull was appointed President and Chief Operating Officer in April 2013. A citizen of the United States of America,
Mr Catmull is a Certified Public Accountant (CPA), and obtained his Bachelor of Science degree in Accounting from Brigham
Young University in 1992. He has more than 20 years’ experience in the insurance industry. Prior to his appointment as
President, he held the positions of Chief Operating Officer, Chief Financial Officer, Treasurer and Chief Accounting Officer.
Mr Catmull joined the Group in 2005, when the predecessor of Sagicor Life Insurance Company (the US operating company) was acquired by the
Group. He has been with the Company since 1999.
ANTHONY CHANDLER
CGA, MBA
Group Chief Financial Controller
Anthony Chandler was appointed Group Chief Financial Controller on July 1, 2013. Prior to this, he served as Executive Vice
President and Chief Financial Officer of Sagicor Life Inc from 2011. He joined Sagicor in 1995 as Financial Accountant, and
was transferred to the Group subsidiary, Island Life Insurance Company Ltd, in 2000. In 2003 he joined the management
of Life of Jamaica as Head of its Internal Audit function, before returning to Barbados in the position of Vice President,
Finance, of Sagicor Life Inc later in the same year. In 2006, he was promoted to Vice President and Chief Financial Officer. Mr Chandler is a member
of the Certified General Accountants Association of Canada, and holds an MBA from the University of Manchester.
2014 Annual Report
79
Sagicor Financial Corporation DR M PATRICIA DOWNES-GRANT
CBE, MA, MBA, DBA, LLD (Hon)
Chief Executive Officer and President, Sagicor Life Inc
Dr Patricia Downes-Grant was appointed Chief Executive Officer and President of Sagicor Life Inc on January 1, 2006, having
served as Group Chief Operating Officer since July 1, 2002. She joined Sagicor in 1991, and held several senior positions,
including those of Vice President, Investments and Treasury and Executive Vice President (Finance and Investments) before
being appointed Chief Executive Officer. She holds an MBA in Finance, an MA in Economics, a Doctorate in Business
Administration (Finance) and an Honourary Doctor of Laws from the University of the West Indies. Prior to joining Sagicor, Dr Downes-Grant was a
Senior Manager in the Management, Consulting and Insolvency Division of Coopers & Lybrand (now PricewaterhouseCoopers). Dr Downes-Grant
has also had significant work experience in development banking. She is a former Chairman of the Barbados Stock Exchange and Barbados Central
Securities Depository, and a Director of several companies within the Sagicor Group and within the private sector of Barbados.
J ANDREW GALLAGHER
FSA, FCIA, CERA
Chief Risk Officer
Andrew Gallagher was appointed to the position of Chief Risk Officer for the Group in 2007. He joined Sagicor in August
1997, and previously held the position of Resident Actuary. He holds a Bachelor of Mathematics degree from the University
of Waterloo, is both a Fellow of the Canadian Institute of Actuaries and a Fellow of the Society of Actuaries, and is a
Chartered Enterprise Risk Analyst. Prior to joining Sagicor, Mr Gallagher worked with Eckler Partners in Toronto in their
financial institutions practice. He has over 25 years of experience in the industry.
ALTHEA HAZZARD
LLM (Cantab), FCIS, MICA
Executive Vice President, General Counsel and Corporate Secretary
Althea Hazzard was appointed Executive Vice President, General Counsel and Corporate Secretary of Sagicor Financial
Corporation on January 1, 2014, having previously served in the positions of Vice President, Legal and Compliance of Sagicor
Life Inc and Corporate Secretary of Life of Barbados Limited. An Attorney-at-Law, Chartered Secretary and Compliance
Professional, Mrs Hazzard joined the Group in 1997 after an eight-year attachment to a leading corporate law firm in Barbados,
specialising in international business. Mrs Hazzard holds a Bachelor of Laws Honors Degree from the University of the West Indies and a Certificate in
Legal Education from the Hugh Wooding Law School in Trinidad, and was called to the Bar in Barbados and Trinidad and Tobago in 1989. She obtained
her Master of Laws degree from the University of Cambridge, United Kingdom, and also holds International Diplomas in Compliance and Anti-money
Laundering from the International Compliance Association in the United Kingdom and the Executive Diploma in Management from the UWI Centre for
Management Development (now the Cave Hill School of Business). Mrs Hazzard is a professional member of the International Compliance Association
and a Fellow of the Institute of Chartered Secretaries and Administrators in Canada.
80
2014 Annual Report
Sagicor Financial Corporation MAXINE MACLURE*
BSc, MEd, MBA
Executive Vice President, Corporate Services and Chief Compliance Officer
Maxine MacLure was appointed Executive Vice President, Corporate Services, Sagicor Financial Corporation in February
2007. Prior to this, she served as President and CEO, Sagicor USA, from March 2004. Ms MacLure joined Sagicor in
December 2001 as President and CEO of Life of Jamaica (LOJ). Before joining Sagicor, Ms MacLure was General Manager
of Insurance for FINSAC in Jamaica, where she ran a 2-year insurance reform project sponsored by the Inter-American
Development Bank and the Jamaican Government. She also spent 7 years as a senior Financial Sector Regulator in Canada, and 11 years in banking
in Canada and the UK. 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.
RAVI RAMBARRAN
BSc, MSc, FIA
President and Chief Executive Officer, Sagicor International
Ravi Rambarran has 25 years of experience, both regionally and internationally, in the pension, insurance and asset
management industries. He was awarded an Open Mathematics Scholarship by the Government of Trinidad and Tobago,
has a BSc (Hons) in Actuarial Science from City University, London, an MSc in Finance from the University of London, and is
a Fellow of the Institute of Actuaries. He is a member of the Executive of the Caribbean Actuarial Association and represents
the Caribbean on the International Actuarial Association Insurance Committee.
* Ms MacLure retired on December 31, 2014
2014 Annual Report
81
Sagicor Financial Corporation 175 years of wisdom
When we act wisely, we act best. Our guiding
principle is, and always has been, to do
what is wise. For 175 years, we have seen the
rewards.
INDEX TO THE FINANCIAL STATEMENTS AND NOTES
Page
Page
Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
9
Financial Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Appointed Actuary’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
10 Reinsurance Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Consolidated Financial Statements:
11
Income Tax Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
12 Miscellaneous Assets and Receivables. . . . . . . . . . . . . . . . . . . . . . . . . 132
Statement of Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
13 Actuarial Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
14 Other Insurance Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
15
Investment Contract Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
16 Notes and Loans Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
Notes to the Financial Statements:
17 Deposit and Security Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
1
Incorporation and Principal Activities . . . . . . . . . . . . . . . . . . . . . . . . . . 93
18 Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
2 Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
19
Income Tax Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
3 Critical Accounting Estimates and Judgements. . . . . . . . . . . . . . . . . . 112
20 Accounts Payable and Accrued Liabilities . . . . . . . . . . . . . . . . . . . . . . 138
4
5
Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
21 Common and Preference Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
Investment Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
22 Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
6 Associates and Joint Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
23 Participating Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
7
8
Property, Plant and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
24 Premium Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
25 Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
84
2014 Annual Report
Sagicor Financial Corporation
Page
Page
26 Fees and Other Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
43
Insurance Risk - Life, Annuity & Health Contracts . . . . . . . . . . . . . . . 186
27 Policy Benefits & Change in Actuarial Liabilities . . . . . . . . . . . . . . . . . 144
44 Fiduciary Risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
28
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
45 Statutory Restrictions on Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
29 Employee Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
46 Capital Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192
30 Equity Compensation Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
47 Relative Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
31 Employee Retirement Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
48 Events after December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
32
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
33 Deferred Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
34 Earnings Per Common Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
35 Other Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
36 Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
37 Subsidiary Acquisition and Ownership Changes . . . . . . . . . . . . . . . . . 157
38 Discontinued Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
39 Contingent Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
40 Fair Value of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
41 Financial Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
42
Insurance Risk - Property & Casualty Contracts . . . . . . . . . . . . . . . . . 184
2014 Annual Report
85
Sagicor Financial Corporation
AUDITOR’S REPORT
86
2014 Annual Report
Sagicor Financial Corporation ACTUARY’S REPORT
2014 Annual Report
87
Sagicor Financial Corporation DRAFT - CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As of December 31, 2014
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As of December 31, 2014
Sagicor Financial Corporation
Sagicor Financial Corporation
Amounts expressed in US $000
Amounts expressed in US$000
Note
2014
2013
Note
2014
2013
ASSETS
Investment property
Property, plant and equipment
Associates and joint ventures
Intangible assets
Financial investments
Reinsurance assets
Income tax assets
Miscellaneous assets and receivables
Cash resources
Total assets
5
7
6
8
9
10
11
12
88,766
169,469
40,806
76,056
98,369
151,539
44,202
71,893
LIABILITIES
Actuarial liabilities
Other insurance liabilities
Investment contract liabilities
Total policy liabilities
4,661,494
4,191,766
Notes and loans payable
527,171
57,503
156,630
402,525
336,427
29,035
148,151
226,370
Deposit and security liabilities
Provisions
Income tax liabilities
Accounts payable and accrued liabilities
6,180,420
5,297,752
Liabilities of discontinued operation
These financial statements have been approved for issue by the Board of Directors on March 27,
2015.
Director
Director
Total liabilities
EQUITY
Share capital
Reserves
Retained earnings
Total shareholders’ equity
Participating accounts
Non-controlling interest in subsidiaries
Total equity
13
14
15
16
17
18
19
20
38
21
22
23
2,562,221
2,324,319
197,420
360,961
194,434
367,001
3,120,602
2,885,754
298,942
290,160
1,623,971
1,106,083
78,356
41,767
197,444
45,796
75,083
29,225
131,237
55,024
5,406,878
4,572,566
295,989
(8,765)
244,474
531,698
364
241,480
773,542
295,450
(4,825)
221,472
512,097
(5,662)
218,751
725,186
Total liabilities and equity
6,180,420
5,297,752
88
Sagicor Financial Corporation
2014 Annual Report
2
DRAFT - CONSOLIDATED STATEMENT OF INCOME
CONSOLIDATED STATEMENT OF INCOME
Year ended December 31, 2014
Year ended December 31, 2014
Note
2014
2013
Sagicor Financial Corporation
Sagicor Financial Corporation
Amounts expressed in US $000
Amounts expressed in US$000
Note
2014
2013
Net income from continuing operations
Net loss from discontinued operation
38
NET INCOME FOR THE YEAR
100,305
(26,367)
73,938
79,628
(75,508)
4,120
REVENUE
Premium revenue
Reinsurance premium expense
Net premium revenue
Net investment income
Fees and other revenue
Gain arising on acquisition
Total revenue
BENEFITS
Policy benefits and change in actuarial liabilities
Policy benefits and change in actuarial liabilities reinsured
Net policy benefits and change in actuarial liabilities
Interest expense
Total benefits
EXPENSES
Administrative expenses
Commissions and related compensation
Premium and asset taxes
Finance costs
Depreciation and amortisation
Total expenses
INCOME BEFORE TAXES
Income taxes
NET INCOME FROM CONTINUING OPERATIONS
3
24
24
25
26
37
27
27
28
32
889,121
(263,564)
625,557
307,215
83,344
29,051
1,016,538
(359,510)
657,028
279,350
103,105
-
1,045,167
1,039,483
714,770
(236,292)
478,478
63,739
542,217
797,743
(262,564)
535,179
57,611
592,790
Net income/(loss) is attributable to:
Common shareholders:
From continuing operations
From discontinued operation
Participating policyholders
Non-controlling interests
Basic earnings /(loss) per common share:
34
From continuing operations
From discontinued operation
233,742
203,959
Fully diluted earnings /(loss) per common share:
34
From continuing operations
From discontinued operation
97,965
11,474
22,544
20,220
385,945
117,005
(16,700)
100,305
99,821
11,988
17,143
15,230
348,141
98,552
(18,924)
79,628
53,737
(26,367)
27,370
6,200
40,368
73,938
39,138
(75,508)
(36,370)
5,005
35,485
4,120
17.3 cents
12.5 cents
(8.7) cents
(25.1) cents
8.6 cents
(12.6) cents
16.6 cents
12.2 cents
(8.2) cents
(24.8) cents
8.4 cents
(12.6) cents
2014 Annual Report
2014 Annual Report
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89
89
DRAFT - CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended December 31, 2014
Year ended December 31, 2014
Sagicor Financial Corporation
Sagicor Financial Corporation
Amounts expressed in US $000
Amounts expressed in US$000
OTHER COMPREHENSIVE INCOME
Note
2014
2013
TOTAL COMPREHENSIVE INCOME
2014
2013
Items net of tax that may be reclassified subsequently
to income:
35
Available for sale assets:
Gains / (losses) on revaluation
Gains transferred to income
Net change in actuarial liabilities
Retranslation of foreign currency operations
Items net of tax that will not be reclassified
subsequently to income:
Gains on revaluation of owner-occupied property
Gains / (losses) on defined benefit plans
Other items
35
38,386
(2,830)
(19,970)
(22,036)
(6,450)
27
13,212
(108)
13,131
(47,442)
(14,769)
30,445
(36,441)
(68,207)
3,813
(9,475)
-
(5,662)
OTHER COMPREHENSIVE INCOME / (LOSS) FROM
CONTINUING OPERATIONS
6,681
(73,869)
Other comprehensive income from discontinued operation
38
-
OTHER COMPREHENSIVE INCOME / (LOSS) FOR THE YEAR
6,681
19,272
(54,597)
Net income
Other comprehensive income
TOTAL COMPREHENSIVE INCOME / (LOSS) FOR THE
YEAR
73,938
6,681
4,120
(54,597)
80,619
(50,477)
Total comprehensive income / (loss) is attributable to:
Common shareholders:
From continuing operations
From discontinued operation
Participating policyholders
Non-controlling interests
64,156
(26,367)
37,789
6,262
36,568
80,619
(515)
(56,236)
(56,751)
4,913
1,361
(50,477)
90
2014 Annual Report
Sagicor Financial Corporation
4
DRAFT - CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended December 31, 2014
Year ended December 31, 2014
Sagicor Financial Corporation
Sagicor Financial Corporation
Amounts expressed in US $000
Amounts expressed in US$000
Share Capital
(note 21)
Reserves
(note 22)
Retained
Earnings
Total
Shareholders’
Equity
Participating
Accounts
(note 23)
Non-controlling
Interests
Total
Equity
2014
Balance, beginning of year
295,450
Total comprehensive income from continuing operations
Total comprehensive income from discontinued operation
Transactions with holders of equity instruments:
Movements in treasury shares
Changes in reserve for equity compensation benefits
Dividends declared (note 21.3)
Changes in ownership interest in subsidiaries
Transfers and other movements
Balance, end of year
2013
(4,825)
2,556
-
-
(463)
-
-
(6,033)
221,472
61,600
(26,367)
-
-
512,097
64,156
(26,367)
539
(463)
(19,835)
(19,835)
1,499
6,105
1,499
72
-
-
539
-
-
-
-
Balance, beginning of year
296,058
Total comprehensive income from continuing operations
Total comprehensive income from discontinued operation
Transactions with holders of equity instruments:
Movements in treasury shares
Changes in reserve for equity compensation benefits
Dividends declared (note 21.3)
Transfers and other movements
Balance, end of year
-
-
(608)
-
-
-
295,450
16,411
(36,413)
19,272
-
2,123
-
(6,218)
(4,825)
274,565
35,898
(75,508)
-
-
(19,835)
6,352
221,472
587,034
(515)
(56,236)
(608)
2,123
(19,835)
134
512,097
5
(5,662)
6,262
218,751
36,568
725,186
106,986
(26,367)
539
(384)
(32,138)
(280)
-
803,134
5,759
(56,236)
(608)
2,178
-
-
79
(12,303)
(1,779)
164
-
-
55
(10,333)
4,913
226,433
1,361
-
-
-
-
-
(236)
364
-
-
-
-
(242)
(5,662)
(9,182)
(29,017)
84
(24)
218,751
725,186
2014 Annual Report
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Sagicor Financial Corporation
91
91
295,989
(8,765)
244,474
531,698
241,480
773,542
DRAFT - CONSOLIDATED STATEMENT OF CASH FLOWS
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31, 2014
Year ended December 31, 2014
Sagicor Financial Corporation
Sagicor Financial Corporation
Amounts expressed in US $000
Amounts expressed in US$000
Note
2014
2013
Note
2014
2013
OPERATING ACTIVITIES
Income before taxes
117,005
Adjustments for non-cash items, interest and dividends
36.1
(185,855)
98,552
(75,741)
FINANCING ACTIVITIES
Movement in treasury shares
Shares issued to non-controlling interests
(1,114)
-
Interest and dividends received
Interest paid
Income taxes paid
Net increase in investments and operating assets
Net increase in operating liabilities
Acquisition of insurance portfolio, net of cash and cash
equivalents
36.1
36.1
13.2
275,582
258,552
(81,518)
(19,402)
(73,683)
(28,063)
(245,772)
(351,404)
305,976
183,379
-
30,699
Other notes and loans payable, net
36.3
(683)
Dividends paid to common shareholders
Dividends paid to preference shareholders
Dividends paid to non-controlling interests
Net cash flows - financing activities
(11,819)
(7,800)
(11,498)
(32,914)
(622)
(18)
42,432
(11,849)
(7,810)
(9,007)
13,126
Net cash flows - operating activities
166,016
42,291
Effects of exchange rate changes
7,925
21
INVESTING ACTIVITIES
Property, plant and equipment, net
36.2
(20,916)
(18,284)
Associates and joint ventures, net
Intangible assets, net
7,320
(2,469)
Acquisition of subsidiary, net of cash and cash equivalents
37
93,227
Sale of subsidiaries, net of disposal costs
Net cash flows - investing activities
-
77,162
1,082
(1,015)
-
86,697
68,480
NET CHANGE IN CASH AND CASH EQUIVALENTS -
CONTINUING OPERATIONS
Net change in cash and cash equivalents - discontinued
operation
218,189
123,918
(35,595)
(78,882)
Cash and cash equivalents, beginning of year
258,600
CASH AND CASH EQUIVALENTS, END OF YEAR
36.4
441,194
213,564
258,600
92
2014 Annual Report
Sagicor Financial Corporation
6
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
93
Amounts expressed in US$000
1 INCORPORATION AND PRINCIPAL ACTIVITIES
2 ACCOUNTING POLICIES
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 accounting policies adopted in the preparation of these consolidated financial
statements are set out below. These policies have been consistently applied to the years presented,
unless otherwise stated.
2.1 Basis of preparation
Sagicor and its subsidiaries ‘the Group’ operate across the Caribbean, in the United States of America
(USA) and in the United Kingdom (UK). Details of the Sagicor’s holdings and operations are set out in
notes 4 and 38.
These consolidated financial statements are prepared in accordance with and comply with
International Financial Reporting Standards (IFRS).
The principal activities of the Sagicor Group are as follows:
Life and health insurance
Annuities and pension administration services
Property and casualty insurance
Banking, investment management and other financial services
For ease of reference, when the term “insurer” is used in the following notes, it refers to either one
or more Group subsidiaries that engages in insurance activities.
The Group has adopted accounting policies for the computation of actuarial liabilities of life insurance
and annuity contracts which comply with the Canadian accepted actuarial standards. As no specific
guidance is provided by IFRS for computing actuarial liabilities, management has judged that
Canadian accepted actuarial standards should continue to be applied. The adoption of IFRS 4 –
Insurance Contracts, permits the Group to continue with this accounting policy, with the modification
required by IFRS 4 that rights under reinsurance contracts are measured separately.
The consolidated financial statements are prepared under the historical cost convention except as
modified by the revaluation of investment property, owner-occupied property, available for sale
investment securities, financial assets and liabilities held at fair value through income, actuarial
liabilities and associated reinsurance assets.
The preparation of financial statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in the process of
applying the Company’s accounting policies. The areas involving a higher degree of judgement or
complexity, or areas when assumptions and estimates are significant to the consolidated financial
statements, are disclosed in note 3.
All amounts in these financial statements are shown in thousands of United States dollars, unless
otherwise stated.
7
2014 Annual Report
Sagicor Financial Corporation
93
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
94DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
2.1 Basis of preparation (continued)
2.2 Basis of consolidation (continued)
(a) Amendments to IFRS
A number of new standards and amendments to standards and interpretations are effective for annual
periods beginning after January 1, 2014, and have not been applied in preparing these consolidated
financial statements (see note 2.25).
2.2 Basis of consolidation
(a) Subsidiaries
Subsidiaries are entities over which the Group has control. The Group has control over an entity
when the Group is exposed to the variable returns from its ownership interest in the entity and when
the Group has the ability to affect those returns through its power over the entity. 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.
The Group uses the acquisition method of accounting when control over entities and insurance
businesses is obtained by the Group. The cost of an acquisition is measured as the fair value of the
identifiable assets given, the equity instruments issued and the liabilities incurred or assumed at the
date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at their fair values at the acquisition date irrespective of
the extent of any non-controlling interest. Acquisition-related costs are expensed as incurred.
The excess of the cost of the acquisition, the non-controlling interest recognised and the fair value of
any previously held equity interest in the acquiree, over the fair value of the of the net identifiable
assets acquired is recorded as goodwill. If there is no excess and there is a shortfall, the Group
reassesses the net identifiable assets acquired. If after reassessment, a shortfall remains, the
acquisition is deemed to be a bargain purchase and the shortfall is recognised in income as a gain on
acquisition.
Subsequent ownership changes in a subsidiary, without loss of control, are accounted for as
transactions between owners in the statement of changes in equity.
Non-controlling interest balances represent the equity in a subsidiary not attributable to Sagicor’s
interests.
On an acquisition by acquisition basis, the Group recognises at the date of acquisition the
components of any non-controlling interest in the acquiree either at fair value or at the proportionate
share of the acquiree’s net identifiable assets. The latter option is only available if the non-controlling
interest component is entitled to a proportionate share of net identifiable assets of the acquiree in the
event of liquidation. For certain components of non-controlling interests, other IFRS may override the
fair value option.
Non-controlling interest balances are subsequently re-measured by the non-controlling’s proportionate
share of changes in equity after the date of acquisition.
94
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8
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
2.2 Basis of consolidation (continued)
(b) Discontinued operation
In December 2012, the Group agreed to sell Sagicor Europe Limited, its subsidiary Sagicor at Lloyd's
Limited and its interest in Lloyd's of London syndicate 1206. The decision to sell resulted in the
closure of the Sagicor Europe operating segment and therefore met the criteria of a discontinued
operation. The sale was concluded in December 2013. Consequently, the balances and results
associated with the discontinued operation have been classified separately in these financial
statements.
As of December 31, 2014, the future price adjustments relating to the discontinued operation are
disclosed in the statement of financial position at their estimated undiscounted value. Prior to the sale
(as of December 31, 2012 and during interim financial periods in 2013), the net assets of the
discontinued operation were carried in the statement of financial position at their estimated fair value
less costs to sell. As this amount was less than the previous carrying value, impairments were
recorded and applied to the goodwill and intangible assets component of the discontinued operation's
assets.
(c) Sale of subsidiaries
On the sale of or loss of control of a subsidiary, the Group de-recognises the related assets, liabilities,
non-controlling interest and associated goodwill of the subsidiary. The Group reclassifies its share of
balances of the subsidiary previously recognised in other comprehensive income either to income or
to retained earnings as appropriate. The gain (or loss) on sale recorded in income is the excess (or
shortfall) of the fair value of the consideration received over the de-recognised and reclassified
balances.
(d) Associates and joint venture
The investments in associated companies, which are not majority-owned or controlled but where
significant influence exists, are included in these consolidated financial statements under the equity
method of accounting.
Sagicor Financial Corporation
95
Amounts expressed in US$000
2.2 Basis of consolidation (continued)
Investments in associate and joint venture companies are originally recorded at cost and include
intangible assets identified on acquisition. Accounting policies have been changed where necessary
to ensure consistency with the accounting policies adopted by the Group.
The Group recognises in income its share of associates and joint venture companies’ post acquisition
income and its share of the amortisation and impairment of intangible assets which were identified on
acquisition. Unrealised gains or losses on transactions between the Group and its associates and
joint ventures are eliminated to the extent of the Group’s interest. The Group recognises in other
comprehensive income, its share of post acquisition other comprehensive income.
(e) Pension and investment funds
Insurers have issued deposit administration and unit linked contracts in which the full return of the
assets supporting these contracts accrue directly to the contract-holders. As these contracts are not
operated under separate legal trusts, they have been consolidated in these financial statements.
The Group manages a number of segregated pension funds, mutual funds and unit trusts. These
funds are segregated and investment returns on these funds accrue directly to unit-holders.
Consequently the assets, liabilities and activity of these funds are not included in these consolidated
financial statements unless the Group has a significant holding in the fund. Where a significant
holding exists, the Group consolidates the assets, liabilities and activity of the fund and accounts for
any non-controlling interest as a financial liability.
(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 are applied towards the future purchase of Company shares.
9
2014 Annual Report
Sagicor Financial Corporation
95
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
96
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
2.3 Foreign currency translation
(a) Functional and presentational currency
Items included in the financial 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.
Sagicor Financial Corporation
Amounts expressed in US$000
2.3 Foreign currency translation (continued)
On consolidation, exchange differences arising from the translation of the net investment in foreign
entities are recorded in other comprehensive income. On the disposal or loss of control of a foreign
entity, such exchange differences are transferred to income.
Goodwill and other intangible assets recognised 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.
The consolidated financial statements are presented in thousands of United States dollars, which is
the Group’s presentational currency.
(c) Transactions and balances
(b) Reporting units
The results and financial position of reporting units that have a functional currency other than the
Group’s presentational currency are translated as follows:
(i) Income, other comprehensive income, movements in equity and cash flows are translated
at average exchange rates for the year.
(ii) Assets and liabilities are translated at the exchange rates ruling on December 31.
(iii) Resulting exchange differences are recognised in other comprehensive income.
Currencies which are pegged to the United States dollar are converted at the pegged rates.
Currencies which float 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:
2014 closing
2014 average
2013 closing
2013 average
Barbados dollar
2.0000
Eastern Caribbean dollar
2.7000
2.0000
2.7000
2.0000
2.7000
Jamaica dollar
114.3232
110.5386
105.9952
Trinidad & Tobago dollar
6.3586
Pound sterling
0.64070
6.3920
0.60482
6.4386
0.60500
2.0000
2.7000
99.7566
6.4064
0.64036
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, which result from the
settlement of foreign currency transactions and from the re-translation of monetary assets and
liabilities denominated in foreign currencies, are recognised in the income statement. Non-monetary
assets and liabilities, primarily deferred policy acquisition costs and unearned premiums, are
maintained at the transaction rates of exchange.
The foregoing exchange gains and losses which are recognised in the income statement are included
in other revenue.
Exchange differences on the re-translation of the fair value of non-monetary items such as equities
held at fair value through income are reported as part of the fair value gain or loss. Exchange
differences on the re-translation of the fair value of non-monetary items such as equities held as
available for sale are reported as part of the fair value gain or loss in other comprehensive income.
2.4 Segments
Reportable operating segments have been defined on the basis of performance and resource
allocation decisions of the Group’s Chief Executive Officer.
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10
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
97
Amounts expressed in US$000
2.5 Investment property
2.6 Property, plant and equipment (continued)
Investment property consists of freehold lands and freehold properties which are held for rental income
and/or capital appreciation. Investment property is recorded initially at cost. In subsequent financial
years, investment property is recorded at fair values as determined by independent valuation, with the
appreciation or depreciation in value being taken to investment income. Fair value represents the
price (or estimates thereof) that would be agreed upon in an orderly transaction between market
participants at valuation date.
Investment property includes property partially owned by the Group and held under joint operations
with third parties for which the Group recognises its share of the joint operation's assets, liabilities,
revenues, expenses and cash flows.
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 the
other portion is occupied by the Group. In such circumstances, the property is accounted for as an
investment property if the Group’s occupancy level is not significant in relation to the total available
occupancy. Otherwise, it is accounted for as an owner-occupied property.
Rental income is recognised on an accrual basis.
2.6 Property, plant and equipment
Property, plant and equipment are recorded initially at cost. Subsequent expenditure is capitalised
when it will result in future economic benefits to the Group.
Owner-occupied property is re-valued at least every three years to its fair value as determined by
independent valuation. Fair value represents the price (or estimates thereof) that would be agreed
upon in an orderly transaction between market participants at valuation date. Revaluation of a
property may be conducted more frequently if circumstances indicate that a significant change in fair
value has occurred. Movements in fair value are reported in other comprehensive income, unless
there is a cumulative depreciation in respect of an individual property, which is then recorded in
income. Accumulated depreciation at the date of revaluation is eliminated against the gross carrying
amount of the asset.
Owner-occupied property includes property held under joint operations with third parties for which the
Group recognises its share of the joint operation's assets, liabilities, revenues, expenses and cash
flows. On the disposal of owner-occupied property, the amount included in the fair value reserve is
transferred to retained earnings.
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 or fair value of property,
plant and equipment to residual value over the estimated useful life. Estimated useful lives are
reviewed annually and are as follows.
Asset
Buildings
Estimated useful life
40 to 50 years
Furnishings and leasehold improvements
10 years or lease term
Computer and office equipment
Vehicles
Leased equipment and vehicles
3 to 10 years
4 to 5 years
5 to 6 years
11
Lands are not depreciated.
2014 Annual Report
Sagicor Financial Corporation
97
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
98 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
2.6 Property, plant and equipment (continued)
An impairment loss is recognised for the amount by which an 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.
Gains or losses recognised in income on the disposal of property, plant and equipment are determined
by comparing the net sale proceeds to the carrying value.
2.7 Intangible assets
(a) Goodwill
Goodwill (defined in note 2.2(a)) arising from an acquisition of a subsidiary or insurance business is
allocated to appropriate cash generating units which are defined by the Group’s operating segments.
Goodwill arising in a reportable operating segment is allocated to that segment. Goodwill arising in a
Group entity, which is not within a reportable operating segment, is allocated to that entity’s own
operations, or, if that entity is managed in conjunction with another Group entity, to their combined
operations.
Sagicor Financial Corporation
Amounts expressed in US$000
2.7 Intangible assets (continued)
(b) Other intangible assets
Other intangible assets identified on acquisition are recognised only if future economic benefits
attributable to the asset will flow to the Group and if the fair value of the asset can be measured
reliably. In addition, for the purposes of recognition, the intangible asset must be separable from the
business being acquired or must arise from contractual or legal rights. Intangible assets acquired in a
business combination are initially recognised at their fair value.
Other intangible assets, which have been acquired directly, are recorded initially at cost.
On acquisition, the useful life of the asset is estimated. If the estimated useful life is definite, then the
cost of the asset is amortised over its life, and is tested for impairment when there is evidence of
same. If the estimated useful life is indefinite, the asset is tested annually for impairment. 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. The estimated useful lives of recognised intangible assets are as follows:
Class of intangible asset Asset
Estimated useful life
Goodwill arising from an investment in an associate is included in the carrying value of the investment.
Customer related
Goodwill is tested annually for impairment and whenever there is an indication of impairment. Goodwill
is carried at cost less accumulated impairment. An impairment loss is recognised for the amount by
which the carrying amount of goodwill exceeds its recoverable amount. The recoverable amount is
the higher of an operating segment's (or operation's) fair value less costs to sell and its value in use.
On the disposal of a subsidiary or insurance business, the associated goodwill is de-recognised and is
included in the gain or loss on disposal. On the disposal of a subsidiary or insurance business forming
part of a reportable operating segment, the proportion of goodwill disposed is the proportion of the fair
value of the asset disposed to the total fair value of the operating segment.
Contract based
Technology based
Licences
Software
Customer relationships
4 - 20 years
Broker relationships
10 years
15 years
2 – 10 years
98
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12
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
2.8 Financial assets
(a) Classification
The Group classifies its financial assets into four categories:
held to maturity financial assets;
available for sale financial assets;
financial assets at fair value through income;
loans and receivables.
Management determines the appropriate classification of these assets on initial recognition.
Held to maturity financial assets are non-derivative financial instruments with fixed or determinable
payments and fixed maturities that management has both the intent and ability to hold to maturity.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market.
Financial assets in the category at fair value through income comprise designated assets or held for
trading assets. These are set out below.
Assets designated by management on acquisition form part of managed portfolios whose
performance is evaluated on a fair value basis in accordance with documented investment
strategies. They comprise investment portfolios backing deposit administration and unit linked
policy contracts for which the full return on the portfolios accrue to the contract-holders.
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Amounts expressed in US$000
2.8 Financial assets (continued)
(b) Recognition and measurement
Purchases and sales of financial investments are recognised on the trade date. 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 fair value 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 fair value 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 reported in other comprehensive
income. 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.
(c) Fair value
Held for trading securities are acquired principally for the purpose of selling in the short-term or if
they form part of a portfolio of financial assets in which there is evidence of short-term profit
taking. Derivatives are also classified as held for trading unless designated as hedges.
Fair value amounts represent the price (or estimates thereof) that would be agreed upon in an orderly
transaction between market participants at valuation date.
Available for sale financial assets are non-derivative financial instruments intended to be held for an
indefinite period of time and which may be sold in response to liquidity needs or changes in interest
rates, exchange rates and equity prices.
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Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
100 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
2.8 Financial assets (continued)
(d) Impaired financial assets
A financial asset is considered impaired if its carrying amount exceeds its estimated recoverable
amount.
