Our Vision
Sagicor’s vision is
“To be a great
company committed
to improving the
lives of the people
in the communities
in which we
operate.”
Our Values
We strongly believe
in Sagicor’s values
of being a Timeless,
Borderless, and
Colourless entity.
Our Brand
To be loved by our
Team Members and
Clients,
and be admired by
our Competitors.
Table of Contents
4 Sagicor 180 Years
8 Financial Highlights
11 Chairman’s Review
13 Group President & Chief Executive Officer’s Message
16 Board of Directors
24 Executive Management
27 Group Organisational Chart
30 Corporate & Social Responsibility
Human Capital Report
Innovation & Technology
60 Management Discussion and
Analysis
140 Index to the Consolidated
Financial Statements
318 Shareholder Information
Sagicor Financial Company Ltd | 2019 Annual Report
1
SAGICOR
180
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Sagicor Financial Company Ltd | 2019 Annual Report
1
2
3
180 Years
In 1840, a group of forward thinking
Barbadians came together and
created Sagicor’s legacy company,
the Barbados Mutual, but little
did they know that they were
setting the solid foundation of an
indigenous company that would
transform the insurance landscape
of the Caribbean some 180 years
later. However, they knew that
they wanted to be relevant to
the needs of the people in their
community, and this proactive value
has remained at the very heart of
the company, prudently guiding
it through decades of growth and
development across the Caribbean.
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8
5
7
9
10
12
1. Sagicor’s newly built office in St John’s,
Antigua.
2. The first General Manager of the Barbados
Mutual Life Assurance Society, Mr J. V. C.
Bellamy.
3. Choc Estate office in Castries, St Lucia opens
for business.
4. The Mutual’s Head Office Management and
Team in Collymore Rock, Barbados, in 1989.
5. The Mutual’s Secretary, Major A.S. Warren,
outside the vault and archives.
6. Staff members of the Mutual during the 1950’s.
7. On March 8, 1988, the Kingsland Housing
Project was launched, marking a major joint
venture/development between the Mutual and
Ideal Homes in Barbados.
8. Constructed in 1895 the iconic Mutual Building,
Lower Broad Street, Bridgetown, Barbados
was later the home to Barclays Bank. Here
colourfully lit for the 1964 holiday season.
9. The office of De Caires Bros Ltd, Agents for
the Barbados Mutual in Guyana circa 1950.
10. Mr Howard Gill (1810-1877) purchased the
Mutual’s first policy for a sum assured of
$10,000 for a premium of $312.
11. The new Mutual Centre in 1989, headquarters
to the Trinidad and Tobago operations.
12. The ground breaking ceremony for a Mutual
development in Antigua.
13. The Mutual Board of Directors at the
Collymore Rock Board room in 1996.
14. Members of the Mutual Team gathered for this
group photo in 1975.
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13
14
14
1
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Sagicor Today
Well-positioned in the markets we
serve, Sagicor is a strong company,
operating in 20 countries, dedicated
and committed to more than 4500
team members, our clients and the
communities we serve. We continue
the journey we began 180 years ago,
touching lives and moving forward
in a spirit consistent with the values
we hold dear. As we advance,
creating even more significant
milestones, we do so with the
knowledge that our best moments
will always be the ones that have
made meaningful and relevant
differences in people’s lives.
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8
3
5
7
6
9
11
10
12
14
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15
16
1. Sagicor Brand and Culture Week 2019 was a
tremendous success, with many team members
seen sporting new “#IAMSAGICOR” tattoos.
2. The Barbados Headquarters in Wildey,
St Michael, Barbados.
3. June and July 2019 were busy months for
young tennis enthusiasts in Trinidad and Tobago
as Sagicor sponsored its 17th annual Junior
Lawn Tennis tournament for beginner and
intermediate players.
4. Sagicor’s Mobile Wellness Clinics offer
convenient access to quality medical care,
including blood pressure testing in Jamaica.
5. The R. Danny Williams building in Kingston,
Jamaica, is the headquarters for Sagicor’s
operations in that country.
6. Sagicor team members join together to show
affection towards the company during a special
Valentine’s Day engagement activity.
7. The Sagicor Foundation’s scholarship
programme provided financial support to
several secondary and tertiary students.
8. Barbados Community College, Origin Active
Lifestyles and the Barbados Government sign
a Memorandum of Understanding to develop
a new curriculum focusing on the care of the
elderly to be taught in the College’s Division of
Health Sciences.
9. Team members in the USA man the telephones
during a fundraising drive for the Phoenix
Children’s Hospital in Arizona.
10. Team Sagicor shares the love On Valentine’s
Day at the Sky Mall Shopping Plaza, Barbados.
11. The headquarters of Sagicor USA is located in
Tampa Florida, at 4010 W. Boy Scout Boulevard.
12. Sagicor Team members join with supporters of
all ages during the warmup session preceding
the 2019 Gynathon Run/Walk which raised both
funds and awareness of below-the-belt cancers.
13. Sagicor’s nurse conducts a biometric
assessment with a runner at the Barbados
Defence Force’s “Have a Heart” charity run.
14. A Team member volunteers for the Adopt-A-
School programme in Jamaica and helps to
positively shape young lives.
15. Sagicor ‘painted towns pink’ across the
Southern Caribbean, also using speed bumps
and signage to remind the public of the
importance of getting their breasts checked.
16. Sagicor appreciates its customers! One happy
client shows off her goodie bag during a
customer appreciation event.
FINANCIAL HIGHLIGHTS
Amounts in US $ millions unless otherwise stated
NET INCOME 1
56
2015
60
2016
62
2017
37
2018
872
2019
SHAREHOLDER RETURNS
COMMON DIVIDENDS
12
2015
14
2016
15
2017
15
2018
15
2019
BOOK VALUE PER SHARE 3 (Amounts in US ¢)
723
2015
766
2016
883
2017
850
2018
781
2019
1 from continuing operations
2 before Alignvest Acquisition II Corporation transaction costs
3 under the Alignvest transaction, Sagicor Financial Corporation Limited common shares not purchased for cash, were exchanged for common shares of Sagicor Financial Company Ltd on an exchange ratio of one
Sagicor Financial Company Ltd. common share for 4.328 of Sagicor Financial Corporation Limited common shares (“Exchange Ratio”). This exchange ratio has been used to convert the 2018 and prior years
outstanding shares to the Sagicor Financial Company Ltd equivalent.
Basic earnings per share 3
Return on shareholder’s equity 1, 2
2015
78.8¢
11.7%
2016
84.4¢
12.3%
2017
88.7¢
11.3%
2018
51.7¢
6.2%
2019 2
57.5¢
10.5%
6,400
2015
6,532
2016
ASSETS 1
6,805
2017
7,308 8,729
2019
2018
1 from continuing operations
8
Sagicor Financial Company Ltd | 2019 Annual Report
GROUP FINANCIAL POSITION
OPERATING LIABILITIES
5,341
5,464
2017
2016
5,700 6,461
2019
2018
5,139
2015
EQUITY & DEBT CAPITAL (TOTAL CAPITAL)
1,215
2015
1,190
2016
1,352
2017
1,622 2,266
2019
2018
Debt to Capital
MCCSR
2015
2016
39.2% 33.2%
249%
301%
2017
30.5%
258%
2018
2019
30.2% 22.8%
253%
234%
FINANCIAL HIGHLIGHTS
Amounts in US $ millions unless otherwise stated
NET INCOME 1
98
2015
108
2016
106
2017
96
2018
147
2019
GROUP RESULTS 1
REVENUE
1,105
2015
1,134
2016
1,219
2017
1,386 1,867
2019
2018
553
2015
560
2016
BENEFITS
659
2017
765
2018
1,117
2019
1 from continuing operations (before Alignvest Acquisition II Corporation transaction costs)
SAGICOR LIFE INC - NET INCOME 1
59
64
2019
2017
65
2016
47
2018
71
2015
SEGMENT RESULTS
SAGICOR GROUP JAMAICA - NET INCOME 1
95
2017
90
2016
124
2019
111
2018
79
2015
SAGICOR USA - NET INCOME 1
7
2015
10
2016
13
2017
18
2018
35
2019
2015
471
1,904
2016
411
1,928
2017
421
1,953
2018
340
2,008
2019
533
2,116
Revenue
Assets
2015
511
2,513
2016
524
2,674
2017
590
2,836
2018
586
3,104
2019
735
3,482
Revenue
Assets
2015
78
1,783
2016
149
1,901
2017
159
1,982
2018
421
2,293
2019
562
2,842
Revenue
Assets
1 from continuing operations
Sagicor Financial Company Ltd | 2019 Annual Report
9
Timothy Hodgson
Sagicor Group Chairman
SAGICOR GROUP CHAIRMAN’S REVIEW
Dear Shareholders
As we review the events of 2019, we do so with the confidence and knowledge that
a carefully crafted strategic initiative came to fruition. This initiative, the Sagicor
Alignvest Transaction (the “Transaction”), was completed in December 2019, marking
one of our most significant milestones in the illustrious history of our company.
Sagicor has now entered a new era as an indigenously led, pan-Caribbean public
company listed on the Toronto Stock Exchange.
The Transaction was quite an accomplishment and I take this opportunity to thank
past and present Shareholders, who showed their confidence in our company,
either by taking an initial equity stake or by maintaining their ownership position.
We are fully aware and recognize the depth of discussions that surrounded the
transaction with Alignvest, and I assure you that the Board was actively consulted by
management throughout and we provided counsel and advice.
Today, we have meaningfully strengthened our balance sheet as a result of the
Transaction, and this enables the vision that the Board and Management hold for
Sagicor. Becoming a publicly listed company in Canada has provided the opportunity
for the Board and Management to review exhaustively the company’s corporate
governance practices, re-evaluate our policies and procedures and reflect best
practices adopted by publicly listed Canadian companies.
As we look to the future of Sagicor, I want to thank all past and current Board
members for their insight and guidance. I want to especially thank my predecessor,
Mr. Stephen McNamara, for his long-time commitment, absolute grace and
unwavering leadership over nine years as Chair and four as Vice Chair. Mr. McNamara
had initially served as a director of the Barbados Mutual in 1997 and has been an
integral part of the growth and transformation of the once single line Barbados
based life insurance company to its current international financial services Group.
Mr. McNamara guided Sagicor through the financial crisis and its impact on the
Caribbean economies with Sagicor maintaining its sound financial position and
operating capacity throughout these global events. Stephen is a true Caribbean
leader with a deep knowledge of the region so I am pleased that Stephen has
accepted the appointment as Vice-Chair of the new Board.
I also want to recognize former board members Mr. Andrew Aleong, Ms. Jeannine
Comma, Ms. Marjorie Fyffe-Campbell, Mr. Richard Kellman, Mr. Lucie-Smith, and Mr.
Richard P. Young who retired on December 6, 2019, and Mr. Monish Dutt and
Mr. Rik Parkhill, who will retire on June 15, 2020 for their very capable service
and invaluable contributions to the former Board. I expect Sagicor to benefit
tremendously from the composition of the new board being a mix of continuing
directors with depth of historical insight and new directors that help expand our
capital and skillset. Underlying our active dialogue will be an assurance that the
Caribbean focus of Sagicor is well-maintained and supported.
As we continue our journey, I am honoured to serve as Chair of one of the oldest
and most successful insurers in the Americas. Much can be respectfully said about
Sagicor’s 180-year history. The critical importance of Sagicor’s role throughout
the Caribbean region as a leading indigenous player has at its core, a vision that
promises to improve the lives of people in the communities where we operate.
This vision will continue to guide us in the coming years, as we remain steadfast in
our commitment to creating value for all stakeholders. We recognize that Sagicor
is and will continue to be a systemically important financial institution throughout
the Caribbean.
On behalf of the Board of Directors, I want to thank all our employee team
members for embracing this transformation, for their dedication and their
ongoing commitment. We know how tirelessly you worked, and we thank
you for that. Our team’s continued commitment to their communities and
their representation of Sagicor in the face of natural disasters and the current
COVID-19 pandemic is highly commended. To all our customers, employees,
shareholders and communities, we know that these are uncertain times. Our
top priority is the health and safety of all Sagicor’s stakeholders and we pledge
that we will be there for them. Moving forward, the Board is fully committed to
providing counsel and support to our outstanding management team that is
guiding Sagicor on its new and exciting path. On behalf of the Board of Directors,
I thank you for your trust, confidence and ongoing support in Sagicor.
Yours truly
Timothy Hodgson
Chair of the Board of Directors
Sagicor Financial Company Ltd | 2019 Annual Report
11
Dodridge Miller
Sagicor Group President &
Chief Executive Officer
SAGICOR GROUP PRESIDENT & CHIEF EXECUTIVE OFFICER’S
MESSAGE
Dear Shareholders:
Our strategy
2019 was another successful year for the Sagicor Group. Each of our key business
segments performed ahead of our plans. We delivered very strong aggregate results
to our shareholders. And we solidified our position for the future by completing
our strategic transaction with Alignvest Acquisition II Corporation, delivering
US $450 million in additional equity capital, adding to our board and shareholder
base, and transitioning our listing to the Toronto Stock Exchange. These events have
Sagicor in a position of strength to weather adversity and poised to continue its
growth when the current challenging economic environment subsides.
2019 year in review
2019 was a banner year. Total revenues grew 35% to US $1.9 billion. Growth was
generated across each of our major segments, including robust premium growth from
US annuities business under Sagicor Life USA, gains in life insurance premiums in
Sagicor Life Inc (Southern Caribbean), and growth across the our diversified business
in Sagicor Jamaica, including increasing contributions from our banking operations
there.
Net Income for the year to shareholders from continuing operations (excluding
one-time costs related to the Alignvest transaction), amounted to US $87 million.
This exceeding the target we had set out to our investors by US $10 million. As
with our revenues, this was driven by solid growth across all core businesses. It was
particularly heartening to see each of our major operating segments experience
profitable growth concurrently.
Our balance sheet is strong, with total equity growing by over US $600 million
to US $1.7 billion and shareholders’ equity growing by over US $550 million to
US $1.2 billion. This reflects both our new capital raised and significant retained
earnings from the year. As a consequence, our total debt to capital ratio improved
7.4 points to 22.8%. And we ended the year with MCCSR of 253%, a robust figure and
well above all regulatory and internal standards. With significant free capital we are
well prepared for opportunities and challenges to come.
Our long-standing vision - “to be a great company, committed to improving the lives
of people in the communities in which we operate” - is what informs each of our
strategic goals.
To be a full-service provider of financial services in the regions where we have a
leading market position
We continue to believe that the Caribbean is an under-pensioned and under-
insured region. Its demographic is younger than other areas in the world and
there are opportunities to cross-sell products. We continued to expand our
product offering in core markets to serve evolving needs of customers, leveraging
strengths across different regions and expanding wealth management services. In
the US, we are focused on providing life and annuity products to middle market
America through independent producers and direct-to-consumer platforms.
To be a leader in innovative solutions and services to meet customer needs
From a technology perspective, one such innovation is “Sagicor Go”, launched
across the Sagicor Group enabling customers to access their policy information
as well as general information on insurance from smartphones and tablets. In
the US, the electronic application, Accelewriting, is a state-of-the-art automated
underwriting process, providing real-time underwriting decisions within minutes to
customers. “SagicorNow” is also another innovative, game-changing initiative that
allows customers to secure life insurance in less than 20 minutes. Because of such
initiatives like these and others, our independent customer service survey on areas
Sagicor Financial Company Ltd | 2019 Annual Report
13
such as customer expectation, perceived quality, brand and transactions continues
to rank Sagicor above global industry average across key business segments.
To positively influence as many lives as possible in the markets where we serve
results. I extend my sincere thanks to them as their dedication to service is reflected
in group satisfaction survey scores which remain fairly consistent across business
segments. Our success would not be possible without the commitment and
dedication of our 4500-plus team members.
We aim to execute our approach to sustainability and corporate citizenship
grounded in transparency, ethical standards and a steady focused approach.
During 2019, Sagicor made significant contributions towards corporate social
responsibility efforts centered around health, education, community, youth
development and sport.
Sagicor has long followed a carefully crafted business strategy, which has seen us
transform from a single line insurance company, into a full financial services group
with a solid Caribbean base, and a growing presence in the US financial services
market. Today, we operate in 20 countries, including the Caribbean, the USA and
Latin America, with total assets of US $8.7 billion, and US $1.2 billion in shareholders’
equity. We continue to seek out organic and inorganic opportunities to maintain our
dominance in the Caribbean while growing our market share in the US insurance
market.
On December 17th, 2019, Dr. Patricia Downes-Grant retired from her role as President
& Chief Executive Officer of Sagicor Life Inc. having held this position since 2006.
Dr. Downes Grant’s career with Sagicor spanned an incredible 27 years, having
held several senior roles across the company. She has played a major role in many
of the most transformational and strategic projects that significantly changed the
business profile of the former Barbados Mutual Life Assurance Society. Through
these initiatives, we saw the organization grow into a great Caribbean and then into
an international company. We wish her well in her retirement. I am also pleased to
congratulate Mr. Ravi Rambarran on his appointment as Pat’s successor to lead the
Sagicor Life Inc. entity as its new President and Chief Executive Officer. Ravi, an
actuary by training, has been with Sagicor for 23 years and has held many senior roles
before this appointment. We wish Ravi well in his new role.
I would also like to give special recognition to Mr Ed Clarke who announced his
intention to retire effective June 30, this year, after over 13 years with Sagicor. Ed has
served as our Chief Operating Officer, Sagicor Life Inc. and General Manager in
Barbados since 2010. Ed was instrumental in successfully navigating discussions on
debt restructuring and the economic recovery in his role as Co-Chair of the Barbados
Economic Recovery and Transformation Programme. We expect Ed to continue to
contribute to Sagicor, managing special projects including local government relations.
Ed is succeeded by Mr Paul Inniss, an executive with extensive experience with other
well-recognized insurance and banking companies in the Caribbean. He holds a
fellowship in Risk Management with the Insurance Institute of Canada and an MBA
from Heriot Watt University, UK. We welcome Paul to our executive team and look
forward to working together.
Sharing in a commitment to group goals and strategies, the Sagicor team continues
to effectively redefine the company’s offerings and deliver consistently stronger
Our future
As I write this, countries across the globe are grappling with the ravages of the novel
Coronavirus (COVID-19). This pandemic is not only a significant health challenge, but
also major social and economic challenge. Globally, health care systems are being
stretched to their limits and global GDP is expected to decline significantly. Our
industry continues to adjust to the negative impact of declining interest rates across
all markets, as policy makers attempt to stabilize global economies and counteract
increasing signs of weakening economic growth. However, hard as it may seem, it
is important to remember that we have successfully navigated other public health,
climate catastrophes and financial crises before and we will again come through this
one. We must come together as a global society and stay coordinated in our efforts
to confront this challenge.
At a time when COVID-19 was already spreading globally and only just coming to the
Caribbean, we very early undertook a comprehensive response plan guided by the
objectives of safety of our people and business continuity for our customers. With
the benefit of global insight, Sagicor not only provided much need financial support,
but also contributed to local discussions on country responses. COVID-19 is already
shaping how business is conducted on a global scale. “Lock-downs, and Stay-at-
home” orders are forcing all of us to rethink how we engage with our customers,
our staff and our wider stakeholders. Ideas and business responses previously
considered far fetched or challenging are now becoming common place. New
products and services are being imagined, and old services becoming obsolete. This
is an opportunity that cannot be ignored and we at Sagicor are busy readying our
company to quickly and efficiently operate in a post COVID-19 environment.
In closing, I would like to personally thank each one of our past Directors, whose
insight and guidance have contributed to the growth and success of our company
over many years. I also extend a warm welcome to our new Board of Directors and
look forward to working with them as we move our company “from 180 years and
beyond”. I would especially also like to thank our team members for their outstanding
contribution during another successful year. Lastly, I thank our customers and
shareholders, for your confidence and support during financial year 2019. I am truly
excited about what lies ahead.
Yours sincerely
Dodridge D Miller
Sagicor Group President and Chief Executive Officer
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Sagicor Financial Company Ltd | 2019 Annual Report
BOARD OF DIRECTORS
Timothy Hodgson
Dr Dodridge Miller
Prof Sir Hilary Beckles Dr Archibald Campbell
Peter Clarke
Keith Duncan
Monish Dutt
16
Sagicor Financial Company Ltd | 2019 Annual Report
Stephen Facey
Mahmood Khimji
Dr Stephen Mcnamara
Rik Parkhill
Reza Satchu
John
Shettle Jr
Aviva
Shneider
Sagicor Financial Company Ltd | 2019 Annual Report
17
TIMOTHY HODGSON, B.Com, MBA
Chairman of Sagicor Financial Company Ltd. | Board of Directors
PROFESSOR SIR HILARY MCD BECKLES, KA, BA, PhD
Director | Board of Directors
Timothy Hodgson is Chairman of the Board at Sagicor Financial Company Ltd. He was
previously a Managing Partner with Alignvest Management Corporation, having served
at the firm from 2012 to August 2019. Mr Hodgson was the special advisor to Mr Mark
Carney, Governor of the Bank of Canada, from 2010 to 2012. From 1990 to 2010, he
held various positions with Goldman Sachs in New York, London, Silicon Valley and
Toronto, serving as Chief Executive Office of Goldman Sachs Canada from 2005-2010,
with overall responsibility for operations, client relationships and regulatory matters in
the region.
He currently chairs the Investment Committee on the board of the Public Sector
Pension Investment Board (PSP Investments) and is Chair of the Board of Hydro One
Limited. Mr Hodgson’s prior directorships include MEG Energy, the Global Risk Institute,
KGS-Alpha Capital Markets, Next Canada, the Richard Ivey School of Business and
Bridgepoint Health.
He holds the Master of Business Administration from the Richard Ivey School of
Business at Western University, and the Bachelor of Commerce degree from the
University of Manitoba. He is a Fellow of the Institute of Chartered Professional
Accountants and has earned the ICD.D designation from the Institute of
Corporate Directors.
DR DODRIDGE D MILLER, FCCA, MBA, LL.M, LL.D (Hons)
Group President and Chief Executive Officer of Sagicor Financial Company Ltd. | Board
of Directors
Dr Dodridge Miller has been Group President and Chief Executive Officer of Sagicor
since July 2002, and has been a director since December 2002. He previously held
the positions of Treasurer and Vice President – Finance and Investments, Deputy Chief
Executive Officer and Chief Operating Officer. Mr Miller is a director of Sagicor Life,
Sagicor USA, Sagicor Jamaica, Sagicor Life Jamaica, Sagicor Investments Jamaica
and a number of other subsidiaries within Sagicor. Mr Miller joined Sagicor in 1989,
and has more than 30 years’ experience in the banking, insurance and financial
services industries.
A citizen of Barbados and the United States of America, Mr Miller is a Fellow of the
Association of Chartered Accountants (FCCA), and obtained the Master of Business
Administration from the University of Wales and the Manchester Business School. He
holds an LL.M in Corporate and Commercial Law from the University of the West Indies,
and in 2008 was conferred with an honorary Doctor of Laws degree by that institution.
Sir Hilary was elected an Independent Director of Sagicor Life Inc. in 2005. He is the
Vice-Chancellor of The University of the West Indies, and has previously served as Head
of the History Department as well as Dean of the Faculty of Humanities. In 1998 he was
appointed Pro-Vice Chancellor for Undergraduate Studies, and in 2002, Principal of
Cave Hill Campus.
He is currently Chairman of the Caribbean Examinations Council. He is also a founding
member of the Science Advisory Board and Sustainable Development Secretary
established by the Secretary-General of the United Nations, and serves on the
United Nations Development Programme’s Advisory Panel on the Caribbean Human
Development Report, is Vice President of UNESCO’s Slave Route Project and is Vice
President of the Commonwealth Ministers’ Advisory Board on Sport and Development.
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 and is an Editor of the iconic UNESCO General History of Africa Series, volume
9. He has lectured in Africa, Asia, Europe and the Americas.
Sir Hilary earned his PhD from Hull University, United Kingdom, from which he received
an Honorary Doctorate of Letters in 2003. He also received honorary Doctorates of
Letters from the University of Glasgow, Brock University in Canada, Kwame Nkrumah
Science and Technology university in Ghana, and the University of the Virgin Islands. In
2007, he received a knighthood, Commander Knight of St. Andrew (KA), the highest
national honour recognised in Barbados, “in recognition of his distinguished service in
the fields of Education, Sports and the Arts”.
DR ARCHIBALD CAMPBELL, FCCA, BSc, MSc, DBA
Director | Board of Directors
Dr Archibald Campbell is a director of Sagicor Financial Company Ltd. He is currently
Chairman of JMMB Group Limited Board of Directors. A Chartered Accountant by
profession, he served JMMB as its Deputy Chairman from 2004-2016 prior to being
appointed Group Chairman in 2017. Part of the JMMB Group since its inception, he also
chairs and sits on the boards of several of the Group’s subsidiaries. He is Chairman of
the JMMBTT Board, and also a director of JMMBTT Merchant Bank Limited and the
Bank’s Credit Committee. In addition, he is a past president of the Institute of Chartered
Accountants of Jamaica and has served as an accounting expert in arbitration as well
as a director of several companies. He is a former Bursar of the UWI, which required
development of relations with 17 Caribbean governments regarding annual funding.
Dr Campbell has earned the Doctor of Business Administration degree from the
University of the West Indies. He also holds Master’s and Bachelor’s degrees from the
same Institution.
18
Sagicor Financial Company Ltd | 2019 Annual Report
PETER CLARKE, BA (History), BA (Law)
Director | Board of Directors
MONISH K. DUTT, BA, MBA, CFA
Director | Board of Directors
Mr Peter Clarke serves as a director of Sagicor Financial Company Ltd, Sagicor Life Inc.,
Sagicor Group Jamaica Limited and Sagicor Life Jamaica Limited.
Mr Clarke is a Financial Consultant who practiced as a Barrister-at-Law before
embarking on a 22-year career in stockbroking. From 1984-2000, he was the Managing
Director of Money Managers Limited, and served as the Chief Executive of West Indies
Stockbrokers Limited from 2001 to 2005, when he retired. From 2002 to 2005 he was
also a director of the Trinidad and Tobago Chamber of Industry and Commerce. From
1995 to 1999 he was Chairman of the Trinidad and Tobago Stock Exchange, and he is
currently a director of that organisation. From 1992 to 1995 Mr Clarke served as Deputy
Chairman of the Trinidad and Tobago Free Zones Company, and he is currently the
Chairman of Guardian Media Limited in Trinidad and Tobago, and a director of a number
of companies including the Trinidad and Tobago IFC Management Company Limited.
He is a member of the Finance Council of the Roman Catholic Archdiocese of Port of
Spain, and sits on the board of some 14 other companies.
He obtained the Bachelor of Arts degree from Yale University, and a law degree from
Downing College, Cambridge University. Mr Clarke was called to the Bar as a member
of Gray’s Inn in London in 1979, and to the Bar of Trinidad and Tobago in 1980.
Monish Dutt has been an Independent Director of Sagicor Financial Company Ltd. Since
2012 and is a citizen of the United States of America. He is also a director of Sagicor
Bank. Currently a consultant on Emerging Markets, he serves on several Boards in these
markets as well as on the Board of FINCA Microfinance Holdings.
Mr Dutt is a seasoned investment professional who was employed with the IFC,
a member of the World Bank Group, for 25 years. He held various positions with
the IFC over the years, rising to the position of Chief Credit Officer for Global
Financial Institutions and Private Equity Funds at the time of his leaving in 2011. He
had also served as the Head of IFC’s Private Equity Advisory Group, Head of the
Baltics, Central Europe, Turkey and Balkans Group, and as an Investment Officer for
Africa, Latin America and Asia. Mr Dutt has also represented IFC on the boards of
investee companies.
He holds the Master of Business Administration with a concentration in Finance from
the London Business school, London University, as well as the Bachelor’s degree in
Economics from St. Stephen’s College, University of Delhi. He is also a Chartered
Accountant, accredited as a Fellow by the Institute of Chartered Accountants,
London, England.
KEITH DUNCAN, BA, CFA
Director | Board of Directors
STEPHEN B. FACEY, BA, M. Arch
Director | Board of Directors
Keith Duncan is a director of Sagicor Financial Company Ltd. Since 2005 he has
been the Chief Executive Officer of JMMB Group, with responsibility for the overall
performance and charting the strategic direction of the Group. Under his leadership,
the JMMB Group was conferred with the American Foundation for the University of the
West Indies (AFUWI) Award for Excellence in Business Leadership in February 2020,
and the prestigious ‘Best of Chamber Award’ from the Jamaica Chamber of Commerce
In March 2011. His financial expertise has not only benefited the JMMB Group, but also
the regional financial sector. From 2012 to 2014 he served as Vice President of the
Private Sector Organisation of Jamaica and is currently President of that organisation.
He is also a past president of the Jamaica Securities Dealers’ Association and currently
chairs the Government of Jamaica’s Economic Programme Oversight Committee.
Mr Duncan obtained the Bachelor of Arts degree in Economics from the University of
Western Ontario in Canada, and holds the Chartered Financial Analyst accreditation.
Stephen Facey is a Director of Sagicor Financial Company Ltd, and Sagicor Group
Jamaica Limited. He is the Chairman and Chief Executive Officer of PanJam Investment
Ltd., and Chairman of a number of other organizations; including Jamaica Property
Company Ltd, New Castle Group of Companies, Caribbean Policy Research Institute
(CAPRI), Kingston Restoration Company Ltd, and the New Kingston Civic Association.
Mr Facey serves as Chairman of the C B Facey Foundation, the charitable arm
of PanJam.
Mr Facey is a Director of Chukka Caribbean Adventures and the National Gallery
of Jamaica.
An architect by training, he has over 40 years of experience in architecture, real estate
development and management, and private equity investing.
Mr Facey holds a Bachelor’s degree in architecture from Rice University, and a Master’s
degree in Architecture from the University of Pennsylvania.
Sagicor Financial Company Ltd | 2019 Annual Report
19
MAHMOOD KHIMJI, BA, J.D.
Director | Board of Directors
RIK PARKHILL, BA (Hons)
Director | Board of Directors
Mahmood Khimji is a director of Sagicor Financial Company Ltd. He is a founding
Principal of Highgate, a fully integrated real estate investment, management and
development company.
Mr Khimji currently serves on the Board of Visitors for Columbia Law School, as well
as the Board of Asia Society. He is a member of the Young President’s Organization,
a global leadership community of Chief Executives, and serves on the National
Committee for the Aga Khan Foundation USA.
He attended the University of British Columbia and graduated from the University of
Houston, summa cum laude with a Bachelor of Arts degree. He earned a Juris Doctor
degree from Columbia Law School and subsequently practiced law at the Manhattan
firm of Paul, Weiss, Rifkin, Wharton & Garrison.
DR STEPHEN D R MCNAMARA, Barrister-at-Law, CBE, LL.D (Hon)
Director | Board of Directors
Dr Stephen McNamara is Vice Chairman of the Board of Sagicor Financial Company
Ltd and is a Director of Sagicor Group Jamaica Ltd., and a number of other subsidiaries
within the Group. He is the Chairman of the Group’s main operating subsidiaries,
Sagicor Life Inc, Sagicor USA and Sagicor Finance Inc. Dr McNamara is the former
Chairman and Vice Chairman of Sagicor Financial Corporation Limited, positions he
respectively held between January 2010 and December 2019, and June 2007 and
January 2010.