An impairment loss for assets carried at amortised cost is calculated as the difference between the
carrying amount and the present value of expected future cash flows discounted at the original
effective interest rate. The carrying value of impaired financial assets is reduced by impairment
losses.
The recoverable amount for an available for sale security is its fair value.
For an available for sale equity security or investment in an associated company, an impairment loss
is recognised in income if there has been a significant or prolonged decline in its fair value below its
cost. Determination of what is significant or prolonged requires judgement which includes
consideration of the volatility of the fair value, and the financial condition and financial viability of the
investee. In this context, management considers a 40% decline in fair value below cost to be
significant and a decline that has persisted for more than twelve months to be prolonged. Any
subsequent increase in fair value occurring after the recognition of an impairment loss is reported in
other comprehensive income.
For an available for sale security other than an equity security, if the Group assesses that there is
objective evidence that the security is impaired, an impairment loss is recognised for the amount by
which the instrument’s amortised cost exceeds its fair value. If in a subsequent period 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.
Sagicor Financial Corporation
Amounts expressed in US$000
2.8 Financial assets (continued)
(e) Securities purchased for resale
Securities purchased under agreements to resell are recognised initially at fair value and are
subsequently stated at amortised cost. Securities purchased for resale are treated as collateralised
financing transactions. The difference between the purchase and resale price is treated as interest
and is accrued over the life of the agreements using the effective yield method.
(f) Finance leases
The Group, as lessor, enters into finance leases with third parties to lease assets. Finance leases are
leases in which the Group has transferred substantially the risks of ownership to the lessee. The
finance lease, net of unearned finance income, is recorded as a receivable and the finance income is
recognised over the term of the lease using the effective yield method.
(g) Embedded derivatives
The Group holds certain bonds and preferred equity securities that contain options to convert into
common shares of the issuer. These options are considered embedded derivatives.
If the measurement of an embedded derivative can be separated from its host contract, the embedded
derivative is carried at current market value and is presented with its related host contract. Unrealised
gains and losses are recorded as investment income.
If the measurement of an embedded derivative cannot be separated from its host contract, the full
contract is accounted for as a financial asset at fair value through income.
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Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
2.9 Real estate developed or held for resale
Lands being made ready for resale along with the cost of infrastructural works are classified as real
estate held for resale and are stated at the lower of carrying value and fair value less costs to sell.
Real estate acquired through foreclosure is classified as real estate held for resale and is stated at the
lower of carrying value and fair value less costs to sell.
Gains and losses realised on the sale of real estate are included in revenue at the time of sale.
2.10 Policy contracts
(a) Classification
The Group issues policy contracts that transfer insurance risk and / or financial risk from the
policyholder.
The Group defines insurance risk as an insured event that could cause an insurer to pay significant
additional benefits in a scenario that has a discernible effect on the economics of the transaction.
Insurance contracts transfer insurance risk and may also transfer financial risk. Once a contract has
been classified as an insurance contract, it remains an insurance contract for its duration, even if the
insurance risk reduces significantly over time. Investment contracts transfer financial risk and no
significant insurance risk. Financial risk includes credit risk, liquidity risk and market risk.
A reinsurance contract is an insurance contract in which an insurance entity cedes assumed risks to
another insurance entity.
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Amounts expressed in US$000
2.10 Policy contracts (continued)
A number of insurance contracts contain a discretionary participation feature. A discretionary
participation feature entitles the holder to receive, supplementary to the main benefit, additional
benefits or bonuses:
that are likely to be a significant portion of the total contractual benefits;
whose amount or timing is contractually at the discretion of management; and
that are contractually based on
the performance of a specified pool of contracts;
investment returns on a specified pool of assets held by the insurer; or
the profit or loss of a fund or insurer issuing the contract.
o
o
o
Policy bonuses and policy dividends constitute discretionary participation features which the Group
classifies as liabilities.
Residual gains in the participating accounts constitute discretionary participation features which the
Group classifies as equity (see also note 2.20).
(b) Recognition and measurement
(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 liability.
Property insurance contracts provide coverage for the risk of property damage or of loss of property.
Commercial property, homeowners’ property, motor and certain marine property are common types of
risks covered. 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 or financial loss
to third parties. Personal accident, employers’ liability, public liability, product liability and professional
indemnity are common types of casualty insurance.
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Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
102DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
2.10 Policy contracts (continued)
Premium revenue is recognised as earned on a pro-rated basis over the term of the respective policy
coverage. If alternative insurance risk exposure patterns have been established over the term of the
policy coverage, then premium revenue is recognised in accordance with the risk exposure. 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 the date of the financial statements.
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. Profit sharing commission due to the Group is accrued as
commission income when there is reasonable certainty of earned profit.
the
financial statements, commissions, premium
Commissions and premium taxes payable are recognised on the same basis as premiums earned. At
the date of
taxes and acquisition-related
administrative expenses attributable to unearned premiums are recorded as deferred policy
acquisition costs. Profit 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.
Sagicor Financial Corporation
Amounts expressed in US$000
2.10 Policy contracts (continued)
(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 accrued 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-rata 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 2.11.
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.
Commissions and premium taxes payable are recognised on the same basis as premiums earned.
(iii) Long-term traditional insurance contracts
Long-term traditional insurance contracts are generally issued for fixed terms of five years or more, or
for the remaining life of the insured. Benefits are typically a death, disability or critical illness benefit, a
cash value on termination and/or a monthly annuity. Annuities are generally payable until the death of
the beneficiaries with a proviso for a minimum number of payments. Some of these contracts have a
discretionary participation feature in the form of regular bonuses or dividends. Other benefits such as
disability and waiver of premium on disability may also be included in these contracts. Some contracts
may allow for the advance of policy loans to the policyholder and may also allow for dividend
withdrawals by the policyholder during the life of the contract.
Premium revenue is recognised when due. Typically, premiums are fixed and are required to be paid
within the due period for payment. If premiums are unpaid, either the contract may terminate, an
automatic premium loan may settle the premium, or the contract may continue at a reduced value.
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Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
103
Amounts expressed in US$000
2.10 Policy contracts (continued)
2.10 Policy contracts (continued)
Policy benefits are recognised on the notification of death, disability or critical illness, on the
termination or maturity date of the contract, 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 financial
statements 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 2.11.
An insurer may obtain reinsurance coverage for death benefit insurance risks. Typically, coverage is
obtained for individual coverage exceeding prescribed limits. The reinsurance premium is expensed
when due, which generally coincides with when the policy premium is due. Reinsurance claim
recoveries are established at the time of claim notification.
Premium revenue is recognised when received and consists of all monies received from the
policyholders. Typically, premiums are fixed at the inception of the contract or periodically thereafter
but additional non-recurring premiums may be paid.
Policy benefits are recognised on the notification of death, disability or critical illness, on the receipt of
a withdrawal request, on the termination or maturity date of the contract, or on the annuity payment
date. Reserves for future policy liabilities are recorded as described in note 2.11.
An insurer may obtain reinsurance coverage for death benefit insurance risks. Typically, coverage is
obtained for individual coverage exceeding prescribed limits. The reinsurance premium is expensed
when due, which generally coincides with when the policy premium is due. Reinsurance claims
recoveries are established at the time of claim notification.
Commissions and premium taxes payable are recognised on the same basis as earned premiums.
Commissions and premium taxes payable are generally recognised only on settlement of premiums.
(iv) Long-term universal life and unit linked insurance contracts
(v) Reinsurance contracts assumed
Universal life and unit linked insurance contracts are generally issued for fixed terms or for the
remaining life of the insured. Benefits are typically a death, disability or critical illness benefit, a cash
value on termination and/or a monthly annuity. Annuities are generally payable until the death of the
beneficiaries with a proviso for a minimum number of payments. Benefits may include amounts for
disability or waiver of premium on disability.
Universal life and unit linked contracts have either an interest bearing investment account or unit
linked investment accounts. Either gross premiums or gross premiums net of allowances are
deposited to the investment accounts. Investment returns are credited to the investment accounts
and expenses, not included in the aforementioned allowances, are debited to the investment
accounts. Interest bearing investment accounts may include provisions for minimum guaranteed
returns or returns based on specified investment indices. Allowances and expense charges are in
respect of applicable commissions, cost of insurance, administrative expenses and premium taxes.
Fund withdrawals may be permitted.
Reinsurance contracts assumed by an insurer are accounted for in a similar manner as if the insurer
has assumed the risk direct from a policyholder.
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.
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103
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
104DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
2.10 Policy contracts (continued)
2.10 Policy contracts (continued)
2.11 Actuarial liabilities (continued)
2.12 Financial liabilities
Reinsurance contracts held by an insurer are recognised and measured in a similar manner to the
originating insurance contracts and in accordance with the contract terms. Reinsurance premium
ceded and reinsurance recoveries on claims are offset against premium revenue and policy benefits in
the income statement.
The benefits to which an insurer is entitled under its reinsurance contracts held are recognised as
reinsurance assets or receivables. Reinsurance assets and receivables are assessed for impairment.
If there is evidence that the asset or receivable is impaired, the impairment is recorded in the
statement of income. The obligations of an insurer under reinsurance contracts held are included in
accounts payable and accrued liabilities and in actuarial liabilities.
Reinsurance balances are measured consistently with the insurance liabilities to which they relate.
Other investment contracts are recognised initially at fair value and are subsequently stated at
amortised cost and are accounted for in the same manner as deposit administration contracts which
are similarly classified.
(c) Embedded derivatives
Certain insurance contracts contain embedded derivatives which are options whose value may vary in
response to changes in interest rates or other market variables.
The Group does not separately measure embedded derivatives that are closely related to the host
insurance contract or that meet the definition of an insurance contract. Options to surrender an
insurance contract for a fixed amount are also not measured separately. In these cases, the entire
contract liability is measured as set out in note 2.11.
(vii) Deposit administration and other investment contracts
(d) Liability adequacy tests
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
2.11 Actuarial liabilities
the pension scheme in direct proportion to the investment returns on specified blocks of
assets.
(a) Life insurance and annuity contracts
At the date of the financial statements, liability adequacy tests are performed by each insurer to
ensure the adequacy of insurance contract liabilities, using current estimates of the related expected
future cash flows. If a test indicates that the carrying value of insurance contract liabilities is
inadequate, then the liabilities are adjusted to correct the deficiency. The deficiency is included in the
income statement under benefits.
Deposit administration contributions are recorded directly as liabilities. Withdrawals are deducted
directly from the liability. The interest or investment return provided is recorded as an interest
expense.
In addition, the Group may provide pension administration services to the pension schemes. The
Group earns fee income for both pension administration and investment services.
The determination of actuarial liabilities of long-term insurance contracts has been done using
Canadian accepted actuarial standards. These liabilities consist of the amounts that, together with
future premiums and investment income, are required to provide for future policy benefits, expenses
and taxes on insurance and annuity contracts. Canadian standards may change from time to time, but
infrequently.
included in actuarial liabilities.
(b) Health insurance contracts
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The process of calculating life insurance and annuity actuarial liabilities for future policy benefits
necessarily involves the use of estimates concerning such factors as mortality and morbidity rates,
future investment yields, future expense levels and persistency, including reasonable margins for
adverse deviations. As experience unfolds, these resulting provisions for adverse deviations will be
included in future income to the extent they are released when they are no longer required to cover
adverse experience. Assumptions used to project benefits, expenses and taxes are based on insurer
and industry experience and are updated annually.
The Canadian accepted actuarial standards for the valuation of policy liabilities are based on an
explicit projection of cash flows using best estimate assumptions for each material cash flow item and
contingency. Investment returns are based on projected investment income using the current asset
portfolios and projected re-investment strategies. Each assumption is adjusted by a margin for
adverse deviation.
During the ordinary course of business, the Group issues investment contracts or otherwise assumes
financial liabilities that expose the Group to financial risk. The recognition and measurement of the
Group’s principal types of financial liabilities are disclosed in note 2.10(b) (vii) and in the following
paragraphs.
(a) Securities sold for re-purchase
Securities sold under agreements to repurchase are recognised initially at fair value and are
subsequently stated at amortised cost. Securities sold for re-purchase are treated as collateralised
financing transactions. The difference between the sale and re-purchase price is treated as interest
and is accrued over the life of the agreements using the effective yield method.
Under this methodology, assets of each insurer are selected to back its actuarial liabilities. Changes in
the carrying value of these assets may generate corresponding changes in the carrying amount of the
associated actuarial liabilities. These assets include available for sale securities, whose unrealised
effective yield method.
gains or losses in fair value are recorded in other comprehensive income. The fair value reserve for
actuarial liabilities has been established in the statement of equity for the accumulation of changes in
(c) Loans and other debt obligations
actuarial liabilities which are recorded in other comprehensive income and which arise from
recognised unrealised gains or losses in fair value of available for sale securities.
(b) Deposit liabilities
Certain life insurance policies issued by the insurer contain equity linked policy side funds. The
investment returns on these unitised funds accrue directly to the policies with the insurer assuming no
credit risk. Investments held in these side funds are accounted for as financial assets at fair value
through income and unit values of each fund are determined by dividing the value of the assets in the
fund at the date of the financial statements by the number of units in the fund. The resulting liability is
Deposits are recognised initially at fair value and are subsequently stated at amortised cost using the
Loans and other debt obligations are recognised initially at fair value, being their issue proceeds, net
of transaction costs incurred. Subsequently, obligations 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 loan obligations using the effective yield method.
Obligations undertaken for the purposes of financing operations and capital support are classified as
notes or loans payable and the associated cost is classified as finance costs. Loan obligations
undertaken for the purposes of providing funds for on-lending, leasing or portfolio investments are
classified as deposit and security liabilities and the associated cost is included in interest expense.
The actuarial liabilities of health insurance policies are estimated in respect of claims that have been
incurred but not yet reported or settled.
(d) Fair value
Fair value amounts represent the price (or estimates thereof) that would be agreed upon in an orderly
transaction between market participants at valuation date.
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
2.11 Actuarial liabilities (continued)
The process of calculating life insurance and annuity actuarial liabilities for future policy benefits
necessarily involves the use of estimates concerning such factors as mortality and morbidity rates,
future investment yields, future expense levels and persistency, including reasonable margins for
adverse deviations. As experience unfolds, these resulting provisions for adverse deviations will be
included in future income to the extent they are released when they are no longer required to cover
adverse experience. Assumptions used to project benefits, expenses and taxes are based on insurer
and industry experience and are updated annually.
The Canadian accepted actuarial standards for the valuation of policy liabilities are based on an
explicit projection of cash flows using best estimate assumptions for each material cash flow item and
contingency. Investment returns are based on projected investment income using the current asset
portfolios and projected re-investment strategies. Each assumption is adjusted by a margin for
adverse deviation.
Under this methodology, assets of each insurer are selected to back its actuarial liabilities. Changes in
the carrying value of these assets may generate corresponding changes in the carrying amount of the
associated actuarial liabilities. These assets include available for sale securities, whose unrealised
gains or losses in fair value are recorded in other comprehensive income. The fair value reserve for
actuarial liabilities has been established in the statement of equity for the accumulation of changes in
actuarial liabilities which are recorded in other comprehensive income and which arise from
recognised unrealised gains or losses in fair value of available for sale securities.
Certain life insurance policies issued by the insurer contain equity linked policy side funds. The
investment returns on these unitised funds accrue directly to the policies with the insurer assuming no
credit risk. Investments held in these side funds are accounted for as financial assets at fair value
through income and unit values of each fund are determined by dividing the value of the assets in the
fund at the date of the financial statements 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 or settled.
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Amounts expressed in US$000
2.12 Financial liabilities
During the ordinary course of business, the Group issues investment contracts or otherwise assumes
financial liabilities that expose the Group to financial risk. The recognition and measurement of the
Group’s principal types of financial liabilities are disclosed in note 2.10(b) (vii) and in the following
paragraphs.
(a) Securities sold for re-purchase
Securities sold under agreements to repurchase are recognised initially at fair value and are
subsequently stated at amortised cost. Securities sold for re-purchase are treated as collateralised
financing transactions. The difference between the sale and re-purchase 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.
(c) Loans and other debt obligations
Loans and other debt obligations are recognised initially at fair value, being their issue proceeds, net
of transaction costs incurred. Subsequently, obligations 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 loan obligations using the effective yield method.
Obligations undertaken for the purposes of financing operations and capital support are classified as
notes or loans payable and the associated cost is classified as finance costs. Loan obligations
undertaken for the purposes of providing funds for on-lending, leasing or portfolio investments are
classified as deposit and security liabilities and the associated cost is included in interest expense.
(d) Fair value
Fair value amounts represent the price (or estimates thereof) that would be agreed upon in an orderly
transaction between market participants at valuation date.
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Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
106 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
2.13 Provisions
Sagicor Financial Corporation
Amounts expressed in US$000
2.15 Offsetting financial instruments
Provisions are recognised when the Group has a legal or constructive obligation, as a result of past
events, if it is probable that an outflow of resources will be required to settle the obligation, and a
reliable estimate of the amount can be made.
Financial assets and liabilities are offset and the net amount is reported in the statement of financial
position when there is a legally enforceable right to offset and there is an intention to settle on a net
basis or to realise the asset and settle the liability simultaneously.
2.14 Derivative financial instruments and hedging activities
2.16 Presentation of current and non-current assets and liabilities
In note 41.2, the maturity profiles of financial and insurance assets and liabilities are identified. For
other assets and liabilities, balances presented in notes 5 to 8, 10 to 12, 14, 18, 19, 31 and 33 are
non-current unless otherwise stated in those notes.
Derivatives are financial instruments that derive their value from the price of underlying items such as
equities, bonds, interest rates, foreign exchange, credit spreads, commodities or other indices.
Derivatives enable users to increase, reduce or alter exposure to credit or market risk. The Group
transacts derivatives for three primary purposes: to create risk management solutions for customers,
for proprietary trading purposes, and to manage its own exposure to credit and market risk.
Derivative financial instruments are initially recognised at fair value on the date a derivative contract is
entered into, and subsequently are re-measured at their fair value at each financial statement date.
The method of recognising the resulting gain or loss depends on whether the derivative is designated
as a hedging instrument, and if so, the nature of the item being hedged. Fair values are obtained from
quoted market prices, discounted cash flow models and option pricing models as appropriate.
The Group documents at the inception of the transaction the relationship between hedging
instruments and hedged items, as well as risk management objectives and strategies for undertaking
various hedging transactions. The Group also documents its assessments, both at hedge inception
and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly
effective in offsetting changes in fair values or cash flows of hedged items.
For cash flow hedges, gains and losses relating to the effective portion of changes in the fair value of
derivatives are initially recognised in other comprehensive income, and are transferred to the
statement of income when the forecast cash flows affect income. The gain or loss relating to the
ineffective portion is recognised immediately in the statement of income.
Gains and losses from changes in the fair value of derivatives that do not qualify for hedge accounting
are included in net investment income or interest expense.
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Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
2.17 Employee benefits
(a ) Pension benefits
Group companies have various pension schemes in place for their employees. Some schemes are
defined benefit plans and others are defined contribution plans.
The liability in respect of defined benefit plans is the present value of the defined benefit obligation at
December 31 less the fair value of plan assets. The defined benefit obligation is computed using the
projected unit credit method. The present value of the defined benefit obligation is determined by the
estimated future cash outflows using appropriate interest rates on government bonds for the maturity
dates and currency of the related liability.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions
are charged or credited to the other comprehensive income and retained earnings or non-controlling
interest in the period in which they arise. Past service costs are charged to income in the period in
which they arise.
For defined contribution plans, the Group pays contributions to the pension schemes on a mandatory
or contractual basis. Once paid, the Group has no further payment obligations. Contributions are
recognised in income in the period in which they are due.
(b) Other retirement benefits
Certain Group subsidiaries provide supplementary health and life insurance benefits to qualifying
employees upon retirement. The entitlement to these benefits is usually based on the employee
remaining in service up to retirement age and the completion of a minimum service period. The
expected costs of these benefits are accrued over the period of employment, using an accounting
methodology similar to that for defined benefit pension plans. Actuarial gains and losses arising from
experience adjustments and changes in actuarial assumptions are charged or credited to the other
comprehensive income and retained earnings or non-controlling interest in the period in which they
arise.
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Amounts expressed in US$000
2.17 Employee benefits (continued)
(c) Profit sharing and bonus plans
The Group recognises a liability and an expense for bonuses and profit sharing, based on various
profit and other objectives of the Group as a whole or of individual subsidiaries. An accrual is
recognised where there are contractual obligations or where past practice has created a constructive
obligation.
(d) Equity compensation benefits
The Group has a number of share-based compensation plans in place for administrative, sales and
managerial staff.
(i) Equity-settled share-based transactions with staff
The services received in an equity-settled transaction with staff are measured at the fair value of the
equity instruments granted. The fair value of those equity instruments is measured at grant date.
If the equity instruments granted vest immediately and the individual is not required to complete a
further period of service before becoming entitled to those instruments, the services received are
recognised in full on grant date in the income statement for the period, with a corresponding increase
in equity.
Where the equity instruments do not vest until the individual has completed a further period of service,
the services received are expensed in the income statement during the vesting period, with a
corresponding increase in the reserve for equity compensation benefits or in non-controlling interest.
Non-market vesting conditions are included in assumptions about the number of instruments that are
expected to vest. At each reporting financial statement date, the Group revises its estimates of the
number of instruments that are expected to vest based on the non-marketing vesting conditions and
adjusts the expense accordingly.
Amounts held in the reserve for equity compensation benefits are transferred to share capital or non-
controlling interest either on the distribution of share grants or on the exercise of share options.
21
2014 Annual Report
Sagicor Financial Corporation
107
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
108 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
2.17 Employee benefits (continued)
The grant by the Company of its equity instruments to employees of Group subsidiaries is treated as a
capital contribution in the financial statements of the subsidiary. The full expense relating to the grant
is recorded in the subsidiary’s income statement.
(ii) Cash-settled share-based transactions with staff
Sagicor Financial Corporation
Amounts expressed in US$000
2.18 Taxes
(a) Premium taxes
Insurers are subject to tax on premium revenues generated in certain jurisdictions. The principal rates
of tax are summarised in the following table.
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 the date of the financial statements 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
Premium tax rates
Barbados
Jamaica
Trinidad and Tobago
The equity instruments granted consist either of grants of, or options to purchase, common shares of
listed entities within the Group. For common shares granted, the listed price prevailing on the grant
date determines the fair value. For options granted, the fair value is determined by reference to 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 benefits
Termination benefits are payable whenever an employee’s employment is terminated before the
normal retirement date or whenever an employee accepts voluntary redundancy in exchange for
these benefits. The Group recognises termination benefits when it is demonstrably committed to
either terminate the employment of current employees according to a detailed formal plan without the
possibility of withdrawal or to provide termination benefits as a result of an offer made to encourage
voluntary redundancy. Benefits falling due more than twelve months after the date of the financial
statements are discounted to present value.
Life insurance and
non-registered
annuities
Health
insurance
3% - 6%
3%
15%
4%
Nil
Nil
Nil
Property and
casualty
insurance
3% - 5%
Nil
Nil
Nil
United States of America
0.75% - 3.5%
(b) Asset tax
The Group is subject to an asset tax in Jamaica and Barbados. In Jamaica, the asset tax is levied on
insurance, securities dealers and deposit taking institutions, and is 0.14% of adjusted assets held at the
end of the year. In Barbados, the asset tax is levied on insurance, deposit taking institutions and credit
unions and is 0.20% of adjusted assets held at the end of a period.
(c)
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 the current year are set out in the next
table.
108
2014 Annual Report
Sagicor Financial Corporation
22
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
109
Amounts expressed in US$000
2.18 Taxes (continued)
Income tax rates
Barbados
Jamaica
Trinidad and Tobago
United States of America
(i) Current income taxes
Life insurance and
non-registered
annuities
5% of gross
investment income
15% of
investment income
15% - 25% of
investment income
35%
of net income
Registered
annuities
Other lines of
business
Nil
Nil
Nil
Nil
25% of
net income
15% - 33.33%
of net income
25%
of net income
35%
of net income
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
Deferred income tax is recognised, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the financial statements.
Deferred income taxes are computed at tax rates that are enacted or substantially enacted by the end
of the reporting period. Deferred tax assets are only recognised when it is probable that taxable profits
will be available against which the asset may be utilised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to do so
and once they relate to the same entity. Deferred tax, related to fair value re-measurement of
available for sale investments and cash flow hedges which are recorded in other comprehensive
income, is recorded in other comprehensive income and is subsequently recognised in income
together with the deferred gain or loss.
2.19 Common and preference shares
(a) Common shares
In exchange for consideration received, the Company has issued common shares that are classified
as equity. Incremental costs directly attributable to the issue of common shares are recorded in share
capital as a deduction from the share issue proceeds.
Where a Group entity purchases the Company’s common shares, the consideration paid, including
any directly attributable cost, is deducted from share capital and is recorded as treasury shares.
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 recorded in retained earnings.
(b) Preference shares
On July 18, 2011, the Company issued convertible redeemable preference shares that are accounted
for as a compound financial instrument. The shares are contractually redeemable on July 18, 2016 if
the shareholder has not opted to convert the shares prior to this date. Dividends may be declared
semi-annually by the Company’s directors.
The redemption value is recognised as a contractual liability, and is measured initially at its discounted
fair value. The discount rate reflects as of July 18, 2011: (i) the rate of interest applicable to a similar
liability with a contractual dividend rate, and (ii) the interest premium required by the shareholder for
an instrument with a non-contractual dividend. The liability component is disclosed in note 16.
The preference shareholders’ rights to receive dividends is recognised within shareholders’ equity,
and is measured initially as the residual fair value of the preference shares in their totality after
deducting the liability for the redemptive value. The equity component is initially recorded as a
preference share reserve in note 22.
Incremental costs directly attributable to the issue of the preference shares are allocated between the
liability for the redemption value and the equity reserve in proportion to their initial carrying amounts.
After initial recognition, the liability component is accreted to its ultimate redemption value using the
effective interest yield method, with the accretion being recorded as a finance cost in the statement of
income. After initial recognition, the preference share reserve is transferred to retained earnings pro-
rata to the dividends declared over the period to redemption.
23
2014 Annual Report
109
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
110 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
2.19 Common and preference shares (continued)
2.20 Participating accounts (continued)
On the initial recognition of the preference shares, the conversion feature of the instrument was
deemed to have no value. Subsequently, when a number of preference shares are converted to
common shares, the associated liability for redemption will be extinguished and consequently will be
transferred to the share capital account for common shares. Additionally at conversion, the proportion
of the preference share reserve attributable to the converted number of preference shares will also be
transferred to the share capital account for common shares. In summary, the total transfer to the
share capital account for common shares will approximate the original consideration for the converted
number of preference shares less attributable issue costs.
(c) Dividends
On the declaration by the Company’s directors of common or preference share dividends payable, the
total value of the dividend is recorded as an appropriation of retained earnings.
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 benefits and future policy dividends,
bonuses and other non-guaranteed benefits of the afore-mentioned policies. The rules of this account
require that premiums, benefits, 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.
Distributable profits of the closed participating account are distributed to the participating policies in
the form of declared bonuses and dividends. Undistributed profits remain in the participating account
for the benefit of participating policyholders.
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, benefits, 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 profit distribution to shareholders (see below) were also transferred to
the account.
Distributable profits of the open participating account are shared between participating policies and
shareholders in a ratio of 90:10. Profits are distributed to the participating policies in the form of
declared bonuses and dividends. Profits which are distributed to shareholders are included in the
allocation of Group net income to shareholders. Undistributed profits / (losses) remain in the
participating account in equity.
110
2014 Annual Report
Sagicor Financial Corporation
24
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
2.20 Participating accounts (continued)
(c) Financial statement presentation
The assets and liabilities of the participating accounts are included but not presented separately in the
financial statements. The revenues, benefits and expenses of the participating accounts are also
included but not presented separately in the financial statements. However, the overall surplus of
assets held in the participating funds over the associated liabilities is presented in equity as the
participating accounts. The overall net income and other comprehensive income that are attributable
to the participating funds are disclosed as allocations.
Sagicor Financial Corporation
111
Amounts expressed in US$000
2.23 Fees and other revenue
Fees and non-insurance commission income are recognised on an accrual basis when the service
has been provided. Fees and commissions arising from negotiating or participating in the negotiation
of a transaction for a third party are recognised on completion of the underlying transaction. Portfolio
and other management advisory and service fees are recognised based on the applicable service
contracts, usually on a time-apportionate basis. Asset management fees related to investment funds
are recognised rateably over the period in which the service is provided. Performance linked fees or
fee components are recognised when the performance criteria are fulfilled. Other revenue is
recognised on an accrual basis when the related service has been provided.
The initial allocation of additional assets to the participating funds is recognised in equity as a transfer
from retained earnings to the participating accounts. Returns of additional assets from the
participating funds are accounted for similarly.
2.24 Cash flows
2.21 Statutory reserves
Statutory reserves are established when regulatory accounting requirements result in lower
distributable profits or when an appropriation of retained earnings is required or permitted by law to
protect policyholders, insurance beneficiaries or depositors.
2.22 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 initial transaction price.
Interest includes coupon interest and accrued discount and premium on financial instruments.
The following classifications apply to the cash flow statement.
Cash flows from operating activities consist of cash flows arising from revenues, benefits,
expenses, taxes, operating assets and operating liabilities. Cash flows from investing activities
consist of cash flows arising from long-term tangible and intangible assets to be utilised in the
business and in respect of changes in subsidiary holdings, insurance businesses, and associated
company and joint venture investments. Cash flows from financing activities consist of cash flows
arising from the issue, redemption and exchange of equity instruments and notes and loans
payable and from equity dividends payable to holders of such instruments.
Cash and cash equivalents comprise:
cash balances,
call deposits,
other liquid balances with maturities of three months or less from the acquisition date,
less bank overdrafts which are repayable on demand,
less other borrowings from financial institutions made for the purpose of meeting cash
commitments and which have maturities of three months or less from origination.
Cash equivalents are subject to an insignificant risk of change in value.
25
2014 Annual Report
111
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
112 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
2.25 Future accounting developments and reporting changes
IFRS (Effective Date)
Subject / Comments
Certain new standards and amendments to existing standards have been issued but are not effective
for the periods covered by these financial statements. The changes in standards and interpretations
which may have a significant effect on future presentation, measurement or disclosure of the Group’s
financial statements are summarised in the following tables.
IFRS 15 –
Revenue from contracts
with customers
(January 1, 2017)
IFRS (Effective Date)
Subject / Comments
IFRS 9 –
Financial Instruments
(January 1, 2018)
Classification and measurement of financial instruments
IFRS 9, addresses the classification, measurement and recognition of
financial assets and financial liabilities. IFRS 9 retains but simplifies the
mixed measurement model and establishes three primary measurement
categories for financial assets: amortised cost, fair value through OCI
and fair value through P&L. The basis of classification depends on the
entity’s business model and the contractual cash flow characteristics of
the financial asset. Investments in equity instruments are required to be
measured at fair value through profit or loss with the irrevocable option
at inception to present changes in fair value in OCI not recycling. There
is now a new expected credit losses model that replaces the incurred
loss impairment model used in IAS 39.
For financial liabilities there were no changes to classification and
measurement except for the recognition of changes in own credit risk in
other comprehensive income, for liabilities designated at fair value
through profit or loss.
IFRS 9 relaxes the requirements for hedge effectiveness by replacing
the bright line hedge effectiveness tests. It requires an economic
relationship between the hedged item and hedging instrument and for
the ‘hedged ratio’ to be the same as the one management actually use
for risk management purposes.
The group is yet to assess IFRS 9’s full impact.
from an entity’s contracts with customers. Revenue
IFRS 15 deals with revenue recognition and establishes principles for
reporting useful information to users of financial statements about the
nature, amount, timing and uncertainty of revenue and cash flows
arising
is
recognised when a customer obtains control of a good or service and
thus has the ability to direct the use and obtain the benefits from the
good or service. The standard replaces IAS 18 ‘Revenue’ and IAS 11
‘Construction contracts’ and related interpretations. The group is
assessing the impact of IFRS 15.
There are no other IFRSs or IFRIC interpretations that are not yet
effective that would be expected to have a material impact on the
Group.
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The development of estimates and the exercise of judgment in applying accounting policies may have
a material impact on the Group’s reported assets, liabilities, income and other comprehensive income.
The items which may have the most effect on the Group’s financial statements are set out below.
3.1 Impairment of financial assets
An available for sale debt security, a loan or a receivable is considered impaired when management
determines that it is probable that all amounts due according to the original contract terms will not be
collected. This determination is made after considering the payment history of the borrower, the
discounted value of collateral and guarantees, and the financial condition and financial viability of the
borrower.
The determination of impairment may either be considered by individual asset or by a grouping of
assets with similar relevant characteristics.
112
2014 Annual Report
Sagicor Financial Corporation
26
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
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, customer related, contract based
or technology based.
For significant amounts of intangibles arising from a business combination, the Group utilises
independent professional advisors to assist management in determining the recognition and
measurement of these assets.
3.3 Impairment of intangible assets
(a) Goodwill
The assessment of goodwill impairment involves the determination of the fair value of the cash
generating business units to which the goodwill has been allocated. Determination of fair value
involves the estimation of future cash flows or of income after tax of these business units and the
expected returns to providers of capital to the business units and / or to the Group as a whole. For the
Sagicor Life reporting segment, the Group uses an actuarial appraisal value technique for testing
goodwill impairment.
The Group updates its business unit financial projections annually and applies discounted cash flow or
earnings multiple models to these projections to determine if there is any impairment of goodwill. The
assessment of whether goodwill is impaired can be highly sensitive to the inputs of cash flows, income
after tax, discount rate, growth rate or capital multiple, which are used in the computation. Further
details of the inputs used are set out in note 8.2.
(b) Other intangible assets
The assessment of impairment of other intangible assets involves the determination of the intangible’s
fair value or value in use. In the absence of an active market for an intangible, its fair value may need
to be estimated. In determining an intangible’s value in use, estimates are required of future cash
flows generated as a result of holding the asset.
Sagicor Financial Corporation
113
Amounts expressed in US$000
3.4 Valuation of actuarial liabilities
(a) Canadian Actuarial Standards
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 in
the financial statements, will be sufficient without being excessive to provide for the policy liabilities
over their respective terms. The amounts set aside for future benefits are dependent on the timing of
future asset and liability cash flows.
The actuarial liabilities are determined as the present value of liability cash flows discounted at
effective interest rates resulting in a value equivalent to the market value of assets supporting these
policy liabilities under an adverse economic scenario.
The AA identifies a conservative economic scenario forecast, and together with the existing
investment portfolio as at the date of the actuarial valuation and assumed reinvestment of net asset
and policy liability cash flows, calculates the actuarial liabilities required at the date of valuation to
ensure that sufficient monies are available to meet the liabilities as they become due in future years.
The methodology produces the total reserve requirement for each policy group fund. In general, the
methodology is used to determine the net overall actuarial liabilities required by the insurer. Actuarial
liabilities are computed by major group of policies and 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, and other individual 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. The latter provision is established in recognition of the uncertainty in computing best
estimate reserves, to allow for possible deterioration in experience and to provide greater comfort that
reserves are adequate to pay future benefits.
27
2014 Annual Report
Sagicor Financial Corporation
113
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
114 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
3.4 Valuation of actuarial liabilities (continued)
3.5 Property and casualty contracts (continued)
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.
The assumption for operating expenses and taxes is in some instances split by participating, non-
participating and universal life / unit linked business.
Provisions for adverse deviations are established in accordance with the risk profiles of the business,
and are, as far as is practicable, standardised across geographical areas. Provisions are determined
within a specific range established by the Canadian Standards of Practice.
The principal assumptions and margins used in the determination of actuarial liabilities are
summarised in note 13.3. However, the liability resulting from the application of these assumptions
can never be definitive as to the ultimate timing or the amount of benefits payable and is therefore
subject to future re-assessment.
3.5 Property and casualty insurance contracts
The property and casualty insurance contracts issued by Sagicor at Lloyd's insurance syndicate 1206
(the principal business of the discontinued operation) up to and including the 2013 underwriting year
of account contain material accounting judgements which may affect the Group's results until the
close of the run-off period contracted with the purchaser of the discontinued operation. The significant
judgements are summarised in the following sections.
(a) Policy benefits payable
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. Reserving for claims
payable, involves the use of statistical techniques of estimation. These techniques generally involve
projecting from past experience, 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.
Claim liabilities are based on estimates due to the fact that the ultimate disposition of claims incurred
prior to the date of the financial statements, whether reported or not, is subject to the outcome of
events that may not yet have occurred. Sig nificant delays are experienced in the notification and
settlement of certain types of claims, particularly in respect of casualty contracts. Events which may
affect 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 reflections of the likely level of ultimate claims to be incurred. Consequently, the
amounts recorded in respect of unpaid losses may change significantly in the short term.
A variety of standard actuarial reserving methods are utilised to estimate claim liabilities, including
frequency-severity
claims development, expected claims
methodologies. An independent actuary is engaged to confirm the claim liabilities recognised by the
syndicate as of the date of the financial statements. The ultimate liability arising from claims incurred
under property and casualty insurance contracts may be mitigated by recovery arising from
reinsurance contracts held.
ratio, Bornhuetter-Ferguson and
(b) Carrying value of the assets and liabilities of the discontinued operation
As of December 31, 2014, the liability of the discontinued operation is the estimated residual liability
due to the purchaser arising from the estimated results of the syndicate for the underwriting years of
account up to and including 2013 until the end of the run-off period. The reported liability is also
impacted by movements in various foreign exchange rates as the insured risks are denominated in a
number of different currencies.
114
2014 Annual Report
Sagicor Financial Corporation
28
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
115
Amounts expressed in US$000
4 SEGMENTS
4 SEGMENTS (continued)
The management structure of Sagicor consists of the parent company Board of Directors, the Group
Chief Executive Officer (CEO), subsidiary company Boards of Directors and subsidiary company
CEOs. For the parent company and principal subsidiaries, there are executive management
committees made up of senior management who advise the respective CEOs. The principal
subsidiaries have a full management governance structure, a consequence of their being regulated
insurance and financial services entities and of the range and diversity of their products and services.
The Group CEO serves as Board Chairman or as a Board Member of the principal subsidiaries and is
the Group’s Chief Operating decision maker. Through subsidiary company reporting, the Group CEO
obtains details of company performance and of resource allocation needs. Summarisation of planning
and results and prioritisation of resource allocation is done at the parent company level where
strategic decisions are taken.
In accordance with the relevant financial reporting standard, the Group has determined that there are
three principal subsidiary Groups within continuing operations which represent the reportable
operating segments of Sagicor. These segments and other Group companies are set out in the
following sections. Details of the discontinued operating segment are set out in note 38.
(a) Sagicor Life
These comprise Group subsidiaries conducting life, health and annuity insurance business, and
pension administration services in (i) Barbados, Eastern Caribbean, Dutch Caribbean, Bahamas and
Central America and (ii) Trinidad and Tobago. As these two segments are broadly similar in products,
services, distribution, administrative and regulatory environment, they are presented on an aggregated
basis in these financial statements. The companies are set out in the following two tables.
Sagicor Life
Segment Companies
Principal Activities
Sagicor Life Inc(1)
Sagicor Life Aruba NV
Life and health insurance,
annuities and pension
administration services
Life and health insurance,
annuities and pension
administration services
Country of
Incorporation
Effective
Shareholders’
Interest
Barbados
100%
Aruba
100%
Capital Life Insurance Company
Bahamas Limited
Life insurance
The Bahamas
100%
Sagicor Panamá, SA
Life and health insurance
Nationwide Insurance Company
Limited
Life insurance
Panamá
Trinidad &
Tobago
Associates
RGM Limited
Property ownership and
management
Trinidad &
Tobago
FamGuard Corporation Limited
Investment holding company
Bahamas
100%
100%
33%
20%
Principal operating company:
Family Guardian Insurance
Company Limited
Life and health insurance and
annuities
Bahamas
20%
Primo Holding Limited
Property investment
Barbados
38%
(1)
On December 31, 2014, Sagicor Life Inc and its wholly-owned subsidiary Sagicor Capital Life
Insurance Company Limited were amalgamated under the laws of Barbados. Under the terms of
the amalgamation, the two companies continue as one corporate entity under the name of
Sagicor Life Inc.
29
2014 Annual Report
Sagicor Financial Corporation
115
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
116 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
4 SEGMENTS (continued)
(b) Sagicor Jamaica
This segment comprises Group subsidiaries conducting life, health, annuity, property and casualty
insurance business, and pension administration services and financial services in Jamaica, Cayman
Islands and Costa Rica.
Effective May 2014, Sagicor Investment Jamaica Limited (SIJL) became a wholly owned subsidiary of
Sagicor Group Jamaica Limited (SGJ). Previously, Sagicor Investment Jamaica Limited was owned
85.45% (2013 – 85.45%) by Sagicor Life Jamaica Limited. The existing minority shareholders of
Sagicor Investment Jamaica Limited exchanged their shares for Sagicor Group Jamaica Limited
(SGJ) shares. The existing parent company, Sagicor Life Jamaica Limited exchanged their shares in
SIJL for unsecured debenture bonds from SGJ. SIJL was subsequently delisted from the Jamaica
Stock Exchange. The exchange of SIJL shares to SGJ shares took effect on 7 May, 2014. This
transaction resulted in a reduction of the Sagicor Financial Corporation's effective shareholder's
interest from 51% to 49.11%.
On June 27, 2014, the Group acquired 100% of the share capital of RBC Royal Bank (Jamaica)
Limited and its subsidiary, RBC Securities (Jamaica) Limited and rebranded that business to Sagicor
Bank.
All Jamaican subsidiaries are now wholly owned by Sagicor Group Jamaica Limited. The companies
comprising this segment are as follows.
Sagicor Jamaica
Segment Companies
Sagicor Group Jamaica
Limited
Principal Activities
Country of
Incorporation
Effective
Shareholders’
Interest
Group holding company
Jamaica
49.11%(1)
Sagicor Life Jamaica
Limited
Life and health insurance and
annuities
Jamaica
49.11%(1)
Sagicor Life of the
Cayman Islands Limited
Sagicor Pooled
Investment Funds Limited
Life insurance
The Cayman
Islands
Pension fund management
Jamaica
49.11% (1)
49.11% (1)
4 SEGMENTS (continued)
Sagicor Jamaica
Segment Companies
(continued)
Employee Benefits
Administrator Limited
Sagicor Re Insurance
Limited
Sagicor Insurance Brokers
Limited
Principal Activities
Pension administration
services
Property and casualty
insurance
Sagicor Financial Corporation
Amounts expressed in US$000
Country of
Incorporation
Effective
Shareholders’
Interest
Jamaica
49.11% (1)
The Cayman
Islands
49.11% (1)
49.11% (1)
Insurance brokerage
Jamaica
Sagicor International
Administrators Limited
Group insurance
administration
Jamaica
49.11% (1)
Sagicor Insurance Managers
Limited
Captive insurance
management services
The Cayman
Islands
49.11% (1)
Sagicor Property Services
Limited
Sagicor Investments
Jamaica Limited
Sagicor Bank Jamaica
Limited
Sagicor Costa Rica SCR,
S.A.
Property management
Jamaica
49.11%(1)
Investment banking
Jamaica
49.11%(2)
Commercial banking
Jamaica
49.11%(2)
Life insurance
Costa Rica
24.56%
LOJ Holdings Limited
Insurance holding company
Jamaica
100%
Sagicor St Lucia Limited
Financial services holding
company
(1)
51% prior to May 7, 2014. (2) 44% prior to May 7, 2014
Control of the company is established through the following:
St Lucia
49.11%(1)
•
•
•
The power of the group to appoint a majority of the directors of the company and thereby
direct relevant activities.
The Group is exposed to the variable returns from its effective shareholder's interest.
Group has the ability to use the power to affect the amount of investor's returns.
The
116
2014 Annual Report
Sagicor Financial Corporation
30
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
4 SEGMENTS (continued)
(c) Sagicor Life USA
Sagicor Financial Corporation
117
Amounts expressed in US$000
4 SEGMENTS (continued)
(d) Head office function and other operating companies
This segment comprises Sagicor’s life insurance operations in the USA and comprises the following.
These comprise the following:
Sagicor Life USA
Segment Companies
Principal Activities
Country of
Incorporation
Effective
Shareholders’
Interest
Sagicor Life Insurance
Company
Sagicor USA Inc
Life insurance and annuities
USA - Texas
100%
Insurance holding company
USA - Delaware
100%
Other Group Companies
Principal Activities
Country of
Incorporation
Effective
Interest
Sagicor Financial
Corporation
Sagicor General
Insurance Inc
Sagicor Finance Inc
Sagicor Asset
Management (T&T)
Limited
Sagicor Asset
Management Inc
Group parent company
Barbados
100%
Property and casualty
insurance
Loan and lease financing, and
deposit taking
Barbados
St. Lucia
53%
70%
Investment management
Trinidad & Tobago
100%
Investment management
Barbados
100%
Barbados Farms Limited
Farming and real estate
development
Barbados
77%
Mutual fund holding company
Barbados
100%
Sagicor Funds
Incorporated
Globe Finance Inc
Loan and lease financing, and
deposit taking
The Mutual Financial
Services Inc
Financial services holding
company
Sagicor Finance Limited
Group financing vehicle
Barbados
Barbados
The Cayman
Islands
51%
73%
100%
31
2014 Annual Report
Sagicor Financial Corporation
117
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
118 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
4.1
Statement of income by segment
2014
Net premium revenue
Interest income
Other investment income
Fees and other revenues
Gain arising
on acquisition
Inter-segment revenues
Net policy benefits
Net change in actuarial liabilities
Interest expense
Administrative expenses
Commissions and premium and asset taxes
Finance costs
Depreciation and amortisation
Inter-segment expenses
Segment income / (loss) before taxes
Income taxes
Net income / (loss) from continuing operations
Net income/(loss) attributable to shareholders from
continuing operations
Total comprehensive income/(loss) attributable to
shareholders from continuing operations
Sagicor Financial Corporation
Amounts expressed in US$000
Sagicor Life
Sagicor Jamaica
Sagicor Life USA
Head office
and other
Adjustments
Total
266,017
70,728
6,689
10,419
-
7,911
361,764
174,595
9,247
11,566
64,638
37,798
-
5,026
354
263,880
133,818
23,790
35,365
29,051
-
485,904
156,024
49,967
44,098
104,386
40,847
-
9,177
1,336
74,538
49,671
14,045
15,230
-
-
153,484
97,697
(18,217)
3,642
30,548
20,618
41
1,437
926
303,224
405,835
136,692
58,540
(8,297)
50,243
44,043
80,069
(2,700)
77,369
38,055
16,792
(4,878)
11,914
11,914
21,122
10,144
(1,670)
22,306
-
33,763
85,665
9,165
-
4,433
32,827
10,176
(243)
4,580
8,065
69,003
16,662
(825)
15,837
-
-
-
24
-
(41,674)
(41,650)
-
-
-
1,343
-
22,746
-
(10,681)
13,408
(55,058)
-
(55,058)
625,557
264,361
42,854
83,344
29,051
-
1,045,167
437,481
40,997
63,739
233,742
109,439
22,544
20,220
-
928,162
117,005
(16,700)
100,305
(7,963)
(32,312)
53,737
50,330
34,004
19,478
(7,428)
(32,228)
64,156
118
2014 Annual Report
Sagicor Financial Corporation
32
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
119
Amounts expressed in US$000
4.1 Statement of income by segment (continued)
Statement of income by segment
A statement of income by segment is set out below. Total comprehensive income by segment is also shown.
Sagicor Life
Sagicor Jamaica
Summary statement of income by segment
Sagicor Life USA
Head office
and other
Adjustments
Total
Sagicor Life Inc
Sagicor Life Jamaica
Sagicor Europe
257,892
Sagicor USA
292,959
Head office & other
87,650
Adjustments
18,527
70,612
118,386
49,609
10,204
Total
-
-
657,028
248,811
2013
Net premium revenue
2009
Interest income
Net premium revenue
Other investment income
Interest income
Fees and other revenues
Gain arising
on acquisition
Fees and other revenues
Inter-segment revenues
Loss on disposal of interest in subsidiary
Inter-segment revenues
Net policy benefits
Net change in actuarial liabilities
Net policy benefits
Interest expense
Net change in actuarial liabilities
Administrative expenses
Interest expense
Commissions and premium and asset taxes
Administrative expenses
Finance costs
Commissions and premium taxes
Depreciation and amortisation
Finance costs
Depreciation & amortisation
Inter-segment expenses
Inter-segment expenses
Segment income / (loss) before taxes
Segment income / (loss) before taxes
Income taxes
Income taxes
Net income / (loss) from continuing operations
Segment income before undernoted items
Net income/(loss) attributable to shareholders from
continuing operations
Group finance costs (2)
Foreign exchange unwinding (1)
Total comprehensive income/(loss) attributable to
shareholders from continuing operations
208,588
65,788
11,062
-
3,344
300,407
136,096
24,550
16,224
48,539
31,490
-
5,477
364
231,516
2,532
248,776
7,705
152,848
20,661
14,299
(187)
(13,085)
(172)
842,942
30,539
149,535
17,353
32,345
-
714
431,463
131,657
46,901
73,375
68,705
35,737
7,714
119
11,960
350,829
171,950
10,452
12,574
61,999
36,075
2,230
43,575
29,859
27,178
10,854
24,556
(401)
2,801
-
-
253,406
129,583
(2,895)
-
1,416
464,041
157,930
74,951
39,599
4,765
2,224
-
-
-
185,098
-
88,486
24,361
1,541
189,696
39,344
119,679
2,608
(119)
29,121
11,831
(9,493)
64,812
33,055
80,444
5,881
(200)
7,049
-
3,897
73,017
-
6,309
31,163
36,702
5,991
-
-
82
-
(9,377)
(25,207)
9,493
(25,297)
(37,113)
(50,082)
-
-
-
-
-
-
1,078
26,665
42,630
20,312
24,865
31,640
8,239
2,501
-
258,266
103,105
35,950
68,176
-
-
-
1,039,483
-
425,415
1,205,334
109,764
442,561
57,611
188,035
101,899
203,959
198,362
111,809
-
73,845
-
13,616
58
6,659
(243)
(3,539)
17,328
157,808
17,143
2,209
5,388
13
4,654
-
1,266
13,153
3,922
6,087
2,022
349
298,787
1,055
1,632
865
393,836
824
172,605
1,386
5,015
233,612
19,794
(3,430)
16,364
70,205
(5,631)
64,574
201,716
(12,020)
4,207
(7,813)
12,493
(4,372)
8,121
8,121
-
4,077
13,472
4,630
73,038
71,831
8,613
(8,226)
(1,872)
(1,974)
(10,098)
6,639
-
-
-
(15,741)
(12,855)
2,665
15,375
15,230
18,659
-
-
940,931
(13,893)
(27,962)
1,122,699
98,552
(36,189)
-
3,608
(27,962)
(32,581)
82,635
(18,924)
(12,184)
79,628
70,451
-
39,988
-
(9,280)
32,143
(30,479)
-
(10,635)
9,280
39,138
-
262,740
366,693
37,667
(5,413)
32,254
64,770
(9,182)
55,588
52,042
(7,049)
44,993
40,251
(1,130)
(377)
(28,620)
(10,639)
(515)
33
2014 Annual Report
Sagicor Financial Corporation
119
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
120 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
4.1 Statement of income by segme
nt (continued)
4.2 Variations in segment income (continued)
The principal non-controlling interests in the Group are in respect of Sagicor Group Jamaica Limited
(Sagicor Jamaica).
(iv) Foreign exchange gains and losses
Out of the total net income attributable to non-controlling interests of $40,368 (2013 - $35,485),
Sagicor Jamaica contributed $39,314 (2013 - $32,431).
Movements in foreign exchange rates may generate significant exchange gains or losses when the
foreign currency denominated monetary assets and liabilities are re-translated at the date of the
financial statements.
4.2 Variations in segment income
(v) Movements in actuarial liabilities arising from changes in assumptions
The change in actuarial liabilities for the year includes the effects arising from changes in
assumptions. The principal assumptions in computing the actuarial liabilities on life and annuity
contracts relate to mortality and morbidity, lapse, investment yields, asset default and operating
expenses and taxes. Because the process of changes in assumptions is applied to all affected
insurance contracts, changes in assumptions may have a significant effect in the period in which they
are recorded.
Variations in segment income may arise from non-recurring or other significant factors. The most
common factors contributing to variations in segment income are as follows.
(i) Investment gains
Fair value investment gains are recognised on:
- the revaluation of investment property;
- the revaluation of debt and equity securities classified as at fair value through income;
- the disposal of debt and equity securities classified as available for sale or loans and
receivables.
Therefore, significant gains and losses may be triggered by changes in market prices and / or by
decisions to dispose of investments.
(ii) Allowances for impairment of financial investments
Significant impairment losses may be triggered by changes in market prices and economic conditions.
(iii) Gains on acquisitions/divestitures
On acquisition of a business or portfolio, if the fair value of the net assets acquired exceeds the total
consideration transferred, the difference is recognised directly in the statement of income.
120
2014 Annual Report
Sagicor Financial Corporation
34
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
4.2 Variations in segment income (continued)
Sagicor Financial Corporation
121
Amounts expressed in US$000
The table below summarises by segment the individual line items within income from continuing operations which are impacted by the foregoing factors.
Variations in income by segment
Sagicor Life
Sagicor
Jamaica
Sagicor Life
USA
Head Office
and Other
Total
Sagicor Life
Sagicor
Jamaica
Sagicor Life
USA
Head Office
and Other
Total
2014
2013
Investment gains / (losses)
Impairment of financial investments
Foreign exchange gains / (losses)
Gains on acquisitions/divestitures
Decrease / (increase) in actuarial
liabilities from changes in assumptions
3,306
(3,409)
(1,376)
-
30,616
(7,030)
4,421
29,051
13,371
375
47,668
7,559
(13)
(2,186)
(12,638)
(11,276)
-
-
180
-
-
3,225
29,051
1,286
119
8,249
(450)
10,376
-
20,649
(246)
-
-
87
(590)
(280)
(119)
36,544
(12,562)
11,382
-
5,622
17,472
(25,443)
(2,349)
14,009
15,080
39,365
-
68,454
35
2014 Annual Report
Sagicor Financial Corporation
121
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
122
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
4.3 Other comprehensive income
(iv) Defined benefit plans gains and losses
Sagicor Financial Corporation
Amounts expressed in US$000
Variations in other comprehensive income may arise also from non-recurring or other significant factors. The most common are as follows.
(i) Unrealised investment gains
Fair value investment gains are recognised on the revaluation of debt and equity securities classified as available for sale. Therefore, significant gains and losses may be triggered by changes in market prices.
(ii) Changes in actuarial liabilities
Changes in unrealised investment gains identified in (i) above may also generate significant changes in actuarial liabilities as a result of the use of asset liability matching in the liability estimation process.
(iii) Foreign exchange gains and losses
Movements in foreign exchange rates may generate significant exchange gains or losses on the re-translation of the financial statements of foreign currency reporting units.
(iv) Defined benefit plans gains and losses
Experience adjustments and changes in actuarial assumptions gives rise to gains or losses on defined benefit plans.
The table below summarises by segment the individual line items within other comprehensive income from continuing operations which are impacted by the foregoing factors.
Variations in other comprehensive income by segment
Sagicor Life Sagicor Jamaica
Sagicor Life
USA
Head Office
and other
Adjustments
Total
6,207
(4,178)
1,339
2,763
(8,273)
5,567
(819)
1,191
6,602
-
(23,528)
9,086
(8,712)
-
(35,606)
(12,901)
25,371
(15,792)
-
-
(30,155)
24,878
-
-
206
-
69
1,363
(302)
-
(12)
2,235
-
-
84
-
-
-
(4)
-
38,386
(19,970)
(22,036)
13,212
(47,442)
30,445
(36,441)
(9,475)
2014
Unrealised investment (losses)
Changes in actuarial liabilities
Retranslation of foreign currency operations
Gains/(losses) on defined benefit plans
2013
Unrealised investment (losses)
Changes in actuarial liabilities
Retranslation of foreign currency operations
Gains/(losses) on defined benefit plans
122
2014 Annual Report
Sagicor Financial Corporation
36
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
4.4 Statement of financial position by segment
2014
Financial investments
Other external assets
Inter-segment assets
Total assets
Policy liabilities
Other external liabilities
Liabilities of discontinued operation
Inter-segment liabilities
Total liabilities
Net assets
2013
Financial investments
Other external assets
Inter-segment assets
Total assets
Policy liabilities
Other external liabilities
Liabilities of discontinued operation
Inter-segment liabilities
Total liabilities
Net assets
37
Sagicor Financial Corporation
123
Amounts expressed in US$000
Sagicor Life USA
Head office
and other
Adjustments
Total
Sagicor Life
1,259,473
379,124
134,254
1,772,851
1,197,480
87,733
-
23,620
1,308,833
Sagicor
Jamaica
2,021,180
464,724
9,363
2,495,267
622,299
1,460,700
-
217
2,083,216
1,247,365
495,735
241
1,743,341
1,244,053
250,792
-
40,582
1,535,427
133,476
179,343
49,805
362,624
56,770
441,255
45,796
129,244
673,065
464,018
412,051
207,914
(310,441)
1,187,903
392,282
126,211
1,706,396
1,170,526
86,789
-
23,479
1,280,794
1,687,893
183,066
9,324
1,880,283
608,883
906,187
-
5,846
1,520,916
1,182,892
300,721
151
1,483,764
1,051,588
203,498
-
40,581
1,295,667
133,078
229,917
49,649
412,644
54,757
435,314
55,024
115,429
660,524
-
-
(193,663)
(193,663)
-
-
-
(193,663)
(193,663)
-
-
-
(185,335)
(185,335)
-
-
-
(185,335)
(185,335)
4,661,494
1,518,926
-
6,180,420
3,120,602
2,240,480
45,796
-
5,406,878
773,542
4,191,766
1,105,986
-
5,297,752
2,885,754
1,631,788
55,024
-
4,572,566
425,602
359,367
188,097
(247,880)
-
725,186
2014 Annual Report
Sagicor Financial Corporation
123
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
124 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
4.4 Statement of financial position by segment (continued)
4.7 Geographical areas
The principal non-controlling interests in the Group are in respect of Sagicor Group Jamaica Limited
(Sagicor Jamaica). Out of the total non-controlling interests in the statement of financial position of
$241,480 (2013 - $218,751), Sagicor Jamaica contributed $202,133 (2013 - $178,920).
The Group operates in certain geographical areas which are determined by the location of the
subsidiary or branch initiating the business.
4.5 Additions to non-current assets by segment
Segment operations include certain non-current assets comprising investment property, property,
plant and equipment, investment in associated companies and intangible assets. Additions to these
categories for the year are as follows:
Group operations in geographical areas include certain non-current assets comprising investment
property, property, plant and equipment, investment in associated companies and intangible assets.
Total external revenues and non-current assets by geographical area are summarised in the following
table.
Sagicor Life
Sagicor Jamaica
Sagicor Life USA
Head office and other
4.6 Products and services
2014
7,384
7,878
2,064
10,645
27,971
2013
5,986
3,946
1,124
11,548
22,604
Barbados
Jamaica
Trinidad & Tobago
Other Caribbean
USA
External revenue
Non-current assets
2014
2013
2014
2013
146,640
458,565
145,735
140,737
153,490
148,901
198,624
195,204
426,141
140,704
138,514
185,223
69,985
67,396
35,499
3,593
59,672
78,167
29,983
2,977
1,045,167
1,039,483
375,097
366,003
Total external revenues relating to the Group’s products and services are summarised as follows:
Life, health and annuity insurance contracts issued to
individuals
Life, health and annuity insurance and pension administration
contracts issued to groups
Property and casualty insurance
Banking, investment management and other financial services
Farming and unallocated revenues
2014
2013
584,973
591,698
273,138
299,497
34,308
112,927
39,821
33,956
94,530
19,802
1,045,167
1,039,483
124
2014 Annual Report
Sagicor Financial Corporation
38
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
5 INVESTMENT PROPERTY
Sagicor Financial Corporation
125
Amounts expressed in US$000
6 ASSOCIATES AND JOINT VENTURE
The movement in investment property for the year is as follows:
The movements in the investment in associates and joint ventures during the year and the aggregate
balances and results of associates and joint venture companies are summarised in the following table.
Balance, beginning of year
Additions at cost
Transfer from property, plant and equipment
Disposals
Change in fair values
Effects of exchange rate changes
Balance, end of year
2014
2013
98,369
115,224
1,638
583
(8,269)
(3,468)
(87)
88,766
1,424
884
(18,040)
982
(2,105)
98,369
Investment property includes $14,372 (2013 - $15,223) which represents the Group’s proportionate
interest in joint operations summarised in the following table.
Description of property
Percentage ownership
Country
Barbados
Freehold lands
Freehold office buildings
Trinidad & Tobago
Freehold office building
50%
10% -50%
60%
Pension Funds managed by the Group own the remaining 50% interests of freehold lands in
Barbados, and a 33% interest in a freehold office building in Barbados.
Movement during the year:
Investment, beginning of year
Additions
Disposals and divestitures
Dividends received
Share of:
Income before taxes
Amortisation of intangible assets identified on acquisition
Income taxes
Other comprehensive income
Effects of exchange rate changes
Investment, end of year
Aggregate balances and results:
Total assets
Total liabilities
Total revenue
Net income for the year
2014
2013
44,202
42,433
540
-
266
(28)
(7,860)
(1,348)
4,419
(178)
(738)
577
(156)
40,806
548,430
365,428
150,650
12,665
3,519
(181)
(364)
923
(1,018)
44,202
532,852
374,794
139,858
14,413
39
2014 Annual Report
Sagicor Financial Corporation
125
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
126DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
7 PROPERTY, PLANT AND EQUIPMENT
Sagicor Financial Corporation
Amounts expressed in US$000
2014
Owner-occupied property
Lands
Land &
buildings
Office
furnishings,
equipment &
vehicles
Operating
lease
vehicles &
equipment
Owner-occupied properties
Land
Land &
buildings
2013
Office
furnishings,
equipment &
vehicles
Operating
lease
vehicles &
equipment
Net book value, beginning of year
38,428
Additions at cost
Additions arising from acquisitions
Transfer to investment property
Transfer to intangible assets (note 8)
Other transfers
Transfers to real estate developed or held
for sale
Disposals
Change in fair values
Depreciation charge
Effects of exchange rate changes
-
-
-
-
-
(7)
-
(201)
-
-
Net book value, end of year
38,220
66,281
2,173
11,568
(583)
-
15
-
-
278
(1,013)
(818)
77,901
33,893
14,637
2,473
-
(3,286)
386
-
(834)
-
(6,713)
(646)
39,910
Total
151,539
23,324
14,041
(583)
(3,286)
401
(7)
12,937
6,514
-
-
-
-
-
(2,748)
(3,582)
-
77
(3,265)
(10,991)
-
(1,464)
38,428
-
-
-
-
-
-
-
-
-
-
65,124
1,418
-
(884)
-
296
-
(963)
3,451
(809)
(1,352)
66,281
31,978
11,777
-
-
(1,801)
228
-
10,288
6,704
-
-
-
-
-
(1,045)
(1,361)
-
(6,126)
(1,118)
33,893
-
(2,694)
-
Total
145,818
19,899
-
(884)
(1,801)
524
-
(3,369)
3,451
(9,629)
(2,470)
13,438
169,469
38,428
12,937
151,539
Represented by:
Cost or valuation
38,220
80,885
111,025
19,707
249,837
38,428
67,253
99,453
18,188
223,322
Accumulated depreciation
-
(2,984)
(71,115)
(6,269)
(80,368)
-
(972)
(65,560)
(5,251)
(71,783)
38,220
77,901
39,910
13,438
169,469
38,428
66,281
33,893
12,937
151,539
Owner-occupied lands are largely utilised for farming operations.
Owner-occupied land and buildings consist largely of commercial office buildings.
126
2014 Annual Report
Sagicor Financial Corporation
40
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
8 INTANGIBLE ASSETS
8.1 Analysis of intangible assets and changes for the year
Sagicor Financial Corporation
127
Amounts expressed in US$000
Goodwill
2014
Customer &
broker
relationships
Software
Total
Goodwill
2013
Customer &
broker
relationships
Software
Total
Net book value, beginning of year
47,948
16,220
Additions at cost
Assumed on acquisition
Transfer from property, plant and equipment
(note 7)
Amortisation
-
-
-
-
Effects of exchange rate changes
Net book value, end of year
(1,305)
46,643
-
10,304
-
(5,995)
(1,400)
19,129
7,725
2,469
-
3,286
(3,056)
(140)
10,284
71,893
2,469
10,304
3,286
(9,051)
(2,845)
76,056
Represented by:
Cost or valuation
48,456
40,224
39,776
128,456
Accumulated depreciation and impairments
(1,813)
(21,095)
(29,492)
(52,400)
46,643
19,129
10,284
76,056
50,338
20,801
-
-
-
-
(2,390)
47,948
49,761
(1,813)
47,948
-
-
-
(2,094)
(2,487)
16,220
8,473
1,015
-
1,801
(3,326)
(238)
7,725
79,612
1,015
-
1,801
(5,420)
(5,115)
71,893
32,577
33,288
115,626
(16,357)
(25,563)
(43,733)
16,220
7,725
71,893
41
2014 Annual Report
Sagicor Financial Corporation
127
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
128 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
8.2 Impairment of intangible assets
Goodwill arises from past acquisitions and is allocated to cash generating units (CGUs). Goodwill is
tested annually for impairment. The recoverable amount of a CGU is determined as the higher of its
value in use or its fair value less costs to sell. Annually, the management of each operating segment
or other operating company prepares financial projections for the next three years.
For those CGU’s which the fair value less costs to sell methodology is used, the financial projections
are used as inputs to determine maintainable earnings over time to which is applied an appropriate
earnings multiple. For those CGU's which the value in use methodology is used, cash flows are
extracted from the financial projections to which are applied appropriate discount factors and residual
growth rates, or alternatively, the cash flows from the financial projections are extended to 50 years
using an actuarial appraisal value technique which incorporates appropriate discount rates and
solvency capital requirements.
The Group obtains independent professional advice in order to select the relevant discount factors,
residual growth rates and earnings multiples.