The senior partner of McNamara & Company, Attorneys-at-Law of St. Lucia, Dr.
McNamara was called to the Bar at Lincoln’s Inn and in St. Lucia in 1972. He specializes
in the representation of foreign investors in St. Lucia in the tourism, manufacturing and
banking sectors and served as Chairman of the St. Lucia Tourist Board for nine years.
His St. Lucia-based service also includes the Board of St. Lucia Electricity Services Ltd.
where he served as Chairman from 2015 until his retirement at the end of 2017, and as
President of the St. Lucia Tennis Association.
In the 2015 Queen’s Birthday Honours, Dr. McNamara was made a Commander of the
Order of the British Empire for public service and services to the legal profession.
Also in 2015 he was awarded an honorary doctorate from the University of the West
Indies for his outstanding achievements and contribution to the region in the areas of
business, sport and general philanthropy for more than 40 years.
Rik Parkhill is a Director of Sagicor Financial Company Ltd and Sagicor Bank Jamaica.
He also serves as a Director of several private companies in Canada and the United
States. Mr Parkhill is currently a Managing Director and leader of the strategic advisory
practice at Clariti Strategic Advisors, a strategic and investment banking advisory
firm. He has over 30 years of experience in the financial services industry, including
managing banks, brokerage firms and exchanges.
Mr Parkhill was the CEO of CIBC FirstCaribbean International Bank from 2011 to 2015.
He was Managing Director, Head of Cash Equities and Capital Markets Sales at CIBC
World Markets from 2008 to 2011. From 2001 to 2008, he held a number of positions
at the TMX Group, the owner of the Toronto Stock Exchange and other businesses,
including interim Co-Chief Executive Officer and President, TMX Markets. Prior to
2001, he worked at several investment firms over a span of seventeen years, including
Research Capital, BZW Canada, Deacon Morgan McEwen Easson, and Jones Heward,
holding such diverse positions as Head of Capital Markets, Head of Institutional Equities
and Head of Research. Mr Parkhill holds a Bachelor of Arts (Honours) degree from
Queen’s University.
REZA SATCHU, BA, MBA
Director | Board of Directors
Reza Satchu is a director of Sagicor Financial Company Ltd. He is Managing Partner
and co-founder of Alignvest Management Corporation, a leading private investment
firm. Previously, Mr. Satchu was the President, Chief Executive Officer and a director of
Alignvest Acquisition II Corporation, where he participated in sourcing, evaluating and
executing the qualifying acquisition. He has co-founded, built and/or managed several
operating businesses from inception, including Alignvest Management Corporation;
SupplierMarket, a leading supply chain software company that was sold to Ariba Inc.;
StorageNow, which became one of Canada’s largest self-storage companies prior to
being sold to Instorage REIT ; and KGS-Alpha Capital Markets L.P., a leading middle
market U.S. fixed income broker dealer, that was sold to BMO Financial Group.
Previously, Mr. Satchu was a General Partner at Fenway Partners, a US$1.4 billion private
equity firm focused on acquiring leading middle market companies, and was also a
Financial Analyst at Merrill Lynch in the High Yield Finance and Restructuring Group. He
is the Founding Chairman of Next Canada, an intensive entrepreneurship programme
for Canada’s most promising young entrepreneurs. Currently on the Board of Directors
of Trilogy International Partners Inc., Mr. Satchu previously served on the Boards of
the Toronto Hospital for Sick Children Foundation where he was Vice Chairman of the
Board 1, and of KGS-Alpha Capital Markets. He has received Canada’s “Top 40 Under
40” Award and the 2011 Management Achievement Award from McGill University.
Mr. Satchu will be joining the faculty of Harvard Business School as a Senior Lecturer
in September 2020. Mr. Satchu has a Bachelor’s degree in economics from McGill
University, and a Master’s in Business Administration from Harvard University.
20
Sagicor Financial Company Ltd | 2019 Annual Report
AVIVA SHNEIDER, BMath, MBA
Director | Board of Directors
Aviva Shneider is a director of Sagicor Financial Company Ltd. She is a Principal and
Operating Partner with CVC Capital. Prior to joining CVC, she founded Bayes Ventures,
a consulting firm. From 2015 to 2018, Ms. Shneider was a part of the private equity team
at Caisse de Depot et Placement du Quebec (CDPQ), initially as an Operating Partner
and subsequently as Co-Head of Direct Private Equity investments in the United States
and Latin America. Prior to this, she spent ten years with Silver Point Capital, a multi-
strategy hedge fund based in Greenwich Connecticut, and has also worked at McKinsey
and Company. She has previously served on the boards of AlixPartners, Alliant National
Title Insurance Co, 2-10 Home Buyers Warranty, LifeCare Hospitals and Cyrus Re
among others.
Ms. Shneider is a trained actuary (ACAS, ASA), with a Bachelor’s degree in Math from
the University of Waterloo, and a Master in Business Administration degree from the
Wharton School at the University of Pennsylvania.
JOHN F. SHETTLE, JR, BA, MBA
Director | Board of Directors
John Shettle, Jr. has been an independent director of Sagicor since June 2008, and
is a citizen of the United States of America. He is also a director of Sagicor USA and
a number of subsidiaries within the Group. He is an Operating Partner of Stone Point
Capital, a private equity firm in the global financial services industry. Mr Shettle has
served as Senior Advisor to the private equity firm Lightyear Capital, President and
Chief Executive Officer of the Victor O Schinnerer Company, and 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.
With over 35 years’ experience in the property/casualty, health and insurance-related
services industry, he has held senior management positions at Securitas Capital, Swiss
Reinsurance Company and the Frederick, Maryland-based AVEMCO Corporation
(NYSE). Mr Shettle received the Bachelor of Arts degree from Washington & Lee
University, and an Executive Master in Business Administration from the Sellinger
School of Business at Loyola College, Maryland.
Sagicor Financial Company Ltd | 2019 Annual Report
21
EXECUTIVE
MANAGEMENT
22
Sagicor Financial Company Ltd | 2019 Annual Report
Sagicor Financial Company Ltd | 2019 Annual Report
23
EXECUTIVE MANAGEMENT
DR DODRIDGE D MILLER, FCCA, MBA, LL.M, LL.D (Hon)
Group President and Chief Executive Officer
DONALD S AUSTIN, FCCA, BSc, MBA
Chief Executive Officer, Sagicor Life (Eastern Caribbean) lnc
• Appointed Group President and Chief Executive Officer in 2002, and
has been a Director since December 2002.
• Fellow of the Association of Chartered Certified Accountants (FCCA),
and obtained his MBA from the University of Wales and Manchester
Business School.
• Holds an LL.M in Corporate and Commercial Law from the University of
the West Indies and, he was conferred with an Honorary Doctor of Laws
degree by the University of the West Indies, in October 2008.
• 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 Executive Vice President
– Finance and Investments, Deputy Chief Executive Officer and Chief
Operating Officer.
• 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 other subsidiaries within
the Group.
ANDRE MOUSSEAU, BSc, MBA
Group Chief Financial Officer
• Appointed Group Chief Financial Officer on February 1, 2019, with
oversight of and primary responsibility for the planning, implementation
and management of the Group’s financial activities.
• Serves as a Director of Edgewood Health Network. His prior
directorships also spans the boards of Aurigen Reinsurance, a Bermuda-
based life reinsurance provider, Impark Corp., one of North America’s
largest parking management providers, and Premier Lotteries. He was
also an alternate board member of Camelot Group PLC, the operator of
UK National Lottery.
• Holds an undergraduate degree in Economics from McGill University,
and an MBA from the Richard Ivey School of Business, University of
Western Ontario.
• Has 18 years of experience in the financial services industry.
• Formerly a Partner with Alignvest Private Capital, Portfolio Manager
for the Long-Term Equities Group at the Ontario Teachers’ Pension
Plan (OTPP), and Principal at EdgeStone Capital Partners, a leading
independent private equity manager in Canada..
• Appointed Chief Executive Officer, Sagicor Life (Eastern Caribbean)
Inc. in 2015.
• Board Member of Sagicor Funds Inc and Sagicor Asset
Management Inc.
• Former Chairman of the Board of Directors of LIME Grenada and LIME
Dominica, and former Board Member of LIME Barbados.
• Holds a Bachelor of Science degree (Hons) in Electronic Engineering
from the University of Bristol, a Master of Business Administration from
Manchester Business School and he is a Fellow of the Association of
Chartered Certified Accountants.
RONALD B BLITSTEIN, BA, MBA
Group Chief Information Officer
• Joined Sagicor Financial Corporation in 2013.
• Holds both a BA in Political Science, and an MBA in Finance from
Syracuse University.
• IT professional, with knowledge in all areas of information technology
and its application to driving improved business outcomes.
• Previously served as Director, Business Technology and Strategies
Practice for a global advisory firm, supporting Fortune 500 clients,
national governments and United Nations agencies.
• Held key executive leadership positions at Revlon, Pitney Bowes, BOC
Group, and Xerox Corporation.
• Served as a Six Sigma Champion for firms pursuing enterprise
operational excellence.
BART F CATMULL, BSc, CPA
President and Chief Operating Officer, Sagicor USA Inc
• Appointed President and Chief Operating Officer of Sagicor USA
in 2013.
• Certified Public Accountant (CPA), and obtained his BSc in Accounting
from Brigham Young University.
• 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 in the Company.
• Joined the Group in 2005, with the predecessor Company since 1999.
24
Sagicor Financial Company Ltd | 2019 Annual Report
ANTHONY O CHANDLER, CPA, CGA, MBA
Group Chief Financial Controller
DR M PATRICIA DOWNES-GRANT, CBE, MA, MBA, DBA, LL.D (Hon)
Group Executive Director, Corporate (retired December 2019).
• Appointed Group Chief Financial Controller in 2013.
• Member of the Certified General Accountants Association of Canada,
and holds an MBA from the University of Manchester.
• Prior to this, he served as Executive Vice President and Chief Financial
Officer of Sagicor Life Inc from 2011.
• Joined Sagicor in 1995 as Financial Accountant, and was transferred to
the Group subsidiary, Island Life Insurance Company Ltd in 2000.
• Has over 20 years of experience in the insurance industry.
• 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
of Sagicor Life Inc.
SAMANTHA CHEUNG, B.Sc.Eng, M.Sc.Eng, MBA, ICD.D
Executive Vice President, Investor Relations.
• Appointed Executive Vice-President, Investor Relations in
September 2018.
• Holds both a B.Sc. (Engineering) and M.Sc. (Engineering) from Queen’s
University (Kingston, Ontario)
• Holds an MBA and ICD.D. from the Rotman School of Management
(Toronto) and Institute of Corporate Directors.
• Member and former board director of the Canadian Investor Relations
Institute and Women in Capital Markets.
• More than 20 years in banking, insurance and financial services.
• Previously served as Head of Investor Relations at two TSX listed
Canadian insurance companies.
J EDWARD CLARKE, FCCA, CIA
Executive Vice President and General Manager, Barbados
• Appointed Chief Operating Officer, Sagicor Life Inc and General
Manager, Barbados in 2010.
• Prior to 2010, he held the position of Group Internal Auditor.
• Fellow of the Association of Chartered Certified Accountants and is a
Certified Internal Auditor.
• More than 30 years’ experience in auditing and finance in Barbados,
Nigeria and the USA.
• Prior to joining Sagicor, he served as Chief Financial Officer of a major
conglomerate in Barbados.
• Director of Sagicor General Insurance Inc, Sagicor Funds Inc, Barbados
Farms Limited, past President of the Barbados Chamber of Commerce
and Industry, Chairman of the Barbados Private Sector Associasion,
and Co-Chair of The Barbados Economic Recovery and Transformation
Programme (BERT).
• Appointed President and Chief Executive Officer of Sagicor Life Inc in
2006, having served as Group Chief Operating Officer since 2002.
• Joined Sagicor in 1991, and held several senior positions, including
those of Vice President, Investments and Treasurer and Executive Vice
President (Finance and Investments) before being appointed Chief
Executive Officer.
• Holds an MBA in Finance, an MA in Economics, a Doctorate in Business
Administration (Finance) and an Honorary Doctor of Laws degree from
the University of the West Indies.
• Prior to joining Sagicor, she served as a Senior Manager
with PricewaterhouseCoopers.
• More than 20 years of experience in insurance, banking and
asset management.
• Former Chairman of the Barbados Stock Exchange and Barbados
Central Securities Depository, and a Director of several companies within
the Sagicor Group and private companies.
J. ANDREW GALLAGHER, FSA, FCIA, CERA, BMath
Chief Risk Officer
• Appointed Chief Risk Officer for the Group in 2007.
• Joined Sagicor in 1997 as Resident Actuary.
• Holds a Bachelor of Mathematics degree from the University
of Waterloo.
• Fellow of Canadian Institute of Actuaries, Fellow of the Society of
Actuaries and a Chartered Enterprises Risk Analyst.
• More than 30 years in the insurance industry.
ALTHEA C HAZZARD, LL.B (Hons). LL.M (Cantab), FCIS, FICA
Executive Vice President, General Counsel and Corporate Secretary
• Appointed Executive Vice President, General Counsel and Corporate
Secretary of Sagicor Financial Corporation in 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.
• 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 Sagicor Cave Hill School of
Business and Management.
• Fellow of the International Compliance Association and a Fellow of
the Chartered Governance Institute of Canada (formerly the Institute of
Chartered Secretaries and Administrators in Canada).
Sagicor Financial Company Ltd | 2019 Annual Report
25
KESTON D HOWELL, BSc, (Hons), MBA
President and Chief Executive Officer, Sagicor General Insurance Inc
• Holds a BSc Management Studies from University of the West Indies
and an MBA from the University of London.
• More than 32 years in the insurance and banking industries.
• Joined Sagicor in April 2005 as Executive Vice-President - Merchant
Banking, responsible for the establishment of Sagicor Merchant Bank and
overall Banking Strategy of the Group.
• Assumed executive responsibility for the life operations of Dutch
Caribbean and Central America in April 2013.
• Appointed President and Chief Executive Officer of Sagicor General
Insurance Inc. in October 2017.
NARI T PERSAD, BSc Actuarial Science, BSc Biochemistry, FSA, FCIA
Group Chief Actuary
• Appointed Group Chief Actuary in August 2017.
• Holds a BSc Specialist in Actuarial Science and Biochemistry from the
University of Toronto.
• Fellow of the Canadian Institute of Actuaries, Fellow of the Society
of Actuaries.
• Member of the Caribbean Actuarial Association.
• Previously served as Partner – Canadian Life Actuarial Practice Leader
with Ernst & Young and Principal of Eckler Ltd.
• More than 30 years in the insurance industry, including positions
at Crown Life Insurance Company, Canada Life Assurance Company,
Toronto Dominion Life Insurance Company, Swiss Re Life and Health and
Dion Durrell + Associates.
RAVI C RAMBARRAN, BSc, MSc, FIA
President and Chief Executive Officer – Sagicor Life Inc
• In January 2018 he was appointed Chief Operating Officer with
responsibility for Sagicor Life Inc, Southern Caribbean Operation.
• In January 2017 he assumed responsibility for group strategy, mergers
and acquisitions, investor relations with rating agencies.
• Appointed President and Chief Executive Officer of Sagicor
International in 2007.
• Joined the Group in 1997.
• 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.
• More than 20 years of experience, both regionally and internationally,
in the pensions, insurance and asset management industries.
• Director of Sagicor USA and Sagicor General.
• Member of the Executive of the Caribbean Actuarial Association and
represents the Caribbean on the International Actuarial Association.
ROBERT J L TRESTRAIL, BA
Executive Vice President and General Manager, Trinidad & Tobago and the Dutch
Caribbean
• Appointed Executive Vice President and General Manager, Trinidad &
Tobago in 2007.
• Assumed executive responsibility for Dutch Caribbean and Sagicor Life
Aruba N.V. in 2017.
• Graduate of the University of Toronto (Bachelor Arts - Economics).
• More than 20 years in the Insurance and Financial Services Industry.
• Board Member of Sagicor Investments Trinidad & Tobago Limited,
Nationwide Insurance Company Limited, RGM Limited and several of its
subsidiaries..
• President of the Trinidad & Tobago Insurance Institute (TTII) Board
of Governors.
• Former President of the Trinidad & Tobago Chamber of Industry and
Commerce (TTCIC) 2015-2016, having served as a Board Member of the
Trinidad & Tobago Chamber of Industry and Commerce
(TTCIC) 2006-2018.
• Positions formerly held with the Trinidad & Tobago Chamber of
Industry and Commerce include President (2015-2016) and Board
Member (2006-2018).
CHRISTOPHER W ZACCA , CD, BSc, MBA
President and Chief Executive Officer, Sagicor Group Jamaica Limited
• Appointed President and CEO of Sagicor Group Jamaica Limited in
May 2017.
• Holds a BSc in Engineering from the Massachusetts Institute of
Technology and an MBA from the University of Florida.
• More than 30 years of experience in public and private sector
management, in particular, during the period 1982-2009 where he held
various Senior Management positions in the private sector namely:-
• Vice President, Engineering - Desnoes & Geddes Limited (t/a Red
Stripe), Brewers of Red Stripe Beer and Manufacturers of Soft Drinks.
• Managing Director - Caribrake Products Limited, Manufacturers and
Distributors of Automotive Parts and Accessories.
• Managing Director - Appliance Traders Limited, Dealers in Air
Conditioning, Appliance and Commercial Equipment.
• Chief Executive Officer - Air Jamaica Limited, former National Airline
of Jamaica.
• Served as President of the Private Sector Organisation of Jamaica from
December 2006 to June 2009, and from June 2012 to December 2014.
• Former Chairman of the Development Bank of Jamaica and the
National Health Fund and has also served on numerous State boards,
including the Factories Corporation, National Education Trust
and JAMPRO.
• Served as special advisor to the Prime Minister of Jamaica from 2009
to 2011.
• In 2014, he was conferred with the National Honour of the Order of
Distinction in the rank of Commander (CD) for his invaluable contribution
to the private and public sectors in Jamaica.
26
Sagicor Financial Company Ltd | 2019 Annual Report
GROUP ORGANISATIONAL CHART
SAGICOR FINANCIAL COMPANY LTD.
(Bermuda)
100%
Sagicor Financial Corporation Limited
(Bermuda)
Sagicor USA, Inc.
(Delaware, USA
Sagicor Reinsurance
Bermuda Ltd
(Bermuda)
Sagicor Life Inc.
Southern Caribbean
(Barbados)
16.66%
100%
100%
Sagicor Life Insurance
Company
(Texas, USA)
LOJ Holdings Ltd.
(Jamaica)
32.45%
Sagicor Group
Jamaica Ltd.
(Jamaica)
(Publicly Traded)
Sagicor Financial Company Ltd | 2019 Annual Report
27
CORPORATE
& SOCIAL
RESPONSIBILITY
& SUSTAINABILITY
REPORT
28
Sagicor Financial Company Ltd | 2019 Annual Report
CORPORATE & SOCIAL
RESPONSIBILITY
30
Sagicor Financial Company Ltd | 2019 Annual Report
EDUCATION
Southern & Eastern
Caribbean
COUNTRY: Barbados
INITIATIVE: Student Programme
for Innovation in Science and
Engineering (SPISE)
Sagicor proudly invested in the
education of seventeen year
old Mya Symister from St Lucia,
ensuring her participation in the
Student Programme for Innovation
in Science and Engineering (SPISE)
hosted by the Caribbean Science
Foundation (CSF). The programme
targets Caribbean children
between the ages of sixteen to
seventeen who are gifted in Science,
Technology, Engineering and Math
(STEM).
COUNTRY: Barbados
INITIATIVE: Barbados Junior
Robotics Camp (BJRC)
Sagicor lauded the Caribbean Science
Foundation (CSF) for promoting
Science, Technology, Engineering and
Mathematics (STEM) education in the
region. The company acknowledged
that advances in STEM are catalysts
that continuously propel the growth
and development of the Caribbean.
In support of this movement, Sagicor
sponsored the Barbados Junior
Robotics Camp (BJRC) which
introduced basic technology and
engineering concepts to children.
Sagicor’s contribution also exposed
the children to practical experiences
aimed at building self-confidence,
communication and team-working
skills.
COUNTRY: Barbados
INITIATIVE: St Luke’s Brighton
Primary School
Sagicor continued its Adopt-A-
School initiative by providing
support to the St Luke’s Brighton
Primary School. For several years,
the students and teachers have
benefitted from Sagicor’s unwavering
contributions. In 2019, Sagicor
supported the school’s Sports Day
which underscored the importance
of team work, discipline and
camaraderie amongst students and
teachers. All medals were donated.
COUNTRY: Trinidad and Tobago
INITIATIVE: Support given to
medical student, Afoluso Hector
Sagicor pledged support to fourth-
year medical student, Afoluso
Hector, after she was selected to
participate in King’s College London
Clinical Elective Placement Exchange
Programme. In its commitment to
improving the lives of the people in
the communities in which it operates,
Sagicor made a dual investment in
education and health. Sagicor made
dual investments in education and
health in assisting the Trinidadian
student to advance in the field of
Cardiac Surgery with the Guy’s and
St Thomas’ NHS Foundation Trust.
COUNTRY: Trinidad and Tobago
INITIATIVE: Sagicor’s cerebral palsy
campaign
In 2019, Josiah Thomas was
acknowledged by Sagicor for his
noteworthy achievement in the
Caribbean Secondary Education
Certificate (CSEC) examinations,
having passed six CSEC subjects,
1
2
3
1 Tomorrow’s engineers cheer for a group photo at the Caribbean Science Foundation’s
Barbados Junior Robotics Camp.
2 & 3 Mya Symister receiving her award to participate in the SPISE student programme
with three other young scientists at the University of the West Indies.
Sagicor Financial Company Ltd | 2019 Annual Report
31
despite living with cerebral palsy.
Sagicor’s contribution also served to
heighten awareness of the disorder.
COUNTRY: Trinidad and Tobago
INITIATIVE: Sagicor contributes to
cerebral palsy advocate’s education
Shamla Maharaj is a host and
producer of a television series
in Trinidad and Tobago entitled
“Unique Not Different”. Though she
lives with cerebral palsy, her career
and educational accomplishments
are impressive as she is currently
pursuing a MPhil/PhD in Agricultural
Economics with a specialization in
Marketing. With the knowledge that
cerebral palsy cannot be cured, but
only effectively managed, Sagicor
assisted with the costs related to her
educational pursuits, and applauded
Shamla for her determination and
success.
COUNTRY: Trinidad and Tobago
INITIATIVE: The LIFE (Learning Is
For Everyone) Centre
In 2019, Sagicor championed the
cause of those who are autistic
by supporting the LIFE Centre, a
special needs school in Cascade
Trinidad and Tobago. The LIFE
Centre offers individualized special
education plans and curricula to
students on the autism spectrum
and those with other communicative
disorders.
1
2
3
COUNTRY: St Vincent and the
Grenadines
INITIATIVE: Annual National
Corporate Public Speaking
Championship
In April 2019, Sagicor offered
support to the first Annual National
Corporate Public Speaking
Championship, hosted by the
Toastmasters of St Vincent and
the Grenadines. Sagicor, a bronze
sponsor of the competition,
presented a cheque to the hosts,
following the finals held at the Girl
Guides Headquarters.
COUNTRY: Dominica
INITIATIVE: The St Joseph’s
Convent High School Sign
Language Club
In April 2019, Sagicor afforded five
students from the Sign Language
Club at the St Joseph’s Convent
High School in Dominica the
opportunity to travel to St Lucia
to attend performances and host a
series of shows. These students also
visited the St Lucy Home for the
Aged, among other activities.
COUNTRY: Dominica
INITIATIVE: 6th Rotary Club of
Dominica National Secondary
Schools Literacy Quiz Competition
Sagicor supported the 6th Annual
Rotary Club of Dominica National
Secondary Schools Literacy Quiz
Competition through its donation of
the first prize. Sagicor sponsored a
plaque and monetary contribution
of EC$1,000 which were won by
Chavis Alcid and Carlisa George of
the Portsmouth Secondary School.
This competition is one of the major
events on the Dominican school
calendar.
COUNTRY: St Kitts & Nevis
INITIATIVE: The Annual Charles
A. Halbert Library Annual Easter
Read-A-Thon
The Charles A. Halbert Library
endeavours to promote learning and
reading amongst the youth of St
Kitts and Nevis. Each year it hosts
the Charles A. Halbert Public Library
Easter Read-A-Thon targeting
seven to twelve-year old students
who display an interest in reading.
Sagicor has sponsored this event
for several years and is happy to
influence the positive growth and
development of our youth.
COUNTRY: Belize
INITIATIVE: Financial Literacy
Programme for Primary School
Students
Sagicor has always believed that
financial literacy should begin from
an early age. The team from Belize
was able to make this a reality by
supporting the pilot programme,
National Financial Literacy
Workshop for Primary Schools.
The programme is targeted to
students between five and twelve
years old and is managed by the
Ministry of Education, with further
patronage from the World Bank and
the Central Bank of Belize. Sagicor
assisted through the purchase
of books that support the initial
training of teachers and students.
This workshop which started in
the 2019-2020 school year with
fourteen schools in Northern Belize
is intended to be expanded to all
32
Sagicor Financial Company Ltd | 2019 Annual Report
schools, and to become an ongoing
programme.
COUNTRY: All Markets
INITIATIVE: Financial Information
Month
Sagicor gives credence to Financial
Information Month in October
of each year. Led by the Eastern
Caribbean Central Bank, Sagicor
supports events and activities that
aim to increase financial literacy
across all EC markets. Under the
theme “Plan for Uncertainty… Make
Insurance Your Priority”, Sagicor
produced articles on insurance
education, financial planning
tips, and covered related costs to
attending educational activities and
participation in seminars.
United States of America
COUNTRY: USA
INITIATIVE: After-School All-Stars
After-School All-Stars provides
free, comprehensive after-school
programmes and experiences that
help under-resourced students to
develop the skills, knowledge and
habits needed to succeed in life,
school and their future careers.
These programmes also help keep
the students safe. Sagicor donated
$1,500 and participated in a charity
cornhole tournament.
created to help alleviate the
educational challenges faced by
children in the state living in or near
poverty. The organisation provides
Tax Credit Scholarships to students
in grades K-12 who come from low-
income families. The funding allows
the students to consider a private
school or an out-of-district public
school better suited to their needs –
an option that is already available to
families with higher incomes. Since
2014, Sagicor has been able to fund
59 such scholarships.
• Serving as ‘personal shoppers’
and escorting students through
each department.
• Helping students to make
selections in the Book and
Stitches of Love Department.
• Assisting with the free dental
checkups and hygiene education
• Scanning items into the
computer inventory and placing
backorders, if necessary.
• Serving lunches provided by St
Mary’s Food Bank and helping to
clean up.
COUNTRY: USA
INITIATIVE: Back-to-School
Clothing Drive
Employees from the Scottsdale,
Arizona office participated in the
52nd annual Back-to-School Clothing
Drive in July 2019 at Grand Canyon
University in Phoenix. Volunteers
assisted children from Kindergarten
through 6th grade in obtaining
much-needed supplies, new
uniforms, backpacks and accessories.
Most of the families who benefit
from this programme, struggle to
pay rent and feed their children,
so new school clothes and other
necessities are often out of the
question. Thirty seven volunteers
from Sagicor logged over 185 hours
in a variety of activities:
In 2019, the programme assisted
more than 25,000 children hailing
from 40 school districts in Maricopa
County and northern Arizona.
COUNTRY: USA
INITIATIVE: Hillsborough Education
Foundation
For many years, Sagicor has
actively supported the Hillsborough
County Education Foundation
(HCEF) in Tampa, with Sagicor
employees contributing many hours
of volunteer service, as well as
monetary support raised through
fundraisers and other events.
HCEF supplies school materials to
teachers working in low-income
areas through its Teaching Tools
Store. Teachers can visit the store
to shop for items ranging from
stationery to books — all free of
charge. Sagicorians raised a total of
$1,000 in support of the Foundation.
COUNTRY: USA
INITIATIVE: Step Up For Students
In 2019, Sagicor Life Insurance
Company supported the Step Up
for Students initiative for the sixth
consecutive year. This is a Florida-
based, not for profit-corporation
• Registering students and
distributing badges & lanyards
• Distributing backpacks and hats
provided by the Phoenix Suns
• Measuring and making sure that
the clothes and shoes fit each
student.
4
5
1 Representatives from Sagicor making
a pledge to the Cerebral Palsy Society
of Trinidad and Tobago to assist one
of its members, Shamla Maharaj, in her
educational pursuits.
2 Sagicor presents their first place
plaque to winners of the Rotary’s National
Secondary Schools Literacy Quiz in
Dominica.
3 Winners of the Charles A Herbert
Library Read-a-Thon in St Kitts, proudly
hold their trophies.
4 Team Sagicor at the After-School
All-Stars Cornhole Tournament in
Scottsdale Arizona.
5 Sagicor volunteers distributing school
supplies during the Back-to-School
Clothing drive in Phoenix Arizona.
Sagicor Financial Company Ltd | 2019 Annual Report
33
Jamaica
COUNTRY: Jamaica
INITIATIVE: Sagicor Scholarship
Awards
The Sagicor Foundation awarded
100 exemplary students with
scholarships and educational grants
in 2019. Thirty-nine secondary
school students were rewarded for
their exceptional performance in the
Grade Six Achievement Test (GSAT)
while thirty-three tertiary-level
students were recogonised for their
academic performance, community
involvement, volunteerism, strong
leadership potential and financial
need.
The GSAT scholarship recipients
were awarded to children of various
Sagicor stakeholders who excelled
in the national examination. The
scholars include children of clients,
team members and members of the
Jamaica Defence Force. Educational
grants were also awarded to the
2019 male and female Parish
Champions of the Jamaica Teachers’
Association/Sagicor National
Athletics Championship. Twenty-
eight parish champions were
awarded.
Tertiary winners each received
$300,000 to cover tuition fees.
They were selected from some of
Jamaica’s top universities including:
The University of the West Indies;
University of Technology Jamaica;
Mico University College; the
Caribbean Maritime University;
Northern Caribbean University;
and the Edna Manley College of
the Visual and Performing Arts.
Over $13 million in scholarships and
grants were disbursed.
in Kingston. Christmas treats were
distributed to each of the schools
during the festive season.
COUNTRY: Jamaica
INITIATIVE: Adopt-A-School
Through the Adopt-a-School
programme, the Sagicor Foundation,
in 2019, completed infrastructural
work at three schools – Tobolski
Basic School in Brown’s Town,
St Ann, Chantilly Gardens ECI in
Savanna-la-Mar, Westmoreland
and the Clifton ECI in Portmore, St
Catherine. Official handovers were
conducted at each school in July,
with over $15 million invested in
infrastructural upgrades, including
building of a new classroom,
upgrade of bathroom and kitchen
facilities, and play areas. The school
was provided with learning material,
and also treated to engagement
sessions, a health tour, Reading Day
and Teachers Day activities and a
festive close-out ceremony.