The carrying values of goodwill and the impairment test factors used are considered in the following
sections.
Sagicor Financial Corporation
Amounts expressed in US$000
8.2 Impairment of intangible assets (continued)
(i) Years ended Decembe r 31, 2014 & 2013
An actuarial appraisal value technique was adopted to test goodwill impairment. The principal
assumptions included the following:
•
•
•
•
•
Discount rates of 8 - 9% (2013 - 9%) for individual life and annuity inforce business,
New individual life and annuity business was included for the five year period 2015 to 2019,
Annual growth rate for new individual life and annuity business was 7.5% from 2014 to
2019 (2013 – 7.5% and 10.0% from 2014 to 2018, and 2.0% from 2019 to 2023),
Discount ratesof 12 - 13% (2013 - 13%) for new individual life and annuity business,
Required Minimum Continuing Capital and Surplus Ratio (MCCSR) of 200%.
Sensitivity
The excess of the appraisal value over carrying value of the operating segment was also tested by
varying the discount rates and capital ratios. The results are set out in the following tables. Negative
amounts illustrate the extent of possible impairment.
(a) Sagicor Life operating segment
Barbados, Eastern Caribbean, Dutch
Caribbean, Bahamas and Central America
MCCSR target ratio
Low
Mid
2014
2013
Discount rate
Inforce
New business
175%
200%
High
225%
Carrying value of goodwill
27,157
27,031
Low
Mid
High
7%
9%
11%
11%
13%
15%
266,629
154,566
74,961
266,910
150,955
68,931
267,204
147,144
62,617
128
2014 Annual Report
Sagicor Financial Corporation
42
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
129
Amounts expressed in US$000
8.2 Impairment of intangible assets (continued)
8.2 Impairment of intangible assets (continued)
Trinidad and Tobago
MCCSR target ratio
(c) Other operating companies
2014
2013
Carrying value of goodwill
4,869
4,869
The Group recognised goodwill on the acquisition of its interests in Sagicor General Insurance Inc and
Globe Finance Inc. The value in use methodology has been used to test goodwill impairment in both
years. The after tax discount factors were 14.0% and 13.1% respectively for each company and the
residual growth rates were 3.8% and 2.1% respectively.
Discount rate
Inforce
New business
175%
200%
Low
Mid
High
225%
Low
Mid
High
6%
8%
10%
10%
12%
14%
109,346
106,917
104,224
46,310
4,448
39,851
(4,070)
32,574
(13,820)
(b) Sagicor Jamaica operating segment
2014
2013
Carrying value of goodwill
14,617
16,048
The fair value less cost to sell methodology was adopted to test goodwill impairment in both years.
The after tax multiple used for the segment was 7.1 (2013 – 7.1) which was derived from a pre-tax
factor of 6.14 (2013 - 6.36) using an iterative method.
Sensitivity
The possible impairment of goodwill is sensitive to changes in earnings multiples and after tax
earnings. This is illustrated in the following table.
2014 test
Scenario 1
Scenario 2
Scenario 3
After tax earnings multiples
Reduction in forecast earnings
7.1
n/a
Excess of recoverable amount (of 49.11% interest)
38,234
Impairment (of 49.11% interest)
Nil
6.4
10%
328
Nil
5.6
10%
n/a
(25,392)
43
2014 Annual Report
Sagicor Financial Corporation
129
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
130 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
9 FINANCIAL INVESTMENTS
9.1 Analysis of financial investments
9.1 Analysis of financial investments (continued)
Sagicor Financial Corporation
Amounts expressed in US$000
2014
2013
Held to maturity securities:
Debt securities
Available for sale securities:
Debt securities
Equity securities
Financial assets at fair value through income:
Debt securities
Equity securities
Derivative financial instruments (note 41.6)
Mortgage loans
Securities purchased for resale
Loans and receivables:
Debt securities
Mortgage loans
Policy loans
Finance loans and finance leases
Securities purchased for resale
Deposits
2014
2013
Carrying
value
Fair
value
Carrying
value
Fair
value
Non-derivative financial assets at fair value through
income comprise:
Assets designated at fair value upon initial recognition
299,611
288,491
20,364
21,102
20,200
20,466
Debt securities comprise:
Government and government-guaranteed debt securities
1,776,729
1,609,133
2,357,014
2,357,014
2,074,114
2,074,114
Collateralised mortgage obligations
76,221
76,221
92,375
92,375
Corporate debt securities
2,433,235
2,433,235
2,166,489
2,166,489
Other securities
227,519
195,858
1,325,583
1,289,061
117,718
97,724
3,447,549
3,191,776
142,840
142,840
148,306
148,306
118,053
118,053
103,185
103,185
23,268
38,718
-
23,268
38,718
-
45,215
36,838
162
45,215
36,838
162
322,879
322,879
333,706
333,706
927,331
972,759
949,156
981,486
255,515
255,630
220,769
221,427
133,483
142,150
134,236
141,464
410,585
417,476
165,050
161,631
31,524
26,271
40,713
40,713
126,578
126,578
161,447
161,447
1,885,016
1,940,864
1,671,371
1,708,168
9.2 Pledged assets
Debt and equity securities include $226,153 (2013 - $213,703) as collateral for loans payable and
other funding instruments.
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
$8,434 (2013 - $7,143), and mortgages and mortgage backed securities having a total market value of
$199,387 (2013 - $160,250).
Debt securities are pledged as collateral under repurchase agreements with customers and other
financial institutions and for security relating to overdraft and other facilities with other financial
institutions. As of December 31, 2014, these pledged assets totalled $764,909 (2013 - $643,127). Of
these assets pledged as security, $73,501 (2013 – $30,934) represents 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.
Total financial investments
4,661,494
4,718,080
4,191,766
4,228,829
130
2014 Annual Report
Sagicor Financial Corporation
44
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
131
Amounts expressed in US$000
9.3 Returns accruing to the benefit of contract-holders
9.4 Reclassification of financial investments (continued)
Financial investments include the following amounts for which the full income and capital returns
accrue to the holders of unit linked policy and deposit administration contracts.
The following disclosures are in respect of these reclassified assets.
Debt securities
Equity securities
Mortgage loans
Securities purchased for re-sale
9.4 Reclassification of financial investments
2014
2013
95,316
111,950
38,718
-
93,864
97,255
36,838
162
245,984
228,119
2014
2013
Carrying
value
Fair
value
Carrying
value
Fair
value
Government debt securities maturing after
September 2018
49,282
56,236
51,342
49,344
Other debt securities
2,721
3,479
3,458
4,095
52,003
59,715
54,800
53,439
In 2008, the Group reclassified certain securities from the available for sale classification to the loans
and receivables classification. The assets reclassified were primarily:
Government of Jamaica debt securities with a maturity date of 2018 and after, which are
held to back long-term insurance liabilities; and
Non-agency collateralised mortgage obligations in the USA.
Cumulative net fair value loss, beginning of year
Net fair value gains / (losses) subsequent to restatement
Disposals
Effect of exchange rate changes
2014
2013
(7,322)
9,437
174
(295)
(4,783)
(2,716)
-
177
The reclassifications were made because the markets for these securities were considered by
management to have become inactive.
Cumulative net fair value gain / (loss), end of year
1,994
(7,322)
The net fair value gain or loss subsequent to restatement approximates the fair value gain or loss that
would have been recorded in total comprehensive income had the reclassification not been made.
The disposal amount represents the net loss that would have been reclassified from other
comprehensive income to income on disposal.
45
2014 Annual Report
131
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
132 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
10 REINSURANCE ASSETS
12 MISCELLANEOUS ASSETS AND RECEIVABLES
Reinsurers’ share of:
Actuarial liabilities (note 13.1)
Policy benefits payable (note 14.2)
Provision for unearned premiums (note 14.3)
Other items
2014
2013
470,271
285,250
31,998
20,152
4,750
28,325
20,153
2,699
527,171
336,427
The provision for unearned premiums and other items are expected to mature within one year of
the financial statements date.
11 INCOME TAX ASSETS
Deferred income tax assets (note 33)
Income and withholding taxes recoverable
2014
2013
28,310
29,193
57,503
4,808
24,227
29,035
Income and withholding taxes recoverable are expected to be recovered within one year of the
financial statements date.
Sagicor Financial Corporation
Amounts expressed in US$000
2014
2013
1,055
12,199
20,753
39,731
34,174
48,718
156,630
495
14,626
15,688
36,318
-
81,024
148,151
Net defined benefit assets (note 31)
Real estate developed or held for resale (ii)
Prepaid and deferred expenses
Premiums receivable
Legal claim (iii)
Other assets and accounts receivable (i)
(i) Other assets and accounts receivables include:
(a) Nil (2013 - $50,104) representing the liquidation of collateral for a banker's letter of
credit facility (see note 38); and
(b) $7,493 (2013 - $4,636) due from managed funds.
(ii) Real estate developed for resale includes $6,953 (2013 - $6,699) which is expected to be
realised within one year of the financial statements date. Prepaid and deferred expenses are
also expected to be realised within one year of the financial statements date.
(iii) $34,174 (2013 – Nil) Legal claim
In March 2014, the Supreme Court of Jamaica granted judgement in favour of a claimant in a
case brought against Sagicor Bank of Jamaica Limited (formerly RBC Royal Bank of Jamaica
Limited). This claim pre-dated the acquisition of control of the Bank by Sagicor Group Jamaica
Limited, and also pre-dated the acquisition of control of the Bank by RBTT International Limited
from Finsac Limited (Finsac) in 2001. By virtue of the Share Sale Agreement entered into
between Finsac, RBTT Financial Holdings Limited and RBTT International Limited, Finsac
agreed to fully indemnify RBTT International Limited (now SGJ Holdings (St. Lucia) Limited).
Though the judgement is being appealed, the amount computed as settlement has been
recorded as payable to the claimant and correspondingly receivable from Finsac (Note 20).
132
2014 Annual Report
Sagicor Financial Corporation
46
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
13 ACTUARIAL LIABILITIES
13.1 Analysis of actuarial liabilities
Gross liability
Reinsurers’ share
2014
2013
2014
2013
Contracts issued to individuals:
Life insurance - participating policies
251,011
319,075
100
106
Sagicor Financial Corporation
133
Amounts expressed in US$000
13.2 Movement in actuarial liabilities
Gross liability
Reinsurers’ share
2014
2013
2014
2013
Balance, beginning of year
2,324,319
2,040,907
285,250
56,683
Amounts assumed on business and
portfolio acquisitions (note 13.2(a))
Changes in actuarial liabilities:
-
33,910
-
-
Life insurance and annuity
- non-participating policies
Health insurance
Unit linked funds
1,698,485
1,424,285
448,021
260,031
Recorded in income
226,018
338,331
185,021
228,568
11,190
7,115
503
517
Recorded in other comprehensive
28,473
(43,840)
-
(326)
(886)
-
-
-
-
-
-
-
-
(1)
Reinsurance contracts held
29,135
23,037
146,703
133,882
-
-
-
-
De-recognised on divestiture
Other movements
2,136,524
1,907,394
448,624
260,654
Effect of exchange rate changes
(16,263)
(44,103)
Contracts issued to groups:
Life insurance
Annuities
Health insurance
36,554
38,575
819
1,448
351,826
343,291
20,681
22,981
37,317
35,059
147
167
425,697
416,925
21,647
24,596
Total actuarial liabilities
2,562,221
2,324,319
470,271
285,250
The following notes are in respect of the foregoing table:
•
•
•
Life insurance includes coverage for disability and critical illness.
Actuarial liabilities include $98,666 (2013 - $101,731) in assumed reinsurance.
The liability for reinsurance contracts held occurs because the reinsurance premium costs
exceed the mortality costs assumed in determining the gross liability of a policy contract.
Balance, end of year
2,562,221
2,324,319
470,271
285,250
Analysis of changes in actuarial liabilities
Arising from increments and
decrements of inforce policies and
from the issuance of new policies
Arising from changes in assumptions
for mortality, lapse, expenses,
investment yields and asset default
Other changes:
Actuarial modelling, refinements,
improvements and corrections
Other items
Total
270,600
403,700
185,021
228,609
2,349
(68,454)
(6,378)
(5,928)
(12,080)
(34,827)
-
-
-
(41)
-
-
254,491
294,491
185,021
228,568
47
2014 Annual Report
Sagicor Financial Corporation
133
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
134
Year ended December 31, 2014
13.2 Movement in actuarial liabilities (continued)
(a) Acquisition of insurance portfolio
During 2013, Sagicor Life Inc acquired the British American Insurance Company Limited (BAICO)
Eastern Caribbean insurance portfolio. This was accounted for as a portfolio acquisition. The
insurance portfolio acquired by Sagicor was made up of group pensions and traditional life policies
issued by BAICO in the Eastern Caribbean. The obligation to pay certain unpaid amounts to
policyholders under these policies (being claims, maturities, surrenders and bonuses) has been
assumed by Sagicor with the transfer of the insurance portfolio, and the Eastern Caribbean
Governments funded the payment of these in accordance with the terms of the policies. The payment
of claims will be subject to the claimant meeting the requirements of the policy terms, and signing an
appropriate release.
The effects of this transaction in the financial statements are set out below.
Fair Value
5,598
594
36,299
(33,910)
(7,185)
1,396
5,600
4,204
Net assets acquired:
Financial investments
Miscellaneous assets and receivables
Cash resources
Actuarial liabilities
Other insurance liabilities
Total net assets
Purchase consideration and related costs
Loss arising on net assets acquired
134
Sagicor Financial Corporation
2014 Annual Report
Sagicor Financial Corporation
Amounts expressed in US$000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
13.3 Assumptions – life insurance and annuity contracts
13.3 Assumptions – life insurance and annuity contracts (continued)
13.3 Assumptions – life insurance and annuity contracts (continued)
(a) Process used to set actuarial assumptions and margins for adverse deviations
(d) Assumptions for investment yields
(f) Asset defaults
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.
Any 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.
Annually, insurers update studies of recent mortality experience. The resulting experience is
compared to external mortality studies including the Canadian Institute of Actuaries (CIA) 1997 - 2004
tables. Appropriate modification factors are selected and applied to underwritten and non-underwritten
business respectively. Annuitant mortality is determined by reference to CIA tables or to other
established scales.
Assumptions for morbidity are determined after taking into account insurer and industry experience
and established guidelines from Actuarial Institutes.
(c) Assumptions for lapse
Policyholders may allow their policies to lapse prior to the maturity date either by choosing not to pay
premiums or by surrendering their policy for its cash value. Lapse studies are updated annually by
insurers to determine the persistency of the most recent period. Assumptions for lapse experience
are generally based on five-year averages.
49
48
government bonds.
Ultimate rate of return
Barbados
Jamaica
Trinidad & Tobago
Other Caribbean
USA
Returns on existing variable rate securities, shares, investment property and policy loans are linked to
The AA of each insurer includes a provision for asset default in the modelling of the cash flows. The
the current economic scenario. Yields on reinvested assets are also tied to the current economic
provision is based on industry and Group experience and includes specific margins, where
scenario. Returns are however assumed to decrease and it is assumed that at the end of twenty years
appropriate, for assets backing the actuarial liabilities, e.g. for investment property, equity securities,
from the valuation date, all investments, except policy loans, are reinvested in long-term, default free
debt securities, mortgage loans and deposits.
The ultimate rate of return is the assumed rate that will ultimately be earned on long-term government
bonds. It is established for each geographic area and is summarised in the following table.
Margins for adverse deviations are determined for the assumptions in the actuarial valuations. The
(g) Margins for adverse deviations
2014
6.5%
5.0%
4.5%
2013
6.0%
5.0%
4.25%
4.5% - 6.5%
4.5% - 6.0%
0.85% - 4.75%
1.75% - 3.96%
application of these margins resulted in provisions for adverse deviations being included in the
actuarial liabilities as set out in the following table.
Provisions for adverse deviations
2014
2013
Mortality and morbidity
Lapse
Other
Investment yields and asset default
Operating expenses and taxes
79,362
61,605
51,630
17,273
2,726
81,199
64,469
45,851
19,777
2,846
212,596
214,142
(e) Assumptions for operating expenses and taxes
Policy acquisition and policy maintenance expense costs for the long-term business of each insurer
13.4 Assumptions – health insurance contracts
are measured and monitored using internal expense studies. Policy maintenance expense costs are
reflected in the actuarial valuation after adjusting for expected inflation. Costs are updated annually
and are applied on a per policy basis.
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
Taxes reflect assumptions for future premium taxes and income taxes levied directly on investment
income (see note 32). For income taxes levied on net income, actuarial liabilities are adjusted for
from the date of the financial statements.
policy related recognised deferred tax assets and liabilities.
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
135
13.3 Assumptions – life insurance and annuity contracts (continued)
13.3 Assumptions – life insurance and annuity contracts (continued)
(d) Assumptions for investment yields
(f) Asset defaults
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 is the assumed rate that will ultimately be earned on long-term government
bonds. It is established for each geographic area and is summarised in the following table.
Ultimate rate of return
Barbados
Jamaica
Trinidad & Tobago
Other Caribbean
USA
2014
6.5%
5.0%
4.5%
2013
6.0%
5.0%
4.25%
4.5% - 6.5%
4.5% - 6.0%
0.85% - 4.75%
1.75% - 3.96%
(e) Assumptions for operating expenses and taxes
Policy acquisition and policy maintenance expense costs for the long-term business of each insurer
are measured and monitored using internal expense studies. Policy maintenance expense costs are
reflected in the actuarial valuation after adjusting for expected inflation. Costs are updated annually
and are applied on a per policy basis.
Taxes reflect assumptions for future premium taxes and income taxes levied directly on investment
income (see note 32). For income taxes levied on net income, actuarial liabilities are adjusted for
policy related recognised deferred tax assets and liabilities.
49
The AA of each insurer includes a provision for asset default in the modelling of the cash flows. The
provision is based on industry and Group experience and includes specific margins, where
appropriate, for assets backing the actuarial liabilities, e.g. for investment property, equity securities,
debt securities, mortgage loans and deposits.
(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 provisions for adverse deviations being included in the
actuarial liabilities as set out in the following table.
Provisions for adverse deviations
2014
2013
Mortality and morbidity
Lapse
Investment yields and asset default
Operating expenses and taxes
Other
79,362
61,605
51,630
17,273
2,726
81,199
64,469
45,851
19,777
2,846
212,596
214,142
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 date of the financial statements.
Sagicor Financial Corporation
2014 Annual Report
135
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
136
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
14 OTHER INSURANCE LIABILITIES
14.2 Policy benefits payable (continued)
14.1 Analysis of other insurance liabilities
Dividends on deposit and other policy balances
Policy benefits payable
Provision for unearned premiums
14.2 Policy benefits payable
2014
2013
68,542
95,276
33,602
70,036
90,834
33,564
Gross liability
Reinsurers’ share
2014
2013
2014
2013
Movement for the year:
Balance, beginning of year
90,834
83,814
28,325
25,080
Policy benefits assumed on business
and portfolio acquisitions
-
7,185
-
-
197,420
194,434
Policy benefits incurred
485,321
457,010
51,272
33,997
Policy benefits paid
(479,423)
(454,975)
(47,477)
(30,576)
Effect of exchange rate changes
(1,456)
(2,200)
(122)
(176)
Balance, end of year
95,276
90,834
31,998
28,325
Gross liability
Reinsurers’ share
2014
2013
2014
2013
14.3 Provision for unearned premiums
Analysis of policy benefits payable:
Life insurance and annuity benefits
65,987
64,498
14,711
12,400
Health claims
Property and casualty claims
3,389
25,900
95,276
2,687
23,649
90,834
2,071
15,216
31,998
2,759
13,166
28,325
Gross liability
Reinsurers’ share
2014
2013
2014
2013
Analysis of the provision:
Property and casualty insurance
32,413
32,410
20,152
20,153
Health insurance
1,189
1,154
-
-
33,602
33,564
20,152
20,153
The provision for unearned premiums is expected to mature within a year of the financial
statements’ date.
136
2014 Annual Report
49
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
137
14.3 Provision for unearned premiums (continued)
16 NOTES AND LOANS PAYABLE
Movement for the year:
Balance, beginning of year
Premiums written
Premium revenue
Gross liability
Reinsurers’ share
2014
2013
2014
2013
33,564
72,704
33,353
71,875
20,153
47,882
20,323
47,914
(72,669)
(71,661)
(47,883)
(48,086)
Effect of exchange rate changes
3
(3)
-
2
Balance, end of year
33,602
33,564
20,152
20,153
15 INVESTMENT CONTRACT LIABILITIES
At amortised cost:
Deposit administration liabilities
Other investment contracts
At fair value through income:
Unit linked deposit administration
liabilities
2014
2013
Carrying
value
Fair
value
Carrying
value
Fair
value
128,404
115,748
244,152
128,404
119,512
119,512
119,317
133,115
135,876
247,721
252,627
255,388
116,809
116,809
114,374
114,374
360,961
364,530
367,001
369,762
2014
2013
Carrying
value
Fair
value
Carrying
value
Fair
value
7.5% senior notes due 2016
147,182
154,867
145,178
156,924
6.5% convertible redeemable
preference shares due 2016
4.6% notes due 2015
Finance lease payable
107,689
122,863
100,417
115,339
43,363
43,363
43,174
43,174
708
708
1,391
1,391
298,942
321,801
290,160
316,828
The Group issued ten year $150,000 senior notes which are repayable in 2016. The notes carry a
7.5% annual rate of interest fixed for the period and interest is payable semi-annually. The notes are
traded and are listed on the Luxembourg Euro MTF Market. Financial covenants in respect of these
notes are summarised in note 46.3(a).
Details of the 6.5% convertible redeemable preference shares due 2016 are set out in note 21.2. The
initial fair value of the subscription proceeds was determined by discounting the ultimate redemption
value ($120,000), at a rate of 6.5% for 5 years. The subsequent finance cost recognised is the
amortisation of the difference between the ultimate redemption value and the initial carrying value,
calculated on an effective interest method for the 5 years to maturity.
On December 18, 2013, the Company issued eighteen month $43,386 notes which are repayable in
2015. The notes carry a 4.6% annual rate of interest fixed for the period and interest is payable semi-
annually. Issue costs amounted to $290. Financial covenants in respect of these notes are
summarised in note 46.3(a).
51
2014 Annual Report
Sagicor Financial Corporation
137
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
138DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
17 DEPOSIT AND SECURITY LIABILITIES
18 PROVISIONS
At amortised cost:
Other funding instruments
Customer deposits
Securities sold for re-purchase
Bank overdrafts
At fair value through income:
2014
2013
Carrying
value
Fair
value
Carrying
value
Fair
value
360,810
570,567
664,802
1,459
362,514
589,519
657,506
1,459
313,439
219,192
524,232
1,933
316,632
235,393
525,267
1,933
1,597,638
1,610,998
1,058,796
1,079,225
Net defined benefit liabilities (note 31)
Other provisions
19 INCOME TAX LIABILITIES
Deferred income tax liabilities (note 33)
Structured products
20,068
20,068
17,371
17,371
Income taxes payable
Derivative financial instruments
(note 41.6)
6,265
6,265
29,916
29,916
26,333
26,333
47,287
47,287
2014
77,926
430
78,356
2013
74,767
316
75,083
2014
2013
31,557
10,210
41,767
22,532
6,693
29,225
Income taxes payable are expected to be settled within a year of the financial statements’ date.
1,623,971
1,637,331
1,106,083
1,126,512
20 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Other funding instruments consist of loans from banks and other financial institutions and include
balances of $189,928 (2013 - $157,608) 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.
Structured products are offered by a banking subsidiary. A structured product is a pre-packaged
investment strategy created to meet specific needs that cannot be met from the standardised financial
instruments available in the market. Structured products can be used as an alternative to a direct
investment, as part of the asset allocation process to reduce risk exposure of a portfolio, or to
capitalize on current market trends.
Collateral for other funding instruments and securities sold under agreements to resell is set out in
note 9.2.
138
2014 Annual Report
Sagicor Financial Corporation
Amounts due to policyholders
Amounts due to reinsurers
Legal claim (i)
Other accounts payable and accrued liabilities
2014
2013
16,526
28,404
34,174
118,340
197,444
16,830
22,929
-
91,478
131,237
(i) In March 2014, the Supreme Court of Jamaica granted judgement in favour of a claimant in a case brought
against Sagicor Bank of Jamaica Limited (formerly RBC Royal Bank of Jamaica Limited). This claim pre-dated the
acquisition of control of the Bank by Sagicor Group Jamaica Limited, and also pre-dated the acquisition of control of
the Bank by RBTT International Limited from Finsac Limited (Finsac) in 2001. By virtue of the Share Sale
Agreement entered into between Finsac, RBTT Financial Holdings Limited and RBTT International Limited, Finsac
agreed to fully indemnify RBTT International Limited (now SGJ Holdings (St. Lucia) Limited). Though the judgement
is being appealed, the amount computed as settlement has been recorded as payable to the claimant and
correspondingly receivable from Finsac (Note 12).
52
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
139
21 COMMON AND PREFERENCE SHARES
21.2 Convertible redeemable preference shares
The Company is authorised to issue:
•
•
•
an unlimited number of common shares,
an unlimited number of preference shares, and
an
unlimited number of convertible redeemable preference shares.
In each case the shares are without nominal or par value.
On July 18, 2011, the Company issued 120,000,000 convertible redeemable preference shares with
the following features:
•
•
Issue price of US $1.00 or Barbados $2.00 per share;
Annual dividend rate of 6.5%, dividends to be declared by the Company’s directors and payable
half yearly on May 15 and November 15;
Convertible into common shares at a ratio of 1.98 preference shares to 1.00 common shares,
conversion to be at the option of the shareholder and exercisable on May 16 or November 16 in
any year prior to the redemption date;
Redeemable on July 18, 2016 at issue price, if not converted before.
•
•
21.1 Common shares
Issued and fully paid:
2014
2013
Number
in 000’s
Share
capital
Number
in 000’s
Share
capital
The preference shares are accounted for as a compound financial instrument and were initially
recognised in the statement of financial position as a financial liability (note 16) and also as equity
(note 22). The preference shares are listed on the Barbados and Trinidad & Tobago stock exchanges.
Put option rights in respect of the preference shares are disclosed in note 46.3(b).
Balance, beginning of year
303,917
301,600
303,917
301,600
21.3 Dividends
Balance, end of year
303,917
301,600
303,917
301,600
Treasury shares:
Shares held for LTI and ESOP,
end of year (note 30.1)
(3,145)
(5,611)
(3,583)
(6,150)
Total
300,772
295,989
300,334
295,450
The common shares are listed on the Barbados, Trinidad & Tobago and London stock exchanges.
The dividends declared and paid during the year in respect of the Company’s convertible
redeemable preference shares and common shares are set out in the following table.
Dividends declared and paid:
Preference shares
Common shares
2014
2013
Per share
Total Per share
Total
6.50 ¢
4.0 ¢
7,800
6.50 ¢
12,035
4.0 ¢
19,835
7,800
12,035
19,835
53
Sagicor Financial Corporation
2014 Annual Report
139
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
140
21.3 Dividends (continued)
The dividends declared after the date of the financial statements in respect of the Company’s convertible redeemable preference shares and common shares are set out in the following table.
Dividends proposed:
Preference shares - May 15
Common shares - final for current year
2014
2013
Per share
Total
Per share
3.25 ¢
2.0 ¢
3,900
6,018
9,918
3.25 ¢
2.0 ¢
Total
3,900
6,018
9,918
21.4 Restrictions on common share dividends
The Company’s Articles of Incorporation include the following limitations on the payment of common share dividends.
(i)
(ii)
For any 6 month period that the convertible redeemable preference shares are not paid, dividends on common shares shall be suspended for that period plus the next 6 month period, and the Company shall
not repurchase any of its common shares, except when pursuant to the LTI plan and ESOP.
The Company shall not pay any dividends on its common shares, in respect of the 2011 financial year or thereafter, or repurchase any of its common shares, other than a repurchase pursuant to the LTI plan
and ESOP, if the cumulative amount of such dividends and repurchases after July 31, 2011 would exceed 50% of the cumulative amount of Group net income from January 1, 2011.
140
2014 Annual Report
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
22 RESERVES
Sagicor Financial Corporation
141
Amounts expressed in US$000
Fair value reserves
Available for
sale assets
Actuarial
liabilities
Owner
occupied
property
Currency
translation
reserves
Preference
share
reserves
Other
reserves
Total
reserves
2014
Balance, beginning of year
25,433
8,798
(16,779)
(77,411)
16,743
38,391
Other comprehensive income from continuing operations allocated to reserves
(184)
35,052
(21,777)
(10,535)
Transactions with holders of equity instruments:
Allocated to reserve for equity compensation benefits
Eliminated from reserve for equity compensation benefits
Transfers to retained earnings and other movements
Balance, end of year
2013
Balance, beginning of year
Other comprehensive income from continuing operations allocated to reserves
Other comprehensive income from discontinued operation
Transactions with holders of equity instruments:
Allocated to reserve for equity compensation benefits
Eliminated from reserve for equity compensation benefits
Transfers to retained earnings and other movements
Balance, end of year
-
-
-
-
-
-
-
-
-
-
-
-
25,249
43,850
(38,556)
(87,946)
10,481
38,157
-
-
-
(6,262)
-
2,057
(2,520)
229
(4,825)
2,556
2,057
(2,520)
(6,033)
(8,765)
22,978
3,109
-
-
-
(654)
25,433
59,946
(47,224)
(77,864)
23,005
35,570
16,411
(51,624)
30,445
(18,343)
476
-
-
-
-
-
-
-
18,796
-
-
-
8,798
(16,779)
(77,411)
-
-
-
-
(6,262)
16,743
-
-
(36,413)
19,272
2,169
(46)
698
38,391
2,169
(46)
(6,218)
(4,825)
Other reserves comprise reserves for equity compensation benefits of $16,070 (2013 - $16,533) and statutory reserves of $22,087 (2013 - $21,858).
Sagicor Financial Corporation
2014 Annual Report
141
54
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
142DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
23 PARTICIPATING ACCOUNTS
24 PREMIUM REVENUE
The movements in the participating accounts during the year and the amounts in the financial
statements relating to participating accounts were as follows:
Closed participating
account
Open participating
account
2014
2013
2014
2013
Life insurance
Annuity
Health insurance
Gross premium
Ceded to reinsurers
2014
2013
2014
2013
361,552
358,876
32,445
34,627
309,329
445,135
177,564
271,665
151,571
146,055
5,672
5,132
Property and casualty insurance
66,669
66,472
47,883
48,086
889,121
1,016,538
263,564
359,510
Movement for the year:
Balance, beginning of year
(3,159)
2,273
(2,503)
(12,606)
Total comprehensive income / (loss)
2,209
(5,432)
4,053
10,345
Return of transfer to support profit
distribution to shareholders
-
-
(236)
(242)
Balance, end of year
(950)
(3,159)
1,314
(2,503)
Financial statement amounts:
Assets
Liabilities
Revenues
Benefits
Expenses
Income taxes
86,687
87,637
8,524
5,512
606
172
95,096
98,255
8,110
11,938
1,447
159
200,007
229,543
198,693
232,046
28,636
21,176
2,813
681
23,441
5,549
6,873
580
The Group has the ability to reduce future policy bonuses and dividends in order to eliminate a deficit in
a participating account.
142
2014 Annual Report
55
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
25 NET INVESTMENT INCOME
25 NET INVESTMENT INCOME (continued)
2014
2013
Further details of interest income and investment gains are set out in the following table.
Sagicor Financial Corporation
143
Amounts expressed in US$000
Investment income:
Interest income
Dividend income
Rental income from investment property
Net investment gains
Share of operating income of associates and joint venture
Other investment income
Investment expenses:
Allowances for impairment losses
Direct operating expenses of investment property
Other direct investment expenses
264,361
248,811
2,577
4,760
2,235
3,723
47,668
36,544
4,419
382
3,519
250
324,167
295,082
12,638
2,410
1,904
16,952
12,562
1,284
1,886
15,732
Net investment income
307,215
279,350
The Group operates across both active and inactive financial markets. The financial investments
placed in both types of market support the insurance and operating financial liabilities of the Group.
Because the type of financial market is incidental and not by choice, the Group manages its financial
investments by the type of financial instrument (i.e. debt securities, equity securities, mortgage loans
etc). Therefore, the income from financial instruments is presented consistently with management
practice, rather than by accounting classification.
The capital and income returns of most investments designated at fair value through income accrue to
the holders of unit linked policy and deposit administration contracts which do not affect net income of
the Group.