In November 2019, the Foundation
launched its 2019/2020 Adopt-
a-School programme, with three
new schools being adopted – the
St Peter Claver Infant School in
Kingston, the Prime Time Early
Childhood Institution in May Pen,
Clarendon and the Petersville
Early Childhood Institution in
Whitehouse, Westmoreland. A
commitment of $15 million was
made towards the infrastructural
upgrades of the schools, to help
them achieve certification under the
Early Childhood Commission. The
children were treated to a tour and
fun-day at the launch at Hope Zoo
COUNTRY: Jamaica
INITIATIVE: Prime Minister’s Youth
Awards for Excellence
With a mandate to support
the nation’s youth, the Sagicor
Foundation awarded 12 scholarship
grants totalling $1.2 million to
selected recipients of the 2019
Prime Minister’s Youth Awards
for Excellence. The awards were
valued at $100,000 each and
the presentation took place in
November, 2019 on the lawns of
Jamaica House.
COUNTRY: Jamaica
INITIATIVE: UN Women’s Guild
Scholarship Programme
Sagicor Foundation donated
$250,000 to the Jamaican
chapter of the United Nation’s
Women’s Guild (UNWG),
providing scholarships for high
school students. The women’s
organisation assists children from
underprivileged circumstances
and enables them to attend school
regularly by sponsoring meals and
transportation. Affiliated with the
UNWG headquartered in New York,
the passionate group of Jamaican
women, seeks to enrich the lives of
individuals around them.
COUNTRY: Jamaica
INITIATIVE: Hope Gospel Assembly
Scholarship Programme
To support the annual back-to-
school fair hosted by the Hope
Gospel Assembly, the Sagicor
1
2
3
34
Sagicor Financial Company Ltd | 2019 Annual Report
Foundation, donated educational
grants totalling $50,000 to students
from nearby underprivileged
communities. Notebooks and
other learning material were also
presented to the students at the
church’s annual fair, which serves
thousands of students and families
from disenfranchised communities
in and around Kingston and St
Andrew.
HEALTH
Southern & Eastern
Caribbean
COUNTRY: Barbados
INITIATIVE: Gyn-A-Thon Walk/Run
Sagicor once again joined the fight
against cancer by partnering with
the Barbados Cancer Society (BCS)
to host the Gyn-A-Thon, formerly
known as the Sagicor Globe-A-Thon.
As title sponsor of the event for over
five years, Sagicor champions the
health of women in our communities
and gives support to those directly
and indirectly affected by ovarian,
uterine, vaginal, vulvar and cervical
cancers. This initiative highlighted
Sagicor’s commitment to prevent
and arrest these cancers, while
increasing awareness and encourage
proactive detection.
COUNTRY: Barbados
INITIATIVE: The Barbados Defence
Force – Have a Heart Charity Run
and Walk
Through sponsorship of the
Barbados Defence Force – Have
a Heart Charity Walk, Sagicor
contributed to the Precious Touch
Foundation which grants wishes to
terminally and critically ill children
in Barbados. A notable number of
Sagicor team members participated
in the walk and supported the
cause. At the end of the walk,
our Sagicor nurse also facilitated
medical check-ups in the Sagicor
mobile unit, and Advisors were on
hand to offer financial advice to the
walk’s participants.
COUNTRY: Trinidad and Tobago
INITIATIVE: World Blood Donation
Day
Sagicor continued its partnership
with Friends of the Blood Bank to
once again host a blood donation
drive at Sagicor’s Head office
in Port-of-Spain. Sagicor team
members donated blood on June
10 to commemorate World Blood
Donor Day. Having participated in
the event for over 10 consecutive
years, Sagicor is a health insurance
company that will continue to
support the biennial blood drive.
COUNTRY: Trinidad and Tobago
INITIATIVE: Cerebral Palsy
Association of Trinidad and Tobago
Sagicor was a major sponsor of
the Cerebral Palsy Association of
Trinidad and Tobago, continuing
its philanthropic efforts for this
disorder. The Cerebral Palsy
Association of Trinidad and Tobago
provides comprehensive services
to the differently-abled and their
immediate families, and Sagicor
has been pleased to continue its
support.
COUNTRY: Trinidad and Tobago
INITIATIVE: My Sister’s Keeper
Initiative
The non-profit organisation, My
Sister’s Keeper, was supported
by Sagicor as it aimed to increase
the awareness of cervical cancer.
The NGO’s second annual Pap
Party provided Sagicor with the
opportunity to share information
on cervical cancer prevention, early
diagnosis and proactive approaches
to safeguarding one’s health.
Sagicor’s donation and volunteerism
at the event helped bring to light
the concerning fact that cervical
cancer is the second most common
cancer in women aged fifteen to
forty-four in Trinidad and Tobago,
with 140 new cases being diagnosed
annually.
COUNTRY: Trinidad and Tobago
INITIATIVE: Caribbean Kids and
Families Therapy Organisation
(CKFTO)
In May 2019, Sagicor was a strong
supporter of the Caribbean Kids
and Families Therapy Organisation
(CKFTO). Sagicor’s donation aided
the charity’s LIFE rehabilitation
programme for children with severe
disabilities. CKFTO offers clinic-
based psychological services,
occupational, speech and physical
therapy to special needs children,
who range in age from newborn to
the age of twenty-one.
4
5
1 & 2 Sagicor Foundation scholarship
recipients were presented with their
awards.
3 Sagicor supports the annual scholarship
programme of the United Nations
Woman’s Guild.
4 Runners line up at the start of the 2019
Gyn-A-Thon.
5 Sagicor supported the Barbados
Defence Force’s Have a Heart Charity Run
and helped grant wishes to terminally and
critically ill children.
Sagicor Financial Company Ltd | 2019 Annual Report
35
COUNTRY: Trinidad and Tobago
INITIATIVE: Down Syndrome Family
Network (DSFN)
In September 2019, Sagicor strongly
supported the Down Syndrome
Family Network (DSFN). Fund
raising was done through the
movie premiere of The Lion King
at Digicel IMAX, Woodbrook.
Sagicor’s donation helped to fund
free family workshops, a mentorship
programme and other activities of
DSFN.
COUNTRY: St Lucia
INITIATIVE: Autism Awareness
Summer Camp
The St Lucia Autism Awareness
Project is a non-profit organisation
that is focused on providing
support, education and resources to
parents and caregivers of those with
autism. In 2019, Sagicor supported
this initiative by sponsoring
the Autism Awareness Summer
Camp, making a cash donation,
and providing gift items to camp
participants.
COUNTRY: St Lucia
INITIATIVE: St Lucia Cancer Society
Carnival Band
Sagicor continued to advocate
for breast cancer awareness,
supporting the inaugural Carnival
T-shirt band organised by the St
Lucia Cancer Society. The band was
entitled, “Oritus: New Beginnings.”
The Society aims to educate and
advocate for healthy lifestyles and
early detection, and Sagicor was
proud to be associated with the new
initiative.
COUNTRY: Antigua
INITIATIVE: Prostate Health Month
In September 2019, Sagicor joined
the mission to bring greater
awareness to prostate cancer, the
leading cause of cancer deaths
among men in the Caribbean.
Sagicor sought to be an advocate
for awareness, education and early
detection of the disease. Sagicor’s
Antigua team signed on to support
Do Blue Inc and the Antigua and
Barbuda Broadcasting Service
(ABS) in observance of Prostate
Health Month. A fundraising
golf tournament was held on
September 8th, an Awareness Walk
on September 28th, and several
seminars were broadcast on radio
and television.
COUNTRY: All Markets
INITIATIVE: Breast Cancer
Awareness Month
Sagicor team members from all
Caribbean markets promoted breast
cancer awareness during the month
of October. Several initiatives were
launched to raise awareness of
the disease and to show support
for those afflicted. Sagicor shared
information on the benefits of a
healthy lifestyle, early detection and
the ways in which insurance can
assist in the event that breast cancer
is diagnosed. Sagicor offices were
also adorned with pink decorations,
and enthusiastic team members
traded corporate uniforms for pink
outfits, and provided treats to staff
and customers, led discussions on
the topic and shared helpful and
encouraging messages to both
women and men.
1
2
1 Sagicor supporting the Down Syndrome Family Network with funds raised from a
movie premier sponsorship.
2 Sagicor gives a helping hand to the Autism Awareness Summer Camp.
36
Sagicor Financial Company Ltd | 2019 Annual Report
United States of America
COUNTRY: USA
INITIATIVE: Arthritis Foundation
In May 2019, Sagicor participated
in its 11th Walk to Cure Arthritis
event. In addition to completing
the three-mile course, Sagicor team
members raised $11,411, their best
fundraising effort for the Foundation
to date, and were recognised
by the Arthritis Foundation as a
top corporate fundraising team.
Arthritis is America’s leading cause
of disability, and donations made
to the Foundation help to fund
research that may someday find a
cure for the debilitating condition.
Other programmes and initiatives of
the Arthritis Foundation which were
supported by Sagicor volunteers:
• Camp Boggy Creek: Team
members spent a day at this
unique ‘SeriousFun Camp’ which
offers children with serious
illnesses and their families a free,
safe and medically-sound camp
environment.
• Taste of Brunch: The Phoenix,
Arizona chapter of the Arthritis
Foundation urged donors to ‘Eat.
Drink. Cure Arthritis” as they
hosted their “Taste of Brunch”
fundraiser with an of array food
prepared by Chef Chuck Wiley,
live and silent auctions, and
music.
• Summer Camp: A number of our
team members volunteered to
assist with this camp experience,
giving children with arthritis and
related rheumatic childhood
diseases an opportunity to
participate in fun summer
activities while experiencing
nature.
• Jingle Bell Run: This innovative
walk/run event saw Sagicorians
surpass their fundraising goal of
$1,000, going on to raise $2,685.
COUNTRY: USA
INITIATIVE: Phoenix Children’s
Hospital
Sagicor Life Insurance Company
is committed to supporting many
worthy causes in our communities,
and Phoenix Children’s Hospital
(PCH) is one of them. Over the past
several years, donations of volunteer
time to PCH have accompanied cash
donations to the cause.
Phoenix Children’s Hospital opened
in 1983 as an independent children’s
hospital operating on the campus of
Good Samaritan Hospital. Eventually
PCH grew to the point where they
needed their own campus and
renovation and construction began
on their current site in the year 2000.
Today the medical facility has a staff
of over 1000 specialists providing
care in over 75 subspecialties. Each
year there is both a telethon and a
radiothon, and Sagicor employees
from our Arizona offices helped by
answering calls and taking donations.
Sagicor donated $5,000 during each
of the telethon broadcasts, totalling
$10,000 for PCH.
Other volunteer activities which
the Scottsdale, Arizona team
participated in:
• Cookies for PCH: Our volunteers
bagged cookies for the snack
carts used to carry drinks and
snacks to patients and visitors to
the Hospital.
• Trick or Treat: In addition to
making a $2,500 donation,
our volunteers assembled
approximately 200 Trick or
Treat kits for patients who were
unable to leave their room for the
Halloween activity.
• Trivia with PCH: A weekly trivia
event which sees a game being
broadcast to the closed circuit
TV channel in patient rooms , and
patients participate by calling in
their answers.
• Holiday Wishes: Each year, our
Scottsdale office collects gifts
from PCH’s “Wish List” and
delivers it to the hospital so that
each child will have a present
to enjoy during the holidays. In
2019, we collected over $2,200
worth of gifts for Phoenix
Children’s Hospital.
3
4
3 Team Sagicor comes out in full support
for Antigua Prostate Health Month.
4 Sagicor lights the town pink for Breast
Cancer Awareness Month.
Sagicor Financial Company Ltd | 2019 Annual Report
37
COUNTRY: Jamaica
INITIATIVE: Jamaica Teachers
Association (JTA) Critical Illness
Fund
The Sagicor Foundation donated
$1 million to the JTA Critical Illness
Fund. The Fund was established to
mark the JTA’s 55th anniversary,
and provides financial assistance
to teachers who are in need due to
medical expenses.
Jamaica
COUNTRY: Jamaica
INITIATIVE: Sagicor Sigma
Corporate Run
The first quarter of the year saw
emphasis placed on the 21st staging
of the Sagicor Sigma Corporate
Run. Held on February 17, 2019, it
attracted over 27,000 participants,
a record number of participants for
this event.
Over $52.4 million was raised in
cash and kind, enabling Sagicor
to make sizeable donations to the
three beneficiaries: The Lupus
Foundation of Jamaica will receive
materials, equipment and resources
to promote awareness of the
disease; The Diabetes Association
has received a mobile medical unit,
outfitted with equipment to assist
with testing and support; and the
May Pen Hospital Neonatal Intensive
Care Unit will receive much-needed
medical equipment.
The year also saw formal handovers
to the Spanish Town Hospital and
the St. Christopher‘s School for the
Deaf, the two beneficiaries of the
2018 Sigma Run. In April, Spanish
Town Hospital’s NICU received
equipment valued at $25 million
and an additional $5 million for
maintenance, and in June, a new
block of classrooms valued at $12
million was commissioned into use
at the St. Christopher’s School for
the Deaf.
1
2
1 Challaine “Annie” Ruddock, sister of the late Elva Ruddock, who passed away from
lupus, represented in the “Hero Duck” cape in honour of her sister, plays superwoman
supported by Gary Matalon (left), Hanel Blake and Kyle Frederick (her nephew). The
Lupus Foundation was one of the beneficiaries of Sigma Run 2019.
2 The Jamaica Teacher’s Association accepts funding for its critical illness fund to
support teachers in need.
3 A school group takes centre-stage at the Sagicor-sponsored National Independence
Festival of Creative Arts.
4&5 Team Sagicor joins the Caribbean Youth Environment Coastal Beach Clean Up.
38
Sagicor Financial Company Ltd | 2019 Annual Report
COMMUNITY
AND YOUTH
DEVELOPMENT
Southern & Eastern
Caribbean
COUNTRY: Barbados
INITIATIVE: Father’s Day Verdun
House Donation
At the heart of Sagicor is the
commitment to improve the lives
of the people in the communities
in which we operate, and in June
2019, Sagicor turned its attention to
Verdun House and the noteworthy
and remarkable service it offers
to men fighting addictions to
illicit drugs and alcohol. Sagicor
coordinated a company-wide
initiative where team members
were able to donate clothes,
shoes, toiletries and their time
to the residential centre. Sagicor
supported the health journey of
these residents and sought to
abolish the stigma associated with
mental health and addiction. In its
celebration of Father’s Day and in its
acknowledgement of the importance
of a solid, healthy family, the
organisation also made a monetary
contribution to Verdun House.
COUNTRY: Barbados
INITIATIVE: Summer with Sagicor
Fun Day
Led by the Customer Experience
Department, Sagicor hosted
“Summer with Sagicor” for
children of its internal and external
customers. The enjoyable and
educational experience featured an
all-day field trip with visits to the
Atlantic Submarine and to Farley
Hill National Park. Fun activities at
Farley Hill sought to improve motor
skills, concentration and short-term
memory, while encouraging Team
Work.
COUNTRY: Barbados
INITIATIVE: Caribbean Youth
Environment Network (CYEN)
Coastal Beach Cleanup
Sagicor provided sponsorship
to the non-profit organisation,
Caribbean Youth Empowerment
Network, in support of its Barbados
Coastal Cleanup initiative. Sagicor
team members joined with other
Barbados residents to tackle
Browne’s Beach, collecting marine
debris. The significance of this
project is the increased awareness
of young people to environmental
issues, and their interest in
sustainable development.
COUNTRY: Barbados
INITIATIVE: National Independence
Festival of Creative Arts (NIFCA)
Sagicor continues to a be stalwart in
the areas of cultural education and
development, especially when our
youth stand to benefit. Once again,
we partnered with the National
Cultural Foundation to produce
the annual National Independence
Festival of Creative Arts (NIFCA)
which showcases Barbadians’ rich
talent in the disciplines of dance,
drama, speech, music, photography,
film, and fine arts, literary and
culinary arts.
3
4
5
Sagicor Financial Company Ltd | 2019 Annual Report
39
COUNTRY: Barbados
INITIATIVE: Lions Club Food
Hamper Drive
For Christmas 2019, dozens of less
fortunate individuals were gifted
with food hampers on behalf of
Sagicor and the Lions Club of
Barbados South. Sagicor made both
a financial and physical contribution
to this project as team members
came together to create sixty
baskets that benefitted the elderly,
reclused and underprivileged
members of the community.
COUNTRY: Barbados
INITIATIVE: BIMAP Youth
Empowerment Programme
In 2019, the Barbados Institute
of Management and Productivity
(BIMAP) received sponsorship from
Sagicor. BIMAP empowers young
people by providing opportunities
to learn essential skills, coupling
them with the knowledge needed
to succeed in the work place. It also
teaches entrepreneurship. Sagicor
sponsored a practical business
lunch that was facilitated by team
members from Sagicor and BIMAP.
During the lunch session, students
were exposed to social etiquette
and the significance of both life and
general insurance.
COUNTRY: Barbados
INITIATIVE: Barbados Boy Scouts
Association
Sagicor’s belief is that it is never
too young to learn the importance
of road safety, and this message
was communicated to the young
males at the Barbados Boy Scouts
Association. Out of its dedication
to youth and to improving the lives
of the people in the communities
in which it operates, Sagicor
encouraged the group to ensure
that their parents are following the
right rules as motorists. Sagicor also
donated t-shirts to the Association
as the members prepared to travel
to Jamaica for the annual Cuboree.
COUNTRY: Barbados
INITIATIVE: Safe and Sober Zone
With the intention of safeguarding
our youth and the wider community,
Sagicor and the Junior Chamber
International (JCI) joined forces to
promote the importance of safe
driving. For the Crop Over season,
signage announcing a “Safe and
Sober Zone” was erected at the fete,
“Fyah D Wuk” where patrons were
encouraged to sign a Sagicor-General
branded pledge wall emblazoned
with the theme “I pledge not to drive
distracted”. One hundred and fifty
signatures were affixed.
COUNTRY: Aruba
INITIATIVE: Arikok National Park
At the core of Sagicor is the desire
to give of its best to the people
and the communities in which it
operates. Sagicor’s team members
in Aruba continued to fulfill that
mission as it joined 3,000 volunteers
to complete hundreds of community
projects across the nation. Partnered
with the Aruba Doet (in English
Aruba Does) organisation, Sagicor
cleaned, painted and landscaped
the walking trails in the Arikok
National Park, known as a “botanical
garden” of abandoned trees about a
century old. This nationwide charity
effort, held on March 15, 2019, saw
repairs, painting, installation and
construction being implemented
in communities across Aruba. In
addition, the elderly, handicapped
and children were assisted.
COUNTRY: Trinidad and Tobago
INITIATIVE: St Jude’s Home for
Girls
The 2019 cohort of Sagicor Inspire
Vacation Internship Programme
proudly embraced Sagicor’s
humanitarian spirit as they offered
invaluable support to the St Jude’s
Home for Girls, located in Belmont.
The St Jude’s Home for Girls
typically houses sixty-five young
females between the ages of ten
and eighteen who need supervision
or have been committed by the
Court. The Home has 23 support
staff who provide case management,
social work and psychological
services. To befit the young women
with computer skills and a greater
knowledge of technology, Sagicor
re-painted the computer room and
provided new air condition units,
chairs and desktop computers.
COUNTRY: Trinidad and Tobago
INITIATIVE: Archbishop Finbar
Ryan Geriatric Home
Sagicor showed support for
the elderly by donating to the
Archbishop Finbar Ryan Geriatric
Home, located in Diego Martin.
Fund raising was facilitated
through the premier of the movie,
Downtown Abbey, at Movie Towne
on September 17. Sagicor’s donation
helped to fund staff training and the
maintenance of the home.
1
2
1 Sagicor volunteers after a long day
beautifying areas within the Arikok
National Park.
2 A patron takes the pledge in the Safe
and Sober Zone not to drive distracted.
3 Participants of the President’s Charities
summer fun day posed for a group photo .
4 New computer equipment is installed at
the St Jude’s Home for Girls.
5 Team Sagicor wears purple in support of
International Women’s Day.
40
Sagicor Financial Company Ltd | 2019 Annual Report
COUNTRY: Trinidad and Tobago
INITIATIVE: Sagicor Team Cooks
for Homeless on National Day of
Caring
Sagicor, unmovable in its vision of
improving the lives of the people
in the communities in which it
operates, extended assistance to
the homeless community within
Port-of-Spain and environs. Sagicor
team members, in observation of
the National Day of Caring on May
26, cooked and served 212 meals
for those in need. The Joy of Giving
Kitchen, Abercromby Street, Port-
of-Spain, provided the facilities for
this worthy cause.
COUNTRY: Trinidad and Tobago
INITIATIVE: St James Police Youth
Club
Sagicor has invested in the St James
Police Youth Club for the past six
years. The club was established in
November 1992 and caters to the
needs of young people between the
ages of five to twenty-one years.
It provides alternatives to juvenile
delinquency and crime, through
education, sport and community
service. From July 18 to August
23, Sagicor sponsored computer
literacy classes for fourteen young
persons, ranging in ages ten to
sixteen years. They were exposed to
computer basics, and taught to use
software, such as Microsoft Word,
Excel and PowerPoint.
COUNTRY: St Lucia
INITIATIVE: International Women’s
Day
Sagicor’s St Lucian team celebrated
International Women’s Day by
acknowledging the contribution
of its female team members to
the success of the organisation.
Female team members dressed in
polo shirts branded with the theme
‘Balance for Better’, a call to action
for gender parity. Female clients
visiting the branches, in addition
to patients at the maternity and
obstetrics ward of the Victoria
Hospital, were also included in
the celebrations as Sagicor team
members presented them with
tokens of appreciation.
COUNTRY: St Kitts & Nevis
INITIATIVE: The Wesleyan Holiness
Church’s Night of Purpose Gala
Sagicor continued its support of
youth as it sponsored the Wesleyan
Holiness Church’s Night of Purpose
Gala, held on April 27. Hosted under
the distinguished patronage of Sir
Tapley Seaton, the Governor General
of St Kitts and Nevis, this prestigious
event sought to energise and inspire
those in attendance, to show love
to one another. On the grounds
of Government House, the event’s
theme “Youth through Spiritual
Development” was reflected
through beautiful musical renditions,
poetry, song and dance.
COUNTRY: Belize
INITIATIVE: Caribbean Association
of Insurers and Financial Advisors
(CARAIFA) Congress
In May 2019, the Caribbean
Association of Insurers and Financial
Advisors (CARAIFA) hosted its
annual congress in Belize. Through
the efforts of its local team
members in Belize, Sagicor offered
support to the association by
sponsoring the Chairman’s Cocktails
and by providing volunteers for
the three-day event. Sagicor Life
Eastern Caribbean Inc’s CEO
also showed support by making
a presentation during one of the
Congress’ segments.
COUNTRY: Dominica
INITIATIVE: President’s Charities
Summer Fun Day
Sagicor has a long tradition of
supporting young people at various
stages of their development. In
Dominica, Sagicor lent its support
to the Summer Fun Programme
hosted by the President’s Charities.
The Summer Fun Programme
targeted less privileged students of
the Roseau Primary School and ran
from July 2 to 8 in 2019. Executives
from Sagicor were invited to the
home of His Excellency Charles
Savarin and Lady Savarin where the
sponsorship cheque was presented
to Coordinator of the Summer Fun
Day Programme, Ms Jermaine Jean-
Pierre. Sagicor had the pleasure
of giving nearly 200 children the
opportunity to benefit from a
fun-filled, educational programme
which included field trips, lessons in
dining and etiquette, and computer
training.
COUNTRY: St Lucia
INITIATIVE: Youth Empowerment
Project Logo Competition
The Ministry of Equity, Social
Justice, Local Government and
Empowerment launched a Youth
Empowerment Project that aims
to tackle crime and set youth
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Sagicor Financial Company Ltd | 2019 Annual Report
41
on the path to success. The
young people of St Lucia were
encouraged to participate in the
Youth Empowerment Project’s logo
design competition. Sagicor, in
its continued commitment to the
development of youth, sponsored
the top three prizes: a laptop plus
$500 in cash, a tablet and an
android mobile phone.
COUNTRY: St Vincent and the
Grenadines
INITIATIVE: Coast Guard Youth
Development Summer Programme
2019
The purpose of the Coast Guard
Youth Development Summer
Programme is to teach important
life skills to teenagers and to provide
an opportunity for entry into the
Coast Guard. Through Sagicor’s
proud sponsorship of this initiative,
90 students were able to take part
over a six-week period.
COUNTRY: St Lucia
INITIATIVE: Annual Ministry
Hamper Drive
Sagicor partnered with the Ministry
of Equity, Social Justice, Local
Government and Empowerment.
The Annual Hamper Drive benefitted
from cash and in-kind donations
made by Sagicor team members in
St Lucia.
The hampers were distributed on
December 23, 2019 to children,
single parent households, elderly
men and women, persons with
disabilities, and those living with
HIV/AIDS.
COUNTRY: St Vincent and the
Grenadines
INITIATIVE: Nine Mornings Festival
Sagicor’s generosity has led to
an increased amount of pomp,
camaraderie and Christmas cheer
in three communities: Carriere, Fitz
Hughes and Stubbs. For the past
few years, these territories have
been competing to stage the best
activities over the nine mornings
before Christmas, as part of the
Sagicor-sponsored Nine Mornings
Festival. The Nine Mornings Festival
is a major Christmas tradition in
St. Vincent and the Grenadines,
and Sagicor’s significant support is
credited with helping to maintain the
country’s cultural traditions.
United States of America
COUNTRY: USA
INITIATIVE: Operation: Military
Matters
What started as a nine-year-
old’s school project in 2015 has
blossomed into the non-profit
corporation Operation Military
matters (OMM) and attracted a
$2,500 donation from Sagicor.
Inspired to raise support and
donations for members of the
military who are posted overseas,
young Graci Tubbs has spent the
last six years growing the project
and speaking to civic organisations
and the military community to
promote OMM and to share its
vision. Graci heard a group of
veterans speak during a school
assembly and she felt that it was
important for the men and women
serving in the military to know that
people back home care about them,
and appreciate their sacrifices.
COUNTRY: USA
INITIATIVE: Feeding Tampa Bay
“Cereal for Summer” was born out
of the realisation that one in four
children in the Tampa area suffer
from hunger, and aims to provide
breakfast during the summer
months for thousands of children
when other feeding programmes
are inactive. Sagicor has teamed
up with Feeding Tampa Bay and
other organisations to help fight
childhood hunger by providing
boxes of cereal and other breakfast
items for the affected children.
COUNTRY: USA
INITIATIVE: Boys & Girls Clubs of
Tampa Bay
Sagicor has proudly donated
$2,500 to the Boy’s & Girls Clubs of
Tampa Bay in support of their Great
Futures Breakfast. Held in November
2019, the event served to celebrate
the stellar work done by the Clubs
over the years and also highlight
testimonials from past members
who credit the organisations with
shaping their lives and helping them
to reach their full potential. Sagicor
has pledged ongoing support to the
programmes.
COUNTRY: USA
INITIATIVE: Adopt-A-Classroom
Scottsdale: The Scottsdale office
organised their annual holiday party
for the 2nd grade class at Wilson
Elementary School in downtown
Phoenix. This unique programme
was started by school administrators
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Sagicor Financial Company Ltd | 2019 Annual Report
over twenty years ago out of the
realization that many of the students
at their school are below the poverty
level, some even qualifying as
homeless and therefore not usually
fortunate enough to receive gifts
and treats and Christmas time. With
this in mind, Sagicor team members
not only ensured that children
received toys and the customary
holiday cheer, but also new shoes
and socks, clothes and a coat or
jacket. Story telling, crafts and
play time were enjoyed, along with
snacks, juices and a pizza lunch.
Tampa: The Tampa office also
organised their annual holiday
party for the 3rd grade class of BT
Washington Elementary, hosting it
next door at Robert W. Saunders,
Sr. Public Library. Several Sagicor
team members collected donations
from their fellow employees as
well as area sports teams such
as the Tampa Bay Rays, Tampa
Bay Rowdies, and the Tampa Bay.
Donations of pizza, salad and drinks
were supplied by a local pizza
restaurant. As the party drew to
a close, Sagicor staff distributed
holiday gift bags full of presents to
each student.
COUNTRY: USA
INITIATIVE: Metropolitan Ministries
Sagicor’s Tampa Office provided
steady support to Metropolitan
Ministries, a community non-
profit organisation which provides
homeless and low-income persons
in the Tampa area with food,
clothing and emergency shelter.
Sagicor team members made
monetary contributions, also logging
many volunteer hours helping
to sort food donations, packing
boxes and cleaning the facilities.
In November, they donated $1,000
and also participated in the ‘Barrels
of Hope’ project, where food was
collected for the upcoming holidays
to ensure that area families would
be able to enjoy a hearty meal.
COUNTRY: USA
INITIATIVE: St Mary’s Food Bank
Arizona staff regularly volunteer
at St Mary’s Food Bank, helping
to collect and distribute food to
needy persons. St Mary’s mission
is to alleviate hunger through the
gathering and distribution of food
while encouraging self-sufficiency,
collaboration, advocacy and
education.
COUNTRY: USA
INITIATIVE: St Vincent de Paul
Society
Sagicor supports St Vincent de
Paul in the greater Phoenix area in
several ways:
Meal Services: In addition to
ensuring the kitchen and food
were prepared for dinner, Sagicor
volunteers help set the table, seat
guests, serve meals, wash dishes
and clean the dining area.
Dream Centre: In the Dream
Centre, Sagicor volunteers help
with homework, read books and
play games after studies have been
completed. The Dream Centre
is intended to be a place where
6
5
7
8
1 Participants of the Youth Empowerment Project’s logo design competition.
2 Ninety students gained valuable life skills as a result of the Coast Guard Youth
Development Summer Programme.
3 Team Sagicor gathered for a photo after their donation to the Annual Ministry Hamper
Drive in St Lucia.
4 Three St. Vincent and the Grenadines communities were beneficiaries of the Sagicor-
sponsored Nine Mornings Festival.
5 & 6 Team Sagicor give hands-on support to the St. Mary’s Food Bank.
7 Team Sagicor gives financial support to Operation: Military Matters.
8 Sagicor volunteers ensured that each child in their adopted classroom would receive a
substantial gift bag.
Sagicor Financial Company Ltd | 2019 Annual Report
43
2
3
1
1 & 2 Sagicor volunteers relax between jobs at a Habitat for Humanity building site.
3 Sagicor team members enjoy the experience of the Rays “Big Leaguer for a Day”
event.
4 Team Sagicor sharing their holiday spirit by providing gifts for patients at the John
Hopkin’s All Children’s Hospital.
5 Team Sagicor at the ready to volunteer at the Rays’ Junior Achievement event.
6 A Tampa Bay Ray player and the team mascot bring a smile to a patient of the John
Hopkin All Children’s Hospital.
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Sagicor Financial Company Ltd | 2019 Annual Report
children can not only get the help
and guidance they need, but also a
place where they feel encouraged to
pursue their dreams.
COUNTRY: USA
INITIATIVE: Habitat for Humanity
Both the Scottsdale and Tampa
offices participated in Habitat for
Humanity construction projects
during 2019. A project typically
consists of eight to twelve Sagicor
volunteers working up to eight
hours to help complete a home for
a family. Projects have ranged from
roof installation, preparing forms for
concrete sidewalks and driveways,
painting the exterior and interior
of homes, putting in insulation and
sodding the lawn.
Habitat’s vision is “a world where
everyone has a decent place to
live”. Through our partnership
with Habitat for Humanity, it is our
hope that future homeowners can
achieve strength, stability and the
independence needed to build a
better life for themselves and their
families.
COUNTRY: USA
INITIATIVE: Hurricane Dorian Relief
Following the devastation of
Hurricane Dorian, one of the
strongest Category 5 hurricanes ever
recorded, staff at the Tampa office
were moved to donate an additional
$10,000 to the Tampa Rays relief
effort. The Rays had organised
collections of emergency supplies
from fans at every game, and Sagicor
readily supported their efforts.
Additionally, the Tampa and Arizona
offices raised $4,635 towards
Hurricane relief efforts as well.
COUNTRY: USA
INITIATIVE: Tampa Bay Rays
Sagicor has teamed up with the
Rays to positively impact our
community through several key
initiatives:
Sagicor Life Insurance Company
Salute to Education: At Sagicor, we
recognise how valuable education
is to the future of our children,
which is why we have sponsored
an initiative that recognises current
and former teachers. During every
other home game — 40 in total
— current and former educators
in attendance are asked to stand
and be recognized, while the video
scoreboard plays a tribute to them.
This Sagicor-branded feature has
inspired several Rays’ players to
reminisce about their favourite
teacher and the impact that the
teacher has made on them.
Johns Hopkins All Children’s
Hospital Visits: The Sagicor team
joined members from the Rays,
including Raymond the mascot,
to interact with children and their
families during three visits to the
John Hopkins All children’s Hospital.
The visits brought smiles to the
young patients, and each were given
Rays and Sagicor-branded items.
Rays Foundation: Sagicor partnered
with the Rays on two occasions in
2019 to provide immediate help to
those in need through our monetary
donations.
• Each year, Sagicor attends
•
the Rays Casino Charity event
and donates $7,500 to the
Rays Baseball Foundation. The
Foundation supports youth and
educational programming in
the Tampa Bay region, with a
special interest in serving at-risk
populations.
In direct response to Hurricane
Dorian, members of the Rays and
Sagicor met to determine how
we could make an immediate
difference after the unthinkable
destruction to the Bahamas.
Sagicor’s $10,000 donation to
the Rays Baseball Foundation
went directly to helping provide
the region with children’s school
supplies.
Rays Fan Fest: Each year, the Rays
host a pre-season Fan Fest to allow
fans to connect to the players and
coaches. In 2019, we sponsored the
Coaches Clinic, where former Major
League Baseball players worked
with children on their fielding and
batting techniques, and the Mascot
Meet & Greet, where children had
the opportunity to get their photos
taken with the Rays’ mascots.
Jamaica
COUNTRY: Jamaica
INITIATIVE: Labour Day Projects
Hundreds of Sagicor Group
Jamaica’s team members
volunteered on Labour Day, May 23,
2019, to carry out renovation and
clean-up activities at four children’s
homes across the island, in line with
the national Labour Day theme:
‘Child Safety – It’s You, It’s Me, It’s All
A We’.
The children’s homes that received
support were: Reddie’s Place of
Safety, Kingston; SOS Children’s
Village, Montego Bay, St James;
St Augustine’s Place of Safety,
Chapelton, Clarendon; and Pringle’s
Children’s Home, Pringles, St Mary.
COUNTRY: Jamaica
INITIATIVE: Keeping Abreast
Luncheon
The Sagicor Foundation continued
its support of the Jamaica Cancer
Society’s annual luncheon to honour
cancer survivors in October 2019.
One of the Jamaica Cancer Society’s
premier fundraisers, Sagicor support
was rendered both in cash and
kind, with a donation of $100,000
being made, and tokens also being
distributed at the event.
As part of the observance of
Breast Cancer Awareness Month,
the Keeping Abreast Luncheon,
serves as a fundraiser to support
the Cancer Society’s ongoing
programme of screening and
education. In previous years, funds
raised have provided financial
assistance to women undergoing
cancer treatment.
event recognizes and pays tribute
to cancer victims and survivors and
fosters awareness about the disease.
The event was held in July at the
Police Officer’s Club.
COUNTRY: Jamaica
INITIATIVE: Luncheon and
Graduation Ceremony for CSJP At-
Risk Youth
Sagicor hosted a group of thirty-six
youngsters, who are participants of
the Ministry of Justice ACTS/Citizen
and Security Justice Programme
(CSJP), to a special motivational
luncheon, where they were offered
words of encouragement and
inspiration from Sagicor executives
and team members.
The participants, ranging from
seventeen to thirty years in age, hail
from inner city communities and
would have been part of a six-month
programme which promotes literacy
and numeracy skills in preparation
for vocational training. Additionally,
the cohort is being exposed to
social and behavioural skills.
Continuing its commitment for the
programme, Sagicor hosted the
group’s graduation ceremony at
its head office in New Kingston in
December.
COUNTRY: Jamaica
INITIATIVE: Relay for Life
As part of our ongoing relationship
with the Jamaica Cancer Society,
Sagicor had over 200 team
members, friends and family support
the Jamaica Cancer Society’s
annual Relay for Life vigil. The
COUNTRY: Jamaica
INITIATIVE: Jamaican National
Children’s Home
Sagicor Foundation in 2019 donated
$1 million to the Jamaica National
Children’s Home in response to the
home being destroyed by fire in
August.
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Sagicor Financial Company Ltd | 2019 Annual Report
45
SPORT
Southern & Eastern
Caribbean
COUNTRY: Barbados
INITIATIVE: The Barbados Golf
Tournament
In August 2019, Sagicor partnered
with the Barbados Golf Club for
its 50th Anniversary and Golf
Championship event. Sagicor’s
sponsorship enabled complimentary
registration for some of the young
participants of the event. For several
years, Sagicor provided ongoing
development of golf on the island,
as evidenced by its sustained
sponsorship of the Barbados Open
Amateur Golf Championship.
COUNTRY: Barbados
INITIATIVE: Olympic Day
On June 23, 2019, the Barbados
Olympic Association celebrated
Olympic Day with students from
primary and secondary schools,
acknowledging the support of
Sagicor.
Olympic Day promotes fitness,
well-being, culture and education
around the world. Together with
its theme, Move, Learn, Discover,”
the Day celebrates and endorses
the values of excellence, friendship
and respect. As an advocate for
sport, health, education and youth
development, Sagicor also provided
shirts for the participants.
COUNTRY: Barbados
INITIATIVE: Sagicor General
Somerset Cricket Team
For eight years, Sagicor has
been a major and title sponsor
of the Sagicor General Somerset
Cricket Team which is a part
of the Somerset Sports Club,
Dominica. This Club, established
in 1963, received the Meritorious
Service Award from the Dominican
government for its contribution
to cricket and to the community.
Sagicor has provided an annual
grant to the club, assisting with
the purchase of uniforms and
supporting other community
development projects.
COUNTRY: Trinidad and Tobago
INITIATIVE: Sagicor/St Andrew’s
Golf Club Invitational
Sagicor was again the title sponsor
of the “Sagicor/St Andrews Golf
Club Invitational” which attracted
102 participants. These players,
grouped by handicap and age, were
provided a platform by Sagicor to
compete for a spot on the Trinidad
and Tobago National Golf Team.
The competition is an attraction
to top players, and provides an
invaluable learning experience for
young golfers. Through Sagicor’s
“Kids on the Greens” tournament,
local youth, namely those from the
St James Police Youth Club, were
also introduced to the fundamentals
of golf.
COUNTRY: Trinidad and Tobago
INITIATIVE: Red/Orange Ball
Tournament
On June 29, 2019, the 17th Sagicor
1
2
1 Sagicor team members, family and friends at the Relay for Life.
2 Young citizens during a motivational luncheon hosted by the CSJP and Sagicor.
3 Children from various schools during the Olympic Day celebrations.
4 Young budding golfers at the St Andrew’s Golf Invitational.
5 Sagicor General Insurance Somerset cricket team.
6 Umpires of the Antigua and Barbuda Cricket Umpires Association smartly modeling
their new uniforms.
46
Sagicor Financial Company Ltd | 2019 Annual Report
Junior Lawn Tennis Tournament
kicked off its first event with
the Red/Orange Ball Under-10
Tournament. The Red/Orange Ball
tournament had seen a 40% increase
in participants, when compared
to 2018, with 20 beginners and 50
intermediates. The main tournament
which ran from July 6 to July 11,
boasted a total of 115 participants
from both Trinidad and Tobago. The
Trinidad Country Club, Long Circular
Road, Maraval was the chosen arena
for these matches. Together with
the Tennis Patrons Association,
Sagicor once again exemplified
its commitment to sport and the
development of youth. This tactical
sport not only enhances your
physical health, but also boosts your
mental prowess and social skills.
COUNTRY: Antigua and Barbuda
INITIATIVE: Antigua and Barbuda
Cricket Umpires Association
Sagicor demonstrated its support
for the Antigua and Barbuda Cricket
Umpires Association by providing
new uniforms for its team members.
Established since 1955, the
Association continues to mold and
develop umpires who exude respect
and professionalism for the game of
cricket. The spanking new t-shirts
and caps were donned from January
20 at the Antigua & Barbuda Cricket
Association 9’s kick-off tournament.
COUNTRY: Antigua and Barbuda
INITIATIVE: The Sagicor Life
Enforcers Ladies Cricket Team
Sagicor Life Enforcers, a cricket and
netball team for females, is a shining
example of the excellence for which
Sagicor is well known. In 2019, this
Sagicor sponsored team emerged
as triple champions in the following
tournaments: the ABSCA Cortwright
“Carty” Mason 10 Over Tournament,
the St John’s Co-operative Credit
Union 25 Over Competition and
the ABSCA Myron Phillip & Sharon
Joseph 20/20 League.
COUNTRY: Dominica
INITIATIVE: Sagicor South East
Football Team
For several years, Sagicor has
sponsored the Sagicor South East
Football Team, working diligently
to nurture the skill and ambition
of these talented footballers. This
long partnership with the premier-
league football team reaped
tremendous rewards in 2019 as the
team emerged as champions of the
Dominica Football Association’s
Premier League competition,
winning $15,000 for its performance.
COUNTRY: St Lucia
INITIATIVE: Sagicor COTECC
Under 12 and Under 14 Tennis
Tournaments
Sgicor, in collaboration with the St
Lucia Tennis Association, hosted
the Sagicor / Confederación de
Tenis de Centroamérica y el Caribe
(COTECC) Under 12 and Under 14
Tournaments. These tournaments
gave youth from various territories
a chance to showcase their talent
and to compete for top titles and
prizes. As the tournaments provide
competitors with points towards
international ratings, participants
from France and the USA joined
competitors from Antigua,
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Sagicor Financial Company Ltd | 2019 Annual Report
47
Barbados, Bermuda, Dominican
Republic, French Guiana, Guatemala,
Honduras, Martinique, St Kitts and
Nevis, St Lucia, St Vincent and
Trinidad and Tobago.
COUNTRY: St Lucia
INITIATIVE: Sagicor Christmas
Tennis Tournament
Sagicor remained consistent in
its support of youth and sports,
continuing its partnership with the
St Lucia Tennis Association and
hosting the Annual Christmas Tennis
Tournament. Both boys and girls
were afforded an opportunity to
compete in Under 10, Under 14 and
Under 18 age groups.
United States of America
COUNTRY: USA
INITIATIVE: onbikes
Onbikes is a Tampa-based, non-
profit organisation which works to
ensure that marginalised children
can receive their first bicycle,
believing that every child, no matter
the circumstances, deserves to have
a bike. Onbikes also promotes self-
confidence, healthy living and the
overall well-being of young at-risk
children and foster kids.
In December 2019, Sagicor
team members joined forces
with onbikes and Leadership
Tampa Bay to help build bikes in
preparation for the holiday season.
Working alongside more than 600
volunteers, Sagicorians were directly
responsible for building 20 bicycles,
and in total, the onbike workday
produced some 900 bikes that day.
COUNTRY: USA
INITIATIVE: Brigham Young
University
Sagicor Life Insurance Company
sponsored Brigham Young
University (BYU) Athletics as part
of its 2019 promotional activities,
serving to raise brand awareness for
Sagicor in the western regions of
the U.S.
The BYU sponsorship helps promote
Sagicor on a national level as the
university has strong alumni support
across the country . As BYU men’s
and women’s basketball teams
have a strong local and national
following, Sagicor benefited from in-
game signage being viewed by fans
attending games as well as national
television audiences.
Elements of the sponsorship
included promotion on the BYU
website, such as banner ads and
a one-time email to everyone on
BYU’s email list. Sponsorship of the
basketball programme included
an in-game print ad in the game
programme, an in-game video board
feature called “Keys to the Game”
and television friendly signage
located centre court and at both
ends of the court.
Sagicor also sponsored the strong
BYU women’s and men’s volleyball
teams, which would have also
placed Sagicor signage in full
view of both live and television
audiences.
COUNTRY: USA
INITIATIVE: Tampa Bay Lightning
The Sagicornow direct-to-consumer
website was featured during the in-
game promotions, and Sagicornow
banner ads were placed on the
Lightning team’s website with
the intention of driving traffic to
SagicorNow.com.
The Tampa Bay Lightning have
attracted a great deal of positive
attention for their outstanding play
on the ice, charitable work in the
community and owner Jeff Vinik’s
development plans for the area
surrounding the team’s home arena
in downtown Tampa.
COUNTRY: USA
INITIATIVE: Positive Coaching
Alliance
Sagicor supports Positive Coaching
Alliance (PCA) chapters in both
Tampa Bay and Arizona, helping to
sponsor the organisation’s Triple-
Impact Competitor scholarship
programme. PCA is dedicated to
developing “Better Athletes, Better
People by providing a wide range
of resources to coaches, parents,
administrators and student-athletes.
These resources have helped
those involved in youth and high
school sports to create a positive
character-building sports culture.
The Triple-Impact Competitor®
scholarship programme, sponsored
by Sagicor, provided 26 scholarships
to student athletes from the Tampa
Bay area, and 14 scholarships to
those from Arizona, for a total of
$66,000 in scholarships. Students
1
2
1 Both boys and girls were encouraged to enter
the Sagicor Christmas Tennis Tournament in St.
Lucia.
2 The COTECC U12 and U14 Tournaments
attracted participants from fourteen countries, two
of which were extra-regional.
3 & 5 Champions of the JTA /Sagicor National
Athletics Championships also received 5-year
scholarships to cover their secondary education
expenses.
4 Team Sagicor helps onbikes to donate bicycles
to at-risk children in the Tampa Bay area.
6 & 7 The Positive Coaching Alliance Scholarships
were provided to student athletes from Arizona
and Tampa Bay.
8 Some of the boys and trainers who attended the
“Our Sons” motivational conference in Jamaica.
48
Sagicor Financial Company Ltd | 2019 Annual Report
conference geared towards
empowering young boys in a
sports-centred conference. As many
as 400 boys from high schools
and communities across Jamaica,
including children from Boys’
Homes, attended the event. The
Foundation also provided volunteers
to help manage the large group
throughout the day’s activities,
and ensured that each participant
received a Sagicor branded item.
apply for the scholarships in May,
and the finalists are recognized as
competitors who make positive
contributions on three levels:
personal mastery, leadership and
honouring the game.
Jamaica
COUNTRY: Jamaica
INITIATIVE: JTA/Sagicor National
Athletics Championships
The JTA/Sagicor Primary, All-Age
and Junior High School National
Athletics Championships was a
two-day athletics competition
held May 24 and 25, attracting the
participation of more than 1000
students. The national event gives
the student athletes a stage on
which they can showcase their
athletic prowess.
Through a partnership with the
Jamaica Teachers’ Association, the
Sagicor Foundation invested over
$6.5 million in sponsorship towards
the 36th staging of the event in
2019, with an additional $1.2 million
funds providing educational grants
for parish champions of the events.
Sagicor also provided over 150
volunteers working to ensure that
the meet ran smoothly. In keeping
with the its charitable tradition,
the Foundation also presented the
overall champion boy and girl with
five-year scholarships to cover their
secondary education expenses.
COUNTRY: Jamaica
INITIATIVE: Our Sons
Sagicor Foundation supported
the B3 Parenting motivational
4
6
7
3
5
8
Sagicor Financial Company Ltd | 2019 Annual Report
49
AWARDS AND RECOGNITION
Caribbean American Advertising (ADDY) Awards
At the recently concluded 2020 Caribbean Advertising Awards, Sagicor copped two of the five top awards:
• Best of Film Video and Sound for the Wedding/Bath Life Happens Fast TV Commercials
• Best of Public Service for the Sagicor Breast Cancer Awareness Campaign
This achievement is noteworthy as over 40 companies from the Caribbean, USA and Canada submitted over 600 entries of advertisement created for
Caribbean markets. In addition to the two prestigious awards, Sagicor’s marketing communications were also recognised and awarded either gold or silver
in the following categories:
SELECTED CATEGORY
AWARD ENTRY NAME
Regional/National Television Commercial
Regional/National Television Commercial
Regional/National Television Commercial Campaign
Out-Of_home (OOH) Campaign
Integrated Media Corporate Social Responsibility Campaign
Public Service OOH & Ambient Campaign
Public Service OOH & Ambient Single Occurrence
Outdoor Board Super-sized, Digital or Animated – Single
Gold
Gold
Gold
Gold
Gold
Gold
Gold
Gold
Bath – life happens fast – be prepared – Southern Caribbean campaign
Wedding – life happens fast – be prepared – southern Caribbean campaign
Wedding – life happens fast – be prepared – southern Caribbean campaign
Sagicor ‘Accidents’ Campaign (Trinidad and Tobago)
Sagicor Breast Cancer Awareness
Sagicor Breast Cancer Awareness
Sagicor Breast Cancer Pink Crossing
Sagicor ‘Don’t Text & Drive’ (Barbados)
Public Service OOH & Ambient Campaign
Silver
Cancer “Tear Apart” Sliding Doors
Outdoor Board Super-sized, Digital or Animated – Single
Silver
Sagicor ‘Accidents’ Highway - 1 (Trinidad and Tobago)
Outdoor Board Super-sized, Digital or Animated – Single
Silver
Sagicor ‘Accidents’ Highway - 2 (Trinidad and Tobago)
Outdoor Board
Silver
Sagicor Bubble wrap Car Billboard - Barbados
Out-Of-Home Multiple Installations
Silver
We’ve Got You Covered Campaign
Both Top Award categories for “Wedding/Bath Campaign and the Breast cancer Awareness Campaign moved to the regional stage, competing with
local winners from Florida American Advertising Awards (AAF)organisations at the District level of the competition. Sagicor’s Breast Cancer Awareness
Campaign was again successful and was awarded the Charlie Award for work supporting corporate and social responsibility.
1
3
50
Sagicor Financial Company Ltd | 2019 Annual Report
1
3
4
2
During Breast Cancer
Awareness Month, Sagicor
painted the town pink
throughout the Southern
Caribbean.
1 We sensitised our clients on
breast cancer awareness as they
entered our offices.
2 Sagicor painted road humps
pink at various malls and
shopping plazas reminding
persons of the importance of
breast examinations.
3 Sliding door decals echoed
the sentiment that breast cancer
can tear persons away from the
families..
4 Client service areas were also
decorated.
5 Elevators within Sagicor
buildings branded with the
message, “Together we can
make a difference”
5
Sagicor Financial Company Ltd | 2019 Annual Report
51
HUMAN CAPITAL REPORT
CHANGING OF THE GUARD
Dr Patricia Downes Grant - CBE,
MA, MBA, DBA, LLD (Hon) retires
The Directors of Sagicor Financial
Corporation Limited announced
the retirement of Dr Patricia
Downes-Grant CBE, MA, MBA,
DBA, LLD (Hon) - President and
Chief Executive Officer – Sagicor
Life Inc on December 17, 2019.
Dr Patricia Downes-Grant joined
the Barbados Mutual Life Assurance
Society in 1991, and during a career
that spanned 27 years, she held
several positions including that
of Vice President - Investments,
Treasurer, Executive Vice President
(Finance and Investments) before
being appointed as President and
Chief Executive Officer of the
newly rebranded financial services
company, Sagicor Life Inc in 2006;
the operations of which reached
across the Eastern and Southern
Caribbean to Belize in Central
America, and she also held the post
of the Group Chief Operating Officer
in Sagicor Financial Corporation Ltd.
during this period.
Over the course of her career
with the Sagicor Group of
Companies, she lead a number
of transformational and strategic
projects that significantly changed
the business profile of the former
Barbados Mutual Life Assurance
Society. Through a series of
acquisitions and other strategic
initiatives the former organisation
grew into a great Caribbean, and
later a subsequently international
company, that listed on the London
Stock Exchange and more recently
on the Toronto Stock Exchange.
She is a former Chairman of the
Barbados Stock Exchange and
the Barbados Central Securities
Depository. She continues to serve
the Group as a director of some of
its subsidiaries.
Congratulations are extended
to Mr Ravi Rambarran on his
appointment as Pat’s successor to
lead the Sagicor Life Inc. entity as its
new President and Chief Executive
Officer. Ravi has been with Sagicor
for 23 years and has held many
senior positions in the Sagicor
Group.
Mr Ed Clarke announced his
intention to retire effective June
30, 2020, after over 13 years with
Sagicor. Ed held the position of
Chief Operating Officer, Sagicor
Life Inc. and General Manager of
Barbados since 2010. Prior to this
role, Ed was the Group’s Chief
Internal Auditor. Ed is expected to
continue to contribute to Sagicor by
being involved with certain special
projects including local government
relations. Ed is succeeded by
Mr Paul Inniss, an executive
with extensive experience with
other well-recognized insurance
and banking companies in the
Caribbean. He holds a fellowship
in Risk Management from the
Insurance Institute of Canada and an
MBA from Heriot Watt University,
UK. We welcome Paul to our
executive team.
We continued to invest in our
people through various specially
tailored and other general insurance
certification programmes regionally
and internationally.
LEADERSHIP & CULTURAL
TRANSFORMATION
2020 - Strategic focus
Cultural transformation focused
on the One Sagicor initiative
as well as improving leadership
capacity through targeted
developmental programmes for our
people leaders. Group companies
adopted a #OneSagicor theme
that influences the direction of
cultural transformation and fosters
the development of a deep client
focused culture.
Attracting, developing
and retaining exceptional
talent.
Job Fairs at universities, a Sagicor
Green leaders’ programme,
mentorship programmes, industry
specific training programmes and
succession planning initiatives
ensure that The Sagicor Group
attracts, retains and provides for
a solid base of exceptional talent
to meet business requirements.
In Jamaica the Sagicor Summer
Mentorship Programme welcomed
approximately 330 summer workers
between May 20 -August 30, 2019.
• Sagicor Sales Internship
Programme
• Sagicor Induction Programme
• Technology Training
• Product Knowledge
• Fraud Detection & Prevention
• Coaching for Sales Leaders
• Transformational Leadership
for Sales Managers
At SLJ the Learning and
Development Unit engaged in the
continued transformation to this
client centric culture with mandatory
courses to build trust amount teams,
“Mastering Emotional Intelligence”,
“Teamwork”, “Communication – The
Art of Listening” and “Leadership
Skills”. Core skill development
training included Excel Courses,
Client Service Documentation,
Compliance, Fraud Detection and
Prevention, Introduction to Data
Analytics, Managing Stress through
Colour Therapy, Time Management,
Self-awareness, Managing Money.
The SagicorLead leadership
development programme continued
with cohorts from Jamaica and
Grand Cayman. The Sagicor Intuit
platform improved the efficiency of
registration, provided online check-
in, eased the generation of reports
to support growth and development
metrics, provided online evaluations,
generated reports and made
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Sagicor Financial Company Ltd | 2019 Annual Report
GLOBAL ISSUES
• Non-Gender Based
online courses available to all team
members.
PROFESSIONAL
ACHIEVEMENTS
Sagicor General Insurance Inc
added a Leadership Index to the
Quarterly Employee Experience
Pulse Survey. The Leadership Index
heightens awareness of the impact of
leadership on this key strategic driver.
The High Potential Leaders
programme at Sagicor Life Inc
enhanced management ability and
leadership skills and was facilitated
through the Sagicor Corporate
University at the Sagicor Cave Hill
School of Business and Management.
This ten-module programme ended
with presentations from the cohort
on strategic business issues. The
open enrolment six module Personal
Mastery programme, offered
through the Corporate University,
provided staff with the opportunity
to participate in self-improvement
programmes.
Queens University, Canada,
facilitated a Negotiation Skills
workshop for key employees to
strengthen skills in this important
business competency.
New employees are required
to complete the Life Office
Management Association (LOMA)
280 and 290 programmes which
teach fundamentals for the
insurance industry. Coaching for our
people leaders continued in 2019.
Diandre Griffith – Fellow, Life
Management Institute (FLMI)
Chanille Jackman - Fellow, Life
Management Institute (FLMI)
With operations in 21 countries,
our Human Resources polices
are robust and address several
workplace issues associated with
the conditions of work and also
reflect concern for the health
and safety and well-being of our
employees. Policies contained in
the Sagicor Employee Handbook
addresses issues related to working
conditions, and interactions with all
stakeholders. Several global themes
and issues impacted the training and
sensitization of employees in 2019.
Our Human Resources Departments
revised and reinforced existing
policies with mandatory workshops
and online training on topics to
ensure professional interactions with
other employees, customers and all
stakeholders.
• Sexual Harassment – there
is full compliance with new
legislation rolled out in
Barbados and voluntary
compliance in other countries
through programmes like
Preventing Workplace
Harassment
• Anti-Money Laundering
• Code of Business Conduct
and Ethics
•
Information Security
• Emotional Wellness
Compensation - Our group
policy on compensation,
driven by roles and grades,
qualifications and experience,
provides management
with the criteria to avoid
inequalities in compensation.
• Recognizing and rewarding
performance
Top performers are recognized
through a solid recognition
programme that recognizes
performance among our sales
and administrative teams.
Annual Awards functions
celebrate top performers
who receive the President’s
Trophies and provide other
attractive incentives including
attendance at the coveted
biannual Convention. The
Sagicorian awards recognize
outstanding managers and
employees each year.
• Employee Engagement
surveys and turnover
Dr M Patricia Downes-Grant
Mr Ravi Rambarran
Mr Edward Clarke
Many group companies
track Employee Engagement
quarterly using the Employee
Net Promoter Score (eNPS)
Mr Paul Inniss
Sagicor Financial Company Ltd | 2019 Annual Report
53
as a human resources metric.
This Survey also allowed
for the tracking of changes
to the recognition and
communication culture over
each quarter and changes
in perceptions of leadership
impact.
Key people metrics over the
past six years using a standard
Employee Engagement Tool
independently administered by
LOMA show scores that range
from 70% to 81% during this
period and exceed global trends
in Employee Engagement which
have ranged from 59% to 66%
over a similar period.
Employee turnover
Average employee turnover rates
across the Sagicor Group of
Companies are well within global
industry trends - 2.2% in the USA
in 2019 for Insurance and Financial
services sector (ADP 2019 report).
• Sagicor Group Jamaica – The
NEW PROGRAMMES
• PERSONAL SOCIAL
RESPONSBILITY PROGRAMME
A new employee Corporate Social
responsibility (CSR) programme
will be launched in 2020 and
will provide employees with 21
hours of paid time off annually for
volunteering and participating in
CSR programmes under specific
conditions. This initiative will
encourage employee involvement in
Social Responsibility programmes,
provide opportunity for employees
to identify local community-
based programmes/charities for
support under the Corporate
Social Responsibility programme;
provide employees with leadership
and networking opportunities,
encourage innovative solutions to
community issues and also increase
the company’s visibility in all
communities.
Work from Home (WFH) policy
to provide team members to
balance their work and family
life and the paternity leave
programme were innovative
benefits introduced in 2019.
• SUSA’s Wellness initiative – to
support health and wellness,
the implementation of a new
paid time off (PTO) programme
and new Identity Management
services for staff and their
families offering credit protection
and identity monitoring services
were among the slate of benefits
introduced in SUSA.
• Sagicor Life Inc – announced
plans for the introduction in
2020 of its Flexible Working
arrangements policy.
• Sagicor General Insurance Inc -
The Huddle – specially designed
meeting space for one on one
meetings, collaboration and
consultations.
EMPLOYEE ENGAGEMENT
• Activities
There was considerable flair and
novelty in the 2019 calendar of
employee engagement initiatives
which included Fashion Fridays
and sports events. Highlights
were two celebrity cricket
matches with SFCL Board
members, executive management
and key staff members played
on the grounds of the Sagicor
Corporate Centre in Barbados.
Other new activities included
workshops on Introduction
to Photography, and Quick
and Easy Meal prepping, Crop
Over Cooldown, Coffee and
Conversation commemorating
International Women’s Day, Brand
2.30%
2.20%
2.10%
2.00%
1.90%
1.80%
1.70%
Turnover Percentage
Sagicor Employee Engagement Scores
2014 to 2019
s
e
g
a
t
n
e
c
r
e
P
84
82
80
78
76
74
72
70
68
66
64
SLI Barbados
SLI Eastern
Caribbean
SLI Dutch
Caribbean
SLI Trinidad
& Tobago
SLI Group
Jamaica
Sagicor USA
2016
2017
2018
2019
2014
2017
2019
71.8
74.12
73.76
70
76.36
76.44
75
72.64
71.84
71
74.2
73.76
77.5
78.7
78.4
-
80.16
81.24
54
Sagicor Financial Company Ltd | 2019 Annual Report
Week, Sagicor’s Got Talent and
“Buss yuh Brain” Competitions
and Shani McGraham-Shirley.
OUR HEROES
Conversations with the General
Manager of Trinidad and
Tobago improved organisational
communication, and “You are
the Magic” was launched via a
video presentation in Trinidad
and Tobago when management
hosted a myriad of activities –
serenades, luncheons, beach
limes and issued appreciation
tokens. Sagicor USA’s used
Kazoo – an online, point-based
recognition programme to create
interaction between management
and staff and provide all team
members with the ability to
instantly recognize each other on
a social platform. Engagement
and participation have been
outstanding.
The SGI Connect Newsletter, Stay
Tuned E-Bulletin and General Chat
sessions continued to be useful
communication tools to support
our employee engagement
strategy throughout 2019.
The inaugural Brand & Culture
Week was one of the top
highlights of 2019 for the Sagicor
Team and the launch of the
“One Sagicor” theme set the
foundation for the annual kick off
events in 2020.
Annual Motivational Seminars and
Meetings included speakers such
as Emmy award winning entertainer
and motivational speaker – Steve
Harvey, Raphael Saul, Wayne Henry
Suzan Foster, Client Service
Representative at Sagicor Bank
Jamaica Limited received The
Badge of Honour for Gallantry from
the Government of Jamaica on
August 6, 2019. Suzan was awarded
for saving the life of a Police Officer
who had been knocked off his
motorcycle.
Nicholas Neckles, CFA – Portfolio
Manager – Sagicor Asset
Management Inc, Sagicor Life Inc
- Barbados shattered the World
Masters record for the 18 and over
200 meters backstroke in the
Central American and Caribbean
Swimming Championship held in
Barbados in 2019 clocking a new
record of 2:09.08 and eclipsing the
former 2:10.57 record.
SLI Barbados celebrated this
achievement and his three (3)
gold medals and simultaneous
breaking of 3 world records in the
50 meters, 100 meters and 200
meters backstroke events at the 18th
FINA World Masters Championships,
which were held in Korea in 2019.