Interest income:
Debt securities
Mortgage loans
Policy loans
Finance loans and finance leases
Securities purchased for resale
Deposits
Other balances
Net investment gains / (losses):
Debt securities
Equity securities
Investment property
Other financial instruments
2014
2013
201,441
201,982
17,652
9,683
31,121
1,960
2,422
82
18,926
8,951
15,270
1,094
2,623
(35)
264,361
248,811
21,560
15,087
(626)
11,647
47,668
7,685
16,741
1,195
10,923
36,544
Sagicor Financial Corporation
2014 Annual Report
143
56
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
144 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
26 FEES AND OTHER REVENUE
28 INTEREST EXPENSE
Fee income – assets under administration
Fee income – deposit administration and policy funds
Commission income on insurance and reinsurance contracts
Other fees and commission income
Foreign exchange gains
Other operating and miscellaneous income
2014
2013
19,406
1,363
28,653
14,694
3,225
16,003
19,300
1,033
40,424
15,150
11,382
20,020
Insurance contracts
Investment contracts
Other funding instruments
Customer deposits
Securities sold for re-purchase
Other items
Loss arising on acquisition of insurance portfolio (note 13.2 (a))
-
(4,204)
83,344
103,105
2014
2013
2,607
15,241
6,552
9,989
2,912
14,697
6,038
7,310
28,805
26,218
545
436
63,739
57,611
27 POLICY BENEFITS AND CHANGE IN ACTUARIAL LIABILITIES
The Group manages its interest-bearing obligations by the type of obligation (i.e. investment contracts,
securities etc). Therefore, the interest expense is presented consistently with management practice,
rather than by accounting classification.
Gross benefit
Ceded to reinsurers
2014
2013
2014
2013
The capital and income returns of most financial liabilities designated at fair value through income
accrue directly from the capital and income returns of financial assets designated at fair value through
income. Therefore, the related interest expense does not affect the net income of the Group.
Life insurance benefits
208,096
199,420
Annuity benefits
149,092
126,698
Health insurance claims
111,486
117,480
Property and casualty claims
20,078
15,814
Total policy benefits
488,752
459,412
12,409
23,276
3,420
12,166
51,271
12,298
8,997
3,937
8,765
33,997
Change in actuarial liabilities
226,018
338,331
185,021
228,567
Total policy benefits and change in
actuarial liabilities
714,770
797,743
236,292
262,564
144
2014 Annual Report
57
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
145
Amounts expressed in US$000
29 EMPLOYEE COSTS
30.1 The Company (continued)
Included in administrative expenses, commissions and related compensation are the following:
The movement in restricted share grants during the year is as follows:
2014
2013
Administrative staff salaries, directors’ fees and short-term benefits
98,529
85,666
Social security and defined contribution retirement costs
Equity-settled compensation benefits (note 30.1 to 30.3)
Defined benefit expense (note 31 (b))
7,917
3,732
6,635
3,499
14,936
12,493
125,114
108,293
30 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. Share
grants may vest over a four year period beginning at the grant date. The vesting of share grants is
conditional upon the relative profitability of the Group as compared to a number of peer companies.
Relative profitability is measured with reference to the financial year preceding the vesting date.
2014
2013
Number of
grants
‘000
Weighted
average
price
Number of
grants
‘000
Weighted
Average
price
Balance, beginning of year
3,524
US$1.14
2,618
US$1.25
Grants issued
Grants vested
2,576
US$1.00
2,183
US$1.03
(897)
US$1.07
(1,229)
US$1.17
Grants lapsed/forfeited
(1,454)
US$1.29
(48)
US$1.30
Balance, end of year
3,749
US$1.02
3,524
US$1.14
Grants issued may be satisfied out of new shares issued by the Company or by shares acquired in the
market. The shares acquired in the market and distributed during the year were as follows:
2014
2013
Number
in 000’s
$000
Number
in 000’s
$000
Balance, beginning of year
Shares acquired
Shares distributed
Balance, end of year
673
753
714
819
(1,424)
(1,531)
2
2
112
561
-
673
92
622
-
714
Sagicor Financial Corporation
2014 Annual Report
145
58
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
146DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
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. Up to
2008, options were granted at the fair market price of the Company shares at the time that the option
is granted. From 2009, options are granted at the fair market price of the Company shares prevailing
one year before the option is granted. Options vest over four years, 25% each on the first four
anniversaries of the grant date. Options are exercisable up to 10 years from the grant date.
The movement in share options for the year and details of the share options and assumptions used in
determining their pricing are as follows:
2014
2013
Number of
options
‘000
Weighted
average
exercise
price
Number of
options
‘000
Weighted
average
exercise
price
Balance, beginning of year
13,290
US$1.75
11,255
US$1.86
Options granted
Options lapsed/forfeited
Balance, end of year
2,916
US$1.08
2,269
US$1.15
-
-
(234)
US$1.68
16,206
US$1.63
13,290
US$1.75
Exercisable at the end of the year
10,264
US$1.88
8,228
US$1.99
Share price at grant date
US $1.08 – 2.50
US $1.15 – 2.50
Fair value of options at grant date
Expected volatility
Expected life
Expected dividend yield
Risk-free interest rate
US$0.24 – 0.69
19.3% – 35.8%
7.0 years
2.6% - 3.7%
4.8% - 6.8%
US$0.28 – 0.69
19.3% – 35.8%
7.0 years
2.6% - 3.5%
4.8% - 6.8%
Sagicor Financial Corporation
Amounts expressed in US$000
30.1 The Company (continued)
The expected volatility of options is based on statistical analysis of monthly share prices over the 7
years prior to grant date.
(c) ESOP
From 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 five years from the award date in order to qualify as a beneficiary. Shares are distributed to
beneficiaries upon their retirement or termination of employment. During 2012, the rules were
amended so that vesting will take place in four equal annual instalments commencing one year after
the award. The change came into effect during 2013. The shares acquired by the Trustees during the
year were as follows:
2014
2013
Number
in 000’s
$000
Number
in 000’s
$000
Balance, beginning of year
2,910
5,436
2,916
5,450
Shares acquired
Shares distributed
286
(53)
295
(122)
-
(6)
-
(14)
Balance, end of year
3,143
5,609
2,910
5,436
30.2
Sagicor Group Jamaica Limited
(a) Long-term incentive plan
The Group offers stock grants and stock options to senior executives as part of its long-term incentive
plan. The Group has set aside 150,000,000 of its authorised but un-issued shares of J$0.10 each for
the stock grants and stock options.
146
2014 Annual Report
59
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
147
Amounts expressed in US$000
30.2 Sagicor Group Jamaica Limited (continued)
30.2 Sagicor Group Jamaica Limited (continued)
In January 2007, the Group introduced a new Long Term Incentive (LTI) plan which replaced the
previous Stock Option plan. Under the LTI plan, executives are entitled but not obliged to purchase
the Group stock at a pre-specified price at some future date. The options are granted each year on
the date of the Board of Directors Human Resources Committee meeting following the performance
year at which the stock option awards are approved. Stock options vest in 4 equal installments
beginning the first December 31 following the grant date and for the next three December 31 dates
thereafter (25% per year). Options are not exercisable after the expiration of 7 years from the date of
grant. The number of stock options in each stock option award is calculated based on the LTI
opportunity via stock options (percentage of applicable salary) divided by the Black-Scholes value of a
stock option of Sagicor Group Jamaica Limited stock on 31 March of the measurement year. The
exercise price of the options is the closing bid price on 31 March of the measurement year.
In December 2013, the Sagicor Group of companies in Jamaica was reorganized to establish a new
holding company which directly or indirectly carries the Group’s holdings in member companies. As a
consequence Sagicor Life Jamaica (SLJ) was delisted from the Jamaica Stock Exchange (JSE) and
Sagicor Group Jamaica Limited (SGJ) was listed. Further, to harmonize compensation plans across
the Group and considering the pending delisting of the subsidiary, Sagicor Investments Jamaica
Limited (SIJL), all outstanding options in SIJL as at December 2013 were converted to corresponding
SGJ options with equivalent monetary value. From the 2013 measurement year, all executives of the
Group participate in the SGJ LTI plan.
Details of the share options outstanding are set out in the following table. J$ represents Jamaica $.
Further details of share options and the assumptions used in determining their pricing are as follows:
2014
2013
Fair value of options outstanding
J$70,025,000
J$72,148,000
Share price at grant date
Exercise price
J$4.20 – 14.10
J$4.20 – 14.10
J$4.20 – 14.10
J$4.20 – 14.10
Standard deviation of expected share price returns
27.0%
25.0%
Remaining contractual term
Risk-free interest rate
0.25 - 7 years
0.25 - 7 years
9.19%
8.04%
The expected volatility is based on statistical analysis of daily share prices over three years.
(b) Employee share purchase plan
Sagicor Life Jamaica 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 $711
(2013 – $285).
2014
2013
Number of
options
‘000
Weighted
average
exercise
price
Number of
options
‘000
Weighted
average
exercise
price
Balance, beginning of year
Options granted
Options exercised
72,148
19,077
(13,826)
J$8.22
J$7.11
J$5.68
Options lapsed/forfeited
(7,374)
J$10.56
Balance, end of year
Exercisable at the end of the year
70,025
50,841
J$8.19
J$9.69
44,590
30,918
(1,524)
(1,836)
72,148
55,885
J$6.39
J$10.58
J$4.82
J$6.50
J$8.22
J$7.92
Sagicor Financial Corporation
2014 Annual Report
60
147
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
148 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
31 EMPLOYEE RETIREMENT BENEFITS
31 EMPLOYEE RETIREMENT BENEFITS (continued)
The Group maintains a number of defined contribution and defined benefit retirement benefit plans for
eligible sales agents and administrative employees. The plans for sales agents and some
for administrative
administrative employees provide defined contribution benefits. The plans
employees in Barbados, Jamaica, Trinidad, Eastern Caribbean and certain other Caribbean countries
provide defined benefits based on final salary and number of years active service. Also, in these
countries, retired employees may be eligible for medical and life insurance benefits which are partially
or wholly funded by the Group. The principal defined benefit retirement plans are as follows:
Funded Plans
Unfunded Plans
Sagicor Life Barbados & Eastern Caribbean
Pension
Sagicor Life Trinidad Pension
Sagicor Life Jamaica Pension
Sagicor Life (Heritage Life of Barbados -
Barbados & Eastern Caribbean) Pension
Sagicor Investments Jamaica Pension
Group medical and life plans
The above plans also incorporate employees of the Company and other subsidiaries, whose
attributable obligations and attributable assets are separately identified for solvency, contribution rate
and reporting purposes.
The assets of the Sagicor Life Trinidad and Sagicor Life (Heritage Life of Barbados) pension plans are
held under deposit administration contracts with Sagicor Life Inc and because these assets form part
of the Group's assets, these plans are presented as unfunded in accordance with IAS 19 (revised).
The above pension plans are registered with the relevant regulatory authorities in the Caribbean and
are governed by Trust Deeds which conform with the relevant laws. The plans are managed by the
Group under the direction of appointed Trustees.
The group medical and life obligations arise from employee benefit insurance plans where benefits are
extended to retirees.
All disclosures in sections 31(a) to (d) of this note relate only to defined retirement benefit plans.
(a) Amounts recognised in the statement of financial position
2014
2013
Present value of funded pension obligations
186,752
162,772
Fair value of retirement plan assets
(169,380)
(136,084)
17,372
26,688
Present value of unfunded pension obligations
Present value of unfunded medical and life benefits
Net liability
Represented by:
Amounts held on deposit by the Group as deposit
administration contracts
Other recognised liabilities
Total recognised liabilities (note 18)
Recognised assets (note 12)
Net liability
35,034
24,465
76,871
40,623
37,303
77,926
(1,055)
76,871
32,164
15,420
74,272
42,143
32,624
74,767
(495)
74,272
Pension plans have purchased annuities from insurers in the Group to pay benefits to plan retirees.
These obligations are included in actuarial liabilities in the statement of financial position and are
excluded from the table above.
148
2014 Annual Report
61
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
31 EMPLOYEE RETIREMENT BENEFITS (continued)
(b) Movements in balances
Sagicor Financial Corporation
149
Amounts expressed in US$000
2014
2013
Retirement
obligations
Retirement plan
assets
Total
Retirement
obligations
Retirement plan
assets
Net liability / (asset), beginning of year
210,356
(136,084)
Current service cost
Interest expense / (income)
Past service cost and gains / losses on settlements
Net expense recognised in income
(Gains) / losses from changes in assumptions
(Gains) / losses from changes in experience
Return on plan assets excluding interest income
Net losses recognised in other comprehensive income
Contributions made by the Group
Contributions made by employees and retirees
Benefits paid
Liabilities assumed on acquisition of subsidiary
Other items
Effect of exchange rate movements
Other movements
8,424
18,933
1,766
29,123
(4,848)
(8,526)
-
(13,374)
419
6,532
(13,088)
31,846
1,150
(6,713)
20,146
-
(14,301)
114
(14,187)
-
(3,670)
2,099
(1,571)
(6,297)
(5,316)
11,546
(22,268)
105
4,692
(17,538)
Net liability / (asset), end of year
246,251
(169,380)
74,272
8,424
4,632
1,880
14,936
(4,848)
(12,196)
2,099
(14,945)
(5,878)
1,216
(1,542)
9,578
1,255
(2,021)
2,608
76,871
189,276
(131,476)
7,067
14,021
2,895
23,983
16,634
(6,923)
-
9,711
184
5,308
(8,860)
-
3,840
(13,086)
(12,614)
-
(11,490)
-
(11,490)
(1,805)
1,567
1,330
1,092
(5,088)
(4,177)
7,292
-
(2,897)
10,660
5,790
210,356
(136,084)
Total
57,800
7,067
2,531
2,895
12,493
14,829
(5,356)
1,330
10,803
(4,904)
1,131
(1,568)
-
943
(2,426)
(6,824)
74,272
Sagicor Financial Corporation
2014 Annual Report
62
149
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
150 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
31 EMPLOYEE RETIREMENT BENEFITS (continued)
31 EMPLOYEE RETIREMENT BENEFITS (continued)
(c) Retirement plan assets
(d) Significant actuarial assumptions
2014
2013
The significant actuarial assumptions for the principal geographic areas as of December 31, 2014
were as follows:
Equity unit linked pension funds under Group management:
Sagicor Equity Fund (Barbados)
Sagicor Bonds Fund (Barbados)
Sagicor Pooled Investment Funds (Jamaica):
Equity Funds
Mortgage & Real Estate Fund
Fixed Income Fund
Foreign Currency Funds
Money Market Fund
Other Funds
Other assets
Total plan assets
(24,579)
(13,847)
(19,827)
(13,270)
(21,689)
(18,130)
(5,221)
(17,161)
(27,921)
(17,955)
(15,768)
(12,730)
(12,894)
(12,043)
(9,433)
(5,220)
(133,724)
(113,964)
(35,656)
(22,120)
(169,380)
(136,084)
The equity unit linked pension funds are funds domiciled in Barbados and Jamaica. Annual reports of
these funds are available to the public.
150
2014 Annual Report
63
Pension plans
Barbados &
Eastern
Caribbean
Jamaica
Trinidad
Discount rate - local currency benefits
7.75%
Discount rate - US$ indexed benefits
Expected return on plan assets
Future promotional salary increases
n/a
7.75%
4.50%
Future inflationary salary increases
Future pension increases
Future increases in National
Insurance Scheme Ceilings
Mortality table
Termination of active members
Early retirement
9.50%
6.50%
9.50%
0.00%
5.50%
2.00%
n/a
4.00%
n/a
4.00%
0.0%
3.00%
0.00%
0.00%
4.50% for 5 years,
5.75% thereafter
2.00%
3.50%
UP94 with
projection scale
AA
GAM1994 with 5
year improvement
UP94 with
projection scale
AA
3% up to age 30,
reducing to 1% at
age 50, 0% at age
51
10% up to age 30,
reducing to 5% at
age 50, 0% at age
51
3% up to age 30,
reducing to 1% at
age 50, 0% at age
51
n/a
100% at the
earliest possible
age receive
unreduced
benefits
100% at the
earliest possible
age receive
unreduced
benefits
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
151
Amounts expressed in US$000
31 EMPLOYEE RETIREMENT BENEFITS (continued)
31 EMPLOYEE RETIREMENT BENEFITS (continued)
Group medical and life plans
Long term increase in health costs
Jamaica
8.00%
(e) Sensitivity of actuarial assumptions
(f) Amount, timing and uncertainty of future cash flows
In addition to the annual actuarial valuations prepared for the purpose of annual financial statement
reporting, full actuarial valuations of pension plans are conducted every 3 years. These full valuations
contain recommendations for Group and employee contribution levels which are implemented by the
Group as the recommendations are made.
The sensitivity of the pension retirement benefit obligations to individual changes in actuarial
assumptions is summarised below:
For the 2014 financial year, the total Group contributions to its defined benefits pension plans are
estimated at $10,457.
Barbados &
Eastern
Caribbean
Jamaica
Trinidad
Base pension obligation
71,029
114,130
12,704
Change in absolute assumption
Increase / (decrease) in pension obligations
Decrease discount rate by 1.0%
9,833
7,414
2,220
Increase discount rate by 1.0%
Decrease salary growth rate by 0.5%
Increase salary growth rate by 0.5%
Increase average life expectancy by 1 year
(7,493)
(1,862)
2,086
206
(5,837)
(2,385)
6,464
1,099
(1,618)
(497)
565
16
Sagicor Financial Corporation
2014 Annual Report
151
64
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
152
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
32 INCOME TAXES
32 INCOME TAXES (continued)
Group companies operating in Caribbean countries are largely taxed according to the taxation rules of
the country where the operations are carried out. The principal rates of taxation are summarised in
note 2.18(c). The income tax expense and the income subject to taxation in the statement of income
are set out in the following table.
Income tax on the total income subject to taxation differs from the theoretical amount that would arise
is as follows:
2014
2013
2014
2013
Total income / (loss) subject to taxation
166,534
(3,658)
Income tax expense:
Current tax
Deferred tax
Share of tax of associates
Sources of income subject to tax:
Investment income subject to direct taxation
Net income / (loss) subject to direct taxation
Total income / (loss) subject to taxation
14,548
16,315
1,414
738
2,245
364
16,700
18,924
115,957
105,638
50,577
(109,296)
Taxation at the applicable rates on income subject to tax
34,343
Adjustments to current tax for items not subject to / allowed for tax
(28,839)
Other current tax adjustments
Adjustments for current tax of prior periods
(78)
23
(7,346)
11,228
(21)
770
Movement in unrecognised deferred tax asset
7,666
11,792
Deferred tax relating to the origination of temporary differences
Deferred tax relating to changes in tax rates or new taxes
Deferred tax that arises from the write down / (reversal of a write
down) of a tax asset
(424)
(17)
(752)
1,598
3,180
16,700
(91)
8
(524)
-
3,108
18,924
166,534
(3,658)
Tax on distribution of profits from policyholder funds
Other taxes
In addition to the above, the income tax on items in other comprehensive income is set out in note 35.
152
2014 Annual Report
65
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
153
Amounts expressed in US$000
33 DEFERRED INCOME TAXES
33 DEFERRED INCOME TAXES (continued)
2014
2013
Analysis of deferred income tax liabilities
2014
2013
Accelerated tax depreciation
Policy liabilities taxable in the future
Defined benefit assets
Accrued interest
1,748
40,064
111
963
1,773
40,577
39
902
Unrealised gains on financial investments
(1,744)
2,175
Off-settable tax assets in respect of unused tax losses and
other items
Other items
Total (note 19)
(9,984)
(23,524)
399
590
31,557
22,532
Deferred income tax liabilities to be settled within one year
6,211
7,124
Analysis of deferred income tax assets:
Defined benefit liabilities
Unrealised losses on financial investments
Unused tax losses
Off-settable tax liabilities in respect of policy liability timing
differences and other items
Other items
Total deferred income tax assets (note 11) (note 37)
Deferred income tax assets to be recovered within one year
Unrecognised tax balances:
Tax losses
Potential deferred income tax assets
Expiry period for unrecognised tax losses:
2014
2015
2016
2017
2018
2019
After 2019
7,330
-
26,413
-
(5,433)
28,310
4,771
3,271
(1,525)
1,586
(953)
2,429
4,808
2,083
217,174
54,305
204,404
51,050
-
14,370
18,807
20,495
25,334
27,627
110,541
217,174
9,160
14,337
18,795
21,063
25,750
27,687
87,612
204,404
Sagicor Financial Corporation
2014 Annual Report
153
66
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
154DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
34 EARNINGS PER COMMON SHARE
34 EARNINGS PER COMMON SHARE (continued)
The basic earnings per common share is computed by dividing earnings attributable to common
shareholders by the weighted average number of shares in issue during the year, after deducting
treasury shares. Earnings attributable to common shareholders recognise the impact on net income
of the Company’s convertible redeemable preference shares (note 21.2).
The table below derives the earnings attributable to common shareholders and the basic earnings per
common share.
The table below derives the adjusted earnings attributable to common shareholders, the adjusted
weighted average number of common shares, and the fully diluted earnings per common share.
Earnings / (loss) attributable to common shareholders
25,832
(37,908)
Weighted average number of shares in issue in thousands
301,558
301,591
2014
2013
2014
2013
LTI restricted share grants
ESOP shares
3,131
2,697
2,252
2,337
Adjusted weighted average number of shares in issue
307,386
306,180
Fully diluted earnings / (loss) per common share
8.4 ¢
(12.6) ¢
Attributable to:
Continuing operations
Discontinued operation
16.6 ¢
(8.2) ¢
12.2 ¢
(24.8) ¢
Net income / (loss) attributable to common shareholders
Finance costs attributable to preference share subscription
Amortisation of issue expenses allocated to
preference share reserve
Preference share dividends declared
Earnings / (loss) attributable to common shareholders
27,370
6,483
(36,370)
6,483
(221)
(221)
(7,800)
25,832
(7,800)
(37,908)
Weighted average number of shares in issue in thousands
301,558
301,591
Basic earnings / (loss) per common share
8.6 ¢
(12.6) ¢
Attributable to:
Continuing operations
Discontinued operation
17.3 ¢
(8.7) ¢
12.5 ¢
(25.1) ¢
The computation of diluted earnings per common share recognises the dilutive impact of LTI share
grants and share options (note 30.1), ESOP shares grants (note 30.1), and the convertible
redeemable preference shares. In computing diluted earnings per share, the income attributable to
common shareholders is adjusted by the dilutive impact of the convertible preference shares and the
weighted average number of common sha res is adjusted by the dilutive impacts of the aforementioned
share grants, options and preference shares.
154
2014 Annual Report
67
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
35 OTHER COMPREHENSIVE INCOME (OCI)
Schedule to OCI from continuing operations
Items that may be reclassified subsequently to
income:
Available for sale assets:
Sagicor Financial Corporation
155
Amounts expressed in US$000
2014
2013
After tax OCI is attributable to
After tax OCI is attributable to
OCI tax
expense
Shareholders
Participating
policyholders
Non-
controlling
interests
Total
OCI tax
expense
Shareholders
Participating
policyholders
Non-
controlling
interests
Total
Gains / (losses) arising on revaluation
(15,278)
36,707
(1,792)
3,471
38,386
19,218
(43,215)
(15)
(4,212)
(47,442)
(Gains) / losses transferred to income
Net change in actuarial liabilities
Retranslation of foreign currency operations
1,158
8,503
-
(1,655)
(21,777)
(10,535)
(5,617)
2,740
-
(1,175)
(2,830)
1,807
47
62
-
(11,548)
(19,970)
(22,036)
(9,252)
(6,450)
1,643
(13,396)
-
7,465
(8,409)
30,445
(18,343)
(39,522)
Items that will not be reclassified subsequently
to income:
Gains / (losses) arising on revaluation of owner-
occupied property
Defined benefit gains / (losses)
Other items
(48)
(184)
(1,733)
-
(1,781)
7,971
(108)
7,679
-
-
-
-
211
27
(32)
3,109
5,241
13,212
1,328
(3,240)
-
(108)
5,452
13,131
-
1,296
-
(131)
-
-
(77)
(92)
-
-
-
-
(6,360)
(14,769)
-
30,445
(18,021)
(36,441)
(28,593)
(68,207)
704
3,813
(6,235)
-
(9,475)
-
(5,531)
(5,662)
Total OCI movements
(7,398)
10,419
62
(3,800)
6,681
8,761
(39,653)
(92)
(34,124)
(73,869)
Allocated to equity reserves
Allocated to retained earnings
2,556
7,863
10,419
(36,413)
(3,240)
(39,653)
Sagicor Financial Corporation
2014 Annual Report
155
68
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
156 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
36 CASH FLOWS
36.1 Operating activities
Sagicor Financial Corporation
Amounts expressed in US$000
36.1 Operating activities (continued)
The gross changes in investment property, debt securities and equity securities are as follows.
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 finance costs
Depreciation and amortisation
Increase in provision for unearned premiums
Other items
Net increase in investments and operating assets:
Investment property
Debt securities
Equity securities
Mortgage loans
Policy loans
Finance loans and finance leases
Securities purchased for re-sale
Deposits
Other assets and receivables
2014
2013
(266,938)
(251,046)
(47,668)
(29,051)
40,997
86,283
20,220
44
10,258
(36,544)
-
109,764
74,754
15,230
390
11,711
(185,855)
(75,741)
9,472
16,616
(222,964)
(270,725)
8,463
(35,500)
(4,491)
(17,510)
(3,632)
37,346
(16,956)
(23,156)
2,785
(3,332)
(24,504)
(24,547)
(24,426)
(115)
(245,772)
(351,404)
Investment property:
Disbursements
Disposal proceeds
Debt securities:
Disbursements
Disposal proceeds
Equity securities:
Disbursements
Disposal proceeds
Net increase in operating liabilities:
Insurance liabilities
Investment contract liabilities
Other funding instruments
Deposits
Securities sold for re-purchase
Other liabilities and payables
2014
2013
(1,638)
11,110
9,472
(1,424)
18,040
16,616
(1,037,913)
(1,115,332)
814,949
844,607
(222,964)
(270,725)
(70,757)
79,220
8,463
2,930
1,314
55,072
32,877
151,980
61,803
305,976
(90,976)
67,820
(23,156)
2,007
38,667
57,330
47,636
(24,712)
62,451
183,379
156
2014 Annual Report
69
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
157
Amounts expressed in US$000
Management has assessed the bank's ability to recognise the deferred tax asset arising from tax
losses and has deemed it appropriate to have such recognition based on projections of future profits.
Banking operations of the acquired and existing bank were combined during 2014, management has
restructured the organisation to remove duplication of resources and costs. The bank is also expected
to benefit in 2015 from improved efficiencies and synergies within the Sagicor Group.
36.2 Investing activities
Property, plant and equipment:
Purchases
Disposal proceeds
36.3 Financing activities
Other notes and loans payable:
Proceeds
Repayments
36.4 Cash and cash equivalents
Cash resources
Call deposits and other liquid balances
Bank overdrafts
Other short-term borrowings
37 SUBSIDIARY ACQUISITION AND OWNERSHIP CHANGES
2014
2013
(23,324)
2,408
(20,916)
(19,899)
1,615
(18,284)
2014
2013
-
(683)
(683)
43,096
(664)
42,432
2014
2013
402,525
226,370
57,782
(1,459)
(17,654)
67,998
(1,933)
(33,835)
441,194
258,600
Net assets acquired:
Property, plant and equipment
Intangible assets
Financial investments
Deferred tax asset
Miscellaneous assets and receivables
Cash resources
Other insurance liabilities
Deposit and security liabilities
Provisions
Income tax liabilities
Accounts payable and accrued liabilities
Total net assets
Share of net assets acquired
Purchase consideration and related costs
Goodwill arising on acquisition (note 8)
On June 27, 2014, the Group acquired 100% of the share capital of RBC Royal Bank (Jamaica)
Limited and its subsidiary, RBC Securities (Jamaica) Limited.
The net assets acquired amounted to $113,427 for a purchase consideration of $84,378. This gave
rise to negative goodwill of $29,051.
Details of acquiree’s net income and total revenue:
For the year ended December 31, 2014
Consolidated from acquisition date to December 31, 2014
Sagicor Financial Corporation
Fair Value
Acquiree's
carrying value
14,041
10,304
6,390
8,816
255,036
255,036
30,602
45,946
178,778
(10,957)
-
17,503
178,778
(10,957)
(356,044)
(356,044)
(6,107)
(4,228)
(9,770)
79,417
(40,281)
(4,228)
(9,770)
113,427
113,427
84,378
(29,051)
Total Revenue
Net Income
56,317
18,626
(7,425)
(5,049)
2014 Annual Report
157
70
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
158 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
38 DISCONTINUED OPERATION
38 Discontinued operation (continued)
On July 29, 2013, the Company entered into an agreement to sell Sagicor Europe and its subsidiaries
to AmTrust Financial Services, Inc. (AmTrust), subject to regulatory approvals. Final regulatory
approvals were obtained on December 23, 2013, on which date the sale was completed.
The operations of the Sagicor Europe operating segment are presented as discontinued operations
in these financial statements and a financial liability has been included for the settlement of open
underwriting years.
The Group's effective shareholder's interest in these companies prior to divestment was 100% and the
effective legal interest was 93%.
The consideration for the sale was £56,178,000 ($91,913), representing the assumption by AmTrust
of indebtedness of Sagicor Europe and its subsidiaries to Sagicor.
The terms of the sale required the Company to take certain actions and provide certain commitments
which included:
(ii)
The purchase prior to the sale by Sagicor of the legal 7% shareholding interest held by the
minority shareholders;
(iii) Future price adjustments to the consideration, representing adjusted profits or losses from
January 1, 2013 in the run-off of the 2011, 2012 and 2013 underwriting years of account of
syndicates 1206 and 44, the total price adjustments subject to a limit.
Immediately prior to the sale, Sagicor purchased the minority shareholdings for $1,157. The minority
shareholders were participating employees who had subscribed in cash for shares of Sagicor Europe.
Each participating employee had contracted with Sagicor Europe and the Company under a share
subscription agreement. Under the provisions of these agreements, participating employees could
exercise a put option to the Company to acquire their shares at the prevailing fair value. The first
tranches of put options vested in 2012 and 2013 representing 7% of the total shareholding and were
exercised for cash consideration of $1,305. The put options were accounted for as cash settled share
based payment arrangements.
As of December 31, 2014, the price adjustments have been estimated at £28,833,000 ($45,003)
which has been recorded as a liability to AmTrust. The anticipated settlement dates are as follows:
March 31, 2014
March 31, 2015 (i)
March 31, 2016
March 31, 2019
2014
-
21,069
30,682
(5,955)
45,796
2013
34,262
-
33,758
(12,996)
55,024
(i) On March 20, 2015, the Group entered into a Convertible Senior Note with AmTrust. This facility
becomes due in 2016 (Note 48).
Movement in Price Adjustments
Balance Payable end 2013
Payment made
Experience loss for 2014
Net currency movements
Payable end 2014
2014
55,024
(35,003)
26,192
(417)
45,796
The price adjustments have a limit of a further £19,948,726 ($31,135) which is the Group's maximum
possible contingent liability for future price adjustments. The price adjustments are subject to
insurance risk (as indicated in note 3.5) and to investment and foreign currency risk as the results of
run-off of the underwriting years up to 2013 could vary if there are future deviations in projected
underwriting returns, investment returns and foreign exchange rates.
158
2014 Annual Report
71
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
159
Amounts expressed in US$000
38 Discontinued operation (continued)
38 Discontinued operation (continued)
After accounting for its status as a discontinued operation and for the details of the sale, the net loss
recognised in the statement of income and the statement of comprehensive income is as follows.
Included in premium revenue and reinsurance premium expense are property and casualty insurance
lines as follows:
Statement of income
Loss from operations
Write-down of carrying value of investment in Sagicor
Europe
Expenses incurred on sale
Available for sale asset fair value loss realised on sale
Currency translation gain / (loss) realised on sale
Other expenses
Movement in price adjustment
Net loss
Other comprehensive income:
Items that may be reclassified subsequently to income:
Fair value reserve for available for sale assets:
Net fair value movements prior to sale
Cumulative loss transferred to income on sale
Net currency translation movements prior to sale
Currency translation loss transferred to income on sale
Other comprehensive loss
Total comprehensive loss
2014
-
-
-
-
417
(592)
(26,192)
(26,367)
-
-
-
-
-
2013
(33,247)
(21,123)
(2,900)
(623)
(17,615)
-
-
(75,508)
(147)
623
1,181
17,615
19,272
(26,367)
(56,236)
Direct property
Direct motor
Direct accident and liability
Reinsurance assumed
Gross premium
Ceded to reinsurers
2013
134,072
(6,269)
133,406
29,762
290,971
2013
24,719
(5)
15,813
6,084
46,611
Included in policy benefits and change in actuarial liabilities (reinsured) are property and casualty
insurance claims as follows:
Direct property
Direct motor
Direct accident and liability
Reinsurance assumed
Gross benefit
Ceded to reinsurers
2013
97,901
(2,799)
83,266
29,206
207,574
2013
30,908
(5,146)
2,066
3,250
31,078
Sagicor Financial Corporation
2014 Annual Report
159
72
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
160DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
38 Discontinued operation (continued)
Net cash flows from the discontinued operation were as follows:
Operating activities
Investing activities
Financing activities
Cash on disposal
Effects of exchange rate changes
Year ended
December 23,
2013
(20,653)
(167)
1,150
(61,069)
1,857
(78,882)
Under the terms of sale, the banker's letter of credit facility and the reinsurance financing facility were
cancelled. The b anker's letter of credit was secured by $50,104 which was returned to Sagicor in
January 2014. These funds were included in other receivables at December 31, 2013 (note 12). As a
result of the sale, Sagicor has no Funds at Lloyd's in respect of the 2013 and prior underwriting years
of account.
Sagicor Financial Corporation
Amounts expressed in US$000
39 CONTINGENT LIABILITIES
Guarantee and financial facilities at the date of the financial statements for which no provision has
been made in these financial statements include the following:
2014
2013
Customer guarantees and letters of credit (1)
16,288
12,372
(1) 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, benefits and expenses. Management considers that any liability from
these actions, for which provision has not been already made, will not be material.