INTERNATIONAL
RECOGNITION-OPTIMA
WIN
Sagicor Group Jamaica Limited
received the Silver Optima Award
for Vision in recognition of the
work with millennials across the
Group through the Pro-Millennial
Mentorship Society. The Optima
Awards programme, which was
established by Workforce Magazine,
is based in the USA and recognizes
exemplary HR programmes
that meet significant business
challenges.
TOP PERFORMERS
Group companies recognise and
celebrate outstanding Sales and
other performers. Contributions
from pioneers and creators of
ingenious business solutions,
and the recognition of service
anniversaries are all part of
the recognition and rewards
programmes each year.
Sales
Top sales performer - Sagicor
Group Jamaica Ltd - Loeri Robinson
Top sales performer - Sagicor Life
Inc - Barbados - Janice Mullin-
Sargeant
Top sales performer – Sagicor Life
Eastern Caribbean Inc - Ogden
Browne.
Loeri Robinson
Janice Mullin-Sargeant
Ogden Browne
Sagicor Financial Company Ltd | 2019 Annual Report
55
The Sagicorian Awards
The prestigious Sagicorian Award is
presented in two categories to the
most outstanding Employee and the
most outstanding Manager in the
Sagicor Group of Companies. Our
top performers were:
Manager of the Year - Tricia De
Gannes - Sagicor Life Inc – Trinidad
and Tobago
Employee of the Year - Leeanna
Joseph - Sagicor Life Eastern
Caribbean Inc.
Group Pioneer of the Year –
Nicolette Bell - Sagicor Life Inc -
Barbados
Group Contributor of the Year –
John Fleming - Sagicor Life Inc –
Trinidad and Tobago
Tricia De Gannes
Leeanna Joseph
Nicolette Bell
John Fleming
Other outstanding team
members
Team Member of the Year -
Stuart South - Sagicor Group
Jamaica
Employee of the Year –
Shakeila Marshall - Sagicor Life Inc
- Barbados
Employee of the Year -
Krystal Bunting, Employee Benefits
Dept - Sagicor Life Inc - Trinidad
and Tobago.
Employee of the Year -
Shelly-Ann McCarthy - Sagicor
General Inc
Employee of the Year - Lisa Melius -
Sagicor Eastern Caribbean Inc
Employee of the Year - Lisa Heard -
Sagicor USA
Manager of the Year - Rohit Pagey -
Sagicor USA
Sagicor Contributor of the Year-
Markus Galuschka - Sagicor Life Inc
- Barbados
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Sagicor Financial Company Ltd | 2019 Annual Report
INNOVATION & TECHNOLOGY
SAGICOR ONE DIGITAL
EXPERIENCE
By providing a new digital
experience to our customers,
Sagicor has transformed the way
insurance products are marketed
and sold. With the Sagicor One
platform, Clients can now use their
preferred channel to find, choose,
and ultimately buy insurance
anytime, anywhere. The Sagicor
One Digital Experience places
all our customer-facing web
properties on a single platform
for ease of administration. The
smart technology learns which
topics are of interest to visitors and
policyholders alike and presents
them accordingly.
SAGICOR GO
Previously, our mobility application
provided customers with access
to information about their policies
as well as general information on
insurance, this was expanded to
include additional lines of business.
Sagicor Go now provides customers
with access to their mortgage
balances and provides a calculator
for future opportunities. Customers
can view their health insurance
benefits, claims and their health
card information while on the go.
The application aids Sagicor General
customers with access to their
policies for all lines of business and
allows them to call for road side
assistance in countries where this
service is provided. This platform
has allowed Sagicor to transform
the way we communicate with our
customers as part of a renewed
digital experience. Sagicor Go is
available through Apple’s App Store
as well as the Google Play store.
SELF SERVICE PORTALS
Our self-service portals allow
customers to access their policy
information and documents at
their convenience. Providing an
intuitive experience for customers,
their ability to retrieve statements
and check on the status of policies
in the privacy of their homes is
unparalleled. In keeping with our
other digital offerings, the self-
service platform is directed at
transforming how our customers
conduct business with Sagicor.
SERVICE QUALITY DASHBOARDS
In addition to valuable products,
Sagicor believes that delivering
superior customer service is an
important dimension that aids
geographic expansion and growth.
Leveraging previous network
investments and workflow data, an
interactive solution was developed
that displays transactional cycle
time across policy administration
activities. The new tool provides
visibility to cycle time, real-time
understanding of emerging
bottlenecks, insight on training
opportunities, and identification of
individual performance regardless
of location across the Southern
Caribbean.
TESTING AUTOMATION
Great products, services, and
technologies still need rigorous
testing. Sagicor has made great
strides in its use of automated
testing methods, which offer the
promise of confidently accelerating
our responses to changing market
dynamics. Important improvements
introduced the use of automated
testing for new products, which
reduced cycle time for certain
product development tasks from
three weeks to three days. Testing
for our automated real-time
underwriting business rules are also
delivering substantial improvements
in cycle time, with reductions
ranging from 50% to 75% of the
previous baseline.
FINANCIAL GENERAL LEDGER
Deployment of a common
general ledger across the Sagicor
Group of companies has brought
opportunities to streamline and
transform processes in finance and
accounting. This initiative delivered
a single platform to support the
three operating companies, enabled
automation of accounts payable
processes, and set the stage for
accelerated consolidation and
enhanced reporting capabilities.
The “Sagicor Go” brand for the Group’s
mobile applications
Sagicor Financial Company Ltd | 2019 Annual Report
57
MANAGEMENT
DISCUSSION &
ANALYSIS
58
Sagicor Financial Company Ltd | 2019 Annual Report
MANAGEMENT DISCUSSION AND ANALYSIS
Introduction and Notice
The principal activities of the Sagicor Group are as follows:
This Management’s Discussion and Analysis (“MD&A”) contains important
information about Sagicor’s business and its performance for the fourth
quarter 2019 and year ended December 31, 2019 with comparative analysis
for the corresponding periods in 2018. This MD&A should be read in
conjunction with the Company’s annual financial statements, prepared
in accordance with International Financial Reporting Standards (IFRS) in
effect on the date of such information.
The following discussion is based on the financial condition and results of
operations of Sagicor, unless otherwise specified or indicated. Financial
information is presented in millions of US dollars, unless otherwise
indicated. Amounts for subtotals, totals and percentage variances included
in tables in this MD&A may not sum or calculate using the numbers as they
appear in the tables due to rounding.
Legal Constitution and General Information
Sagicor Financial Company Ltd. (“Sagicor”) (TSX: SFC) is a leading
financial services provider in the Caribbean, with almost 180 years of
history. Sagicor’s registered office is located at Clarendon House, 2 Church
Street, Hamilton, HM 11, Bermuda, with its principal office located at Cecil F
De Caires Building, Wildey, St. Michael, Barbados.
On November 27, 2018, Sagicor Financial Corporation Limited entered
into a definitive arrangement agreement as amended on January 28, 2019
with Alignvest Acquisition II Corporation (“Alignvest”) pursuant to which
on December 5, 2019, Alignvest acquired all the shares of Sagicor by way
of a scheme of arrangement under the laws of Bermuda, where Sagicor is
incorporated, and continued as Sagicor Financial Company Ltd.
The Company’s issued common shares are listed on the Toronto
Stock Exchange.
Sagicor Financial Company Ltd. and its subsidiaries (‘the Group’) operate
across the Caribbean and in the United States of America (USA). There is
a discontinued operation in the United Kingdom. Details of the Sagicor’s
holdings and operations are set out in notes 4 and 38 to the 2019
financial statements.
• Life and health insurance,
• Annuities and pension administration services,
• Banking and investment management services,
and its principal operating companies are as follows:
• Sagicor Life Inc. (Barbados and Trinidad & Tobago),
• Sagicor Life Jamaica Limited (Jamaica),
• Sagicor Bank Jamaica Limited (Jamaica),
• Sagicor Life Insurance Company (USA).
The Group also underwrites property and casualty insurance and provides
hospitality services.
Result of Operations
An understanding of Sagicor’s financial condition and the results and
related risks of Sagicor’s operations for the periods discussed in this
MD&A requires an understanding of Sagicor’s business. Accordingly, the
following discussion should be read in conjunction with the discussion of
these and related matters that appear elsewhere in this MD&A, including
under the following headings: (i) Key Factors Affecting Results; (ii) Critical
Accounting Estimates and Judgments; and (iii) Risk Management.
Non-IFRS Financial Information
Sagicor reports its financial results and statements in accordance with
IFRS. It also publishes certain financial measures that are not based
on IFRS (non-IFRS). A financial measure is considered a non-IFRS
measure if it is presented other than in accordance with the generally
accepted accounting principles used for the Company’s audited financial
statements. These non-IFRS financial measures are often accompanied
by and reconciled with IFRS financial measures. For certain non-IFRS
financial measures, there are no directly comparable amounts under IFRS.
The Company believes that these non-IFRS financial measures provide
additional information to better understand the Company’s financial
results and assess its growth and earnings potential. Since non-IFRS
financial measures do not have standardised definitions and meanings,
they may differ from the non-IFRS financial measures used by other
60
Sagicor Financial Company Ltd | 2019 Annual Report
institutions and should not be viewed as an alternative to measures of
financial performance determined in accordance with IFRS. The Company
strongly encourages investors to review its financial statements and
other publicly filed reports in their entirety and not to rely on any single
financial measure.
Sagicor believes that certain non-IFRS measures described below are
more reflective of its ongoing operating results and provide readers
with a better understanding of management’s perspective on the
Company’s performance. These measures enhance the comparability of
the Company’s financial performance from period to period, as well as
measure relative contribution to shareholder value.
The following represent non-IFRS financial measures:
4. Debt to capital ratio
The debt to capital ratio is the ratio of notes and loans payable (refer to
note 16 to the audited annual financial statements) to total capital, where
capital is defined as the sum of notes and loans payable and total equity.
This ratio measures the proportion of debt a company uses to finance its
operations as compared with its capital.
5. Debt to equity ratio
The debt to equity ratio is the ratio of notes and loans payable (refer to
note 16 to the audited annual financial statements) to total equity. This
ratio measures the proportion of debt a company uses to finance its
operations as compared with its equity.
1. Return on Shareholders’ Equity
6. Dividend pay-out ratio
IFRS does not prescribe the calculation of return on shareholders’
equity and therefore a comparable measure under IFRS is not available.
To determine this measure, reported net income/(loss) attributable
to shareholders is divided by the total weighted average common
shareholders’ equity for the period. The quarterly return on shareholders’
equity is annualised.
2. Book value per share
To determine the book value per share, shareholders’ equity is divided
by the number of shares outstanding at the period end, net of any
treasury shares.
3. MCCSR
The MCCSR was a capital adequacy measure for life insurance companies
established by the Office of the Superintendent of Financial Institutions
Canada (“OSFI”). It was a measure used to monitor that insurers maintain
adequate capital to meet their financial obligations with 150% being the
minimum standard that was recommended by Canadian regulators when it
was in effect; companies were expected to establish and meet an internal
target greater than 150%. Refer to note 46.2 of the 2019 audited annual
financial statements for details.
This is the ratio of dividends paid per share to basic earnings per
common share.
7. Coverage ratio
This ratio earnings for the year before interest and taxes, divided by the
sum of interest and preferred share dividends. The coverage ratio is a
solvency check which measures the number of times interest can be paid
the earnings of the company.
Cautionary Statement Regarding Forward-Looking Information
This MD&A includes “forward-looking information” and “forward-looking
statements” (collectively “forward-looking information”) and assumptions
about, among other things, Sagicor’s business, operations, and financial
performance and condition, approved by the board of directors of Sagicor
on the date of this MD&A.
This forward-looking information and these assumptions include, but
are not limited to, statements about Group’s objectives and strategies
to achieve those objectives, and about its beliefs, plans, expectations,
anticipations, estimates, or intentions. Information included in this MD&A
that is not a statement of historical fact is forward-looking information.
When used in this MD&A, words such as “believes,” “may,” “will,”
“estimate,” “should,” “shall,” “plans,” “assumes,” “continue,” “outlook,”
“could,” “anticipates,” “intends,” “expects,” and words of similar import, are
intended to identify statements containing forward-looking statements.
Sagicor Financial Company Ltd | 2019 Annual Report
61
These statements appear throughout this MD&A. Such forward-
looking statements are based on Sagicor’s estimates, assumptions,
strategies and projections and subject to known and unknown risks,
uncertainties and other factors, all of which are difficult to predict and
many of which are beyond its control and which may cause actual results,
events or developments to be significantly different from any future
results, events or developments expressed or implied by such forward-
looking statements.
These factors include, but are not limited to, the following: fluctuations
in the fixed income markets may adversely affect Sagicor’s profitability
and financial condition; the success of Sagicor’s operations in the United
States depends on Sagicor’s ability to grow its business; Sagicor’s
financial targets may prove materially inaccurate or incorrect; Sagicor’s
exposure to the credit risk of its counterparties could adversely affect
its profitability; differences between actual claims experience and
estimated claims at the time the product was priced may result in
increased losses, and so Sagicor’s policy reserves may be insufficient to
cover actual policy benefits; Sagicor could be forced to sell investments
at a loss to cover policyholder withdrawals; Sagicor’s risk management
policies and procedures could leave Sagicor exposed to unidentified
or unanticipated risk, which could negatively affect Sagicor’s business
or result in losses; illiquidity of certain investment assets may prevent
Sagicor from selling investments at fair prices in a timely manner; Sagicor’s
fiduciary relationship with certain counterparties could adversely affect
its profitability; a prolonged labour dispute could hurt Sagicor’s business;
disease outbreaks may negatively impact the performance of Sagicor and
its subsidiaries; a failure to successfully integrate Sagicor’s acquisitions
could adversely affect Sagicor’s operations and profitability; a failure
to successfully execute current and future strategic acquisitions could
adversely affect Sagicor’s profitability; Sagicor may be required to make
an offer to purchase all of the 2022 Notes and Short Term Notes, but
may not be financially able to repurchase the notes; Sagicor’s business is
highly regulated and subject to numerous laws and regulations; litigation
and regulatory proceedings outcomes could adversely affect Sagicor’s
business; companies in the financial services industry are sometimes
the target of law enforcement investigations and the focus of increased
regulatory scrutiny; there may be adverse consequences if the status of
Sagicor’s independent contractors is successfully challenged; failures to
implement or comply with legally required anti-money laundering practices
could subject Sagicor to sanctions and/or criminal and civil penalties; the
amount of statutory capital that Sagicor’s insurance subsidiaries have
and the amount of statutory capital that they must hold to maintain their
financial strength and credit ratings and meet other requirements can
vary significantly from time to time and are sensitive to factors outside of
Sagicor’s control; a failure to maintain adequate levels of surplus capital
may result in increased regulatory scrutiny or a downgrade by the private
rating agencies; Sagicor’s financial condition may be adversely affected
by geopolitical events; Sagicor operates in a highly competitive industry;
Sagicor faces significant competition mainly from national and regional
insurance companies and from self-insurance, and Sagicor also faces
competition from global companies – this competition could limit Sagicor’s
ability to gain or maintain its position in the industry and could materially
adversely affect its business, financial condition and results of operations;
brokers that sell Sagicor’s products may sell insurance products of
Sagicor’s competitors and such brokers may choose not to sell Sagicor’s
products; computer viruses, network security breaches, disasters or other
unanticipated events could affect Sagicor’s data processing systems or
those of its business partners and could damage Sagicor’s business and
adversely affect its financial condition and results of operations; a financial
strength downgrade in Sagicor’s A.M. Best ratings or any other negative
action by a rating agency may increase policy surrenders and withdrawals,
adversely affect relationships with advisors and negatively affect Sagicor’s
financial condition and results of operations; the unpredictable nature of
the property and casualty insurance industry may cause fluctuations in
Sagicor’s results; Sagicor may be unable to reinsure risks on terms that are
commercially reasonable or satisfactory to Sagicor, or Sagicor’s reinsurers
may fail to meet assumed obligations, increase rates, or be subject to
adverse developments, negatively affecting Sagicor’s business, financial
condition and result of operations; Sagicor’s business model depends on
the performance of various third parties including actuarial consultants
and other service providers; negative publicity in the insurance industry
could adversely affect Sagicor; Sagicor depends on key personnel, and if
they were to leave Sagicor, Sagicor might have an insufficient number of
qualified employees; Sagicor is highly dependent upon economic, political
and other conditions and developments in Barbados, Jamaica, Trinidad
and Tobago, the United States of America and the other jurisdictions
in which it operates; Sagicor’s financial condition and operating results
may be adversely affected by foreign exchange fluctuations; foreign
exchange controls may restrict Sagicor’s ability to receive distributions
from its subsidiaries and any such distributions may be subject to foreign
withholding taxes; catastrophes and weather-related events, such as
hurricanes, may adversely affect Sagicor; the performance of Sagicor’s
group life insurance may be adversely affected by the characteristics
of the employees insured or through unexpected catastrophic events
such as natural disasters; Sagicor’s credit ratings may be reduced, which
may adversely affect Sagicor; Sagicor may be subject to Bermuda tax;
Bermuda’s compliance with the Organization for Economic Cooperation
62
Sagicor Financial Company Ltd | 2019 Annual Report
1.
Highlights
2. Profitability
3. Analysis by Business Segment
Sagicor Life
Sagicor Jamaica
Sagicor Life USA
Other
4. Financial Position
Capitalisation
Equity and Financing
Controls and Procedures
Other Items
5. Financial Investments
6. Risk Management
Risk Management Principles and Responsibilities
Risk Categories
Page
64
72
91
106
118
120
and Development international tax standards could subject Sagicor
to additional taxes; legislation enacted in Bermuda in response to the
European Union’s review of harmful tax competition could adversely
affect Sagicor’s operations and financial condition; any additional taxes
resulting from changes to tax regulations or the interpretation thereof
in countries in which it does business could negatively impact Sagicor’s
financial condition; Sagicor Financial Company Ltd. is a holding company
and is dependent upon distributions from subsidiaries to pay taxes and
other expenses.
Additional information about material risk factors that could cause actual
results to differ materially from expectations and about material factors or
assumptions applied in making forward-looking statements may be found
in this MD&A under “Risk Management”, “Key Factors Affecting Results,”
and “Critical Accounting Estimates and Judgements” and in the “Financial
Risk” and “Insurance Risk” notes to the consolidated financial statements.
The forward-looking statements in this document are, unless otherwise
indicated, stated as of the date hereof and are presented for the purpose
of assisting investors and others in understanding our financial position
and results of operations, our future operations, as well as our objectives
and strategic priorities, and may not be appropriate for other purposes.
We do not undertake to update any forward-looking statements, except as
required by law.
Additional Information
All documents related to the financial results of Sagicor Financial Company
Ltd are available on the Company’s website at Sagicor.com, in the Investor
Relations section. Additional information about Sagicor may be found
on the SEDAR website at sedar.com, as well as the Company’s Annual
Information Form, which may be found on the Company’s website or the
SEDAR website.
The Management’s Discussion and Analysis is dated April 23, 2020.
Sagicor Financial Company Ltd | 2019 Annual Report
63
1. HIGHLIGHTS
About Sagicor
The Sagicor Group experienced a strong performance in 2019, with growth
observed in all operating segments across the Group.
Creation of Sagicor Financial Company Ltd. (formerly Sagicor Financial
Corporation Limited)
On November 27, 2018, Sagicor Financial Corporation Limited entered
into a definitive arrangement agreement with Alignvest Acquisition II
Corporation (“Alignvest”) pursuant to which Alignvest will acquire all the
shares of Sagicor by way of a scheme of arrangement under the laws of
Bermuda, where Sagicor is incorporated.
On December 5, 2019 Sagicor and Alignvest announced they had
completed the business combination involving the transfer of all issued
and outstanding shares in Sagicor to Alignvest. This transaction raised
over US $450 million in new capital for the Group. As a result of the
completion of the transaction, all issued and outstanding shares in
Sagicor were transferred to Alignvest, with former shareholders of Sagicor
receiving cash or shares in Alignvest, which was renamed Sagicor Financial
Company Ltd. and trades on the Toronto Stock Exchange under the
symbol SFC. The Group incurred cash and non-cash transaction expenses
of US $43.4 million related to this exercise.
Group net income excluding Alignvest transaction expenses amounted
to US $147.5 million compared to US $102.9 million in the prior year.
Net income from continuing operations attributable to common
shareholders, excluding Alignvest transaction expenses, closed the
year at US $87.4 million compared to US $36.5 million in the prior year.
Both Group net income and income attributable to Shareholders from
continuing operations were affected by the Government of Barbados debt
restructuring in 2018. Management estimates that net income attributable
to shareholders from continuing operations, excluding the Government
of Barbados debt restructuring, would have been US $72.6 million, in the
prior year.
Established in 1840 as The Barbados Mutual Life Assurance Society,
Sagicor is one of the oldest providers of insurance in the Americas.
Sagicor offers a wide range of products and services including life
and health insurance, annuities, pension administration, property and
casualty insurance, asset management, investment and merchant
banking, securities brokerage, mutual funds and real estate development,
and commercial banking. Sagicor’s principal markets are Barbados,
Jamaica, Trinidad and Tobago, and the United States of America.
Sagicor demutualised in November 2002 and listed its shares on the
Barbados Stock Exchange (BSE: SFC), with subsequent listings on the
Trinidad and Tobago Stock Exchange (TTSE: SFC) and the London Stock
Exchange (LSE: SFI). Sagicor Financial Corporation moved its corporate
domicile from Barbados to Bermuda and continued as Sagicor Financial
Corporation Limited (SFCL), an exempted company, on July 20, 2016.
As a result of its completed business combination with Alignvest
Acquisition II Corporation (AQY) on December 5, the new Sagicor, known
as Sagicor Financial Company Ltd., now trades on the Toronto Stock
Exchange under the new symbols “SFC” and “SFC.WT”. With a listing on
the Toronto Stock Exchange, SFCL’s common shares, formerly listed on
the London Stock Exchange, have ceased trading and have been delisted
from the London Stock Exchange. Former listings on the Barbados and
the Trinidad and Tobago Stock Exchanges have ceased trading and
applications for delisting have been submitted.
Sagicor currently operates in 22 countries and maintains a strong market
position in most of the markets where it operates. Their primary business is
the provision of insurance (life, annuity, health and property and casualty)
and financial services, including pension management, asset management
and banking.
Sagicor operates its business primarily through its three reporting
operating segments, namely Sagicor Life, Sagicor Jamaica, and Sagicor
Life USA.
Along with the capital raised in 2019, organic capital growth was also
strong, and the group closed the year with a Minimum Continuing Capital
and Surplus Requirement (MCCSR) of 253% well above the recommended
minimum standard set by Canadian regulators.
Sagicor’s objective is to be a leading insurance and financial services
provider of world class products and services to better serve its customers
and other stakeholders in its markets. Sagicor is expanding its banking and
asset management business in the Caribbean, where it has strong brand
recognition and market shares
64
Sagicor Financial Company Ltd | 2019 Annual Report
REVENUE BY GEOGRAPHICAL SEGMENTS
Barbados 10%
Jamaica 35%
USA 32%
Trinidad & Tobago 13%
Other Caribbean 10%
2019 Revenue:
US $1,867.3 m
REVENUE BY LINE OF BUSINESS
2019 Revenue:
US $1,867.3 m
Hospitality, 2%
Other, 2%
Banking, investment management
and other financial services - 10%
Property and casualty
insurance - 3%
Life, health and annuity insurance
and pension administration contracts
issued to groups - 17%
Life, health and annuity
insurance contracts
issued to individuals 66%
Recent Developments
Alignvest Agreement
On November 27, 2018, Sagicor Financial Corporation Limited entered
into a definitive arrangement agreement with Alignvest Acquisition II
Corporation (“Alignvest”) pursuant to which Alignvest will acquire all the
shares of Sagicor by way of a scheme of arrangement under the laws of
Bermuda, where Sagicor is incorporated.
On December 5, 2019 Sagicor and Alignvest announced they had
completed the business combination involving the transfer of all issued
and outstanding shares in Sagicor to Alignvest. This transaction raised over
US $450 million in new capital for the Group. As a result of the completion
of the transaction, all issued and outstanding shares in Sagicor were
transferred to Alignvest, with former shareholders of Sagicor receiving
cash or shares in Alignvest, which has been renamed Sagicor Financial
Company Ltd. and trades on the Toronto Stock Exchange under the
symbol SFC. The Group incurred cash and non-cash transaction expenses
of US $43.4 million related to this exercise.
As a result of the closing of this transaction, approximately 147.8 million
common shares of Sagicor were issued and outstanding including
approximately 6.44 million shares held in escrow and subject to
performance measures.
Sagicor had announced its intention in November 2018 to acquire
Scotia Jamaica Life Insurance Company Limited (“Scotiabank Insurance
Jamaica”) and ScotiaLife Trinidad and Tobago Limited (“Scotiabank
Insurance Trinidad and Tobago”). On November 1, 2019, Sagicor and
The Bank of Nova Scotia Jamaica Limited announced that they have
mutually agreed not to proceed with the 20-year distribution agreement
for insurance products and solutions in Jamaica. As a result, Sagicor will
not proceed with the acquisition of Scotiabank Insurance Jamaica at this
time. Sagicor, Alignvest Acquisition II Corporation and Scotiabank Trinidad
and Tobago Limited remain parties to a share purchase agreement dated
November 27, 2018 (the “Trinidad SPA”) pursuant to which Sagicor agreed
to establish a 20-year distribution agreement for insurance products
and solutions in Trinidad and Tobago, and acquire all of the issued and
outstanding shares in the capital of Scotiabank Insurance Trinidad and
Tobago, subject to the satisfaction of certain conditions precedent.
The Scotia Trinidad Agreement expires June 30, 2020. Given current
circumstances, there can be no assurance that the transaction will
be completed.
Acquisition
On September 30, 2019, the Sagicor Jamaica segment acquired 60% of the
share capital of Advantage General Insurance Company Limited. Our share
of net assets was US $23.4 million and was acquired for a consideration
of US $31.2 million. Refer to note 37.1 to the Group’s 2019 audited financial
statements for details.
Sagicor Financial Company Ltd | 2019 Annual Report
65
Financial Summary
The summary consolidated financial data is derived from the audited
annual financial statements, for each of the periods indicated on the
following table.
Under the Alignvest transaction, Sagicor Financial Corporation Limited
common shares not purchased for cash, were exchanged for common
shares of Sagicor Financial Company Ltd. on an exchange ratio of one
Sagicor Financial Company Ltd. common share for 4.328 of Sagicor
Financial Corporation Limited common shares (“Exchange Ratio”). This
exchange ratio has been used to convert the 2018 outstanding shares to
the Sagicor Financial Company Ltd. equivalent. All per share ratios for 2018
have been adjusted to reflect the Exchange Ratio.
Other Events
Acquisition Agreement
October 7, 2019 – Sagicor Financial Corporation Limited announced
that, on September 30, 2019, Sagicor Life Inc. (“SLI”), its wholly-owned
subsidiary, entered into agreements to acquire the traditional insurance
portfolios, and investment assets, primarily, sovereign debt of the
Government of the Republic of Trinidad and Tobago to support the
liabilities of both Colonial Life Insurance Company (Trinidad) Limited
(“CLICO”) and British American Insurance Company (Trinidad) Limited
(“BAT”). In addition, contracts with respect to CLICO’s pension fund
administration, management and investment services operations (as well
as supporting investment assets) will be acquired and assumed by SLI.
Approximately US $1.2 billion of total investment assets are proposed to be
acquired to fund a similar amount of actuarial liabilities.
The completion of the transaction is subject to regulatory approval.
Government of Barbados Debt
On December 11, 2019 the Government of Barbados, with the agreement
of an External Creditor Committee, completed the restructuring of its US
dollar denominated commercial debt. In exchange for its debt, the Group
has accepted two Government of Barbados securities along with a small
amount of cash. The first security is repayable in 2021 while the second is
an amortising bond with final maturity in 2029 and represents the majority
of the exchange. Both securities carry an interest rate of 6.5%. The terms
of the restructuring of US dollar denominated commercial debt are more
favourable relative to the impairments previously recorded in 2018, leading
to a gain in 2019 of US $3.1 million on the exchange.
Change of Control Notice and Offer to Purchase
On December 20, 2019 the Group made an offer to purchase for cash, any
and all of the outstanding US $320.0 million aggregate principal amount of
8.875% Senior Notes due 2022. This offer was made in connection with the
completed business combination by Sagicor Financial Corporation Limited
with Alignvest Acquisition II Corporation, a special purpose acquisition
corporation listed on the Toronto Stock Exchange, completed on
December 5, 2019 (the “Transaction”). On January 27, 2020 US $1,897,000
notes were tendered, purchased and cancelled.
66
Sagicor Financial Company Ltd | 2019 Annual Report
Quarterly Results
Yearly Results
Quarterly Results
Yearly Results
Q4
2019
11.5
54.9
15.0¢
71.8¢
14.1¢
67.5¢
Q4
2018 Change
2019
2018 Change
8.0
8.0
44%
586%
44.0
87.4
36.5
36.5
21%
139%
11.3¢
N/A
11.1¢
N/A
33%
57.5¢
-
114.3¢
51.7¢
N/A
27%
54.1¢
50.8¢
11%
-
15%
-
-
-
107.5¢
N/A
6.8%
6.2%
14.0%
N/A
-
-
-
6.2%
5.4%
30.4%
N/A
(in US $millions,
unless
otherwise noted)
Growth (continued)
Net
premium revenue:
Life insurance
Annuity
Health insurance
Property and
casualty insurance
Total net premium
revenue
Q4
2019
Q4
2018 Change
2019
2018 Change
111.8
125.5
45.2
110.0
170.8
45.7
2% 430.6
592.1
(27%)
(1%)
173.1
412.0
440.1
168.1
5%
35%
3%
18.0
7.5
140%
45.7
33.9
35%
300.5
334.0
(10%)
1,241.5 1,054.1
18%
Assets from
continuing
operations
8,728.9 7,308.2
8,728.9 7,325.4
Total assets
Operating liabilities 6,461.3 5,699.7
19% 8,728.9 7,308.2
19% 8,728.9 7,325.4
13% 6,461.3 5,699.7
19%
19%
13%
Notes and loans
payable
Book value per
common share
Financial strength
517.7
490.3
6%
517.7
490.3
6%
$7.81
$8.50
-
$7.81
$8.50
288.5
269.9
7% 1,214.8
856.4
42%
Debt to capital ratio
N/A
N/A
N/A 22.8% 30.2%
78.7
75.2
5%
317.9
284.3
12%
23.5
11.4
106%
61.9
44.2
40%
Dividend pay-out
ratio
Dividend pay-out
ratio (b)
Dividends paid per
common share
N/A
N/A
N/A
37.6% 41.8%
N/A
N/A
N/A
18.9%
N/A
2.5¢
2.5¢
-
5.0¢
5.0¢
-
-
-
-
-
(in US $millions,
unless
otherwise noted)
Profitability
Net income (a)
attributable
to common
shareholders
Net income(a),(b)
Earnings per share:
Basic earnings(a)
Basic earnings (a),(b)
Fully diluted (a)
Fully diluted(a),(b)
Return on
shareholders’
equity (a)
Return on
shareholders’
equity (a),(b)
Growth
Revenue:
Individual life, health
and annuity
Group life, health
and annuity
Property and
casualty insurance
Banking and
investment
management
Hospitality
Farming and
unallocated
revenues
Total revenue
54.9
46.9
51.6
8.1
(20.8)
4.5
471.7
420.7
6%
192.2
167.8
15%
Total capital
2,266.3
1,621.7
40% 2,266.3
1,621.7
40%
479%
41.7
8.1
415%
(562%)
38.8
25.8
12% 1,867.3 1,386.6
50%
35%
Average common
shares outstanding
(000’s)
Outstanding shares,
at end of period
(000’s)
MCCSR, at end of
period
N/A
N/A
N/A 76,452 70,680
147,789 306,115
- 147,789 306,115
N/A
N/A
N/A
253% 234%
-
-
-
Sagicor Financial Company Ltd | 2019 Annual Report
67
(a) From continuing operations
(b) Excluding Alignvest transaction cost
Profitability
Group net income excluding Alignvest transaction expenses amounted
to US $147.5 million compared to US $102.9 million in the prior year.
Net income from continuing operations attributable to common
shareholders, excluding Alignvest transaction expenses, closed the
year at US $87.4 million compared to US $36.5 million in the prior year.
Both Group net income and income attributable to Shareholders from
continuing operations were affected by the Government of Barbados debt
restructuring in 2018. Management estimates that net income attributable
to shareholders from continuing operations, excluding the Government
of Barbados restructuring, would have been US $72.6 million, in the
prior year.
Earnings per share (basic) before Alignvest transaction costs for the
year ended December 31, 2019 and December 31, 2018, was US $1.143
and US $0.517, respectively.
Refer to the Profitability section of this Management’s Discussion and
Analysis for additional information on the Company’s profitability in 2019.
Yearly Results
2019
2018
Change
growth in all operating segments, with our USA segment demonstrating
significant growth.
Net investment income also experienced growth and benefited from
capital gains on our international portfolio. Growth in banking and
investment management fees in our Jamaica segment, were significant
contributors to the overall growth in our other revenue.
In 2018, the Group recorded US $95.5 million in credit impairment losses
mainly associated with the Government of Barbados debt restructuring.
There were no significant credit impairment losses in 2019.
The following table summarises the revenue growth by operating segment.
Total Revenue by
Business Segment
(in US $millions,
unless
otherwise noted)
Growth
Sagicor Life
Sagicor Jamaica
Sagicor Life USA
Head office, Other
and adjustments
Q4
2019
162.2
194.3
102.9
Quarterly Results
Yearly Results
Q4
2018 Change
2019
2018 Change
112.1
157.9
142.4
45%
23%
(28%)
533.3
735.3
561.5
340.1
585.9
420.7
57%
26%
33%
(7%)
35%
87.4
(43.4)
44.0
36.5
-
36.5
US $1.143
N/A
US $0.575 US $0.517
139%
Total revenue
12.3
471.7
8.3
420.7
37.2
48%
39.9
12% 1,867.3 1,386.6
-
Refer to the sections that follow for more information the business growth.
21%
Financial Strength
-
11%
The consolidated Minimum Continuing Capital and Surplus Requirement
(MCCSR - a Canadian risk-based assessment measure), for the life insurers
of the Sagicor Group as of December 31, 2019 has been estimated at 253%
(2018 - 234%), exceeding the minimum standard recommended by the
Canadian regulators for companies of 150%.
Profitability
(in US $millions, unless
otherwise noted)
Net income attributable to common
shareholders before Alignment
transaction expenses
Alignvest transaction expenses
Net income attributable to common
shareholders
Earnings per common share (EPS) –
(basic) before Alignvest transaction
expenses
Earnings per common share (EPS)
– (basic)
Business Growth
Net premiums, net investment income and other revenue all showed
growth at the end of 2019. Overall, the Group closed the year with
revenue growth of 35% when compared to 2018. Growth in net premium
revenue was driven by the life and annuity line of business which showed
68
Sagicor Financial Company Ltd | 2019 Annual Report
The debt to capital ratio was 22.8% at December 31, 2019 compared 30.2%
at December 31, 2018, while the coverage ratio excluding the Alignvest
transaction expenses was 5.7 times at the end of December 2019,
compared to 5.0 times for the same period in 2018. The significant change
in the debt to capital ratio was the result of the impact of the Alignvest
transaction in 2019 which raised additional capital.
As of December 31, 2019, capital resources totalled US $2,266.3 million
compared to US $1,621.7 million reported at the end of December 2018
again driven by the Alignvest transaction.
For detailed comments on financial strength, refer to the Financial Position
section of the Management’s Discussion and Analysis.
Dividends
On February 3, 2020, the Board of Directors declared a dividend of US
$0.05625 per share, on issued and outstanding common shares held by
registered holders on record at the close of business on February 10, 2020.
The dividends declared and paid in respect of Sagicor common shares in
respect of 2019 totalled US $15.3 million and represented US $0.05 per
common share.
Quality of Investments
As of December 31, 2019, Sagicor held US $6,685.6 million (2018 – US
$5,347.7 million) of diversified financial assets and net investment income
of US $419.8 million (2018 - US $293.8 million). The net investment return
was 7.2% (2018 – 6.1%). Since becoming a public company in 2002, Sagicor
has had positive and stable investment portfolio performance. As at
December 31, 2019, Sagicor held US $5,064.9 million in debts securities
(76% of the total financial investments on hand).
Investment Income Summary
Yearly Results
(in US $millions, unless
otherwise noted)
Interest income (AC)
Interest income (FVOCI)
Income from FVTPL
investments
Other income measured on
IFRS 9 basis
Other investment income
Investment expenses
2019
175.5
132.5
112.8
0.3
7.6
(8.9)
419.8
2018
177.5
113.5
4.5
0.8
5.9
(8.4)
293.8
Change
(1%)
17%
2,407%
(63%)
29%
6%
43%
Litigation or Other Matters
The Group is subject to various claims, disputes and legal proceedings, as
part of the normal course of business. Provision is made for such matters
when, in the opinion of management and its professional advisors, it is
probable that a payment will be made by the Group, and the amount can
be reasonably estimated.
In respect to claims asserted against the Group which, according to the
principles outlined above, have not been provided for, management is of
the opinion that such claims are either without merit, can be successfully
defended, cannot be reasonably estimated or will result in exposure to the
Group which is immaterial to both the financial position and the results
of operations.
Significant matters are outlined below:
1. Suit has been filed by a customer against one of the Group’s,
subsidiaries for breach of contract, and breach of trust in the amount
of US $8.9 million being loss allegedly suffered as a result of what the
claimants say is the unlawful withholding of insurance proceeds by
the subsidiary. No provision was made in these financial statements
for this claim as the outcome of this matter cannot be properly
assessed until it has been heard.
2. Suit has been filed by an independent contractor against one of
the Group’s subsidiaries for breach of contract arising from alleged
contractual agreement. The Claimant alleges that the company failed
to pursue initiatives contemplated by the contract with a third party
and that by not doing so, it caused the Claimant company significant
losses which they have estimated at over US $300,000,000. No
provision was made in these financial statements for this claim as the
claim has been stayed to accommodate arbitration as required under
the Agreement between the parties coupled with the assessment by
the Group of a probable favourable outcome.
Sagicor Financial Company Ltd | 2019 Annual Report
69
Board of Directors
As of December 23, 2019, the directors of the Company were as follows:
1. Timothy Hodgson, Chairman (new)
2. Archibald Campbell (new)
3. Keith Duncan (new)
4. Stephen Facey (new)
5. Mahmood Khimji (new)
6. Douglas Fridrik (Rik) Parkhill (new)
7. Reza Satchu (new)
8. Aviva Shneider (new)
9. Stephen McNamara
10. Sir Hilary Beckles
11. Peter Clarke
12. Monish Dutt
13. Dodridge Miller
14. John Shettle Jr
IAS 28 – Investments in Associates and Joint Ventures
IAS 19 – Employee Benefits
•
•
• Annual Improvements
None of these amendments had a material effect on the Group’s financial
statements. Refer to note 2.1 of the annual financial statements for further
details on amendments to existing IFRS and IAS effective January 1, 2019.
Outlook for 2020
The Group’s outlook for 2020 is uncertain. While the Group exceeded
its operating targets in 2019 and is robustly capitalized following its
transaction with Alignvest, we believe the macroeconomic environment
will be materially affected in all of the jurisdictions in which we operate by
the COVID-19 pandemic and related economic contraction. We therefore
will not set out specific guidance for financial targets for the year. Refer to
the Subsequent Events section for more details on the potential impact of
the COVID-19 pandemic.
Changes to Accounting Policies in 2019 and Future Changes in
Accounting
Economic Environment
As disclosed in the Company’s annual financial statements for the year
ended December 31, 2019, as of January 1, 2019, the Sagicor Group
adopted IFRS 16. The Group has not restated comparatives for the 2018
reporting period, as permitted under the specific transitional provisions
in the standard. Reclassifications and adjustments arising from the new
leasing rules are therefore recognised on January 1, 2019 (see note 49).
This standard removes the current distinction between operating and
finance leases and requires recognition of an asset (the right to use the
leased item) and a financial liability to pay rentals for virtually all lease
contracts. An optional exemption exists for short-term and low-value
leases. For further details on the impacts of the application of IFRS 16,
including the description of accounting policies, refer to notes 2.10 and
49 of the annual financial statements. Refer to note 2.26 of the annual
financial statements for details on future accounting developments and
reporting changes.
Amendments to existing IFRS and IAS effective January 1, 2019
The Group has adopted the following amendments to IFRS and IAS:
Global economic activity for 2019 was estimated at 2.9%, the weakest
growth rate since the global financial crisis a decade ago. Rising trade
barriers and associated uncertainty weighed on business sentiment and
activity globally. In the USA, GDP growth of 2.3% was estimated for 2019.
The U.S labor market remained strong and economic activity has risen at
a moderate rate. The unemployment rate stood at 3.6% in December 2019
down from December 2018 where it stood at 3.9%. The US Federal Reserve
(Fed) in July 2019 decided to lower interest rates, this was the first rate
cut since December 2008. This change in direction of interest rates was
described by the Fed as a “mid-course correction” and was the result of
trade policy uncertainties. Interest rates were cut three times during the
year from a range of 2.25% - 2.50% as at December 2018 to a range of
1.50% - 1.75% as at December 2019. Oil prices remained subdued during
2019 with WTI oil prices closing at US $61.06 per barrel.
Europe and Japan experienced growth estimated at 1.4% and 1.0%,
respectively, as their respective Central Banks generally continued
accommodative fiscal and monetary policies throughout 2019. The Bank
of England maintained its short-term interest rate at 0.75% while Japan’s
short-term rates remained unchanged at - 0.1% during 2019.
•
•
IFRS 9 - Financial Instruments
IFRIC 23 – Uncertainty over Income Tax Treatments
2019 was an exceptional year for the global equity markets. In the US
market, the S&P 500 index was up 31.49% for the year which was its
70
Sagicor Financial Company Ltd | 2019 Annual Report
growth rate of -0.2% in 2018. As at September 30th, 2019, headline and
core inflation were subdued at 1.1% and 1.0%, respectively. The Central
Bank of Trinidad and Tobago kept the repo rate steady at 5% for the
year 2019. At the end of October 2019, gross official reserves were
approximately US $7,110.0 million, equivalent to 7.9 months of prospective
imports of goods and services which was US $465.0 million lower than the
value recorded at the end of 2018. There was a significant improvement in
the domestic stock market for the financial year ending September 2019
where the major Composite Price Index increased by 14.9% and the total
stock market capitalization was up 14.8%.
In the quarter ended September 2019, the Jamaica economy grew by
0.6% compared to 1.3% in the second quarter of 2019. On September 27,
2019, Standard and Poor’s rating agency upgraded the Government of
Jamaica’s long-term ratings to B+ from B and affirmed the short-term debt
at B, as well as, affirmed a stable outlook. Similarly, Moody’s upgraded the
Government of Jamaica’s long-term issuer and senior unsecure rating from
B3 to B2. The key drivers for these upgrades were Jamaica’s commitment
to structural reform, fiscal consolidation and its improving debt structure.
The Bank of Jamaica continued along the path of monetary easing and
reduced its policy interest rate from 1.75% to a historic low of 0.50% during
the year 2019. Inflation of 6.2% was recorded in 2019 which falls marginally
above the Bank of Jamaica’s target of between 4% to 6%. The labour
market continued to improve as the unemployment rate declined to 7.2%
as at October 2019, compared to 8.7% in 2018. Similar to the international
equity markets, the Jamaica Stock Exchange exhibited extraordinary
returns and was up 34.26% for 2019. However, the fixed income market
yields trended downwards as the GOJ 180-day Treasury Bill declined to
1.75% at the end of September 2019 from 2.07% at the end of 2018.
best year since 2013. The NASDAQ Composite and Dow Jones Industrial
Average Index were up 36.7% and 25.3%, respectively. The MSCI Emerging
Market Index was up 18.42% for the year. However, treasury yields
continued to decline with the 10-year treasury yield starting 2019 at 2.69%
and ended the year at 1.92%.
Growth in the Eastern Caribbean was expected to improve during 2019
as a result of increased activity in the tourism and construction sectors.
Dominica and Anguilla continued their post-hurricane rebuilding and
recovery drive which resulted in accelerated construction activity and
some spill-off activity in the tourism sector. This activity placed their
growth trajectory on an upward path. In 2018 Dominica’s real GDP
growth was 4% and it was expected that there will be a further growth of
approximately 9% in 2019. Anguilla’s real GDP was expected to grow by
8.8% in 2019 compared to 10.8% in 2018. However, growth in Barbados
remained flat and Jamaica’s growth began to slow down during the third
quarter of 2019. Inflation remained suppressed for the Eastern Caribbean
territories although there were marginal increases in five countries.
In Barbados, real economic activity is estimated to have declined during
2019 by 0.1%. However, the international reserves increased by BDS$481
million which is equivalent to 18 weeks of import cover. This increase
in international reserves reflected borrowings from the international
financial institutions, the on-going suspension of commercial external debt
payments and an active foreign exchange market that allowed commercial
banks to sell foreign exchange to the Central Bank. During the year there
was an improvement in the debt-to-GDP ratio which now stands at 119.5%.
The lowering of the debt-to-GDP ratio can be attributed to the completion
of the external debt restructuring in December 2019.
During December 2019, Barbados’ Long-term Foreign Currency credit
rating was upgraded to B- from Selective Default (SD) by Standard and
Poor’s. This six-notch upward movement on the rating scale is a significant
step in restoring investor confidence and lowering the cost of funds for
the private and public sector over the medium-term. There was no change
in the average unemployment rate which stood at 10.1% at the end of
December 2019, compared to 2018. However, inflation trended upwards
to 4.1% this was primarily as a result of the impact of persistent drought
conditions on non-sugar agriculture, the influx of sargassum seaweed
on fish catches and policy measure implementation at some state-
owned enterprises.
As Trinidad and Tobago’s energy sector recovers, it is estimated that the
economy expanded by 1.8% in 2019, compared to revised annual GDP
Sagicor Financial Company Ltd | 2019 Annual Report
71
2. PROFITABILITY
Highlights
Net income before the Alignvest transaction, attributable to
common shareholders for the year ended December 31, 2019 totalled
US $87.4 million, compared to the US $36.5 million reported in 2018, an
increase of US $50.9 million. Return on equity for the 2019 year-end was
14.0%, before the Alignvest transaction, compared to 6.2% in 2018, and
reflected higher profitability. The Earnings per Share (EPS - basic) moved
similarly, closing at US $1.143 (before Alignvest transaction expenses) in
2019. In 2018, Earnings per share was US $0.517. The difference in Earnings
per share reflects the change in capital structure implemented in 2019 and
strong operating results.
Net income attributable to Common
shareholders from continuing operations
(in US $millions, unless otherwise noted)
Sagicor Life
Sagicor Jamaica
Sagicor Life USA
Yearly Results
2018
Change
2019
60.9
61.4
35.4
39.6
55.7
18.3
Head office, Other and adjustments
(70.3)
(77.1)
Net income before Alignvest transaction
costs
Alignvest transaction costs
Net income
Earnings per common share (EPS):
Basic
Basic – excluding Alignvest transaction
costs
Diluted
87.4
(43.4)
44.0
36.5
-
36.5
57.5¢
51.7¢
114.3¢
N/A
54.1¢
50.8¢
Diluted – excluding Alignvest transaction
costs
107.5¢
N/A
Return on common shareholders’ equity
(ROE)
Return on common shareholders’ equity
(ROE)– excluding Alignvest transaction
costs
6.8%
6.2%
14.0%
N/A
72
Sagicor Financial Company Ltd | 2019 Annual Report
Group net income for the year
The table below summarises Sagicor’s net income for the years ended
December 31, 2019 and 2018.
(in millions of US $)
Group net income
Group net income before Alignvest
transaction costs
Alignvest transaction costs
Total
Year ended December 31
2019
2018 Change
147.5
(43.4)
104.1
102.9
43%
-
102.9
-
1%
Net income/(loss) is attributable to
Common shareholders:
From continuing operations before Alignvest
transaction costs
Alignvest transaction costs
From total continuing operations
From discontinued operation
Participating policyholders
Non-controlling interest
Group net income
87.4
(43.4)
44.0
0.5
44.5
(1.9)
61.5
104.1
36.5
139%
-
36.5
7.1
43.6
7.2
52.1
102.9
-
21%
(93%)
2%
(126%)
18%
1%
Group net income excluding Alignvest transaction expenses amounted to
US $147.5 million compared to US $102.9 million in the prior year.
Net income from continuing operations attributable to common
shareholders, excluding Alignvest transaction expenses, closed the
year at US $87.4 million compared to US $36.5 million in the prior year.
Both Group net income and income attributable to Shareholders from
continuing operations were affected by the Government of Barbados
debt restructuring in 2018. During 2018, the Group increased its provisions
on the Government of Barbados debt for which the net impact on the
Group’s net income was US $39.2 million (shareholder net income –
US $36.1 million). The Group also benefited from certain one-time positive
earnings releases that did not recur in 2019 some relating to the impact of
the Group’s adoption of IFRS 9 in 2018.
54%
10%
93%
9%
139%
-
21%
11%
-
7%
-
-
-
Revenue
The following table summarises the main items of Sagicor’s revenue for the
periods ended December 31, 2019 and 2018.
Net income from discontinued operation totalled US $0.5 million for the
year, compared to income of US $7.1 million for the same period in 2018.
On February 12, 2019, The Group completed a review of the consideration
related to the price adjustments to December 31, 2018 and entered into a
Deed of Release to close this exposure. The final settlement amount was
received on February 26, 2019.
Group net income from continuing operations
The table below summarises Sagicor’s net income from continuing
operations for the years ended December 31, 2019 and 2018.
(in millions of US $)
Revenue
Net insurance premiums:
Life and annuity
Health
Property and casualty
Group net income from
continuing operations
(in millions of US $)
Revenue
Benefits
Expenses
Other
Income taxes
Group net income from continuing
operations before transactions
expenses
Alignvest transaction cost
Group net income from continuing
operations
2019
2018
Change
1,867.3
(1,116.5)
(547.1)
3.0
(59.7)
147.0
(43.4)
103.6
1,386.6
(765.3)
(495.2)
20.4
(50.7)
95.8
-
95.8
35%
(46%)
(10%)
(85%)
(18%)
53%
-
8%
Net investment income
Gain on derecognition of
amortised cost investments
Gain reclassified to income from
accumulated OCI
Credit impairment losses
Fees and other revenue
Total
Total Revenue by Operating
Segment
Sagicor Life
Sagicor Jamaica
Sagicor Life USA
Head office, Other and
Adjustments
Year ended December 31
2019
2018
Change
1,022.7
173.1
45.7
1,241.5
419.8
852.1
168.1
33.9
1,054.1
293.8
12.9
10.4
30.0
(4.9)
168.0
1,867.3
533.2
735.3
561.5
37.3
1,867.3
9.3
(95.5)
114.5
1,386.6
340.1
586.0
420.7
40.4
1,386.6
20%
3%
35%
18%
43%
24%
223%
95%
47%
35%
57%
26%
34%
(8%)
35%
Revenue from continuing operations reached US $1,867.3 million for the
year ended December 31, 2019, an increase of US $480.7 million (35%)
from US $1,386.6 million reported for the same period in 2018. The 2018
financial year included US $95.5 million in credit impairment losses, as the
Group impaired the Government of Barbados debt securities.
Sagicor Financial Company Ltd | 2019 Annual Report
73
Interest yields
Debt securities
Mortgage loans
Policy loans
Finance loans and leases
Securities purchased for resale
Deposits
Year ended December 31
2019
2018
5.1%
6.0%
7.3%
11.6%
6.2%
1.6%
5.8%
6.0%
7.2%
11.4%
7.5%
2.9%
The Group generated Fees and other revenues of US $168.0 million for the
year ended December 31, 2019, compared to US $114.5 million for the same
period in 2018, an increase of US $53.5 million. Fees and other revenues for
the current year from our Jamaica segment now include US $39.7 million
in hotel revenues associated with the consolidation of the Sagicor X Fund,
compared to revenue of US $9.7 million (for October to December 2018)
in the prior year. The Sagicor X Fund was deemed to be a subsidiary from
October 1, 2018.
Benefits
Benefits totalled US $1,116.5 million in 2019, a 46% increase from
US $765.3 million reported in 2018. The growth in benefits (which include
actuarial provisions for future benefits) reflects and is consistent with our
premium revenue growth in our operating segments. You will recall that
there was significant growth in premiums in the Sagicor Life USA segment.
The following table summarises the benefits provided by Sagicor to
holders of insurance contracts, investment contracts and deposit and
security liability contracts for the years ended December 31, 2019
and 2018.
REVENUE GROWTH BY OPERATING SEGMENT
159.2
582.9
418.0
2017
420.7
585.9
339.5
2018
561.5
735.3
533.2
2019
Sagicor USA
Sagicor Jamaica
Sagicor Life
s
n
o
i
l
l
i
m
$
S
U
Net insurance premium revenue represented 66% (2018 – 76%) of total
revenue, and closed the year at US $1,241.5 million, US $187.4 million
(18%) above the US $1,054.1 million reported for the same period in 2018.
Increased premium revenue was driven primarily by the Sagicor Life
and Sagicor Life USA business segments which experienced significant
premium growth in life and annuity business during the year.
Net premium revenue from health insurance business totalled
US $173.1 million in 2019, a moderate increase from US $168.1 million in
2018. Net premium revenue from property and casualty insurance totalled
US $45.7 million in 2019, a 35% increase from US $33.9 million in 2018,
and includes net premiums for the fourth quarter related to the general
insurance business - Advantage General Insurance Company Limited,
acquired on September 30, 2019, in our Jamaica segment.
Net investment income reached US $419.8 million in 2019 compared to
US $293.8 million in 2018, an increase of US $126.0 million. The increase
in investment income was due in part to an increase in marked to market
gains experienced on indexed options and equities, along with significant
growth in investment assets in our Sagicor Life USA segment. Our
Jamaica segment also experienced growth in investment income related
to underlying growth in its investment portfolio, and gains arising from
improvements in the Jamaica stock market, as the index grew by 34% year
on year.
The interest yields and returns achieved on financial investments are
disclosed in the following table.
74
Sagicor Financial Company Ltd | 2019 Annual Report
(in millions of US $)
Benefits
Net insurance benefits:
Life and annuity
Health
Property and casualty
Interest cost
Total
Year ended December 31
2019
2018
Change
900.0
135.3
27.0
1,062.3
54.2
1,116.5
571.0
122.8
19.0
712.8
52.5
765.3
58%
10%
42%
49%
3%
46%
Interest yields
Investment contracts
Other funding instruments
Customer deposits
Securities sold for repurchase
Expenses and taxes
Year ended December 31
2019
2018
2.6%
2.3%
1.3%
3.0%
4.8%
2.3%
1.6%
3.4%
Life and annuity benefits totalled US $900.0 million for the year ended
December 31, 2019, of which US $414.6 million related to current benefits
and US $485.4 million related to future benefits. The amounts for the
corresponding period in 2018 were a total of US $571.0 million, of which
US $392.7 million related to current benefits and US $178.3 million related
to future benefits. The change in provision for future benefits from 2018 to
2019 represented an increase of US $307.1 million and was driven primarily
by the strong growth in new business in our Sagicor Life USA segment.
In 2018, benefits were impacted by one-time actuarial adjustments
related to the Group’s initial adoption of IFRS 9 and the impairment of the
Government of Barbados debt.
Total health insurance benefits were US $135.3 million representing an
overall claim to premium ratio of 78.2%. In 2018 the Group experienced
health insurance benefits of US $122.8 million and an overall claim to
premium ratio of 73.0%.
Property and casualty claims amounted to US $27.0 million in 2019, a
US $8.0 million increase over US $19.0 million incurred in 2018. During
the quarter, the newly acquired subsidiary Advantage General Insurance,
acquired on October 1, 2019 in our Jamaica segment, contributed
additional benefits during the fourth quarter.
Interest expense totalled US $54.2 million for the twelve-month period
ended December 31, 2019, a marginal increase from US $52.5 million
reported for the same period in 2018.
The following table summarises the interest returns to holders of
insurance contracts, investment contracts and deposit and security
liability contracts.
Expenses and taxes totalled US $650.2 million for 2019, up from
US $545.8 million for 2018. The table below summarises Sagicor’s
expenses and taxes from continuing operations for the years ended
December 31, 2019 and 2018.
(in millions of US $)
Expenses and taxes
Administrative expenses
Commissions and related
compensation
Finance costs, depreciation and
amortisation
Premium, asset and income taxes
Total
Alignvest transaction costs
Total expenses and taxes
Year ended December 31
2019
2018
Change
333.3
303.1
(10%)
120.1
117.3
(2%)
79.1
74.3
606.8
43.4
650.2
60.8
64.6
545.8
-
(30%)
(15%)
(11%)
-
545.8
(19%)
Total expenses and taxes totalled US $606.8 million before the
Alignvest transaction expense for the year under review, compared
to US $545.8 million for the same period in 2018, an increase of
US $61.0 million (11%).
Administration expenses totalled US $333.3 million for the year 2019
compared to US $303.1 million for the same period in 2018, an increase
of US $30.2 million. For the 2019 financial year our Jamaica segment
now includes US $31.2 million of hotel expenses associated with the
consolidation of the Sagicor X Funds, representing twelve months of
expenses. 2018 included three months of expenses (US $6.9 million)
reflecting the fact that the XFund in Jamaica was deemed to be a
Sagicor Financial Company Ltd | 2019 Annual Report
75
subsidiary from October 1, 2018. The Sagicor Life USA segment also
incurred higher costs mainly related to increased interest expense on
deposit and security liabilities.
(in millions of US $)
Net income - discontinued
operation
Year ended December 31
2019
2018
Change
Commissions and related compensation grew by 2% to US $120.1 million
and this increase was related to new business growth.
Sagicor 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. Sagicor is
also subject to an asset tax in Jamaica and Barbados. In Jamaica, the asset
tax is levied on insurance, securities dealers and deposit taking institutions
at a percentage 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 at a percentage of adjusted assets held at the end of the period.
Premium, asset and income taxes were US $74.3 million compared
to US $64.6 million in the prior year, an increase of US $9.7 million.
Of the total taxes, income taxes were US $59.7 million, compared to
US $50.7 million in 2018, an increase of US $9.0 million, and was largely
related to our Jamaica and USA segments, where we continue to
experience business growth.
Discontinued operation
Sagicor’s discontinued operation comprised the Sagicor at Lloyd’s
business, which consisted primarily of property and casualty insurance
business written through Lloyd’s of London Syndicate 1206. The Lloyd’s
of London franchise enabled the syndicate to write international business
outside of the United Kingdom.
In December 2012, Sagicor made the decision to dispose of the Sagicor
Europe Limited (“SEL”) segment, which owns the Sagicor at Lloyd’s
operations. The disposal of this segment occurred on December
23, 2013. In accordance with IFRS, the results of SEL have been
separated from Sagicor’s continuing operations and presented as a
discontinued operation.
The following tables summarise Sagicor’s discontinued operation for the
years ended December 31, 2019 and 2018.
Currency translation gain realised
on sale
Movement in price adjustment
Total
(in millions of US $)
Financial position - discontinued
operation
Assets
Net assets
0.5
-
0.5
(0.7)
7.8
7.1
171%
(100%)
(93%)
Year ended December 31
2019
2018
Change
-
-
17.2
17.2
(100%)
(100%)
On February 12, 2019, Sagicor Financial Corporation Limited completed a
review of the consideration related to the price adjustments to December
31, 2018 and entered into a Deed of Release with AmTrust to close this
exposure. The final settlement amount of £13.5 million was received on
February 26, 2019. The Group has no further exposure to this business.
Shareholder returns
Sagicor’s net income and comprehensive income are allocated to the
equity owners of Sagicor’s respective Group companies in accordance
with their results. As some Group companies have minority shareholders,
particularly in the Sagicor Jamaica operating segment, the net income is
allocated accordingly between holders of Sagicor 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 demutualization of the Barbados Mutual Life
Assurance Society (now Sagicor Life), and of its amalgamation with Life of
Barbados Limited.
For the 2019 financial year, US $87.4 million of net income, from continuing
operations and before the Alignvest transaction expenses, was allocated
to the holders of Sagicor common shares, which corresponded to earnings
per share for continuing operations of US $1.143. The comparative
amounts for the 2018 fiscal year were US $36.5 million of net income from
76
Sagicor Financial Company Ltd | 2019 Annual Report
continuing operations allocated to the holders of common shares, which
corresponded to earnings per share for continuing operations of US $0.517.
The respective annual returns on average shareholders’ equity were 14.0%
for 2019 and 6.2% for 2018 (before the Alignvest transaction expenses).
The dividends declared and paid in respect of Sagicor common shares in
respect of 2019 totalled US $15.3 million and represented US $0.0.5 per
common share. Dividends of US $0.05 per share were declared and paid
in 2018. The table below summarises Sagicor’s profitability, dividends and
returns in respect of common shareholders for the years ended December
31, 2019 and 2018.
Common shareholder returns
Net income (a) attributable to common
shareholders
Net income (a) (b) attributable to common
shareholders
Year ended December 31
2019
2018
$44.0m
$36.5m
$87.4m
$36.5m
Basic earnings (a) per share
Basic earnings (a) (b) per share
Fully diluted earnings (a) per share
Fully diluted earnings (a) (b) per share
Return (a) on shareholders’ equity
Return (a) (b) on shareholders’ equity
Dividend pay-out ratio
Dividend pay-out ratio (b)
Dividends paid
Dividends paid per common share
(a) From continuing operations.
(b) Before Alignvest transaction expenses
57.5¢
114.3¢
54.1¢
107.5¢
6.8%
14.0%
37.6%
18.9%
$15.3m
5.0 ¢
51.7¢
N/A
50.8¢
N/A
6.2%
N/A
41.8%
N/A
$15.3m
5.0¢
Comprehensive income
The table below summarises Sagicor’s total comprehensive income for the
years ended December 31, 2019 and 2018.