(b) Tax assessments
The Group is also subject to tax assessments during the normal course of business. Adequate
provision has been made for all assessments received to date and for tax liabilities accruing in
accordance with management’s understanding of tax regulations. Potential tax assessments may be
received by the Group which are in addition to accrued tax liabilities. No provisions have been made
in these financial statements for such potential tax assessments.
160
2014 Annual Report
73
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
161
Amounts expressed in US$000
40 FAIR VALUE OF PROPERTY
40 Fair value of property (continued)
Investment and owner-occupied property are carried at fair value as determined by independent
valuations using internationally recognised valuation techniques. Direct sales comparisons, when such
data is available, and income capitalisation methods, when appropriate, are included in the
assessment of fair values. The highest and best use of a property may also be considered in
determining its fair value.
Some tracts of land are currently used for farming operations or are un-developed or are leased to
third parties. In determining the fair value of all lands, their potential for development within a
reasonable period is assessed, and if such potential exists, the fair value reflects that potential. These
lands are mostly in Barbados and the Group has adopted a policy of orderly development and
transformation to realise their full potential over time.
The fair value hierarchy has been applied to the valuations of the Group's property. The different
levels of the hierarchy are as follows:
Level 1 - fair value is determined by quoted un-adjusted prices in active markets for
identical assets;
Level 2 - fair value is determined by inputs other than quoted prices in active markets that
are observable for the asset either directly or indirectly;
Level 3 - fair value is determined from inputs that are not based on observable market
data.
The results of applying the fair value hierarchy to the Group's property as of December 31, 2013 are
as follows:
Investment property
Owner-occupied lands
Owner-occupied land and buildings
Level 1
Level 2
Level 3
Total
-
-
-
-
-
-
-
-
88,766
38,220
77,901
88,766
38,220
77,901
204,887
204,887
For Level 3 investment property, reasonable changes in fair value would affect net income. For Level
3 owner occupied property, reasonable changes in fair value would affect other comprehensive
income. The following table represents the movements in Level 3 property for the current year.
Investment
property
Owner-occupied property
Lands
Land and
buildings
Total
Balance, beginning of year
Additions
Transfers in / (out)
Fair value changes recorded in net
investment income
Fair value changes recorded in other
comprehensive income
Depreciation
Disposals and divestitures
Effect of exchange rate changes
98,369
1,638
583
(3,468)
-
-
(8,269)
(87)
38,428
66,281
203,078
-
(7)
-
13,741
15,379
(568)
8
-
(3,468)
(201)
278
77
-
-
-
(1,013)
(1,013)
-
(8,269)
(818)
(905)
Balance, end of year
88,766
38,220
77,901
204,887
Sagicor Financial Corporation
2014 Annual Report
74
161
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
162DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
41 FINANCIAL RISK
41.1 Credit 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 financial and other assets, banking and dealing
in securities, exposes the Group to various insurance and financial risks. Financial risks include credit
default, liquidity and market risks. Market risks arise from changes in interest rates, equity prices,
currency exchange rates or other market factors. The principal insurance risks are identified in notes
42 and 43.
The overriding objective of the Group’s risk management framework is to enhance its capital base
through competitive earnings growth and to protect capital against inherent business risks. This
means that the Group accepts certain levels of risk in order to generate returns, and the Group
manages the levels of risk assumed through enterprise wide risk management policies and
procedures. Identified risks are assessed as to their potential financial impact and as to their likelihood
of occurrence.
Credit risk is the exposure that the counterparty to a financial instrument is unable to meet an
obligation, thereby causing a financial loss to the Group. Credit risks are primarily associated with
financial investments and reinsurance contracts held.
Credit risk from financial investments is minimised through holding a diversified portfolio of
investments, purchasing securities and advancing loans only after careful assessment of the
borrower, obtaining collateral before advancing loans, and placing deposits with financial institutions
with a strong capital base. Limits may be placed on the amount of risk accepted in relation to one
borrower.
The Group has developed an internal credit rating standard. The internal rating is a 10 point scale
which allows for distinctions in risk characteristics and is referenced to the rating scales of
international credit rating agencies. The scale is set out in the following table.
The amounts disclosed in this note and in notes 42 and 43, exclude amounts in the statement of
financial position as liabilities of discontinued operation.
Category
Investment
grade
t
l
u
a
f
e
d
-
n
o
N
Non-
investment
grade
Watch
Default
Sagicor
Risk
Rating
1
2
3
4
5
6
7
8
9
Classification
S&P
Moody’s
Fitch
AM Best
Minimal risk
AAA, AA
Aaa, Aa
AAA, AA
aaa, aa
Low risk
Moderate risk
Acceptable risk
Average risk
A
BBB
BB
B
A
Baa
Ba
B
A
BBB
BB
B
a
bbb
bb
b
Higher risk
CCC, CC
Caa, Ca
CCC, CC
ccc, cc
Special mention
C
Substandard
Doubtful
D
C
C
10
Loss
c
d
C
DDD
DD
D
162
2014 Annual Report
75
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
163
Amounts expressed in US$000
41.1 Credit risk (continued)
41.1 Credit risk (continued)
The Group applies this rating scale to three categories of exposures:
Investment portfolios, comprising debt securities, deposits, securities purchased for re-sale, and
cash balances;
Lending portfolios, comprising mortgage, policy and finance loans and finance leases;
Reinsurance exposures, comprising reinsurance assets for life, annuity and health insurance (see
note 43.3) or realistic disaster scenarios for property and casualty insurance (see note 42.3).
The 3 default grades are used for lending portfolios while investment portfolios and reinsurance
exposures use one default grade: 8.
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.
Investment portfolios
Lending portfolios
Reinsurance assets
Other financial assets
2014
2013
$000
%
$000
4,008,176
71.4
3,620,468
838,301
14.9
507,019
145,891
9.0
2.6
556,893
316,274
162,557
%
76.7
11.8
6.7
3.4
Total financial statement exposures
5,499,387
97.9
4,656,192
98.6
Loan commitments
Customer guarantees and letters of credit
Other
69,307
16,288
25,415
Total off financial statement exposures
1
11 ,010
1.2
0.4
0.5
2.1
40,728
12,372
13,626
66,726
0.9
0.2
0.3
1.4
Total
5,610,397
100.0%
4,722,918
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.
Sagicor Financial Corporation
The Group’s largest exposures to individual counterparty credit risks as of December 31, 2014
and 2013 are set out below. The individual ratings reflect the rating of the counterparty listed below,
while the amounts include exposures with subsidiaries of the counterparty.
Sagicor
Risk
Rating
2014
Sagicor
Risk
Rating
2013
Investment portfolios:
Government of Jamaica
Government of Trinidad and Tobago
Government of Barbados
The Bank of Nova Scotia
Government of St Lucia
The Federal National Mortgage Association
The Federal Home Loan Mortgage
Corporation
Lending portfolios:
Value Assets International S.A. and Egret
Limited
Reinsurance assets:
Guggenheim Partners(1)
5
2
5
1
5
1
1
4
5
929,353
156,574
297,742
86,405
79,013
91,943
81,139
5
2
4
1
5
1
1
869,609
144,897
301,385
74,886
70,370
88,020
66,444
32,611
4
59,452
412,516
5
229,433
(1)The reinsurance asset held in the name of Guggenheim Partners are secured by assets held in
trust totalling $421,098 (2013 - $230,255).
2014 Annual Report
163
76
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
164 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
41.1 Credit risk (continued)
(a)
Investment portfolios
Sagicor Financial Corporation
Amounts expressed in US$000
41.1 Credit risk (continued)
(b) Lending portfolios
The results of the risk rating of investment portfolios are as follows:
The results of the risk rating of lending portfolios are as follows:
Investment portfolios
Risk
Rating
Classification
2014
2013
Exposure
$000
Exposure
%
Exposure
$000
Exposure
%
1
2
3
4
5
6
7
8
Minimal risk
Low risk
Moderate risk
Acceptable risk
587,359
642,099
994,603
119,418
Average risk
1,610,551
Higher risk
Special mention
Substandard
11,575
5,692
10,851
15%
16%
25%
3%
40%
0%
0%
0%
484,677
677,896
792,690
432,679
1,182,436
15,849
6,461
9,535
TOTAL RATED EXPOSURES
3,982,148
99%
3,602,223
UN-RATED EXPOSURES
26,028
1%
18,245
13%
19%
22%
12%
33%
0%
0%
0%
99%
1%
Lending portfolios
Risk
Rating
Classification
1
2
3
4
5
6
7
8
9
Minimal risk
Low risk
Moderate risk
Acceptable risk
Average risk
Higher risk
Special mention
Substandard
Doubtful
10
Loss
2014
2013
Exposure
$000
Exposure
%
Exposure
$000
Exposure
%
407,558
57,952
198,498
16,919
30,102
12,779
647
13,763
5,665
11,020
49%
7%
24%
2%
4%
2%
0%
2%
1%
1%
92%
8%
134,565
101,367
122,481
37,076
54,500
13,250
904
10,977
2,381
2,469
479,970
76,923
24%
18%
22%
7%
10%
2%
0%
2%
0%
0%
85%
15%
TOTAL
4,008,176
100%
3,620,468
100%
TOTAL RATED EXPOSURES
754,903
UN-RATED EXPOSURES
83,398
Investment portfolio assets are mostly unsecured except for securities purchased under agreement to
resell for which title to the securities is transferred to the Group for the duration of each agreement.
TOTAL
838,301
100%
556,893
100%
164
2014 Annual Report
77
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
165
Amounts expressed in US$000
41.1 Credit risk (continued)
41.1 Credit risk (continued)
Exposure to credit risk is also managed in part by obtaining collateral and guarantees for lending
portfolios. For mortgage loans, the collateral is real estate property, and the approved loan limit is 80%
to 95% of collateral value. For finance loans and finance 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 finance loans and finance leases are only granted when the initial amount is less
than $4,592.
Policy loans are advanced on the security of the underlying insurance policy cash values. Cash loans
are advanced to a maximum of 82% to 100% of the cash surrender value. Automatic premium loans
may be advanced to the extent of available cash surrender value.
Mortgage loans less than 90 to 180 days past due and finance loans and finance leases less than 30
to 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.
Accumulated allowances for impairment reflect the Group’s assessment of total individually impaired
assets at the date of the financial statements. The following tables set out the carrying values of debt
securities, mortgage loans, finance loans and finance leases, analysed by past due or impairment
status.
Exposure to the lending portfolios by geographic area is as follows.
Barbados
Jamaica
Trinidad & Tobago
Other Caribbean
USA
2014
2013
212,236
361,387
111,662
97,585
55,431
206,762
123,276
78,364
91,217
57,274
838,301
556,893
(c) Past due and impaired financial assets
A financial 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 debt securities, mortgage
loans, finance loans and finance leases.
Debt securities are assessed for impairment when amounts are past due, when the borrower is
experiencing cash flow difficulties, or when the borrower’s credit rating has been downgraded.
Debt
securities
Mortgage
loans
Finance
loans &
leases
2014
Neither past due nor impaired
3,435,400
233,202
330,215
Past due up to 3 months, but not impaired
Past due up to 12 months, but not impaired
Past due up to 5 years, but not impaired
Past due over 5 years, but not impaired
683
125
-
-
23,810
67,037
8,944
9,177
4,765
419
-
-
Total past due but not impaired
808
46,696
67,456
Impaired assets (net of impairment)
11,341
14,335
12,914
Total carrying value
3,447,559
294,233
410,585
Accumulated allowances on impaired assets
Accrued interest on impaired assets
9,334
216
3,976
400
20,575
212
Sagicor Financial Corporation
2014 Annual Report
78
165
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
166DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
41.1 Credit risk (continued)
Debt
securities
Mortgage
loans
Finance
loans &
leases
2013
Neither past due nor impaired
3,175,967
167,522
143,909
Past due up to 3 months, but not impaired
Past due up to 12 months, but not impaired
Past due up to 5 years, but not impaired
Past due over 5 years, but not impaired
6,587
250
-
-
55,945
11,444
4,034
6,881
16,937
193
-
-
Total past due but not impaired
6,837
78,304
17,130
Impaired assets (net of impairment)
8,972
11,781
4,011
Total carrying value
3,191,776
257,607
165,050
Accumulated allowances on impaired assets
Accrued interest on impaired assets
9,759
4,096
3,034
319
2,682
132
The Group is also exposed to impaired premiums receivable. Property and casualty insurers
frequently provide settlement terms to customers and intermediaries which extend up to 3 months.
However, under the terms of insurance contracts, insurers can usually lapse an insurance policy for
non-payment of premium, or if there is a claim, recover any unpaid premiums from the claim
proceeds.
(d) Repossessed assets
The Group may foreclose on overdue mortgage loans and finance loans and finance 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-
financing to a new purchaser on customary terms.
Sagicor Financial Corporation
Amounts expressed in US$000
41.1 Credit risk (continued)
(e) Renegotiated assets
The Group may renegotiate the terms of any financial investment to facilitate borrowers in financial
difficulty. Arrangements to waive, adjust or postpone scheduled amounts due may be entered into.
The Group classifies these amounts as past due, unless the original agreement is formally revised,
modified or substituted.
41.2 Liquidity risk
Liquidity risk is the exposure that the Group may encounter difficulty in meeting obligations associated
with financial or insurance liabilities that are settled by cash or by another financial asset. Liquidity risk
also arises when excess funds accumulate resulting in the loss of opportunity to increase investment
returns.
Asset liability matching is a tool used by the Group to mitigate liquidity risks particularly in operations
with significant maturing short-term liabilities. For long-term insurance contracts, the Group has
adopted a policy of investing in assets with cash flow characteristics that closely match the cash flow
characteristics of its policy liabilities. The primary purpose of this matching is to ensure that cash
flows from these assets are synchronised with the timing and the amounts of payments that must be
paid to policyholders.
Group companies monitor cash inflows and outflows in each operating currency. Through experience
and monitoring, the Group is able to maintain sufficient liquid resources to meet current obligations.
Investment property may be held to back insurance liabilities. As these assets are relatively illiquid,
the insurers hold less than 5% of their total assets in investment property.
166
2014 Annual Report
79
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
41.2 Liquidity risk (continued)
(a) Insurance liabilities
Sagicor Financial Corporation
167
Amounts expressed in US$000
The Group’s monetary insurance liabilities mature in periods which are summarised in the following table. Amounts are stated at their carrying values recognised in the financial statements and are analysed by their
expected due periods, which have been estimated by actuarial or other statistical methods.
2014
Actuarial liabilities
Other insurance liabilities
Total
2013
Actuarial liabilities
Other insurance liabilities
Total
Maturing
within
1 year
193,615
95,220
288,835
159,515
92,323
251,838
Expected discounted cash flows
Maturing
1 to 5
years
597,671
13,691
611,362
547,912
12,567
560,479
Maturing
after
5 years
1,770,935
54,907
1,825,842
1,616,892
55,980
1,672,872
Total
2,562,221
163,818
2,726,039
2,324,319
160,870
2,485,189
Sagicor Financial Corporation
2014 Annual Report
167
80
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
168DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
41.2 Liquidity risk (continued)
(b) Financial liabilities and commitments
Sagicor Financial Corporation
Amounts expressed in US$000
Contractual cash flow obligations of the Group in respect of its financial liabilities and commitments are summarised in the following table. Amounts are analysed by their earliest contractual maturity dates and
consist of the contractual un-discounted cash flows. Where the interest rate of an instrument for a future period has not been determined as of the date of the financial statements, it is assumed that the interest
rate then prevailing continues until final maturity.
2014 - Contractual un-discounted cash flows
2013 - Contractual un-discounted cash flows
On demand
or within
1 year
1 to 5
years
After
5 years
Total
On demand
or within
1 year
1 to 5
years
After
5 years
Total
Financial liabilities:
Investment contract liabilities
Notes and loans payable
Deposit and security liabilities:
Other funding instruments
Customer deposits
Structured products
Securities sold for re-purchase
Derivative financial instruments
Bank overdrafts
Accounts payable and accrued liabilities
Total financial liabilities
Off financial statement commitments:
Loan commitments
Non-cancellable operating lease and rental payments
Guarantees, acceptances and other financial facilities
Total off financial statements commitments
314,269
56,353
330,844
532,004
1,221
669,455
9,063
1,459
117,784
2,032,452
47,732
4,553
22,730
75,015
43,026
275,644
31,778
44,978
18,860
122
1,425
-
45,859
461,692
7,656
7,875
1,542
9,241
-
11,527
4
-
-
-
-
34,870
55,642
13,919
4,324
2,486
366,536
331,997
374,149
576,986
20,081
669,577
10,488
1,459
198,513
301,539
13,968
283,099
178,566
9,548
503,906
28,730
1,933
109,316
2,549,786
1,430,605
69,307
16,752
26,758
31,288
7,001
10,321
48,610
17,073
20,729
112,817
61,773
331,571
33,510
48,357
7,823
23,755
5,877
-
21,649
534,315
8,187
16,581
1,917
26,685
10,759
-
9,010
-
-
-
-
-
374,071
345,539
325,619
226,923
17,371
527,661
34,607
1,933
844
131,809
20,613
1,985,533
1,253
5,908
134
7,295
40,728
29,490
12,372
82,590
Total
2,107,467
478,765
76,371
2,662,603
1,479,215
561,000
27,908
2,068,123
168
2014 Annual Report
81
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
41.2 Liquidity risk (continued)
(c) Financial and insurance assets
Sagicor Financial Corporation
Amounts expressed in US$000
169
The contractual maturity periods of monetary financial assets and the expected maturity periods of monetary insurance assets are summarised in the following table. Amounts are stated at their carrying values
recognised in the financial statements. For this disclosure, monetary insurance assets comprise policy loans and reinsurance assets.
Debt securities
Mortgage loans
Policy loans
Finance loans and finance leases
Securities purchased for re-sale
Deposits
Derivative financial instruments
Reinsurance assets: share of actuarial liabilities
Reinsurance assets: other
Premiums receivable
Other assets and accounts receivable
Cash resources
Total
2014 – Contractual or expected discounted cash flows
2013 – Contractual or expected discounted cash flows
Maturing
within
1 year
Maturing
1 to 5
years
Maturing
after
5 years
Total
Maturing
within
1 year
Maturing
1 to 5
years
Maturing
after
5 years
Total
427,885
892,531
2,127,133
3,447,549
375,659
810,560
2,005,557
3,191,776
24,449
5,237
106,041
31,487
116,070
21,845
52,877
32,082
39,731
42,436
28,132
14,298
143,164
37
8,530
1,423
241,652
113,948
161,380
-
1,978
-
168,454
248,940
4,449
-
217
-
3,010
37,446
294,233
133,483
410,585
31,524
126,578
23,268
470,271
36,748
39,731
82,892
27,096
5,387
47,044
40,875
147,406
40,362
29,966
27,260
36,318
79,625
402,525
-
-
402,525
226,370
31,945
14,851
73,670
-
11,434
4,853
198,566
113,998
44,336
-
2,607
-
102,656
152,628
3,539
-
534
-
225
-
865
-
257,607
134,236
165,050
40,875
161,447
45,215
285,250
31,024
36,318
81,024
226,370
1,302,665
1,264,028
2,932,694
5,499,387
1,083,368
1,054,042
2,518,782
4,656,192
Sagicor Financial Corporation
2014 Annual Report
82
169
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
170
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
41.3 Interest rate risk
41.3 Interest rate risk (continued)
The Group is exposed to interest rate risks. Cash flow interest rate risk is the risk that future cash flows
of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest
rate risk is the risk that the fair value of a financial instrument will fluctuate because of changes in
market interest rates. The occurrence of an adverse change in interest rates on invested assets may
result in financial loss to the Group in fulfilling the contractual returns on insurance and financial
liabilities.
The Group manages its interest rate risk by a number of measures, including where feasible the
selection of assets which best match the maturity of liabilities, the offering of investment contracts
which match the maturity profile of assets, the re-pricing of interest rates on loans receivable, policy
contracts and financial liabilities in response to market changes. In certain Caribbean markets, where
availability of suitable investments is often a challenge, the Group holds many of its fixed rate debt
securities to maturity and therefore mitigates the transient interest rate changes in these markets.
The return on investments may be variable, fixed for a term or fixed to maturity. On reinvestment of a
matured investment, the returns available on the new investment may be significantly different from the
returns formerly achieved. 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 financial 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 fluctuations in the prevailing levels of market interest
rates on its financial position and cash flows. Interest margins may increase or decrease as a result of
such changes. Interest rate changes may also result in losses if asset and liability cash flows are not
closely matched with respect to timing and amount.
The Group is exposed to risk under embedded derivatives contained in a host insurance contract.
These risks include exposures to investment returns which may produce losses to the insurer arising
from the following contract features:
minimum annuity rates which are guaranteed to be applied at some future date;
minimum guaranteed death benefits which are applicable when the performance of an
interest bearing or unit linked fund falls below expectations;
minimum guaranteed returns in respect of cash values and universal life investment
accounts.
170
2014 Annual Report
83
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
41.3
Interest rate risk (continued)
Sagicor Financial Corporation
Amounts expressed in US$000
171
The table following summarises the exposures to interest rates on the Group’s monetary insurance and financial 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 liabilities are categorised by their expected maturities.
Exposure
within
1 year
Exposure
1 to 5
years
43,990
312,935
4,859
40,052
708
298,637
325,194
533,351
184
655,048
4,600
1,459
8,117
28,443
37,048
13,149
6,158
-
-
292
2014
Exposure
after
5 years
54,422
7,974
-
6,681
4
-
-
-
-
-
Not
exposed to
interest
60,547
-
(403)
492
164
6,735
3,596
1,665
-
Total
163,818
360,961
298,942
360,810
570,567
20,068
664,802
6,265
1,459
189,035
197,444
Other insurance liabilities
Investment contract liabilities
Notes and loans payable
Deposit and security liabilities:
Other funding instruments
Customer deposits
Structured products
Securities sold for re-purchase
Derivative financial instruments
Bank overdrafts
Accounts payable and accrued liabilities
Exposure
within
1 year
Exposure
1 to 5
years
2013
Exposure
after
5 years
Not
exposed to
interest
45,521
300,215
5,133
57,617
55,981
9,169
54,235
-
683
292,813
-
(3,336)
278,196
174,979
8,640
497,455
-
1,933
10,050
27,362
43,133
6,016
23,162
26,168
-
-
7,699
-
-
-
-
-
-
182
1,080
2,715
3,615
3,748
-
121,187
131,237
Total
160,870
367,001
290,160
313,439
219,192
17,371
524,232
29,916
1,933
Total
1,885,586
428,638
69,081
261,831
2,645,136
1,317,672
481,404
72,849
183,426
2,055,351
Sagicor Financial Corporation
2014 Annual Report
84
171
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
172
Year ended December 31, 2014
41.3
Interest rate risk (continued)
Sagicor Financial Corporation
Amounts expressed in US$000
The table following summarises the exposures to interest rate and reinvestment risks of the Group’s monetary insurance and financial assets. Assets are stated 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.
2014
2013
Exposure
within
1 year
Exposure
1 to 5
years
Exposure
after
5 years
Not
exposed to
interest
Total
Exposure
within
1 year
Exposure
1 to 5
years
Exposure
after
5 years
Not
exposed to
interest
Total
627,847
828,091
1,942,487
49,124
3,447,549
497,918
860,716
1,788,189
44,953
3,191,776
742
49,590
4,358
288,177
31,378
115,621
4,999
2,281
2,286
5,229
273,993
-
33,754
14,049
64,861
-
207,015
110,646
55,637
-
8,422
1,570
-
-
-
605
-
-
217
-
12
-
-
193,532
194,274
3,874
4,430
1,910
146
965
18,269
34,250
37,445
77,046
294,233
133,483
410,585
31,524
126,578
23,268
36,748
39,731
82,892
14,811
122,658
4,368
46,137
40,713
146,554
-
1,842
2,435
1,683
-
34,703
14,599
73,647
-
11,529
24,847
-
-
207
-
-
180,749
195,560
96,436
110,682
44,236
-
3,810
4,587
1,030
162
257,607
134,236
165,050
40,875
2,282
1,082
161,447
-
225
-
27
-
20,368
28,957
33,883
79,107
63,327
45,215
31,024
36,318
81,024
226,370
128,532
402,525
163,043
1,406,501
949,782
2,317,584
549,523
5,223,390
1,042,162
1,020,248
2,042,077
462,015
4,566,502
Debt securities
Equity securities
Mortgage loans
Policy loans
Finance loans and leases
Securities purchased for re-sale
Deposits
Derivative financial instruments
Reinsurance assets: other
Premiums receivable
Other assets and accounts receivable
Cash resources
Total
172
85
2014 Annual Report
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
173
Amounts expressed in US$000
41.3
Interest rate risk (continued)
41.3
Interest rate risk (continued)
The table below summarises the average interest yields on financial assets and liabilities held during
the year in respect of continuing operations.
Sagicor Investments Jamaica Limited and Sagicor Bank Jamaica Limited
2014
2013
The following table indicates the sensitivity to a reasonable possible change in interest rates, with all
other variables held constant, on net income and total comprehensive income (TCI) of the above
companies which operate in Jamaica.
Financial assets:
Debt securities
Mortgage loans
Policy loans
Finance loans and finance leases
Securities purchased for re-sale
Deposits
Financial liabilities:
Investment contract liabilities
Notes and loans payable
Other funding instruments
Deposits
Securities sold for re-purchase
6.3%
6.6%
7.5%
11.4%
5.6%
1.7%
5.4%
8.3%
2.0%
2.6%
5.0%
6.6%
7.5%
7.1%
10.0%
3.7%
1.8%
5.3%
7.2%
2.2%
3.6%
4.8%
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 43.4. The Group’s property
and casualty operations are not exposed to a significant degree of interest rate risk, since the majority
of its interest bearing instruments has short-term maturities. The sensitivity of the Group’s principal
operating subsidiaries engaged in banking, investment management and other financial services are
considered in the following paragraphs.
The sensitivity of income is the effect of the assumed changes in interest rates on income based on
floating rate debt securities and financial liabilities. The sensitivity of TCI is calculated by revaluing fixed
rate available-for-sale financial 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
JMD
USD
2014
Effect on
net
income
Effect on
TCI
Change in
interest rate
JMD
USD
2013
Effect on
net
income
Effect on
TCI
- 1%
- 0.5%
(996)
11,653
- 1%
- 0.5%
+2.5%
+ 2%
1,799
(37,376)
+2.5%
+ 2%
(2,287)
6,174
8,831
(27,580)
41.4 Foreign exchange risk
The Group is exposed to foreign exchange risk as a result of fluctuations in exchange rates since its
financial assets and liabilities are denominated in a number of different currencies.
In order to manage the risk associated with movements in currency exchange rates, the Group seeks
to maintain investments and cash in each operating currency, which are sufficient to match liabilities
denominated in the same currency. Exceptions are made to invest amounts in United States dollar
assets which are held to back liabilities in Caribbean 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 by currency are summarised in the following tables.
Sagicor Financial Corporation
2014 Annual Report
173
86
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
174 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
41.4 Foreign exchange risk (continued)
Sagicor Financial Corporation
Amounts expressed in US$000
2014
US$ 000 equivalents of balances denominated in
Barbados $
Jamaica $
Trinidad $
Eastern
Caribbean $
US $
Other
Currencies
Total
ASSETS
Financial investments(1)
Reinsurance assets
Receivables (1)
Cash resources
Total monetary assets
Other assets (2)
Total assets of continuing operations
LIABILITIES
Actuarial liabilities
Other insurance liabilities(1)
Investment contracts
Notes and loans payable
Deposit and security liabilities
Provisions
Accounts payable and accruals
Total monetary liabilities
Other liabilities (2)
Total liabilities of continuing operations
Net position
478,885
689,190
289,162
135,458
2,684,225
190,300
4,467,220
10,174
16,357
16,313
521,729
211,032
732,761
911
65,213
48,162
803,476
275,029
1,078,505
401,181
270,145
68,178
34,726
18,630
87,245
26,744
29,863
666,567
13,059
679,626
53,135
18,861
66,206
-
521,969
29,400
79,045
985,626
6,258
991,884
86,621
10,149
10,382
71,990
381,683
83,939
465,622
327,944
26,603
126,811
-
1,774
13,586
12,912
509,630
22,208
531,838
(66,216)
2,507
8,400
9,137
481,543
17,751
205,568
155,502
3,389,087
33,860
66,396
189,362
3,455,483
71,624
9,351
48,703
-
12,293
1,026
7,677
1,404,396
27,799
76,544
280,312
969,762
1,492
64,800
1,735
4,520
51,355
247,910
10,777
258,687
86,931
13,026
7,971
-
507,019
122,623
402,525
5,499,387
681,033
6,180,420
2,562,221
163,818
360,961
298,942
30,928
1,623,971
6,108
3,147
78,356
197,444
150,674
2,825,105
148,111
5,285,713
3,652
29,110
1,082
75,369
154,326
2,854,215
149,193
5,361,082
35,036
601,268
109,494
819,338
(1) Monetary balances only
(2) Non-monetary balances, income tax balances and retirement plan assets
174
2014 Annual Report
87
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
41.4 Foreign exchange risk (continued)
Sagicor Financial Corporation
175
Amounts expressed in US$000
2013
US$ 000 equivalents of balances denominated in
Barbados $
Jamaica $
Trinidad $
Eastern
Caribbean $
US $
Other
Currencies
Total
ASSETS
Financial investments(1)
Reinsurance assets
Receivables (1)
Cash resources
Total monetary assets
Other assets (2)
Total assets of continuing operations
LIABILITIES
Actuarial liabilities
Other insurance liabilities(1)
Investment contracts
Notes and loans payable
Deposit and security liabilities
Provisions
Accounts payable and accruals
Total monetary liabilities
Other liabilities (2)
Total liabilities of continuing operations
Net position
485,069
566,073
294,036
122,584
2,298,468
229,976
3,996,206
8,291
12,051
25,244
530,655
209,384
740,039
412,830
65,868
35,797
17,372
92,762
30,339
29,701
684,669
13,765
698,434
41,605
664
24,730
12,884
604,351
190,941
795,292
288,580
18,538
69,879
-
260,637
25,088
30,540
693,262
3,738
697,000
98,292
10,617
9,761
24,929
339,343
96,006
435,349
303,083
25,696
116,304
-
1,946
11,780
16,541
475,350
20,378
495,728
(60,379)
2,277
6,365
7,420
138,646
34,280
172,926
70,562
11,225
44,852
-
11,865
961
6,543
292,327
9,885
129,525
2,730,205
100,589
2,830,794
1,162,915
26,263
92,551
272,788
699,248
1,119
42,090
2,098
54,550
26,368
312,992
10,360
323,352
86,349
13,280
7,618
-
316,274
117,342
226,370
4,656,192
641,560
5,297,752
2,324,319
160,870
367,001
290,160
39,625
1,106,083
5,796
5,822
75,083
131,237
146,008
2,296,974
158,490
4,454,753
3,151
20,216
1,541
62,789
149,159
2,317,190
160,031
4,517,542
23,767
513,604
163,321
780,210
(1) Monetary balances only
(2) Non-monetary balances, income tax balances and retirement plan assets
Sagicor Financial Corporation
2014 Annual Report
88
175
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
176DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
41.4 Foreign exchange risk (continued)
41.4 Foreign exchange risk (continued)
41.5 Fair value of financial instruments
41.5 Fair value of financial instruments (continued)
(a) Sensitivity
JMD currency risk
The fair value of financial instruments is measured according to a fair value hierarchy which reflects
In assessing the fair value of non-traded financial liabilities, the Group uses a variety of methods
the significance of market inputs in the valuation. This hierarchy is described and discussed in
including obtaining dealer quotes for specific or similar instruments and the use of internally
The Group is exposed to currency risk in its operating currencies whose values have noticeably
fluctuated against the United States dollar (USD).
The effect of a 10% depreciation in the JMD relative to the USD arising from JMD reporting units as of
December 31, 2014 and for the year then ended are considered in the following table.
sections (i) to (iii) below.
(i) Level 1 – unadjusted quoted prices in active markets for identical instruments
Amounts denominated in
JMD
USD
Total
amounts
Effect of a 10%
depreciation
A financial instrument is regarded as quoted in an active market if quoted prices are readily and
which are carried at fair value. The Group assigns a fair value hierarchy of Level 2 to the contract
regularly available from an exchange or other independent source, and those prices represent actual
liability if the liability represents the unadjusted fair value of the underlying pool of assets.
The exposure to currency risk may result in three types of risk, namely:
Currency risk relating to the future cash flows of monetary balances
This occurs when a monetary balance 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 monetary balances being retranslated at the date of the financial statements and the exchange
gain or loss is taken to income (note 26).
Financial position:
Assets
Liabilities
Net position
Represented by:
1,292,783
1,052,094
2,344,877
1,045,321
1,143,878
2,189,199
247,462
(91,784)
155,678
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 results at a different rate of exchange results in either less or more income being
consolidated in the Group’s income statement.
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 or retained earnings.
Income statement:
Revenue
Benefits
Expenses
Income taxes
Net income
Represented by:
375,719
53,251
428,970
(212,992)
(8,973)
(221,965)
(132,177)
(14,270)
(146,447)
(7,740)
22,810
-
30,008
(7,740)
52,818
Currency risk relating to the future cash flows of monetary balances
Currency risk of reported results of foreign operations
(129,279)
(104,532)
(24,747)
(24,747)
(47,065)
21,299
13,218
774
(11,774)
(9,493)
(2,281)
(11,774)
developed pricing models, such as the use of discounted cash flows. If the non-traded liability is
backed by a pool of assets, then its value is equivalent to the value of the underlying assets.
Certain of the Group’s policy liabilities are unit linked, i.e. derive their value from a pool of assets
(iii) Level 3 – inputs for the instrument that are not based on observable market data
A financial instrument is classified as Level 3 if:
The fair value is derived from quoted prices of similar instruments that are observable and
which would be classified as Level 2; or
The fair value is derived from inputs that are not based on observable market data.
Level 3 available for sale securities comprise primarily of corporate and government agency debt
instruments issued in the Caribbean, with significant amounts in Jamaica and Trinidad. The fair values
and regularly occurring market transactions on an arm’s length basis. The Group considers that
market transactions should occur with sufficient frequency that is appropriate for the particular market,
when measured over a continuous period preceding the date of the financial statements. If there is
no data available to substantiate the frequency of market transactions of a financial instrument, then
the instrument is not classified as Level 1.
(ii) Level 2 – inputs that are observable for the instrument, either directly or indirectly
A financial instrument is classified as Level 2 if:
as Level 1; or
The fair value is determined from quoted prices that are observable but there is no data
The fair value is derived from quoted prices of similar instruments which would be classified
of these instruments have been derived from December 31 market yields of government instruments
of similar durations in the country of issue of the instruments.
available to substantiate frequent market trading of the instrument.
Level 3 assets designated fair value through income include mortgage loans and securities purchased
In estimating the fair value of non-traded financial assets, the Group uses a variety of methods such
and deposit administration contracts. These assets are valued with inputs other than observable
for re-sale for which the full income return and capital returns accrue to holders of unit linked policy
as obtaining dealer quotes and using discounted cash flow techniques. Where discounted cash flow
techniques are used, estimated future cash flows are discounted at market derived rates for
market data.
government securities in the same country of issue as the security; for non-government securities, an
The techniques and methods described in the preceding section (ii) for non traded financial assets
interest spread is added to the derived rate for a similar government security rate according to the
and liabilities may also used in determining the fair value of Level 3 instruments.
perceived additional risk of the non-government security.
The operating currency whose value noticeably fluctuate against the USD is the Jamaica dollar (JMD).
The theoretical impact of JMD currency risk on reported results and of the Group’s investment in
foreign operations is considered in the following section.
A 10% appreciation in the JMD relative to the USD would have equal and opposite effects to those
disclosed above.
176
2014 Annual Report
89
Sagicor Financial Corporation
Sagicor Financial Corporation
90
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
177
Amounts expressed in US$000
41.5 Fair value of financial instruments
41.5 Fair value of financial instruments (continued)
The fair value of financial instruments is measured according to a fair value hierarchy which reflects
the significance of market inputs in the valuation. This hierarchy is described and discussed in
sections (i) to (iii) below.
(i) Level 1 – unadjusted quoted prices in active markets for identical instruments
A financial instrument is regarded as quoted in an active market if quoted prices are readily and
regularly available from an exchange or other independent source, and those prices represent actual
and regularly occurring market transactions on an arm’s length basis. The Group considers that
market transactions should occur with sufficient frequency that is appropriate for the particular market,
when measured over a continuous period preceding the date of the financial statements. If there is
no data available to substantiate the frequency of market transactions of a financial instrument, then
the instrument is not classified as Level 1.
(ii) Level 2 – inputs that are observable for the instrument, either directly or indirectly
A financial instrument is classified as Level 2 if:
The fair value is derived from quoted prices of similar instruments which would be classified
as Level 1; or
The fair value is determined from quoted prices that are observable but there is no data
available to substantiate frequent market trading of the instrument.
In estimating the fair value of non-traded financial assets, the Group uses a variety of methods such
as obtaining dealer quotes and using discounted cash flow techniques. Where discounted cash flow
techniques are used, estimated future cash flows 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.
In assessing the fair value of non-traded financial liabilities, the Group uses a variety of methods
including obtaining dealer quotes for specific or similar instruments and the use of internally
developed pricing models, such as the use of discounted cash flows. If the non-traded liability is
backed by a pool of assets, then its value is equivalent to the value of the underlying assets.
Certain of the Group’s policy liabilities are unit linked, i.e. derive their value from a pool of assets
which are carried at fair value. The Group assigns a fair value hierarchy of Level 2 to the contract
liability if the liability represents the unadjusted fair value of the underlying pool of assets.
(iii) Level 3 – inputs for the instrument that are not based on observable market data
A financial instrument is classified as Level 3 if:
The fair value is derived from quoted prices of similar instruments that are observable and
which would be classified as Level 2; or
The fair value is derived from inputs that are not based on observable market data.
Level 3 available for sale securities comprise primarily of corporate and government agency debt
instruments issued in the Caribbean, with significant amounts in Jamaica and Trinidad. The fair values
of these instruments have been derived from December 31 market yields of government instruments
of similar durations in the country of issue of the instruments.
Level 3 assets designated fair value through income include mortgage loans and securities purchased
for re-sale for which the full income return and capital returns accrue to holders of unit linked policy
and deposit administration contracts. These assets are valued with inputs other than observable
market data.
The techniques and methods described in the preceding section (ii) for non traded financial assets
and liabilities may also used in determining the fair value of Level 3 instruments.
Sagicor Financial Corporation
2014 Annual Report
90
177
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
178 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
41.5 Fair value of financial instruments (continued)
(a) Financial instruments carried at fair value
Sagicor Financial Corporation
Amounts expressed in US$000
Available for sale securities:
Debt securities
Equity securities
Investments at fair value through income:
Debt securities
Equity securities
Derivative financial instruments
Mortgage loans
Securities purchased for re-sale
Total assets
2014
2013
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
396,980
1,947,067
36,010
29,200
432,990
1,976,267
22,824
20,841
-
-
-
49,495
91,108
6,663
-
-
43,665
147,266
476,655
2,123,533
12,967
11,011
23,978
70,521
6,104
16,605
38,718
-
131,948
155,926
2,357,014
76,221
2,433,235
142,840
118,053
23,268
38,718
-
322,879
2,756,114
327,742
1,734,391
59,898
22,834
387,640
1,757,225
22,674
20,268
-
-
-
57,235
76,992
28,488
-
-
42,942
162,715
430,582
1,919,940
11,981
9,643
21,624
68,397
5,925
16,727
36,838
162
128,049
149,673
2,074,114
92,375
2,166,489
148,306
103,185
45,215
36,838
162
333,706
2,500,195
Total assets by percentage
17%
77%
6%
100%
17%
77%
6%
100%
Investment contracts:
Unit linked deposit administration liabilities
Deposit and security liabilities:
Structured products
Derivative financial instruments
Total liabilities
Total liabilities by percentage
178
2014 Annual Report
91
-
-
-
-
-
0%
-
-
6,265
6,265
6,265
4%
116,809
116,809
20,068
-
20,068
136,877
96%
20,068
6,265
26,333
143,142
100%
-
-
-
-
-
0%
-
-
29,916
29,916
29,916
19%
114,374
114,374
17,371
-
17,371
17,371
29,916
47,287
131,745
161,661
81%
100%
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
41.5 Fair value of financial instruments (continued)
Balances totalling $165 have been transferred from Level 1 to Level 2 in 2014 (2013 - $10,018).
Sagicor Financial Corporation
179
Amounts expressed in US$000
For Level 3 instruments, reasonable changes in inputs which could be applied to the valuation of available for sale securities would affect other comprehensive income. Reasonable changes in inputs which could
be applied to the valuations of investments designated at fair value are largely offset in income, since the changes in fair value are borne by contract holders. Changes in the valuations of structured products
reflect changes in the underlying securities and are borne by the contract holders. The following table presents the movements in Level 3 instruments for the year.
2014
Available
for sale
securities
Investments
at fair value
through income
Derivative
instruments
Total
assets
2013
Total
assets
Balance, beginning of year
Additions
Issues
Settlements
Fair value changes recorded within net investment
income
Fair value changes recorded within interest expense
Fair value changes recorded in other comprehensive
income
Disposals
Transfers out of Level 3
Transfers from (to) instruments carried at amortised
cost
21,624
2,763
-
-
1,189
-
19
111,322
27,814
-
-
184
-
-
-
-
-
-
16,727
13,057
-
-
149,673
43,634
144,465
49,923
-
-
-
-
5,473
6,846
13,128
-
28
(31,795)
(20,599)
-
-
-
19
-
-
-
-
-
130
(691)
(25,033)
(18,652)
(44,376)
2014
2013
Policy
liabilities
Structured
products
Total
liabilities
Total
liabilities
114,374
17,371
131,745
113,300
-
15,888
(6,332)
-
(742)
-
-
-
-
3,963
-
-
-
-
-
-
-
-
19,851
(6,332)
-
20,460
(5,379)
-
-
(742)
5,524
-
-
-
(7,766)
-
-
-
-
-
(7,766)
Effect of exchange rate changes
(926)
1,056
Balance, end of year
23,978
115,343
16,605
155,926
(5,477)
149,673
1,387
116,809
(1,266)
20,068
121
(2,160)
136,877
131,745
Fair value changes recorded in investment income
for instruments held at end of year
Fair value changes recorded in interest expense for
instruments held at end of year
-
-
183
-
3,835
4,018
7,506
-
-
-
-
(742)
-
-
-
-
(742)
5,524
Sagicor Financial Corporation
2014 Annual Report
179
92
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
180
Year ended December 31, 2014
41.5 Fair value of financial instruments (continued)
(b) Financial instruments carried at amortised cost
The carrying values of the Group’s non-traded financial assets and financial liabilities carried at
amortised cost approximate their fair value in notes 10, 12, and 20. The fair value hierarchy of other
financial instruments carried at amortised cost as of December 31, 2014 is set out in the following
tables.
Level 1
Level 2
Level 3
Total
Held to maturity securities:
Debt securities
-
21,102
-
21,102
Loans and receivables:
Debt securities
Mortgage loans
Policy loans
Finance loans and finance leases
Securities purchased for resale
6,171
372,708
593,880
972,759
95
19,284
236,251
255,630
-
-
-
-
-
-
142,150
142,150
417,476
417,476
26,271
26,271
6,266
391,992
1,416,028
1,814,286
6,266
413,094
1,416,028
1,835,388
Sagicor Financial Corporation
Amounts expressed in US$000
41.5 Fair value of financial instruments (continued)
Level 1
Level 2
Level 3
Total
Investment contracts:
Deposit administration liabilities
Other investment contracts
Notes and loans payable:
Convertible redeemable preference
shares
Notes and lease payables
Deposit and security liabilities
Other funding instruments
Customer deposits
Securities sold for repurchase
-
-
-
-
-
-
-
-
-
-
-
10,003
118,401
128,404
-
119,317
119,317
10,003
237,718
247,721
122,863
-
122,863
154,867
44,071
198,938
277,730
44,071
321,801
-
362,514
362,514
2,305
587,214
589,519
-
657,506
657,506
2,305
1,607,234
1,609,539
290,038
1,889,023
2,179,061
180
2014 Annual Report
93
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
41.5 Fair value of financial instruments (continued)
(c) Equity price risk
The Group is exposed to equity price risk arising from changes in the market values of its equity
securities. The Group mitigates this risk by establishing overall limits of equity holdings for each
investment portfolio and by maintaining diversified holdings within each portfolio of equity securities.
Sensitivity
The sensitivity to fair value changes in equity securities arises from those instruments classified as
available for sale. There is no significant sensitivity to those instruments classified at fair value through
income, since fair value changes are borne by policy contract holders.
The effects of an across the board 20% change in equity prices of the Group’s available for sale
equity securities as of December 31, 2014 on total comprehensive income before tax (TCIBT) are as
follows.
Available for sale equities
Carrying value
20% change
on TCIBT
Listed on Caribbean stock exchanges and markets
Listed on US stock exchanges and markets
Listed on other exchanges and markets
18,510
49,319
8,392
76,221
3,702
9,864
1,678
15,244
41.6 Derivative financial instruments and hedging activities
The Group's derivative activities give rise to open positions in portfolios of derivatives. These
positions are managed to ensure that they remain within acceptable risk levels, with matching deals
being utilised to achieve this where necessary. When entering into derivative transactions, the Group
employs its credit risk management procedures to assess and approve potential credit exposures.
Sagicor Financial Corporation
181
Amounts expressed in US$000
41.6 Derivative financial instruments and hedging activities (continued)
Derivatives are carried at fair value and presented in the financial statements as separate assets and
liabilities. Asset values represent the cost to the Group of replacing all transactions with a fair value in
the Group’s favour assuming that all relevant counterparties default at the same time, and that
transactions can be replaced instantaneously. Liability values represent the cost to the Group
counterparties of replacing all their transactions with the Group with a fair value in their favour if the
Group were to default. Derivative assets and liabilities on different transactions are only set off if the
transactions are with the same counterparty, a legal right of set-off exists and the cash flows are
intended to be settled on a net basis. The contract or notional amounts of derivatives and their fair
values are set out below.
2014
Derivatives held for trading:
Cross currency swap
Equity indexed options
2013
Derivatives held for trading:
Currency forwards
Cross currency swap
Equity indexed options
Contract /
notional
amount
Fair value
Assets
Liabilities
19,226
473,982
493,208
2,763
24,965
317,699
345,427
5,022
18,246
23,268
2,683
24,965
17,567
45,215
4,626
1,639
6,265
2,763
26,313
840
29,916
Sagicor Financial Corporation
2014 Annual Report
181
94
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
182 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
41.6 Derivative financial instruments and hedging activities (continued)
41.6 Derivative financial instruments and hedging activities (continued)
For certain universal life and annuity insurance contracts, an insurer has purchased custom call
options that are selected to materially replicate the policy benefits that are associated with the equity
indexed components within the policy contract. These options are appropriate to reduce or minimise
the risk of movements in specific equity markets. Credit risk that the insurer has regarding the options
is mitigated by ensuring that the counterparty is sufficiently capitalized. Both the asset and the
associated actuarial liability are valued at fair market value on a consistent basis, with the change in
values being reflected in the income statement. The valuations combine external valuations with
internal calculations.
(i) Currency forwards and swaps
Currency forwards represent commitments to buy and sell foreign currencies on a gross basis at
future dates at specified prices. The credit risk is evaluated for each contract and is collateralised
where deemed necessary. The currency forward contracts are settled on a gross basis.
(ii) Cross currency swap
A Group company entered into a currency swap with an initial notional principal amount of Euro 45
million maturing in February 2015. Under the terms of this swap, the Group company pays Euro at a
rate of 5% and receives 4.26% in US dollars on the notional principal amount.
The Group company obtains principal and interest in Euros on a promissory note included in debt
securities classified as financial assets at fair value through income in note 9.
(iii) Equity indexed options
The Group has purchased equity indexed options in respect of structured products and in respect of
life and annuity insurance contracts.
For certain structured product contracts with customers (note 17), equity indexed options give the
holder the ability to participate in the upward movement of an equity index while being protected from
downward risk. The Group is exposed to credit risk on purchased options only, and only to the extent
of the carrying amount, which is their fair value.
182
2014 Annual Report
95
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
41.7 Offsetting Financial Assets and Liabilities
The Group is eligible to present certain financial assets and financial liabilities on a net basis on the balance sheet pursuant to criteria described in Note 1 “Accounting Policies: 2.15 Offsetting financial instruments”.
The following tables provide information on the impact of offsetting on the consolidated balance sheet, as well as the financial impact of netting for instruments subject to an enforceable master netting arrangement or
similar agreement as well as available cash and financial instrument collateral.
183
2014
ASSETS
Financial investments
Securities purchases under resale agreement
Derivative financial instruments
LIABILITIES
Security Liabilities
Derivative financial instruments
2013
ASSETS
Financial investments
Securities purchases under resale agreement
Derivative financial instruments
LIABILITIES
Security Liabilities
Derivative financial instruments
Gross amounts of
financial assets
Gross amounts set off
on the balance sheet
Net amounts of
financial assets
presented on the
balance sheet
Impact of master
netting arrangements
Financial instruments
collateral
Net amount
4,606,702
31,524
23,268
4,661,494
1,617,706
6,265
1,623,971
4,105,838
40,713
45,215
4,191,766
1,076,167
29,916
1,106,083
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2
4,606,70
31,524
23,268
4,661,494
1,617,706
6,265
1,623,971
4,105,838
40,713
45,215
4,191,766
1,076,167
29,916
1,106,083
(750,813)
(31,524)
(6,663)
(789,000)
(750,813)
(6,265)
(757,078)
(592,511)
(40,713)
(26,413)
(659,637)
(592,511)
(27,737)
(620,248)
(106,365)
-
-
(106,365)
(106,365)
-
(106,365)
(56,422)
-
-
(56,422)
(56,422)
-
(56,422)
3,749,524
-
16,605
3,766,129
760,528
-
760,528
3,456,905
-
18,802
3,475,707
427,234
2,179
429,413
2014 Annual Report
183
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
184DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
42 INSURANCE RISK – PROPERTY & CASUALTY CONTRACTS
42.2 Claims risk (continued)
Property and casualty insurers in the Group are exposed to insurance risks such as underwriting,
claims and availability of reinsurance, and to credit risk in respect of reinsurance counterparties.
Sagicor General Insurance is the principal insurer within the Group's continuing operations that issues
property and casualty insurance contracts. It operates mainly in Barbados and Trinidad and Tobago.
The principal insurance risks affecting property and casualty contracts are disclosed in the following
sections.
42.1 Underwriting risk
Risks are priced to achieve an adequate return on capital on the insurer’s business as a whole. This
return is expressed as a premium target return. Budgeted expenses and reinsurance costs are
included in the pricing process. Various pricing methodologies, including benchmark exposure rates
and historic experience are used and are generally applied by class of insurance. All methods
produce a technical price, which is compared against the market to establish a price margin.
Annually, the overall risk appetite is reviewed and approved. The risk appetite is defined as the
maximum loss the insurer is willing to incur from a single event or proximate cause. Risks are only
underwritten if they fall within the risk appetite. Individual risks are assessed for their contribution to
aggregate exposures by nature of risk, by geography, by correlation with other risks, before
acceptance. Underwriting a risk may include specific tests and enquiries which determine the insurer’s
assessment of the risk. Insurers may also establish deductibles, exclusions, and coverage limits which
will limit the potential losses incurred.
Inaccurate pricing or inappropriate underwriting of insurance contracts, which may arise from poor
pricing or lack of underwriting control, can lead to either financial loss or reputational damage to the
insurer.
42.2 Claims risk
Incurred claims are triggered by an event and may be categorised as:
•
attritional losses, which are expected to be of reasonable frequency and are less than
established threshold amounts;
184
2014 Annual Report
Sagicor Financial Corporation
•
•
large losses, which are expected to be relatively infrequent and are greater than
established threshold amounts;
catastrophic losses, which are an aggregation of losses arising from one incident or
proximate cause, affecting one or more classes of insurance. These losses are infrequent
and are generally very substantial.
The insurer records claims based on submissions made by claimants. The insurer may also obtain
additional information from loss adjustors, medical reports and other specialist sources. The initial
claim recorded may only be an estimate, which has to be refined over time until final settlement
occurs. In addition, from the pricing methodology used for risks, it is assumed that at any particular
date, there are claims incurred but not reported (IBNR).
Claims risk is the risk that incurred claims may exceed expected losses. Claims risk may arise from
•
•
•
•
invalid or fraudulent claim submissions;
the frequency of incurred claims;
the severity of incurred claims;
the development of incurred claims.
Claims risk may be concentrated in geographic locations, altering the risk profile of the insurer. The
most significant exposure for this type of risk arises where a single event could result in a large
number of claims. Concentration of risk is mitigated through risk selection, line sizes, event limits,
quota share reinsurance and excess of loss reinsurance.
Total insurance coverage on insurance policies provides a quantitative measure of absolute risk.
However, claims arising in any one year are a very small proportion in relation to the total insurance
coverage provided. The total amounts insured by the Group at December 31, gross and net of
reinsurance, are summarised by class of insurance.
96
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
185
Amounts expressed in US$000
42.2 Claims risk (continued)
42.3 Reinsurance risk (continued)
Total insurance coverage
2014
2013
Property
Motor
Accident and liability
Total
Gross
Net
Gross
Net
Gross
Net
Gross
Net
6,196,281
1,435,522
356,963
178,482
5,999,030
1,347,863
346,662
173,331
2,153,760
2,053,672
1,035,102
8,707,004
2,649,106
995,697
8,399,364
2,516,891
The insurer assesses its exposures by modelling realistic disaster scenarios of potential catastrophic
events. Claims arising from wind storms, earthquakes and floods and events triggering multi-coverage
corporate liability claims are considered to be the potential sources of catastrophic losses arising from
insurance risks. A realistic disaster scenario modelled for 2014 is presented below and results in
estimated gross and net losses.
A Barbados and St. Lucia windstorm having a 200 year return period.
293,355
5,000
Gross loss
Net loss
The Group selects reinsurers which have well established capability to meet their contractual
obligations and which generally have a Sagicor credit risk rating of 1 or 2. Insurers also place
reinsurance coverage with various reinsurers to limit their exposure to any one reinsurer.
The reinsurance programmes are negotiated annually with reinsurers for coverage generally over a 12
month period. It is done by class of insurance, though for some classes there is aggregation of
classes and / or subdivision of classes by the location of risk.
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 specified 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. Excess of loss
catastrophe reinsurance treaties typically cover up to four separate catastrophic events per year.
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. Claim amounts in excess of reinsurance treaty limits revert to
the insurer. Principal features of retention program used by Sagicor General for its property insurance
class is summarised in the following table.
The occurrence of one or more catastrophic events in any year may have a material impact on the
reported net income of the Group.
Type of risk
Retention by insurers - currency amounts in thousands
42.3 Reinsurance risk
To limit the potential loss for single policy claims and for aggregations of catastrophe claims, the
insurer may cede certain levels of risk to a reinsurer. Reinsurance however does not discharge the
insurer’s liability. Reinsurance risk is the risk that reinsurance is not available to mitigate the potential
loss on an insurance policy. The risk may arise from
•
•
•
the credit risk of holding a recovery from a reinsurer;
the unavailability of reinsurance cover in the market at adequate levels or prices,
the failure of a reinsurance layer upon the occurrence of a catastrophic event.
97
Property
•
•
•
•
maximum retention of $5,250 for a single event;
maximum retention of $5,000 for a catastrophic event;
quota share retention to maximum of 30% in respect of treaty limits;
quota share retention is further reduced to a maximum of $1,500 per
event.
The effects of reinsurance ceded are disclosed in notes 14, 24 and 27 and information on reinsurance
balances is included in notes 10, 20 and 41.
2014 Annual Report
Sagicor Financial Corporation
185
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
186DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
42.3 Reinsurance risk (continued)
In order to assess the potential reinsurance recoveries on the occurrence of a catastrophic insurance
event, the Sagicor credit risk ratings of the reinsurance recoverable are assessed using the following
realistic disaster scenario:
•
Hurricane with a 200 year return period affecting Barbados and St. Lucia and an earthquake
with a 250 year return period affecting Trinidad within a 24 hour period.
The reinsurance recoveries derived from the foregoing are assigned internal credit ratings as follows:
Risk Rating
Classification
Exposure
$000
Exposure
%
1
2
3
4
5
6
7
8
Minimal risk
Low risk
Moderate risk
Acceptable risk
Average risk
Higher risk
Special mention
Substandard
218,546
402,484
19,291
-
-
-
-
-
34%
63%
3%
0%
0%
0%
0%
0%
TOTAL
640,321
100%
43 INSURANCE RISK – LIFE, ANNUITY & HEALTH CONTRACTS
Insurers are exposed to insurance risks such as product design and pricing, mortality and morbidity,
lapse, expense, reinsurance, and actuarial liability estimation in respect of life, annuity and health
contracts. Disclosure of these risks is set out in the following sections.
43.1 Contracts without investment returns
These contracts are principally term life, critical illness and health insurance. Individual term life and
critical illness products are generally long-term contracts while group term life and health insurance
products are generally one year renewable. The principal insurance risks associated with these
contracts are product design and pricing and mortality and morbidity.
2014 Annual Report
186
Sagicor Financial Corporation
Sagicor Financial Corporation
Amounts expressed in US$000
43.1 Contracts without investment returns (continued)
(a)
Product design and pricing risk
Product design and pricing risk arises from poorly designed or inadequately priced contracts and can
lead to both financial loss and reputational damage to the insurer.
Risks are priced to achieve an adequate return on capital on the insurer’s business as a whole. In
determining the pricing of an insurance contract, the insurer considers the nature and amount of the
risk assumed, and recent experience and industry statistics of the benefits payable. Pricing
inadequacy may arise either from the use of inadequate experience and statistical data in deriving
pricing factors or from market softening conditions.
The underwriting process has established pricing guidelines, and may include specific medical tests
and enquiries which determine the insurer’s assessment of the risk. Insurers may also establish
deductibles and coverage limits for health risks which will limit the potential claims incurred. Term life
and critical illness risks have limitations of insured amounts. The pricing of a contract therefore
consists of establishing appropriate premium rates, deductibles and coverage limits.
(b) Mortality and morbidity risk
Mortality risk is the risk that worsening mortality rates will result in an increase of death claims.
Morbidity is the incidence of disease or illness and the associated risk is that of increased disability
and medical claims. Insurance claims are triggered by the incurrence of a medical claim, the
diagnosis of a critical illness or by death of the person insured.
For contracts providing death benefits, higher mortality rates would result in an increase in death
claims. The Group annually reviews its mortality experience and compares it to industry mortality
tables. This review may result in future adjustments to the pricing or re-pricing of these contracts.
Critical illness claims arise from the diagnosis of a specific illness incurred by the policy beneficiary.
The Group annually reviews its critical illness claims experience and compares it to industry statistics.
This review may result in future adjustments to the pricing or re-pricing of these contracts.
The concentration risks of term life and critical illness contracts are included in the related disclosure
on other long-term contracts in note 43.2(b).
98
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
187
Amounts expressed in US$000
43.1 Contracts without investment returns (continued)
43.2 Contracts with investment returns
The cost of health related claims depends on the incidence of beneficiaries becoming ill, the duration
of their illness, and the cost of providing medical services. An increase in any of these three factors
will result in increased health insurance claims. In such circumstances, the insurer may adjust the
pricing or re-pricing of these contracts.
For health insurance contracts, the concentration of insurance risk is illustrated by the distribution of
premium revenue by the location of the insured persons.
Life and annuity insurance contracts with investment returns generally have durations of 5 or more
years. The contract terms provide for the policyholder to pay either a single premium at contract
inception, or periodic premiums over the duration of the contract. From the premium received,
acquisition expenses and maintenance expenses are financed. Investment returns are credited to the
policy and are available to fund surrender, withdrawal and maturity policy benefits. The principal risks
associated with these policies are in respect of product design and pricing, mortality and longevity,
lapse, expense and investment.
2014 Premium revenue by location of insureds
Gross
Ceded
Net
(a) Product design and pricing risk
Barbados
Jamaica
Trinidad & Tobago
Other Caribbean
USA
Total
(c) Sensitivity of incurred claims
19,909
79,978
24,805
26,737
142
1,160
2,177
794
1,431
110
18,749
77,801
24,011
25,306
32
151,571
5,672
145,899
Product design and pricing risk arises from poorly designed or inadequately priced contracts and can
lead to both financial loss and reputational damage to the insurer.
Risks are priced to achieve an adequate return on capital on the insurer’s business as a whole. In
determining the pricing of a contract, the insurer considers the age of the policyholder and/or
beneficiary, the expenses and taxes associated with the contract, the prospective investment returns
to be credited to the contract, and the guaranteed values within the contract. Pricing inadequacy may
arise either from the use of inadequate experience and statistical data in deriving pricing factors or
from future changes in the economic environment.
The sensitivity of term life and critical illness claims is included in the related disclosure on other long-
term contracts in note 43.4. The impact on gross claims of increasing the total liability by 5% for un-
reinsured health insurance claims is illustrated in the following table.
2014
2013
Liability
5% increase
in liability
Liability
5% increase
in liability
48,507
3,389
51,896
2,425
169
2,594
42,174
2,687
44,861
2,109
134
2,243
Actuarial liability
Claims payable
99
(b) Mortality and longevity risk
Mortality risk is the risk that worsening mortality rates will result in an increase of death claims.
Longevity risk is the risk that improving mortality rates will lengthen the payout period of annuities.
For contracts providing death benefits, higher mortality rates will result in an increase in death claims
over time. For contracts providing the payout of annuities, improving mortality rates will lead to
increased annuity benefits over time. Insurers annually review their mortality experience and compare
it to industry mortality tables. This review may result in future adjustments to the pricing or re-pricing of
these contracts.
2014 Annual Report
Sagicor Financial Corporation
187
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
188 DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
43.2 Contracts with investment returns (continued)
43.2 Contracts with investment returns (continued)
Mortality risk may be concentrated in geographic locations, affecting the risk profile of the insurer. The
most significant exposure for this type of risk arises where a single event or pandemic could result in a
large number of claims.
Total insurance coverage on insurance policies provides a quantitative measure of absolute mortality
risk. However, claims arising in any one year are a very small proportion in relation to the total
insurance coverage provided. The total amounts insured by the Group in respect of both contracts
with or without investment returns at December 31, gross and net of reinsurance, are summarised by
geographic area below.
Total insurance coverage
Individual
contracts
Group
contracts
Individual
contracts
Group
contracts
2014
2013
Barbados
Gross
3,575,173
1,293,251
3,443,539
1,575,665
Net
3,245,153
1,244,721
3,095,266
1,508,962
Jamaica
Gross
6,579,009
4,894,151
6,495,724
4,362,914
Net
6,396,752
4,875,291
6,262,554
4,349,803
Trinidad & Tobago
Gross
3,040,062
1,775,661
2,778,294
1,640,918
Net
2,458,724
1,660,732
2,206,915
1,519,513
Other Caribbean
Gross
7,248,379
2,382,119
7,146,664
2,532,093
USA
Total
Net
Gross
Net
6,025,887
2,100,054
5,833,715
1,872,424
4,630,990
1,821,525
50,022
47,230
3,954,741
1,731,024
57,145
53,909
Gross
25,073,613
10,395,204
23,818,962
10,168,735
Net
19,948,041
9,928,028
19,129,474
9,304,611
Total liability under annuity contracts which represents the present value of future annuity benefits
provides a good measure of longevity risk exposure.
Total liability
under annuity contracts
Individual
contracts
Group
contracts
Individual
contracts
Group
contracts
2014
2013
Barbados
Jamaica
Gross
Net
Gross
Net
Trinidad & Tobago
Gross
Net
Other Caribbean
Gross
USA
Total
Net
Gross
Net
Gross
Net
99,604
99,604
541
541
112,401
112,401
19,998
19,998
852,121
418,838
1,084,665
651,382
54,160
54,160
266,893
266,893
-
-
69
69
29,757
9,076
350,879
330,198
92,777
92,777
483
483
97,115
97,115
19,090
19,090
656,932
405,068
866,397
614,533
53,838
53,838
236,506
236,506
-
-
66
66
33,087
10,106
323,497
300,516
188
2014 Annual Report
Sagicor Financial Corporation
100
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
189
Amounts expressed in US$000
43.2 Contracts with investment returns (continued)
43.3 Reinsurance risk
(c) Lapse risk
Lapse risk is that, on average, policyholders will terminate their policies ahead of the insurer’s
expectation. Early lapse may result in the following:
Acquisition costs are not recovered from the policyholder;
In order to settle benefits, investments are liquidated prematurely resulting in a loss to the
insurer;
Maintenance expenses are allocated to the remaining policies, resulting in an increase in
expense risk.
(d) Expense risk
The Group monitors policy acquisition and policy maintenance expenses. Expenses are managed
through policy design, fees charged and expense control. However, there are a significant number of
inforce contracts for which insurers have limited or no ability to re-price for increases in expenses
caused by inflation or other factors. Therefore growth in maintenance expenses has to be funded
either by increasing the volume of inforce policies or by productivity gains. Failure to achieve these
goals will require increases in actuarial liabilities held.
(e) Investment risk
A substantial proportion of the Group’s financial investments support insurer obligations under life and
annuity contracts with investment returns. The financial risks outlined in note 41 pertaining to credit,
liquidity, interest rate, foreign exchange and equity price are considered integral investment risks
associated with these insurance contracts.
Asset defaults, mismatches in asset and liability cash flows, interest rate and equity price volatility
generally have the effect of increasing investment risk and consequential increases in actuarial
liabilities held.
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 for new business a Sagicor credit risk rating of 1 or 2 is usually selected.
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.
Insurers have limited their exposure 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. The principal features of retention programs used by insurers are
summarised in the following table.