(in millions of US $)
Other comprehensive income:
Items net of tax that may be
reclassified subsequently
to income:
Fair value assets measured
at fair value through other
comprehensive income:
Gains/(losses) on revaluation
Gains transferred to income
Net change in actuarial liabilities
Retranslation of foreign currency
operations
Other items
Items net of tax that will not
be reclassified subsequently
to income:
Gains arising on revaluation of
ownership occupied property
Net gains on equity securities
designated at fair value through
other comprehensive income
Gains/(losses) on defined benefits
plans
Other Comprehensive Income from
continuing operations
Year ended December 31
2019
2018
Change
168.7
(20.4)
(95.0)
(16.6)
(3.2)
33.5
(82.9)
304%
(1.8)
(1,033%)
41.6
(328%)
(25.2)
-
(68.3)
33%
-
149%
(1.0)
6.9
(115%)
-
0.1
(100%)
11.2
10.2
43.7
(2.7)
4.3
515%
137%
(64.0)
168%
Sagicor Financial Company Ltd | 2019 Annual Report
77
(in millions of US $)
Total comprehensive income
Group net income before Alignvest
transaction costs
Other comprehensive income
Total comprehensive income for the
year, before Alignvest transaction
costs
Alignvest transaction costs
Total comprehensive income for the
year
Total comprehensive income
attributable to:
Common shareholders:
From continuing operations before
Alignvest transaction expenses
Alignvest transaction costs
From continuing operations
From discontinued operation
Participating policyholders
Non-controlling interests
Year ended December 31
2019
2018
Change
of foreign currency operations and largely related to the impact of
the depreciation of the Jamaican dollar when compared to the United
States dollar.
147.5
43.7
102.9
(64.0)
191.2
(43.4)
38.9
-
43%
168%
392%
-
147.8
38.9
280%
Overall total comprehensive income for the year ended December 31,
2019 totalled US $147.8 million and included the impact of the Alignvest
transaction expenses of US $43.4 million. Total comprehensive income
allocated to shareholders from continuing operations was US $80.7 million.
Absent the Alignvest transaction expenses of US $43.4 million total
comprehensive income allocated to shareholders from continuing
operations would have been income of US $124.1 million. Total
comprehensive income of US $3.0 million was reported for the same
period in 2018.
Statement of financial position
124.1
(43.4)
80.7
0.5
81.2
(2.7)
69.3
147.8
3.0
-
3.0
7.1
10.1
6.4
22.4
38.9
4,037%
-
2,590%
(93%)
704%
(142%)
209%
280%
The table below summarises Sagicor’s consolidated statement of financial
position as at December 31, 2019 and 2018, respectively.
(in millions of US $)
Sagicor Group
Financial investments
Other assets
Assets of discontinued operation
Total assets
Policy liabilities
Other operating liabilities
Borrowings
Total liabilities
Shareholders’ equity
Participating accounts
Non-controlling interests
Total equity
December 31
2019
2018
Change
6,685.6
2,043.3
-
8,728.9
4,316.0
2,145.4
517.7
6,979.1
1,154.1
1.2
594.5
1,749.8
5,347.7
1,960.5
17.2
7,325.4
3,662.4
2,037.2
490.3
6,189.9
600.9
4.1
530.5
1,135.5
25%
4%
(100%)
19%
18%
5%
6%
13%
92%
(71%)
12%
54%
Total liabilities and equity
8,728.9
7,325.4
19%
Items recorded within other comprehensive income arise from gains and
losses on employee defined benefit pension plans, from fair value changes
of certain asset classes and from the related movements in actuarial
liabilities, and from the retranslation of foreign currency operations.
Other comprehensive income for year ended December 31, 2019 totalled
US $43.7 million, a significant increase from the loss of US $64.0 million
reported in 2018.
During the year, the Group reported net gains on financial assets totalling
US $168.7 million resulting from marked-to-market gains financial assets
in our international portfolio. This was offset by a net change in actuarial
liabilities reserve of US $95.0 million. Other comprehensive income for
the period also included a loss of US $16.6 million on the retranslation
78
Sagicor Financial Company Ltd | 2019 Annual Report
Fourth Quarter 2019 Profitability
Group net income for the three-month period ended December 31, 2019
The table below summarises Sagicor’s net income for the three-month
periods ended December 31, 2019 and 2018.
Net income from discontinued operation was nil during the fourth quarter,
compared to net income of US $3.9 million, for the same period in 2018.
On February 12, 2019, Sagicor Financial Corporation Limited completed a
review of the consideration, related to the price adjustments to December
31, 2018, and entered into a Deed of Release with AmTrust to close this
exposure. The final settlement amount of £13.5 million was received on
February 26, 2019.
(in millions of US $)
Group net income
From continuing operations before
Alignvest transaction costs
Alignvest transaction costs
From continuing operations
From discontinued operation
Total
Net income/(loss) is attributable to
Common shareholders:
From continuing operations
Alignvest transaction costs
From discontinued operation
Participating policyholders
Non-controlling interest
Group net income
Quarter ended December 31
Q4 2019
Q4 2018
Change
Group net income from continuing operations
67.9
(43.4)
24.5
-
24.5
54.8
(43.4)
11.4
-
11.4
(1.1)
14.2
24.5
40.0
-
40.0
3.9
43.9
8.0
-
8.0
3.9
11.9
14.9
17.1
43.9
The table below summarises Sagicor’s net income from continuing
operations for the three-month periods ended December 31, 2019
and 2018.
70%
-
(39%)
(in millions of US $)
Quarter ended December 31
(100%)
(44%)
Group net income from
continuing operations
Q4 2019
Q4 2018
Change
Revenue
Benefits
585%
Expenses
-
Other
43%
Income taxes
Group net income from continuing
operations before Alignvest
transaction costs
Alignvest transaction costs
(100%)
(4%)
(107%)
(17%)
(44%)
471.7
(228.5)
(147.9)
(5.4)
(22.0)
67.9
(43.4)
24.5
420.7
(228.0)
(148.2)
13.6
(18.1)
40.0
-
40.0
12%
-
-
(140%)
(22%)
70%
-
(39%)
Group net income before the Alignvest expenses, from continuing
operations, for the three-month period to December 31, 2019 was
US $67.9 million compared to net income of US $40.0 million for the
same period in 2018; an increase of US $27.9 million (70%). The group
experienced a strong performance across all operating segments during
the fourth quarter.
Net income attributable to shareholders for continuing operations for Q4
2019 was US $54.8 million before Alignvest transactions costs, significantly
above the US $8.0 million net income reported for the same period in 2018.
Overall, Group net income before Alignvest transaction expenses,
closed at US $67.9 million for the quarter compared to net income of
US $40.0 million for the same period ended December 31, 2018; an
increase of US $27.9 million or 70%.
Sagicor Financial Company Ltd | 2019 Annual Report
79
Net Life and annuity insurance premiums closed the period
at US $237.3 million, a US $43.5 million (16%) decrease from
US $280.8 million reported for the same period in 2018 and was driven
primarily by the USA segment which experienced lower premium growth
(US $80.1 million) in life and annuity business, as the segment scaled
back new business production in the quarter in response to relative net
interest margins.
Net premium revenue from health insurance totalled US $45.2 million in
2019 and was slightly below the US $45.7 million reported for the three-
month period ended December 31, 2018. Net premium revenue from
property and casualty insurance totalled US $18.0 million in 2019, closing
US $10.5 million above the US $7.5 million reported for the same period in
2018, as the group benefited from premiums from the recently acquired
60% share of Advantage General Insurance company Limited, in our
Jamaica segment.
Net investment income was US $107.7 million in 2019 compared to
US $48.0 million in 2018, an increase of US $59.7 million and was primarily
due an increase in marked to market changes on indexed options in our
USA segment, commensurate with the investment market gains year
to date in the US. In our Jamaica segment, the group benefited from
underlying growth in our investment portfolio along with gains arising from
the strong performance of the Jamaica stock market.
The Group generated Fees and other revenue of US $44.3 million
for the three-month period ended December 31, 2019, compared
to US $30.5 million for the same period in 2018, an increase of
US $13.8 million. This was largely driven by the Jamaica segment which
experienced growth in the payments business.
Revenue
The following table summarises the main items of Sagicor’s revenue for the
three-month periods ended December 31, 2019 and 2018.
(in millions of US $)
Revenue
Net insurance premiums:
Life and annuity
Health
Property and casualty
Gain on derecognition of
amortised cost investments
Gain reclassified to income from
accumulated OCI
Interest income earned from
financial assets measured at
amortised cost and FVOCI
Other investment income
Credit impairment (losses)/gains
Fees and other revenue
Total
Quarter ended December 31
2019
2018
Change
237.3
45.2
18.0
300.5
10.0
19.5
79.9
27.8
(10.4)
44.3
471.7
280.8
45.7
7.5
334.0
7.7
-
75.6
(27.6)
0.5
30.5
420.7
(16%)
(1%)
140%
(10%)
30%
-
6%
201%
(2,180%)
45%
12%
(in millions of US $)
2019
2018
Change
Quarter ended December 31
Total Revenue attributable to
Operating segments:
Sagicor Life
Sagicor Jamaica
Sagicor Life USA
Head office and Other
Total
162.2
194.3
102.9
12.3
471.7
112.1
157.9
142.4
8.3
420.7
45%
23%
(28%)
48%
12%
Revenue from continuing operations reached US $471.7 million for
the three-month period ended December 31, 2019, an increase of
US $51.0 million (12%) from US $420.7 million reported for the same period
in 2018.
80
Sagicor Financial Company Ltd | 2019 Annual Report
Benefits
Expenses and taxes
The table below summarises benefits provided by Sagicor to holders of
insurance contracts, investment contracts and deposit and security liability
contracts for the three-month periods ended December 31, 2019 and 2018.
The table below summarises Sagicor’s expenses and taxes from continuing
operations for the three-month periods ended December 31, 2019
and 2018.
Quarter ended December 31
Quarter ended December 31
2019
2018
Change
(in millions of US $)
2019
2018
Change
(in millions of US $)
Benefits
Net insurance benefits:
Life and annuity
Health
Property and casualty
Interest cost
Total
174.0
33.4
8.4
215.8
12.7
228.5
179.0
28.2
5.8
213.0
15.0
228.0
(3%)
18%
45%
1%
(15%)
-
Life and annuity benefits totalled US $174.0 million for the three-month
period ended December 31, 2019, of which US $108.0 million related to
current benefits and US $66.0 million related to future benefits. Benefits
for the corresponding period in 2018 were a total of US $179.0 million, of
which US $102.2 million related to current benefits and US $76.8 million
related to future benefits. The change to future benefits from 2018 to 2019
represented a decrease of US $10.8 million and occurred mainly as a result
of lower growth in new business in the fourth quarter when compared to
2018 in USA segment.
Total health insurance benefits were US $33.4 million representing an
overall claim to premium
ratio of 75.7%. Total health insurance benefits in 2018 amounts were
US $28.2 million and an overall claim to premium ratio of 85.9%.
Property and casualty claims amounted to US $8.4 million in 2019, a
US $2.6 million increase from US $5.8 million in 2018. Property and
casualty benefits now include claims on the Advantage General Insurance
acquired on October 1, 2019.
Interest expense incurred was US $12.7 million for the three-month period
ended December 31, 2019, a 15 % decrease from US $15.0 million reported
for the three-month period in 2018.
Expenses and taxes
Administrative expenses
Commissions and related
compensation
Finance costs, depreciation and
amortisation
Premium, asset and income taxes
Total expenses before Alignvest
transaction costs
Alignvest transaction costs
Total expenses
91.1
90.5
1%
32.4
22.0
24.3
169.8
43.4
213.2
37.9
(15%)
17.5
20.4
166.3
-
166.3
26%
19%
2%
-
28%
Total expenses and taxes before Alignvest transaction expenses totalled
US $169.8 million for the three-month period ended December 31, 2019
compared to US $166.3 million for the same period in 2018, an increase of
US $3.5 million (2%).
Administration expenses was US $91.1 million before the Alignvest
transaction expenses for the three-month period ended December 31,
2019, compared to US $90.5 million for the same period 2018, a slight
increase of US $0.6 million.
Commissions and related compensation declined by US $5.5 million to
close at US $32.4 million for the three-month period ended December 31,
2019, trending in line with the decline in net premium revenue earned for
the period under review.
Premium, asset and income taxes were US $24.3 million for the three-
month period ended December 31, 2019 compared to US $20.4 million for
the same period in 2018, an increase of US $3.9 million. Of the total taxes,
income taxes were US $22.0 million, with increases being recorded across
all segments.
Sagicor Financial Company Ltd | 2019 Annual Report
81
Comprehensive income
The table below summarises Sagicor’s total comprehensive income for the
three-month periods ended December 31, 2019 and 2018.
(in millions of US $)
2019
2018
Change
Quarter ended December 31
gains on financial assets totalling US $17.7 million resulting from marked
to market gains on financial assets in our international portfolio. This was
offset by a net change in actuarial liabilities reserve of US $10.7 million.
Retranslation of foreign currency operations generated gains of
US $4.6 million for the quarter and largely related to the impact of the
depreciation of the Jamaican dollar when compared to the United States
dollar.
(in millions of US $)
2019
2018
Change
Quarter ended December 31
Other comprehensive income:
Items net of tax that may be
reclassified subsequently
to income:
Fair value assets measured
at fair value through other
comprehensive income:
Losses on revaluation
(Gains)/losses transferred to
income
Net change in actuarial liabilities
Retranslation of foreign currency
operations
Other items
Items net of tax that will not
be reclassified subsequently
to income:
Gains arising on revaluation of
ownership occupied property
Net gains on equity securities
designated at fair value through
other comprehensive income
Gains/(losses) on defined
benefits plans
Other Comprehensive Income
from continuing operations
Total comprehensive income
Group net income
Other comprehensive income
Total comprehensive income for
the year
Alignvest transaction costs
Total comprehensive income
attributable to:
Common shareholders:
From continuing operations
before
Alignvest transaction costs
Alignvest transaction costs
From discontinued operation
17.7
(13.7)
-
(10.7)
4.6
(3.2)
(5.3)
(25.2)
(1.0)
170%
(1,270%)
-
14.3
9.8
-
(2.1)
-
(175%)
(53%)
-
(152%)
1.5
6.1
(75%)
0.2
(100%)
Participating policyholders
Non-controlling interests
-
11.2
12.7
7.4
(2.7)
3.6
515%
253%
1.5
393%
67.9
7.4
75.3
(43.4)
31.9
61.6
(43.4)
18.2
-
18.2
(2.1)
15.8
31.9
44.0
1.5
45.5
-
45.5
13.0
-
13.0
3.9
16.9
14.7
14.0
45.5
54%
347%
65%
-
(30%)
374%
-
40%
(100%)
8%
(114%)
13%
(30%)
Overall, total comprehensive income for the three-month period ended
December 31, 2019 totalled US $31.9 million and included Alignvest
transaction expenses of US $43.4 million. Overall, total Comprehensive
income before the Alignvest transaction expenses was US $75.3 million.
Other comprehensive income for the three-month period ended December
31, 2019 was US $7.4 million, an increase from the US $1.5 million reported
for the same period in 2018. During the quarter, the Group reported net
82
Sagicor Financial Company Ltd | 2019 Annual Report
Quarterly Financial Disclosures
The following table provides a summary of Sagicor’s results from
continuing operations for the eight most recently completed quarters. A
more complete discussion of our historical quarterly results can be found
in our interim and annual MD&A for the relevant periods.
(in US $millions, unless
otherwise noted)
Q4 2019
Q3 2019
Q2 2019
Net premium revenue
300.5
263.3
312.7
Net investment and
other income
Total revenue
171.2
471.7
148.2
411.5
Benefits and expenses
(376.4)
(379.3)
Other
Income before tax
Income tax
Net income before
Alignvest transaction
costs
Alignvest transaction
costs
Net income
Income attributable to
shareholders before
Alignvest transaction
costs
Income attributable to
shareholders
(5.4)
89.9
(22.0)
67.9
(43.4)
24.5
54.9
11.5
-
32.2
(11.1)
21.1
-
21.1
6.3
6.3
155.7
468.4
(429.3)
0.6
39.7
(14.2)
25.5
-
25.5
11.1
11.1
Q1 2019
365.0
150.7
515.8
(478.7)
7.7
44.8
(12.4)
32.4
-
32.4
15.1
15.1
Q4 2018
Q3 2018
Q2 2018
Q1 2018
334.0
310.0
222.7
187.3
86.6
420.6
(376.2)
13.6
58.0
(18.1)
39.9
-
39.9
8.0
8.0
84.1
394.1
(356.9)
(2.1)
35.1
(15.4)
19.7
-
19.7
7.0
7.0
61.1
283.8
(279.2)
1.8
6.4
(8.8)
(2.4)
-
(2.4)
2.0
2.0
100.7
288.0
(248.2)
7.1
46.9
(8.4)
38.5
-
38.5
19.5
19.5
Sagicor Financial Company Ltd | 2019 Annual Report
83
Quarterly Financial Disclosures, (continued)
(in US $millions, unless
otherwise noted)
Basic EPS before
Alignvest transaction
costs
Basic EPS
Diluted EPS before
Alignvest transaction
costs
Diluted EPS
Annualised return on
shareholders’ equity
before Alignvest
transaction costs
Annualised return on
shareholders’ equity
Dividends paid per
share
Total assets (a)
Total equity
attributable to
shareholders (a)
Q4 2019
Q3 2019
Q2 2019
Q1 2019
Q4 2018
Q3 2018
Q2 2018
Q1 2018
71.8¢
15.0¢
67.5¢
14.1¢
30.4%
6.2%
2.5 ¢
8,728.9
8.9¢
8.9¢
N/A
8.6¢
N/A
3.8%
-
8,056.4
15.7¢
15.7¢
N/A
15.3¢
N/A
6.9%
2.5 ¢
7,861.7
21.3¢
21.3¢
N/A
21.0¢
N/A
9.9%
11.3 ¢
11.3 ¢
N/A
11.1 ¢
N/A
5.4%
9.9 ¢
9.9 ¢
N/A
9.7¢
N/A
4.7%
2.9¢
2.9¢
N/A
2.8¢
N/A
1.3%
27.5¢
27.5¢
N/A
27.0¢
N/A
12.7%
-
7,639.8
2.5 ¢
7,308.2
-
6,821.4
2.5 ¢
6,942.9
-
6,895.9
1,154.1
660.4
658.6
640.4
600.9
598.1
596.7
622.9
Income before Alignvest transaction costs, attributable to shareholders by operating segment:
Sagicor Life
Sagicor Jamaica
Sagicor Life USA
Head office, other
& inter-segment
eliminations
Total
29.4
18.2
16.5
(9.2)
54.9
10.5
18.4
6.0
(28.6)
6.3
9.8
14.3
6.0
(19.0)
11.1
11.2
10.4
6.9
(13.4)
15.1
5.5
20.9
6.6
(25.0)
8.0
1.1
12.6
12.1
(18.8)
7.0
5.2
11.7
2.8
(17.7)
2.0
27.8
10.6
(3.2)
(15.7)
19.5
Under the Alignvest transaction, Sagicor Financial Corporation Limited common shares not purchased for cash, were exchanged for common shares of
Sagicor Financial Company Ltd on an exchange ratio of one Sagicor Financial Company Ltd. common share for 4.328 of Sagicor Financial Corporation
Limited common shares (“Exchange Ratio”). This exchange ratio has been used to convert the 2018 outstanding shares to the Sagicor Financial Company
Ltd equivalent. The earnings per share ratio for 2018 has been adjusted to reflect the Exchange Ratio.
84
Sagicor Financial Company Ltd | 2019 Annual Report
Quarterly Financial Disclosures (continued)
Fourth Quarter 2018
Third Quarter 2019
Results for third quarter of 2019 reflected moderate aggregate growth
in our core operating segments, offset somewhat with the effect of
Hurricane Dorian.
Net income from continuing operations attributable to shareholders
was US $6.3 million for the three-month period ended September 30,
2019, (three-month period end September 30, 2018 – US $7.0 million),
a decrease of US $0.7 million. During Q3 2019, Sagicor took a provision
of US $2.5 million, representing our maximum potential impact from
Hurricane Dorian. During Q3 2018, the Group increased its provisions
on the Government of Barbados (GoB) debt. The net impact on the net
income was US $16.4 million. Net income in 2018, also benefitted from
certain one-time positive earnings releases that did not recur in 2019.
Second Quarter 2019
Net income from continuing operations attributable to shareholders
was US $11.1 million for the three-month period ended June 30, 2019,
(three-month period end June 30, 2018 – US $2.0 million), an increase
of US $9.1 million. The Group benefited from net premium growth in our
USA segment. Benefits and expenses also grew over the prior year’s levels
driven by business growth. In the June quarter of 2018 the Group also
experienced the net impact of increased provisions for expected credit
impairment losses on the Government of Barbados debt (US $19.8 million).
First Quarter 2019
Net income from continuing operations attributable to shareholders was
$15.1 million for the three months ended March 31, 2019, (first quarter
March 2018 – US $19.5 million). While the Group benefited from net
premium growth through our USA segment, benefits and expenses also
grew over the prior year-to-date levels and was consistent with premium
growth due to the provisions for future benefits on new business. During
the first quarter of 2019, the Group also benefited from increased
investment income due to marked to market changes on equities and
indexed options in our Jamaica and USA segments. During the first quarter
of 2018 the results included a one-time gain of US $5.3 million on the
acquisition of the British American insurance portfolio.
Net income from continuing operations attributable to shareholders was
US $8.0 million for the three months ended December 31, 2018, compared
to US $15.7 million for the three-month period ended December 31, 2017.
The Group was impacted by lower realised gains on the sale of securities
and lower interest rates in our Jamaica Segment in 2018. In addition, in
2017, the Group recognised a tax benefits in our Sagicor USA segment,
arising from the 2017 US Federal tax law changes.
Third Quarter 2018
Net income from continuing operations attributable to shareholders was
US $7.0 million in the three-month period ended September 30, 2018,
compared to a profit of US $28.6 million for the same period in 2017. The
Group benefitted from increased new annuity business growth in our USA
segment. The Group was also impacted by lower realised gains on the sale
of securities and lower interest rates in our Jamaica Segment.
In addition, on September 7, 2018 the Government of Barbados entered
into a staff-level agreement with the International Monetary Fund (IMF) to
provide financial and technical assistance. As part of the programme, the
Government of Barbados launched a debt exchange offer for Government
of Barbados Domestic Barbados-dollar debt holders on September 7,
2018 and announced on October 15, 2018 that its debt exchange offer
received unanimous support from the domestic creditors. A restructuring
plan had not been announced for external US dollar denominated debt.
The Sagicor Group held approximately US $337 million in Government of
Barbados debt, of which US $278 million was domestic Barbados-dollar
debt. The net impact of credit events on Government of Barbados debt to
shareholders for Q3 2018 was US $16.4 million. The year to date impact to
shareholders was US $36.1 million, at the end of the period.
Second Quarter 2018
Net income from continuing operations attributable to shareholders was
US $2.0 million in the second quarter of 2018, compared to US $5.6 million
for the same period in 2017. The Group reported revenue growth which
was mainly due to growth in premiums in the USA segment. Benefits also
increased, driven largely by growth in new business.
Sagicor Financial Company Ltd | 2019 Annual Report
85
First Quarter 2018
Net income from continuing operations, attributable to shareholders,
was US $19.5 million in the first quarter of 2018 (first quarter March 2017
– US $12.4 million). The Group benefited from net premium growth and
lower net benefits when compared to the same period in 2017, however
net investment income fell short of that reported for the same period
in 2017. The 2018 first quarter results also included a one-time gain of
US $5.3 million on the acquisition of the British American insurance
portfolio from the Government of Barbados.
Key Factors Affecting Results
A variety of factors affect Sagicor’s results, including:
sales of core products and services;
life insurance and annuity policy lapse experience;
insurance claims experience;
investment yields;
asset default;
(i)
(ii)
(iii)
(iv)
(v)
(vi) country inflation and taxes;
(vii) Sagicor’s expansion into new geographic markets (in the United
duration. If the policy lapses during the initial years, Sagicor will not fully
recover its up-front costs and incur a loss on that policy.
For the same reasons that the quantum of sales of insurance policies
is an important factor in maintaining insurance policy unit costs of
administration, the rates of lapse or termination of inforce policies impacts
the policy unit costs incurred. The lower the lapse or termination rate, the
more policies are inforce, enabling Sagicor to contain growth in unit policy
administrative costs.
Insurance claims experience
Across all lines of insurance, claims experience is a factor in profitability.
In establishing rates of premium, Sagicor provides for appropriate
levels of claims experience, be it rates of mortality for life insurance,
rates of longevity for annuities, rates of morbidity for disability and
health insurance, or rates of contingent losses for property and casualty
insurance. Claims rates incurred in excess of pricing have adverse
consequences for profitability, and conversely, claims rates incurred at
levels below pricing impact profitability positively.
States) and product markets (in Jamaica) through portfolio and /
or company acquisitions; and
Investment yields
(viii) the continuing availability of appropriately priced reinsurance
treaties for life, health and property and casualty insurance
Sales of core products and services
Growth in sales enables Sagicor to allocate its fixed operating expenses
over larger revenues and subsequently increases its profitability. The
impact is very significant for the Sagicor Life and Sagicor Jamaica
operating segments which sell significant amounts of periodic premium life
insurance and annuity policies. The pricing of such products is either fixed
at the issue of each policy or may limit the extent of cost recovery over
the duration of the policy which can extend over decades. Growth in sales
enables Sagicor to contain the growth in unit policy operating expenses.
Lapse experience
With respect to periodic premium life insurance and annuity policies, lapse
experience is a factor of profitability. Many of these polices have up-front
commission, policy issue and medical underwriting costs which are only
recovered in full if the policy is premium paying for the initial years of its
Across applicable lines of insurance and across financial contracts issued
by Sagicor, investment yield is important to the profitability of the Group.
Higher investment yields enable Sagicor to achieve higher interest
margins (defined as the difference between interest earned and payable)
on applicable insurance contracts and financial contracts. With lower
investment yields, the interest margins are generally lower and may be
eliminated if Sagicor is not able to earn a guaranteed rate of interest which
is payable under the insurance or financial contract.
For long-term life insurance and annuity contracts, the Appointed
Actuaries within the Group determine each segment’s actuarial liabilities
at December 31 after factoring in rates of investment return on re-invested
assets. These rates, including the ultimate rates of return, affect the
quantum of actuarial liability determined, with higher re-investment rates
resulting in a lower actuarial liability, and with lower re-investment rates
resulting in a higher actuarial liability.
Asset default
The recognition of an un-anticipated default from an invested asset, may
have immediate negative consequences for profitability. Sagicor maintains
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Sagicor Financial Company Ltd | 2019 Annual Report
certain invested assets for which the full return (of capital and of interest)
is borne by insurance and /or financial contract-holders. In such instances,
Sagicor is generally not exposed to asset default risk. However, for other
invested assets, for which Sagicor is exposed to default risk, the default
risk may be entirely borne by Sagicor’s shareholders, or the risk is shared
by Sagicor’s shareholders and insurance and /or financial contract-holders.
In such instances, the impact on profitability will be negative.
For long-term life insurance and annuity contracts, the Appointed
Actuaries within the Group determine each segment’s actuarial liabilities
at December 31 after factoring in the expected rates of asset default.
Should asset default rates over time be lower than expected, profitability is
impacted positively. Conversely, if asset default rates over time are higher
than expected, profitability is impacted negatively.
Country inflation and taxes
As with other key factors affecting profitability, changes in the level of
country inflation and taxes impact the operating costs of the Sagicor
Group, immediately and in the longer term.
Actuaries within the Group determine each segment’s actuarial liabilities as
of December 31 after factoring in expected levels of operating expenses.
Higher inflation and taxation levels result is adverse consequences for
profitability and lower inflation and taxation levels result in positive
consequences for profitability.
Sensitivity arising from the valuation of actuarial liabilities
The estimation of actuarial liabilities is sensitive to the assumptions made.
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
• the margins for adverse deviations
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:
Sagicor Financial Company Ltd | 2019 Annual Report
87
Sensitivity
Scenario
Sagicor Life Inc
segment
Sagicor Jamaica
Segment
Sagicor USA
segment
Worsening
rate of
lapse
Lapse rates were either doubled or
halved, and the more adverse result
was selected.
High
interest rate
Assumed increases
in the investment
portfolio yield
rates of 0.25%
per year for 5
years, with the
rates remaining
constant thereafter.
Assumed
increases in
the investment
portfolio yield
rates of 0.5% for
10 years.
Lapse rates were
increased or
reduced by 30%,
and the more
adverse result
was selected.
A 1% increase
was applied to
the investment
portfolio rate.
Sensitivity
Scenario
Sagicor Life Inc
segment
Sagicor Jamaica
Segment
Sagicor USA
segment
Low
interest rate
Assumed
decreases in
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 0.5% per
year for 10 years.
A 1% decrease
was applied to
the investment
portfolio rate.
Worsening
mortality
and
morbidity
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, the mortality
rates were decreased by 3% of the
base rate for 5 years.
For life insurance
and deferred
annuity products,
the base
assumed rates
were increased
annually by 3%
cumulatively
over the next
5 years. For
pay-out annuity
products only,
the mortality
rates were
decreased 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.
To illustrate the potential impact of some of the foregoing key factors,
the following table presents the estimated sensitivity using the economic
scenarios outlined above, relating to (i) worsening rate of lapse, (ii) higher
interest rate (on invested assets), (iii) lower interest rate (on invested
assets), (iv) worsening rate of mortality and morbidity, and (v) higher
operating expenses, to the net actuarial liabilities of each of operating
segments of the Group, as of December 31, 2019 and 2018.
88
Sagicor Financial Company Ltd | 2019 Annual Report
(in US $millions)
Sagicor Life Segment
Base net actuarial liability
Scenario
Worsening rate of lapse
Higher interest rate
Lower interest rate
Worsening mortality / morbidity
Higher expenses
Sagicor Jamaica Segment
Base net actuarial liability
Scenario
Worsening rate of lapse
High interest rate
Low interest rate
Worsening mortality / morbidity
Higher expenses
Sagicor Life USA Segment
Base net actuarial liability
Scenario
Worsening rate of lapse
High interest rate
Low interest rate
Worsening mortality / morbidity
Higher expenses
2019
2018
1,038.7
926.1
Increase (decrease) in
actuarial liability
177.6
(97.6)
163.3
42.6
20.4
156.2
(97.6)
170.0
39.7
20.6
360.0
345.2
Increase (decrease) in
actuarial liability
78.5
(116.6)
97.1
56.9
20.9
66.6
(115.8)
110.2
48.3
16.6
1,212.2
816.8
Increase (decrease) in
actuarial liability
18.4
(72.2)
83.1
17.0
2.9
12.1
(49.7)
57.5
16.0
3.0
Expansion into new markets and company acquisitions
While Sagicor has endured for 178 years, its product offerings and
geographic markets have evolved. Markets often have different
preferences for certain products and any successful venture into new
markets need to adapt to market tastes. Sagicor only ventures into new
markets or offers new products after extensive research and appraisal.
Company acquisitions has been a strategy employed by the Sagicor Group
over the last twenty years. As a result of these acquisitions, Sagicor’s
assets include goodwill and other intangibles acquired on company
acquisitions. The goodwill carried by operating segments as of December
31, 2019 and 2018 respectively, is summarised in the following table.
(in US $millions)
Goodwill
Sagicor Life segment
Sagicor Jamaica segment
Sagicor General Insurance
Total goodwill
2019
2018
26.6
31.0
5.7
63.3
26.5
24.2
5.7
56.4
Goodwill is subject to an annual impairment test, whereby the carrying
value of the business unit including the associated goodwill is compared
to the fair value of the business. As long as the fair value of the business
exceeds the carrying value of the business and its associated goodwill, the
goodwill is un-impaired. If it is not, the goodwill is impaired to the extent
of the excess of the carrying value plus goodwill over its fair value, and the
resulting impairment charge is recorded in the income statement.