Type of insurance contract
Retention by insurers
- currency amounts in thousands
Health insurance contracts with individuals
Retention per individual to a maximum of $88
Health insurance contracts with groups
Retention per individual to a maximum of $88
Life insurance contracts with individuals
Retention per individual life to a maximum of $500
Life insurance contracts with groups
Retention per individual life to a maximum of $306
43.4 Sensitivity arising from the valuation of actuarial liabilities
The estimation of actuarial liabilities is sensitive to a number of assumptions. Changes in those
assumptions could have a significant effect on the valuation results which are discussed below.
The valuation of actuarial liabilities of life insurance and annuity contracts is sensitive to:
the economic scenario used,
the investments allocated to back the liabilities,
the underlying assumptions used (note 13.3 (b) to (f)), and
the margins for adverse deviations (note 13.3 (g)).
101
2014 Annual Report
189
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
190DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
43.4 Sensitivity arising from the valuation of actuarial liabilities (continued)
43.4 Sensitivity arising from the valuation of actuarial liabilities (continued)
Under Canadian accepted actuarial standards, the AA is required to test the actuarial liability under
economic scenarios. The scenarios developed and tested by insurers were as follows.
The following table represents the estimated sensitivity of each of the above scenarios to net actuarial
liabilities for insurers by segment. Correlations that may exist between scenario assumptions were not
explicitly taken into account.
Sensitivity
Worsening
rate of lapse
High interest
rate
Low interest
rate
Worsening
mortality and
morbidity
Sagicor Life Inc
segment
Scenario
Sagicor Jamaica
Segment
Sagicor USA segment
Sagicor Life segment
Sagicor Jamaica
segment
Sagicor Life USA
segment
Lapse rates were either doubled or halved, and the
more adverse result was selected.
rates
were
Lapse
doubled.
Assumed increases in the
investment portfolio yield
rates of 0.25% per year for
5 years, with
the rates
remaining constant
thereafter.
Assumed decreases
in
investment portfolio yield
rates of 0.25% per year for
5 years, with
the rates
remaining constant
thereafter.
increases
in
Assumed
the
investment portfolio
yield rates of 0.5% for 10
years.
A 1%
increase was
applied to the investment
portfolio rate.
Assumed decreases
in
investment portfolio yield
rates of 0.5% per year
for 10 years.
A 1% decrease was
applied to the investment
portfolio rate.
2014
2013
2014
2013
2014
2013
Base net actuarial
liability
882,151
864,680
488,320
458,188
715,303
709,225
Scenario
increase in liability
increase in liability
increase in liability
Worsening rate
of lapse
120,151
108,682
41,484
42,921
27,804
24,967
High interest rate
(76,586)
(146,739)
(98,548)
(90,059)
(42,745)
(42,476)
Low interest rate
143,890
206,820
126,221
116,950
49,378
48,998
Worsening mortality /
morbidity
33,049
35,006
26,624
25,871
15,295
15,276
Higher expenses
26,770
30,777
16,860
17,413
4,983
5,478
Mortality and morbidity rates for insurance and critical
illness products were increased by 3% of the base rate
per year for 5 years.
For annuity products,
decreased by 3% of the base rate for 5 years.
the mortality
rates were
life
For
insurance
products only, the base
assumed
rates were
increased annually by
3% cumulatively over the
next 5 years.
Higher
expenses
Policy unit maintenance expense rates were increased by 5% per year for 5 years
above those reflected in the base scenario.
190
2014 Annual Report
Sagicor Financial Corporation
102
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
191
Amounts expressed in US$000
43.5 Dynamic capital adequacy testing (DCAT)
44 FIDUCIARY RISK
DCAT is a technique used by the Group to assess the adequacy of the insurer’s financial position and
financial condition in the light of different future economic and policy experience scenarios. DCAT
assesses the impact over the next 5 years on the insurer’s financial position and financial condition
under specific scenarios.
The Group provides investment management and pension administration services to investment and
pension funds which involve the Group making allocation, purchase and sale decisions in relation to a
wide range of investments. These services give rise to fiduciary risk that may expose the Group to
claims for mal-administration or under-performance of these funds.
The financial position of an insurer is reflected by the amounts of assets, liabilities and equity in the
financial statements at a given date. The financial position therefore relies on the valuation
assumptions used for establishing the actuarial liabilities being adequate to measure future adverse
deviations in experience. The financial position does not offer any indication of an insurer’s ability to
execute its business plan.
The financial condition of an insurer at a particular date is its prospective ability at that date to meet its
future obligations, especially obligations to policyholders, those to whom it owes benefits and to its
shareholders. The financial condition analysis examines both an insurer’s ability to execute its
business plan and to absorb adverse experience beyond that provided for when its actuarial liabilities
are established.
In the ordinary course of business, the Group manages assets of pension funds, mutual funds and
unit trusts which are held in a fiduciary capacity and are not included in the Group’s financial
statements. The investments and cash under administration are summarised in the following table.
2014
2013
Pension and insurance fund assets
1,324,229
1,282,487
Mutual fund, unit trust and other investment fund assets
581,393
431,816
1,905,622
1,714,303
The purpose of the DCAT is
Fee income under administration is discussed in Note 26.
to develop an understanding of the sensitivity of the total equity of the insurer and future
financial condition to changes in various experience factors and management policies;
to alert management to material, plausible and imminent threats to the insurer’s solvency;
and to describe possible courses of action to address these threats.
Full DCAT is conducted periodically by some insurers within the Group.
45 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 $1,169,848 (2013 - $1,202,220)
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.
103
2014 Annual Report
191
Sagicor Financial Corporation
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
192DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
46 CAPITAL MANAGEMENT
The Group's objectives when managing capital, which is a broader concept than equity in the
statement of financial position, are:
To comply with capital requirements established by insurance, banking and other financial
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 benefits and returns to
policyholders, depositors, note-holders and shareholders;
To provide adequate returns to shareholders;
To maintain a strong capital base to support the future development of Group operations.
46.1 Capital resources
The principal capital resources of the Group are as follows:
Shareholders’ equity
Non-controlling interest
Notes and loans payable
2014
2013
531,698
241,480
298,942
512,097
218,751
290,160
Total financial statement capital resources
1,072,120
1,021,008
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 financial
services. The capital is deployed in such a manner as to ensure that subsidiaries have adequate and
sufficient capital resources to carry out their activities and to meet regulatory requirements.
Sagicor Financial Corporation
Amounts expressed in US$000
46.2 Capital adequacy
The capital adequacy of the principal operating subsidiaries is discussed in this section.
(a) Life insurers
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 requirements.
To assist in evaluating the current business and strategy opportunities, a risk-based capital approach
is a core measure of financial performance. The risk-based assessment measure which has been
adopted is the Canadian Minimum Continuing Capital and Surplus Requirement (MCCSR) standard.
The minimum standard recommended by the Canadian regulators for companies is an MCCSR of
150%. A number of jurisdictions in the Caribbean region have no internationally recognised capital
adequacy requirements, and in accordance with its objectives for managing capital, the Group has
adopted the Canadian MCCSR standard. Jamaica and the USA have recognised capital adequacy
standards.
The consolidated MCCSR for the Sagicor Group as of December 31 has been estimated as 273%
(2013 – 259%). This is the principal standard of capital adequacy used to assess the overall strength
of the Sagicor Group. However, because of the variations in capital adequacy standards across
jurisdictions, the consolidated result should be regarded as applicable to the Group as a whole and
not necessarily applicable to each individual segment, insurance subsidiary or insurance subsidiary
branch.
192
2014 Annual Report
Sagicor Financial Corporation
104
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
193
46.2 Capital adequacy (continued)
46.2 Capital adequacy (continued)
(i) Sagicor Life Jamaica
(b) Sagicor Investments Jamaica Limited and Sagicor Bank Jamaica Limited
Sagicor Life Jamaica is governed by the Jamaican MCCSR regime which requires an insurer to
maintain a minimum ratio of 150%. For the years ended December 31, 2014 and 2013, this ratio was
182% and 180% respectively.
(ii) 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 affiliates 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 defined 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 300% of the Company Action Level, and
has maintained these ratios as of December 31, 2014 and 2013 respectively.
Capital adequacy and the use of regulatory capital are monitored monthly by 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 filed 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, and to maintain a minimum ratio
of total regulatory capital to the risk-weighted assets.
The risk-weighted assets are measured by means of a hierarchy of five risk weights classified
according to the nature of each asset and counterparty, taking into account any eligible collateral or
guarantees. A similar treatment is adopted for off financial statements exposure, with some
adjustments to reflect the more contingent nature of the potential losses.
The table below summarises the capital adequacy ratios. During 2014 and 2013, all applicable
externally imposed capital requirements were complied with.
Sagicor
Investments
Jamaica
Sagicor Bank
Jamaica
2014
2013
2014
2013
13%
10%
15%
10%
15%
10%
17%
10%
Actual capital base to risk weighted assets
Required capital base to risk weighted assets
105
Sagicor Financial Corporation
2014 Annual Report
193
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
194
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
46.3 Financial covenants
46.3 Financial covenants (continued)
(a) 7.5% senior notes due 2016 and 4.6% notes due 2015
(b) International Finance Corporation (IFC)
Under an indenture and a trust deed entered into by the Group on the issue of the senior notes and
notes respectively (see note 16), the Group has to comply with permitted lien covenants, which will
not allow the Company nor any of its subsidiaries to directly or indirectly, incur or permit to exist any
lien to secure any indebtedness or any guarantee of indebtedness, other than permitted liens, without
effectively providing that the senior notes and notes are secured equitably and rateably with (or, if the
obligation to be secured by the lien is subordinated in right of payment to the senior notes and notes,
prior to) the obligations so secured for so long as such obligations are so secured.
Permitted liens are liens existing on the dates of issue of the senior notes and notes respectively,
certain liens which would arise in the course of normal business, and other liens whose outstanding
principal amounts in aggregate outstanding principal amount do not exceed 10% of the consolidated
net tangible assets (as is defined in the indenture and trust deed). As of December 31, 2014 and
2013, the Group satisfied these requirements.
On March 31, 2011, the Company entered into subscription and policy agreements with IFC,
regarding the latter’s participation in the issue of new common and convertible redeemable
preference shares. Pursuant to the aforementioned agreements, on July 18, 2011, 12,269,938
common shares and 78,339,530 convertible redeemable preference shares were issued to IFC. The
financial covenants included in these agreements are summarised as follows.
(i) Put option
IFC has been granted the right to require the Company to purchase IFC’s holding of convertible
redeemable preference shares in the event that the Company is in breach of any of the policy
reporting or IFC policy covenants. The Company may nominate a third party to purchase the shares.
The purchase must take place within 10 and 60 days of the date of notice. If the Company either fails
to purchase or does not arrange a third party purchase, IFC may sell the shares to a third party and
the Company is required to pay a late payment charge of 6.5% per annum.
194
Sagicor Financial Corporation
2014 Annual Report
106
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
DRAFT - Notes to the Financial Statements
Year ended December 31, 2014
Sagicor Financial Corporation
Amounts expressed in US$000
195
47 RELATED PARTY TRANSACTIONS
48 EVENTS AFTER DECEMBER 31, 2014
Other than as disclosed in notes 5, 12, 26, 30, 31 and 44, there are no material
related party transactions except as disclosed below.
Key management transactions and balances
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 are summarised in the following tables:
Compensation
2014
2013
On March 20, 2015, the Group entered into a Convertible Note arrangement with AmTrust Financial
Services Inc. Under the terms of this arrangement, AmTrust Financial Services Inc agreed to accept
all present and future obligations under the Deed of Undertaking, entered into on the sale of Sagicor
Europe. The cost of this arrangement was $12.2 million, and will be expensed in 2015. At the end
of the year, the balance due to AmTrust was $45.8 million and, together with the $12.2 million cost
of this arrangement, will result in a total convertible note amount of $58 million. The note will bear
interest at the rate of 5% per annum if AmTrust exercises its conversion option on, or prior to
maturity. Otherwise, interest will be at the rate of 10% per annum retroactive to the date of the note
purchase. The note will mature on May 31, 2016.
Salaries, directors’ fees and other short-term benefits
Equity-settled compensation benefits
Pension and other retirement benefits
20,177
2,324
1,672
24,173
21,027
3,346
2,479
26,852
Balance, beginning of year
Advances
Repayments
Effects of exchange rate changes
Balance, end of year
Mortgage
loans
5,441
735
(1,009)
-
5,167
Other loans
Total loans
395
134
(101)
(16)
412
5,836
869
(1,110)
(16)
5,579
Interest rates prevailing during the year
3.75% - 12.5%
7.5% - 48.0%
107
Sagicor Financial Corporation
2014 Annual Report
195
Notes to the Financial Statements Sagicor Financial Corporation Year ended December 31, 2014 Amounts expressed in US $000
175 years of
commitment
When we find something worth supporting,
our support must be unwavering. We stand
by each and every commitment that we
make.
SHAREHOLDER INFORMATION
DIVIDENDS
An interim dividend of US 2 cents per common share, approved for the half-year ended June 30, 2014, was paid on November 15, 2014 to the
holders of common shares, including depositary interest holders, whose names were registered on the books of the Company at the close of
business on October 22, 2014. A final common dividend of US 2 cents per common share, payable on May 15, 2015, was approved for the financial
year ended December 31, 2014 to the holders of common shares, including depositary interest holders, whose names were registered on the books
of the Company at the close of business on April 15, 2015. The total dividend on common shares for the 2014 financial year amounted to US 4 cents
per share.
An interim dividend of US 3.25 cents per convertible redeemable preference share was paid on November 15, 2014 to the holders of convertible
redeemable preference shares, whose names were registered on the books of the Company at the close of business on October 22, 2014. A final
dividend of US 3.25 cents per convertible redeemable preference share, payable on May 15, 2015, was approved for the financial year ended
December 31, 2014 to the holders of convertible redeemable preference shares, whose names were registered on the books of the Company at the
close of business on April 15, 2015. The total convertible redeemable preference dividend for the 2014 financial year amounted to US 6.50 cents per
share.
SHARES
The following Shareholders own more than 5% and 3% respectively of the capital of the Company as at December 31, 2014:
Common Shares
Convertible Redeemable Preference
Shares
Number of Shares
Percentage
Number of Shares
Percentage
International Finance Corporation:
National Insurance Board, Barbados:
Republic Bank Limited – 1162:
12,269,938
18,950,000
N/A
4.04
6.24
N/A
78,339,530
10,000,000
4,000,000
65.28
8.33
3.33
The total number of issued shares as at December 31, 2014 and as at December 31, 2013 is set out below. No new shares were issued in 2014.
Common Shares
Convertible Redeemable Preference Shares
As at 31-Dec-14
As at 31-Dec-13
As at 31-Dec-14
As at 31-Dec-13
303,917,020
303,917,020
120,000,000
120,000,000
198
2014 Annual Report
Sagicor Financial Corporation LONG TERM INCENTIVE PLAN (LTI)
The Tables below show grants of restricted stock and stock options as at December 31, 2014 under the LTI for Executives.
Award Year
Value attributable to
Stock Grant
Awards Made and
in Effect
Vested
Not Vested
Vested in 2014
Restricted Stock
As of December 31, 2014
2006 – 2008
US$ 1.98, 2.01, 2.50
2009
2010
2011
2012
2013
2014
US$ 1.58, 2.50
US$ 1.6
US$ 1.48
US$ 1.53
US$ 1.15
US$ 1.075
1,302,161
1,031,429
744,162
600,129
1,409,816
2,070,618
2,634,725
9,793,040
1,302,161
1,031,429
744,162
600,129
640,574
780,301
374,931
5,473,687
0
0
0
0
769,242
1,290,317
2,259,794
4,319,353
0
0
0
65,440
160,968
270,880
374,931
872,219
Allocated for settlement of tax 2014
(289,010)
Total converted to shares 2014
583,209
2014 Annual Report
199
Sagicor Financial Corporation Award Year
Exercise Price of
Stock Option
Awards Made
and in Effect
Stock Options
As of December 31, 2014
Vested
Exercised
Not Exercised
Not Vested
Vested in 2014
US$ 1.98
577,121
577,121
120,443
456,678
US$ 2.01
1,245,090
1,245,090
72,839
1,172,251
US$ 2.5
US$ 2.5
US$ 1.6
875,859
875,859
1,038,889
1,038,889
1,535,342
1,535,342
US$ 1.48
1,932,137
1,449,092
US$ 1.53
1,203,995
US$ 1.15
1,885,288
US$ 1.075
2,916,007
601,991
471,308
0
0
0
0
0
0
0
0
875,859
1,038,889
1,535,342
1,449,092
601,991
0
0
0
0
0
483,045
602,004
0
0
0
0
433,585
543,393
330,149
520,887
0
471,308
1,413,980
0
2,916,007
13,209,728
7,794,692
193,282
7,601,410
5,415,036
1,828,014
2006
2007
2008
2009
2010
2011
2012
2013
2014
200
2014 Annual Report
Sagicor Financial Corporation ANALYSIS OF COMMON SHAREHOLDING
Common Shareholders by Size of Holding
Number of Common Shareholders by Size of Holding as at December 31, 2014 (with 2013 Comparison)
Size of Holding
Number of
Shareholders
Percentage of
Shareholders
Total Shares Held
Percentage of Shares
Held
1 - 1,000
2014
6,335
2013
6,348
1,001 - 2,500
15,009
15,132
2,501 - 5,000
5,001 - 10,000
10,001 - 25,000
25,001 - 100,000
100,001 - 1,000,000
1,000,001 & above
7,003
4,031
2,920
663
230
24
7,103
4,071
2,958
687
225
23
2014
2013
2014
2013
2014
2013
17.49
41.44
19.34
11.13
8.06
1.83
0.64
0.07
17.37
3,823,240
3,840,582
41.40
24,897,535
25,107,553
19.44
24,306,373
24,665,252
11.14
28,825,664
29,070,097
8.09
1.88
0.62
0.06
42,058,378
42,605,565
31,454,944
32,948,906
67,944,123
66,180,202
80,606,763
79,498,863
1.26
8.19
8.00
9.48
13.84
10.35
22.36
26.52
1.26
8.26
8.12
9.57
14.02
10.84
21.78
26.16
Total
36,215
36,547
100.00
100.00
303,917,020 303,917,020
100.00
100.00
2014 Annual Report
201
Sagicor Financial Corporation Common Shareholders by Country of Residence
Number of Common Shareholders by Country of Residence and by Type as at December 31, 2014
Country
Directors, Management,
Staff, Advisors
Companies
Individuals
Total
Trinidad and Tobago
Barbados
Eastern Caribbean
Other Caribbean
Other
Total
Shareholders
%
Shareholders
%
Shareholders
%
Shareholders
%
104
178
25
13
20
340
0.29
0.49
0.07
0.04
0.06
0.94
639
262
35
34
5
975
1.76
0.72
0.10
0.09
0.01
2.69
15,079
11,400
7,026
168
1,227
41.64
31.48
19.40
0.46
3.39
15,822
11,840
7,086
215
1,252
43.69
32.69
19.57
0.59
3.46
34,900
96.37
36,215
100.00
Common Shares held by Country of Residence
Number of Common Shares held by Country of Residence and by Type as at December 31, 2014
Country
Directors, Management,
Staff, Advisors
Companies
Individuals
Total
Trinidad and Tobago
Barbados
Eastern Caribbean
Other Caribbean
Other
Total
Shares
1,855,739
8,449,064
67,178
1,349,998
1,585,661
13,307,640
%
0.61
2.78
0.02
0.44
0.52
4.38
Shares
%
Shares
%
Shares
%
71,783,081
23.62
82,366,071
27.10
156,004,891
51.33
37,487,173
12.33
54,987,283
18.09
100,923,520
33.21
1,377,215
3,646,368
12,779,778
0.45
1.20
4.21
19,869,541
1,321,353
4,991,517
6.54
0.43
1.64
21,313,934
6,317,719
19,356,956
7.01
2.08
6.37
127,073,615
41.81
163,535,765
53.81
303,917,020
100.00
202
2014 Annual Report
Sagicor Financial Corporation ANALYSIS OF CONVERTIBLE REDEEMABLE PREFERENCE SHAREHOLDING
Preference Shareholders by Size of Holding
Number of Preference Shareholders by Size of Holding as at December 31, 2014 (with 2013 Comparison)
Size of Holding
Number of
Shareholders
Percentage of
Shareholders
Total Shares Held
Percentage of Shares
Held
2014
2013
2014
1 - 1,000
1,001 - 2,500
2,501 - 5,000
5,001 - 10,000
10,001 - 25,000
25,001 - 100,000
100,001 - 1,000,000
1,000,001 & above
417
186
256
109
77
71
31
7
418
186
257
104
73
66
33
7
36.14
16.12
22.18
9.45
6.67
6.15
2.69
0.61
2013
36.54
16.26
22.47
9.09
6.38
5.77
2.88
0.61
2014
2013
2014
2013
227,309
227,309
371,404
371,404
1,177,810
1,182,810
954,598
904,598
1,419,995
1,334,995
4,224,049
4,039,049
12,902,500
13,217,500
98,722,335
98,722,335
0.19
0.31
0.98
0.80
1.18
3.52
10.75
82.27
0.19
0.31
0.99
0.75
1.11
3.37
11.01
82.27
Total
1,154
1,144
100.00
100.00
120,000,000 120,000,000
100.00
100.00
2014 Annual Report
203
Sagicor Financial Corporation Preference Shareholders by Country of Residence
Number of Preference Shareholders by Country of Residence and by Type as at December 31, 2014
Country
Directors, Management,
Staff, Advisors
Companies
Individuals
Total
USA
Trinidad and Tobago
Barbados
Other
Total
Shareholders
0
10
39
0
49
%
0
0.87
3.38
0
4.25
Shareholders
%
Shareholders
%
Shareholders
%
1
96
43
0
0.09
8.32
3.73
0
140
12.13
1
398
564
2
965
0.09
34.49
48.87
0.17
83.45
2
504
646
2
0.17
43.67
55.98
0.17
1,154
100.00
Preference Shares held by Country of Residence
Number of Preference Shares held by Country of Residence and by Type as at December 31, 2014
Country
Directors, Management,
Staff, Advisors
Companies
Individuals
Total
USA
Trinidad and Tobago
Barbados
Other
Total
Shares
0
250,000
2,238,090
0
%
0
0.21
1.87
0
Shares
%
Shares
78,339,530
65.28
1,000
15,154,507
12.63
4,368,204
19,505,770
16.25
139,799
0
0
3,100
2,488,090
2.07
112,999,807
94.17
4,512,103
%
0.00
3.64
0.12
0.00
3.76
Shares
%
78,340,530
65.28
19,772,711
16.48
21,883,659
18.24
3,100
0.00
120,000,000
100.00
204
2014 Annual Report
Sagicor Financial Corporation
ADVISORS AND BANKERS
APPOINTED ACTUARY
Sylvain Goulet, FCIA, FSA, MAAA, Affiliate Member of the (British) Institute of Actuaries
and Affiliate Member of the Caribbean Actuarial Association
AUDITOR
PricewaterhouseCoopers SRL
LEGAL ADVISORS
Allen & Overy LLP, New York, USA
Allen & Overy LLP, London, United Kingdom
Carrington & Sealy, Barbados
Barry L V Gale, QC, LLB (Hons), Barbados
Patterson K H Cheltenham, QC, LLM, Barbados
M Hamel Smith & Co, Trinidad and Tobago
Hobsons, Trinidad and Tobago
Holman Fenwick Willan LLP, London, United Kingdom
Shutts & Bowen LLP, Florida, USA
BANKERS
First Citizens Bank (Barbados) Limited
CIBC FirstCaribbean International Bank Limited
RBC Royal Bank (Trinidad & Tobago) Limited
RBC Royal Bank (Barbados) Limited
The Bank of Nova Scotia
2014 Annual Report
205
Sagicor Financial Corporation OFFICES
Sagicor Corporate Head Office
SAGICOR FINANCIAL CORPORATION
Cecil F de Caires Building
Wildey, St Michael Barbados
Tel: (246) 467-7500
Fax: (246) 436-8829
Email: info@sagicor.com
Website: www.sagicor.com
Subsidiaries
SAGICOR LIFE INC
Sagicor Financial Centre
Cecil F de Caires Building
Wildey, St Michael Barbados
Tel: (246) 467-7500
Fax: (246) 436-8829
Email: contactus@sagicor.com
Website: www.sagicorlife.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 Sir Sydney Walling Highway
St John’s
Tel: (268) 480-5550
Fax: (268) 480-5520
Email: info_antigua@sagicor.com
Belize
Coney Drve Business Plaza
Coney Drve
Belize City, Belize
Tel: (501)223-3147
Fax: (501) 223-7390
Email: info@sagicor.com
Curaçao
Schottegatweg Oost #11
Tel: (599) 9 736-8558
Fax: (599) 9 736-8575
Email: info_curacao@sagicor.com
Grenada
TransNemwil Complex
The Villa
St George’s
Tel: (473) 440-1223
Fax: (473) 440-4169
Email: info_grenada@sagicor.com
St Lucia
Sagicor Financial Centre
Choc Estate, Castries
Tel: (758) 452-3169
Fax: (758) 450-3787
Email: info_stlucia@sagicor.com
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 Anico Insurance Co Ltd
Manico Headuarters
Cosley Drve, The Valley
Tel: (264) 497-3712
Fax: (264) 497-3710
Aruba
Lyder Insurance Consultants
Seroe Blanco 56A
Tel: (297) 582-6133
Curaçao
Guillen Insurance Consultants
PO Box 4929
Kaya E, Salas No 34
Tel: (599) 9 461-2081
Fax: (599) 9 461-1675
Email: chris-guillen@betlinks.an
Dominica
WillCher Services Inc
44 Hillsborough Street
Corner Hillsborough & Independence Streets
Roseau
Tel: (767) 440-2562
Fax: (767) 440-2563
Email: info_dominica@sagicor.com
Haiti
Cabinet d’Assurance
Fritz de Catalogne
Angles Rues de Peuple et des Miracles
Port-au-Prince
Tel: (509) 3701 1737
206
2014 Annual Report
Sagicor Financial Corporation Montserrat
Sagicor Life Inc
C/o V. Yvette Fenton-Ryan
Ryan Investments
P. O. Box 280
Brades
Montserrat
Tel: (664) 491-3403
Fax: (664) 491-7307
St Maarten
C/o Charlisa NV,
Walter Nisbeth Road #99B
Phillipsburg
Tel: (721) 542-2070
Fax: (721) 542-3079
Email: capital@sintmaarten.net
St Kitts
Sagicor Life Inc
C/o The St Kitts Nevis Anguilla Trading and
Development Co. Ltd
Central Street, Basseterre
Tel: (869) 465-9476
Fax: (869) 465 6437
St Vincent
Incorporated Agencies Limited
Frenches
Kingstown
Tel: (784) 456-1159
Fax: (784) 456-2232
SAGICOR GENERAL INSURANCE INC.
P. O. Box 150
Beckwith Place, Lower Broad Street
Bridgetown, Barbados
Tel: (246) 431-2886
Fax: (246) 228-8266
Email: sgi-info@sagicorgeneral.com
Sagicor General Insurance Inc
Haggatt Hall
St Michael
Tel: (246) 431-2800
Fax: (246) 426-0752
Email: sgi-info@sagicorgeneral.com
St Lucia
Sagicor Life Inc
Sagicor Financial Centre
Choc Estate
Castries
St Lucia
Tel: (758) 452-0994
Fax: (758) 450-4870
Antigua
Sagicor Life Inc
Sagicor Financial Centre
#9 Sir Sydney Walling Highway
St John’s
Tel: (268) 480-5555
Fax: (268) 480-5550
Trinidad and Tobago
122 St Vincent Street
Port of Spain
Tel: (868) 623-4744
Fax: (868) 628-1639 or (868) 625-1927
Willcher Services Inc
44 Hillsborough Street
Corner Hillsborough & Independence Streets
Roseau
Dominica
Tel: (767) 440-2562
Fax: (767) 440-2563
JE Maxwell & Company Limited
Linmores Building
Castries
St Lucia
Tel: (758) 451-7829
Fax: (758) 451-7271
Email: jemax@candw.lc
GLOBE FINANCE INC
Shirley House
Hastings Main Road
Christ Church
Tel: (246) 426-4755
Fax: (246) 426-4772
Website: www.globefinanceinc.com
SAGICOR FUNDS INCORPORATED
Cecil F de Caires Building Wildey, St Michael
Barbados
Tel: (246) 467-7500
Fax: (246) 436-8829
Email: info@sagicor.com
Sagicor General Insurance Agencies
HHV Whitchurch & Company Limited Old Street
PO Box 771
Roseau
Dominica
Tel: (767) 448-2182
Fax: (767) 448-5787
SAGICOR ASSET MANAGEMENT INC
Cecil F de Caires Building
Wildey, St Michael Barbados
Tel: (246) 467-7500
Fax: (246) 426-1153
Email: info@sagicor.com
2014 Annual Report
207
Sagicor Financial Corporation SAGICOR FINANCE INC
Sagicor Financial Centre Choc Estate
Castries
St Lucia
Tel: (758) 452-4272
Fax: (758) 452-4279
SAGICOR ASSET MANAGEMENT (TRINIDAD AND
TOBAGO) LIMITED
Sagicor Financial Centre
16 Queen’s Park West, Port of Spain
Trinidad
Tel: (868) 628-1636/7/8
Fax: (868) 628-1639
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
BARBADOS FARMS LIMITED
Bulkeley
St George
Barbados
Tel: (246) 427-5299
Fax: (246) 437-8873
SAGICOR PANAMA SA
Ave Samuel Lewis y Calle Santa Rita
Edificio Plaza Obarrio
3er Piso Oficina 201
Panama City, Panama
Tel: (507) 223-1511
Fax: (507) 264-1949
Email: capital1@sinfo.net
CAPITAL LIFE INSURANCE COMPANY BAHAMAS
LIMITED
C/o Family Guardian Insurance Company Limited
East Bay & Shirley Street
PO Box SS-6232
Nassau, NP Bahamas
Tel: (242) 393-4000
Fax: (242) 393-1100
Email: info@familyguardian.com
SAGICOR LIFE ARUBA NV
Fergusonstraat #106
AHMO Plaza Building, Suites 1 and 2
Oranjestad, Aruba
Tel: (297) 582-3967
Fax: (297) 582-6004
Email: calico@setarnet.aw
LOJ HOLDINGS LIMITED
28-48 Barbados Avenue
Kingston 5, Jamaica
Tel: (876) 929-8920(-9)
Fax: (876) 960-1927
SAGICOR LIFE JAMAICA LIMITED
28-48 Barbados Avenue
Kingston 5, Jamaica
Tel: (876) 929-8920(-9)
Fax: (876) 960-1927
Website: www.sagicorjamaica.com
EMPLOYEE BENEFITS ADMINISTRATORS LIMITED
28-48 Barbados Avenue
Kingston 5, Jamaica
Tel: (876) 929-8920(-9) Fax: (876) 960-1927
Website: www.sagicorjamaica.com
SAGICOR LIFE OF THE CAYMAN ISLANDS LTD
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 INSURANCE MANAGERS LIMITED
1st Floor Harbour Place
103 South Church Street
George Town
Grand Cayman
Tel: (345)-949-7028
Fax: (345)-949-7457
SAGICOR PROPERTY MANAGEMENT SERVICES
LIMTED
78a Hagley Park Road
Kingston 10
Jamaica
Tel: (876) 929-9182
Fax: (876) 929-9187
SAGICOR RE INSURANCE LTD
Global House, 198 North Church Street
George Town, Grand Cayman
Cayman Islands
Tel: (345) 949-8211
Fax: (345) 949-8262
Email: global@candw.ky
HEALTH CORPORATION JAMAICA LTD
SAGICOR INSURANCE BROKERS LIMITED
28-48 Barbados Avenue
Kingston 5, Jamaica
Tel: (876) 929-8920(-9)
Fax: (876) 960-1927
Website: www.sagicorjamaica.com
208
2014 Annual Report
Sagicor Financial Corporation Associated Companies
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
RGM LTD
Albion Plaza Energy Centre
22-24 Victoria Avenue
Port of Spain
Trinidad
Tel: (868) 625-6505
Fax: (868) 624-7607
SAGICOR INVESTMENTS JAMAICA LIMITED
Sagicor Bank Building
60 Knutsford Boulevard
Kingston 5, Jamaica
Tel: (876) 929-5583
Fax: (876) 926-4385
Email: options@sagicor.com
Website: www.sagicorjamaica.com
SAGICOR BANK JAMAICA LIMITED
Sagicor Bank Building
60 Knutsford Boulevard
Kingston 5, Jamaica
Tel: (876) 929-5583
Fax: (876) 926-4385
Website: www.sagicorjamaica.com
SAGICOR USA, INC
4010 W. Boy Scout Blvd, Suite 800
Tampa, Florida 33607, USA
Tel: (813)-287-1602
Fax: (813)-287-7420
SAGICOR LIFE INSURANCE COMPANY
4010 W. Boy Scout Blvd, Suite 800
Tampa, Florida 33607, USA
Tel: (813) 287-1602
Fax: (813) 287-7420
4343 N. Scottsdale Road, Suite 300
Scottsdale, Arizona, 85251, USA
Tel: 1-800-531-5067
Fax: (480) 425-5150
Website: www.sagicorlifeusa.com
SAGICOR FINANCE LIMITED
Maples Corporate Services Limited
Ugland House
South Church Street
George Town, Grand Cayman
Cayman Islands
2014 Annual Report
209
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