In this test, fair value is defined as the higher of ‘value in use’ and ’fair
value less costs to sell’. The computation of fair value includes the
use of management prepared income and cash flow forecasts, and
independently determined market discount and residual growth rates.
For some life insurance elements of the carrying value, the Group uses
an actuarially determined ‘embedded value’ to determine fair value, as
this is an appropriate methodology to determine fair value of long-term
insurance business.
As income and cash flow forecasts and market discount and residual
factors vary from year to year, there is the possibility of a significant
impairment charge. For the years ended December 31, 2019 and 2018
respectively, there was no goodwill impairment charge recorded in the
income statement.
Reinsurance treaties
In order to offer useful insurance coverages to potential customers, the
Group holds reinsurance coverages that allow potential policy benefits to
exceed amounts which are prudent for Sagicor to undertake the claims
risk. Reinsured amounts may be on a per policy basis, (i.e. in excess of
a pre-determined insured amount) or may be based on the aggregation
of the insured’s coverages (i.e. the insured has several policies and the
amount reinsured is the aggregate exceeding a pre-determined amount).
Sagicor Financial Company Ltd | 2019 Annual Report
89
The tables below illustrate the gross and net (of reinsurance) total life
insurance coverages and annuity liabilities for individual and group polices
as of December 31, 2019 and 2018, respectively.
(in US $millions)
Total life insurance coverage
Individual contracts - gross
Individual contracts - net
Group contracts – gross
Group contracts - net
2019
2018
33,486.9
27,482.8
12,350.6
11,853.5
31,820.2
25,655.5
11,667.0
11,240.1
(in US $millions)
2019
2018
Total actuarial liability for annuity contracts
Individual contracts - gross
Individual contracts - net
Group contracts – gross
Group contracts - net
2,016.2
1,335.0
428.1
414.2
1,542.9
862.0
414.3
399.4
90
Sagicor Financial Company Ltd | 2019 Annual Report
3. ANALYSIS BY BUSINESS SEGMENT
Sagicor operates its business primarily through three reporting operating segments. These segments are: Sagicor Life, Sagicor Jamaica and Sagicor Life
USA. A summary analysis of revenue and net income by operating segment are presented on a three-month quarterly basis and on a yearly basis for
2019 and 2018, as follows:
(in millions of US $)
Revenue
Net premium revenue
Net gain/(losses) on derecognition of financial assets
measured at amortised cost
Gains reclassified to income from accumulated OCI
Interest income
Other investment income
Credit impairment losses
Fees and other revenues
Inter-segment revenues
Segment revenue
Benefits and expenses
Inter-segment expenses
Gain arising on business combinations, acquisitions
and divestitures
Gain/(Loss) arising on acquisition of insurance business
Share of operating income of associates and joint
ventures
Segment income before tax
Income taxes
Segment net income/(loss) from continuing before
Alignvest transaction costs
Alignvest transaction costs
Segment net income/(loss) from continuing operations
Net income attributable to shareholders
Net income attributable to shareholders before
Alignvest transaction costs
Fourth Quarter (three-month period) – December 2019
Sagicor Life
Sagicor
Jamaica
Sagicor Life
USA
Head office &
other
Adjustments
Total
126.0
0.5
2.9
15.5
7.7
(0.4)
4.9
5.1
162.2
(131.2)
(1.4)
0.1
-
0.3
30.0
(1.8)
28.2
-
28.2
29.4
29.4
93.7
10.3
15.1
38.8
10.7
(9.5)
35.1
-
194.2
(139.8)
(0.9)
-
-
(5.7)
47.8
(15.5)
32.3
-
32.3
18.2
18.2
70.9
-
1.5
15.8
16.2
(0.5)
(0.9)
-
103.0
(81.7)
(0.4)
-
-
-
20.9
(4.4)
16.5
-
16.5
16.5
16.5
9.9
(0.8)
-
0.6
2.8
-
5.8
18.5
36.8
(48.0)
(5.0)
-
-
-
(16.2)
(0.5)
(16.7)
(43.4)
(60.1)
(34.1)
-
-
-
-
(0.3)
-
(0.6)
(23.6)
(24.5)
24.3
7.7
-
-
-
7.5
0.2
7.7
-
7.7
(18.5)
300.5
10.0
19.5
70.7
37.1
(10.4)
44.3
-
471.7
(376.4)
-
0.1
-
(5.4)
90.0
(22.0)
68.0
(43.4)
24.6
11.5
9.3
(18.5)
54.9
Sagicor Financial Company Ltd | 2019 Annual Report
91
(in millions of US $)
Revenue
Net premium revenue
Net gain/(losses) on derecognition of financial assets
measured at amortised cost
Gains reclassified to income from accumulated OCI
Interest income
Other investment income
Credit impairment losses
Fees and other revenues
Inter-segment revenues
Segment revenue
Benefits and expenses
Inter-segment expenses
Gain arising on business combinations, acquisitions
and divestitures
Gain/(Loss) arising on acquisition of insurance business
Share of operating income of associates and joint
ventures
Segment income before tax
Income taxes
Segment net income/(loss) from continuing operations
before Alignvest transaction costs
Alignvest transaction costs
Segment net income/(loss) from continuing operations
Net income attributable to shareholders
Net income attributable to shareholders before
Alignvest transaction costs
Fourth Quarter (three-month period) – December 2018
Sagicor Life
Sagicor
Jamaica
Sagicor Life
USA
Head office &
other
Adjustments
Total
89.7
85.3
(0.3)
0.5
20.2
(3.2)
0.4
1.0
4.4
112.7
(90.1)
(1.0)
-
1.1
0.1
22.8
(2.0)
20.8
-
20.8
5.5
5.5
7.5
8.4
38.5
(9.3)
0.5
27.0
-
157.9
(117.7)
(0.8)
11.8
-
0.5
51.8
(11.9)
39.9
-
39.9
20.9
20.9
151.5
-
0.8
15.8
(24.5)
(0.6)
(0.4)
-
142.5
(133.9)
(0.2)
-
-
-
8.4
(1.8)
6.6
-
6.6
6.6
6.6
7.5
0.4
-
1.1
(0.4)
0.2
3.6
55.1
67.5
(60.9)
(4.2)
-
-
-
2.5
(2.4)
0.1
-
0.1
27.2
27.2
-
-
(0.4)
-
0.6
-
(0.7)
(59.5)
(60.0)
26.5
6.2
-
-
-
(27.2)
(0.1)
(27.3)
-
(27.3)
(52.2)
(52.2)
334.0
7.6
9.3
75.6
(36.8)
0.5
30.6
(0.0)
420.7
(376.0)
-
11.8
1.1
0.6
58.2
(18.2)
40.0
-
40.0
8.0
8.0
92
Sagicor Financial Company Ltd | 2019 Annual Report
Change December 2019 Quarter vs December 2018 Quarter (%)
Sagicor Life
Sagicor
Jamaica
Sagicor Life
USA
Head office &
other
Adjustments
Total
Revenue
Net premium revenue
Net gain/(losses) on derecognition of financial assets
measured at amortised cost
Gains reclassified to income from accumulated OCI
Interest income
Other investment income
Credit impairment losses
Fees and other revenues
Inter-segment revenues
Segment revenue
Benefits and expenses
Inter-segment expenses
40%
267%
480%
(23%)
341%
(200%)
390%
16%
44%
(46%)
(40%)
10%
37%
80%
1%
215%
(2,000%)
30%
-
23%
(19%)
(13%)
Gain arising on business combinations, acquisitions
and divestitures
-
(100%)
Gain/(Loss) arising on acquisition of insurance business
(100%)
-
Share of operating income of associates and joint
ventures
Segment income before tax
Income taxes
Segment net income/(loss) from continuing operations
before Alignvest transaction costs
Alignvest transaction costs
Segment net income/(loss) from continuing operations
Net income attributable to shareholders
Net income attributable to shareholders before
Alignvest transaction costs
200%
32%
10%
36%
-
36%
435%
435%
(1,240%)
(8%)
(30%)
(19%)
-
(19%)
(13%)
(13%)
(53%)
32%
-
88%
0%
166%
17%
(125%)
-
(28%)
39%
(100%)
-
-
-
(300%)
-
(45%)
800%
(100%)
61%
(66%)
(45%)
21%
(19%)
-
-
-
149%
(144%)
(748%)
79%
150%
(16,800%)
-
150%
150%
150%
-
(60,200%)
(225%)
(66%)
-
-
(100%)
-
(150%)
-
14%
60%
(59%)
(8%)
24%
-
-
-
128%
300%
128%
-
128%
65%
65%
(10%)
32%
110%
(6%)
201%
(2,180%)
45%
-
12%
0%
-
(99%)
(100%)
(1,000%)
55%
(21%)
70%
-
(39%)
44%
586%
Sagicor Financial Company Ltd | 2019 Annual Report
93
(in millions of US $)
Revenue
Net premium revenue
Net gain/(losses) on derecognition of financial assets
measured at amortised cost
Gains reclassified to income from accumulated OCI
Interest income
Other investment income
Credit impairment losses
Fees and other revenues
Inter-segment revenues
Segment revenue
Benefits and expenses
Inter-segment expenses
Gain arising on business combinations, acquisitions and
divestitures
Gain/(Loss) arising on acquisition of insurance business
Share of operating income of associates and joint
ventures
Segment income before tax
Income taxes
Segment net income/(loss) from continuing operations
before Alignvest transaction costs
Alignvest transaction costs
Segment net income/(loss) from continuing operations
Net income attributable to shareholders
Net income attributable to shareholders before
Alignvest transaction costs
Sagicor Life
Sagicor
Jamaica
Sagicor Life
USA
Head office &
other
Adjustments
Total
Year ended December 31, 2019
409.2
350.1
444.7
0.5
6.2
74.2
10.8
1.4
11.0
20.0
533.3
(465.1)
(5.0)
(0.4)
-
4.0
66.8
(7.9)
58.9
-
58.9
60.9
60.9
13.3
21.3
160.3
52.1
(6.1)
144.3
-
735.3
(568.2)
(2.5)
-
-
(0.6)
164.0
(40.4)
123.6
-
123.6
61.4
61.4
-
2.5
70.2
46.9
(0.4)
(2.4)
-
561.5
(515.4)
(1.3)
-
-
-
44.8
(9.4)
35.4
-
35.4
35.4
35.4
37.5
(0.9)
-
3.3
2.6
0.2
17.2
41.7
101.6
(107.0)
(19.3)
-
-
-
24.7
(2.2)
(26.9)
(43.4)
(70.3)
(69.6)
-
-
-
-
(0.6)
-
(2.1)
(61.7)
(64.4)
(7.9)
28.1
-
-
-
(44.2)
0.2
(44.0)
-
(44.0)
(44.1)
1,241.5
12.9
30.0
308.0
111.8
(4.9)
168.0
-
1,867.3
(1,663.6)
-
(0.4)
-
3.4
206.7
(59.7)
147.0
(43.4)
103.6
44.0
(26.2)
(44.1)
87.4
94
Sagicor Financial Company Ltd | 2019 Annual Report
(in millions of US $)
Revenue
Net premium revenue
Net gain/(losses) on derecognition of financial
assets measured at amortised cost
Gains reclassified to income from accumulated OCI
Interest income
Other investment income
Credit impairment losses
Fees and other revenues
Inter-segment revenues
Segment revenue
Benefits and expenses
Inter-segment expenses
Gain arising on business combinations, acquisitions
and divestitures
Gain/(Loss) arising on acquisition of insurance
business
Share of operating income of associates and joint
ventures
Segment income before tax
Income taxes
Segment net income/(loss) from continuing operations
before Alignvest transaction costs
Alignvest transaction costs
Segment net income/(loss) from continuing operations
Net income attributable to shareholders before
Alignvest transaction costs
Net income attributable to shareholders
Sagicor Life
Sagicor
Jamaica
Sagicor Life
USA
Head office &
other
Adjustments
Total
Year ended December 31, 2018
320.5
309.7
390.0
33.9
(0.3)
0.5
74.1
3.4
(82.3)
8.5
15.7
340.1
(290.0)
(2.9)
0.5
6.4
2.6
56.7
(9.6)
47.1
-
47.1
39.6
39.6
10.3
8.3
155.9
13.8
(10.2)
98.1
-
585.9
(451.0)
(2.2)
11.8
-
(0.5)
144.0
(33.2)
110.8
-
110.8
55.7
55.7
-
0.8
54.2
(14.8)
(0.6)
(8.9)
-
420.7
(396.9)
(0.7)
-
-
-
23.1
(4.8)
18.3
-
18.3
18.3
18.3
0.4
-
6.7
0.6
(2.4)
17.4
94.1
150.7
(120.6)
(15.1)
(0.5)
-
-
14.5
(3.2)
11.3
-
11.3
14.3
14.3
-
-
(0.3)
-
(0.1)
-
(0.6)
(109.8)
(110.8)
(1.8)
20.9
-
-
-
(91.9)
0.1
(91.8)
-
(91.8)
(91.4)
(91.4)
1,054.1
10.4
9.3
290.9
2.9
(95.5)
114.5
-
1,386.6
(1,260.4)
-
11.8
6.4
2.1
146.5
(50.7)
95.8
-
95.8
36.5
36.5
Sagicor Financial Company Ltd | 2019 Annual Report
95
Change December 31, 2019 vs December 31, 2018 (%)
Sagicor Life
Sagicor
Jamaica
Sagicor Life
USA
Head office &
other
Adjustments
Total
Revenue
Net premium revenue
Net gain/(losses) on derecognition of financial assets
measured at amortised cost
Gains reclassified to income from accumulated OCI
Interest income
Other investment income
Credit impairment losses
Fees and other revenues
Inter-segment revenues
Segment revenue
Benefits and expenses
Inter-segment expenses
Gain arising on business combinations, acquisitions and
divestitures
Gain/(Loss) arising on acquisition of insurance business
Share of operating income of associates and joint
ventures
Segment income before tax
Income taxes
Segment net income/(loss) from continuing operations
before Alignvest transaction costs
Alignvest transaction costs
Segment net income/(loss) from continuing operations
Net income attributable to shareholders
Net income attributable to shareholders before
Alignvest transaction costs
27%
267%
1,140%
0%
218%
102%
29%
27%
57%
(60%)
(72%)
(180%)
(100%)
54%
18%
18%
25%
-
25%
54%
54%
13%
29%
157%
3%
278%
40%
47%
-
25%
(26%)
(14%)
(100%)
-
(20%)
14%
(22%)
12%
-
12%
10%
10%
14%
-
213%
27%
397%
33%
73%
-
33%
(30%)
(86%)
-
-
-
94%
(96%)
93%
-
93%
93%
93%
11%
(300%)
-
(51%)
317%
108%
(2%)
(56%)
(33%)
11%
(28%)
100%
-
-
70%
31%
(338%)
-
(722%)
(587%)
(283%)
-
-
(100%)
-
500%
-
(250%)
44%
42%
(316%)
34%
-
-
-
52%
100%
52%
-
52%
52%
52%
18%
25%
219%
5%
6,106%
95%
47%
-
35%
(32%)
-
(103%)
(100%)
62%
41%
(18%)
54%
-
8%
21%
139%
96
Sagicor Financial Company Ltd | 2019 Annual Report
The performance of these reporting segments in 2019 compared to 2018 is
discussed in the following sections.
The following table summarises the results of the Sagicor Life segment for
the years ended December 31, 2019 and 2018.
Sagicor Life segment
The Sagicor Life segment conducts life, health insurance, property &
casualty insurance, pensions, annuities, and asset management service
in Barbados, Trinidad and Tobago, Eastern Caribbean, Dutch Caribbean,
Bahamas and Central America. Sagicor Life has a diversified customer
base providing financial solutions to both individuals and corporations
through mainly a captive distribution network, and local brokers. Sagicor
Life’s strong corporate image, people, financial strength, and diverse
insurance solutions has contributed to Sagicor Life’s lead position in the
insurance market in the Caribbean. Sagicor Life has an “A-stable” rating
from A.M. Best.
Sagicor Life Highlights
NET PREMIUM REVENUE AND NET INCOME GROWTH
308.6
2017
320.5
2018
409.2
2019
63.7
2017
47.1
2018
58.9
2019
s
n
o
i
l
l
i
m
$
S
U
Net Premium Revenue
Net Income
Return on Total Equity
Return on Investments
2019
2018
2017
2019
2018
2017
Sagicor Life
segment
12.2%
9.5%
12.7%
6.1%
5.7%
6.5%
Quarterly Results
Year ended December 31
(in millions of US $)
Sagicor Life segment
Q4
2019
Q4
2018 Change
2019
2018 Change
Net premium revenue
126.0
89.7
40% 409.2
320.5
27%
Gains/(losses) on
derecognition of
financial assets
measured at AC.
Gains/(losses) on
derecognition of
financial assets
measured at FVOCI
Interest income
Other investment
income
Credit impairment
(losses) /gains
Fees and other
revenue
Inter-segment
revenues
Total revenue
carried forward
0.5
(0.3)
267%
0.5
(0.3)
267%
2.9
15.5
0.5
480%
20.2
(23%)
6.2
74.2
0.5
1,140%
74.1
-
7.7
(3.2)
341%
10.8
3.4
218%
(0.4)
0.4 (200%)
1.4
(82.3)
102%
4.9
1.0
390%
11.0
8.5
29%
5.1
4.4
16%
20.0
15.7
27%
162.2
112.7
44% 533.3
340.1
57%
Sagicor Financial Company Ltd | 2019 Annual Report
97
Quarterly Results
Year ended December 31
Q4
2019
Q4
2018 Change
2019
2018 Change
period ended December 31, 2019 compared to US $89.7 million for the
same period in 2018 with premium growth seen particularly in single
premium business.
(in millions of US $)
Total revenue
brought forward
162.2
112.7
44% 533.3
340.1
57%
Benefits
(94.6)
(54.1)
(75%)
(331.4)
(166.9)
(99%)
Expenses and taxes
(34.5)
(34.0)
(1%)
(126.3)
(116.3)
(9%)
Depreciation and
amortisation
Inter-segment
expenses
Other
Segment income
before taxes
Income taxes
Net segment income
from continuing
operations
Income attributable
to shareholders
(2.1)
(2.0)
(5%)
(7.4)
(6.8)
(9%)
(1.4)
0.4
(1.0)
(40%)
(5.0)
(2.9)
(72%)
1.2
(67%)
3.6
9.5
(62%)
30.0
22.8
(1.8)
(2.0)
32%
10%
66.8
56.7
(7.9)
(9.6)
18%
18%
28.2
20.8
36%
58.9
47.1
25%
29.4
5.5
435%
60.9
39.6
54%
Fourth quarter (three-month period) results of the Sagicor Life Segment
analysis
Q4 2019 results for the Sagicor Life reflected robust organic growth, with
net income showing an improved performance over the corresponding
period in the prior year.
The net income attributable to shareholders was US $29.4 million for the
three-month period, $23.9 million higher than the US $5.5 million recorded
for the same period in 2018.
Net income attributable shareholders in the fourth quarter of 2019
benefited from a significant growth in new business particularly in annuity
business, gains on the derecognition of, and revaluation of financial assets,
along with better asset liability matching.
The Sagicor Life segment generated revenue totalling US $162.2 million
for the three-month period ended December 31, 2019, a US $49.5 million
(44%) increase from US $112.7 million reported for the same period in 2018.
Net premium revenue increased to US $126.0 million for the three-month
98
Sagicor Financial Company Ltd | 2019 Annual Report
Net investment income including interest income, gains on derecognition
of financial assets and other investment income totalled US $26.6 million
for the three-month period ended December 31, 2019, US $9.9 million
above the US $16.7 million reported for the same period in 2018 with gains
on the derecognition of and revaluation of financial assets contributing to
this increase.
Fees and other revenues also increased by US $4.9 million when compared
to the prior year. The prior year included exchange losses on the
translation, largely related to the depreciation of the Trinidad dollar when
compared to the United States dollar.
Benefits incurred for the Sagicor Life segment totalled US $94.6 million
for the three-month period ended December 31, 2019 compared to
benefits of US $54.1 million reported for the same period in 2018. The
increase in benefits incurred was mainly due to net changes in actuarial
liabilities which totalled US $34.5 million for the three-month period
for 2019, compared to a reduction of US $10.0 million in the prior year.
This represents an increase of US $44.5 million. The increase in actuarial
liabilities was partially due to the higher provisions for future benefits for
new business.
Total expenses and taxes for the Sagicor Life segment totalled
US $34.5 million for the three-month period ended December 31, 2019,
slightly above the US $34.0 million reported for the same period in 2018.
Administrative expenses closed US $1.2 million lower in 2019, when
compared to the December 31, 2018 three-month period. Commissions
and premium taxes increased by US $1.8 million and was driven by the new
business growth.
Year-to-date (twelve-month period) results of the Sagicor Life Segment
analysis
The Sagicor Life segment reported strong results for the year ended
December 31, 2019, largely fuelled by organic growth. The net income
attributable to shareholders was US $60.9 million for the year and was 54%
higher than the US $39.6 million for the same period in 2018. The result for
2018 was affected by the impairment of Government of Barbados debt.
The Sagicor Life segment generated revenue of US $533.3 million for the
year ended December 31, 2019, compared to revenue of US $340.1 million
reported for the same period in 2018 and represented a 57% or
US $193.2 million increase when compared to the same period in 2018.
Net premium revenue which represented 77% of total revenue, grew by
28% (US $88.7 million) to US $409.2 million up from US $320.5 million
reported in 2018. The segment benefitted from higher new business in
both insurance and annuities. In 2018, the segment reported gross credit
impairment losses amounting to US $82.3 million, as the segment impaired
its Government of Barbados debt securities. The segment experienced a
credit impairment gain of US $1.4 million in 2019.
Net investment income including, interest income gains on derecognition
of financial assets and other investment income totalled US $91.7 million
for the year ended December 31, 2019, US $14.0 million above the
US $77.7 million reported for the same period in 2018 with gains on
the derecognition of and revaluation of financial assets contributing to
this increase.
Fees and other revenues also increased by US $2.5 million when compared
to the prior year. The prior year included exchange losses on the
translation, largely related to the depreciation of the Trinidad dollar when
compared to the United States dollar
Benefits incurred for the Sagicor Life segment totalled
US $331.4 million for the year ended December 31, 2019, compared to
US $166.9 million reported for the same period in 2018 an increase of 99%
(US $164.5 million). The increase in benefits incurred was mainly due to
net changes in actuarial liabilities which totalled US $94.1 million in 2019
compared to a release of US $62.1 million in the prior year, an increase of
US $156.2 million. The increase in actuarial liabilities was due to higher
new annuity business. In addition, during the same period in 2018, benefits
were impacted by one-time actuarial adjustments related to the segment’s
initial adoption of IFRS 9 as well as refinements to the actuarial interest
rate assumptions.
Total expenses and taxes for the Sagicor Life segment totalled
US $126.3 million for the year under review, a US $10.0 million increase
from US $116.3 million reported for the same period in 2018. Commissions
and premium taxes closed the year at US $48.3 million compared to
US $43.1 million for the year under review. The increase in expenses and
taxes was largely due to new business growth.
In 2018, this segment also benefited from gains associated with the
acquisition of an insurance portfolio amounting to US $6.9 million.
The following table summarises the financial position of the Sagicor Life
segment as of December 31, 2019 and 2018.
Statement of Financial Position
December 31
(in millions of US $)
Sagicor Life segment
Financial investments
Other assets
Inter-segment assets
Total assets
Policy liabilities
Other liabilities
Inter-segment liabilities
Total liabilities
Net assets
2019
2018
Change
1,438.6
341.4
335.8
2,115.8
1,379.8
77.3
120.0
1,577.1
538.7
1,418.0
324.4
266.1
2,008.5
1,235.4
160.8
124.2
1,520.4
488.1
2%
5%
26%
5%
12%
(52%)
(3%)
4%
10%
Financial investments totalled US $1,438.6 million (2018 - US $1,418.0
million) and comprised 68% (2018 - 71%) of the segment’s total assets, and
policy liabilities totalled US $1,379.8 million (2018 - US $1,235.4 million) and
comprised 87% (2018 - 81%) of the segment’s total liabilities at the end of
2018. Overall, net assets increased by 10% mainly due to strong operating
results net of dividend distributions and unrealised gain on defined
benefit plans.
New initiatives and developments
October 7, 2019 – Sagicor Financial Corporation Limited announced
that, on September 30, 2019, Sagicor Life Inc. (“SLI”), its wholly-owned
subsidiary, entered into agreements to acquire the traditional insurance
portfolios, and investment assets, primarily, sovereign debt of the
Government of the Republic of Trinidad and Tobago to support the
liabilities of both Colonial Life Insurance Company (Trinidad) Limited
(“CLICO”) and British American Insurance Company (Trinidad) Limited
(“BAT”). In addition, contracts with respect to CLICO’s pension fund
administration, management and investment services operations (as well
as supporting investment assets) will be acquired and assumed by SLI.
Approximately US $1.2 billion of total investment assets are proposed to be
acquired to fund a similar amount of actuarial liabilities.
Sagicor Financial Company Ltd | 2019 Annual Report
99
The completion of the transaction is subject to regulatory approval.
Sagicor Jamaica segment
The Sagicor Jamaica segment offers life, health, annuity, property and
casualty insurance, pension administration services, commercial banking,
investment banking, hospitality and real estate investment services in the
markets of Jamaica, Cayman Islands and Costa Rica. Sagicor Jamaica’s
strong brand, together with its wide range of products and highly skilled
work force, has allowed it to maintain a leading position in all market
segments in which it operates. Its commercial banking services are offered
through a network of sixteen (16) branches. Sagicor Life Jamaica Limited,
a life insurance subsidiary within the Sagicor Jamaica segment, currently
holds a financial strength rating of B++ stable and an issuer credit rating of
bbb+ stable, with A.M. Best.
Sagicor Jamaica Highlights
NET PREMIUM REVENUE AND NET INCOME GROWTH
320.1
2017
309.7
2018
350.1
2019
94.9
2017
110.8
2018
123.6
2019
s
n
o
i
l
l
i
m
$
S
U
Net Premium Revenue
Net Income
Return on Total Equity
Return on Investments
2019
2018
2017
2019
2018
2017
Sagicor Jamaica
segment
15.1%
17.4%
20.6%
8.8%
8.0%
9.6%
The Sagicor Jamaica segment saw significant growth during the year. In
addition to strong organic growth across major business lines, the Group
expanded their investment in Property and Casualty Insurance with the
acquisition of a 60% interest in Advantage General Insurance Company
Limited (AGI). In addition, the 2019 results also include activities for a full
year relating to the Sagicor X-Fund Group (X-Fund) of which the group
was deemed to have effective control from the 4th quarter of 2018. The
Group also acquired TravelCash Jamaica Limited (“TravelCash”) effective
December 1, 2018.
(in millions of
US $)
Sagicor Jamaica
segment
Net premium
revenue
Gains/(losses) on
derecognition of
financial assets
measured at AC.
Gains/(losses) on
derecognition of
financial assets
measured at
FVOCI
Interest income
Other investment
income
Credit impairment
(losses)/gains
Fees and other
revenue
Total revenue
carried forward
Quarterly Results
Year ended December 31
Q4
2019
Q4
2018 Change
2019
2018 Change
93.7
85.3
10%
350.1
309.7
13%
10.3
7.5
37%
13.3
10.3
29%
15.1
38.8
8.4
38.5
80%
1%
21.3
160.3
8.3
157%
155.9
3%
10.7
(9.3)
215%
52.1
13.8
278%
(9.5)
0.5 (2,000%)
(6.1)
(10.2)
40%
35.1
27.0
30%
144.3
98.1
47%
194.2
157.9
23%
735.3
585.9
25%
The Sagicor Jamaica Group performed well in 2019, producing
profits attributable to shareholders of US $61.4 million compared to
US $55.7 million in the prior year, a 10 % improvement over prior year.
100
Sagicor Financial Company Ltd | 2019 Annual Report
Quarterly Results
Year ended December 31
Q4
2019
Q4
2018 Change
2019
2018 Change
US $10.7 million compared to a loss of US $9.3 million for the same period
in 2018, as the segment benefitted from gains arising from appreciations
in the Jamaica capital market. In 2018, this segment recorded credit
impairment losses which did not repeat at the same level in 2019.
(in millions of
US $)
Total revenue
brought forward
Benefits
Expenses and
taxes
Depreciation and
amortisation
Inter-segment
expenses
Other
Segment income
before taxes
Income taxes
Net segment
income from
continuing
operations
Income
attributable to
shareholders (a)
194.2
(65.1)
157.9
(54.1)
735.3
23%
(20%) (308.9)
585.9
25%
(245.9)
(26%)
(69.2)
(59.7)
(16%)
(238.9)
(193.8)
(23%)
(5.5)
(3.9)
(41%)
(20.4)
(11.3)
(81%)
(0.9)
(5.7)
47.8
(15.5)
(0.8)
(13%)
12.3 (146.3%)
(2.5)
(0.6)
(2.2)
(14%)
11.3
(105%)
51.8
(8%)
164.0
144.0
14%
(11.9)
(30%)
(40.4)
(33.2)
(22%)
32.3
39.9
(19%)
123.6
110.8
12%
18.2
20.9
(13%)
61.4
55.7
10%
Fourth quarter (three-month period) results of the Sagicor Jamaica
Segment analysis
Net income for the Sagicor Jamaica segment for the three-month
period ended December 31, 2019 was US $32.3 million compared to
US $39.9 million in the prior year. This segment benefited from growth in
its insurance portfolios including a recently acquired property & casualty
business, fee-based income and other revenue from the banking business.
This segment generated revenue of US $194.2 million for the three-month
compared to US $157.9 million for the same period in the prior year. This
represented an increase of US $36.3 or 23%. Premium income totalled
US $93.7 million compared to US $85.3 million in 2018 an increase of
US $8.4 million.
Interest income was US $38.8 million compared to US $38.5 million in
the prior period as interest rates declined. Other investment income was
Fees and other revenue were US $35.1 million compared to US $27.0 million
in 2018 an increase of US $8.1 million or 30%. During the period under
review, the segment benefited from growing fee-based revenue in the
banking lines.
Benefits totalled US $65.1 million compared to US $54.1 million reported
for the same period in 2018 an increase of US $11.0 million. Benefits were
impacted by business growth and lower interest rates. Net policy benefits
totalled US $58.3 million for the three-month period, compared to the
US $50.1 million reported in 2018. Net change in actuarial liabilities was
US $0.1 million compared to a release of US $4.4 million reported in 2018.
Expenses and taxes incurred amounted to US $69.2 million for the three-
month period compared to US $59.7 million for the same period in 2018, an
increase of US $9.5 million over the prior year-to-date levels, driven in part
by increased earnings from the acquisitions of Q4 2018 and Q4 2019.
Earnings from other sources was a loss of US $5.7 million for the fourth
quarter of 2019, compared to income of US $12.3 million for the same
period in 2018. During Q4, 2019, the segment incurred losses from its
associated company Playa, totalling US $5.9 million. In 2018, the segment
benefited from gains totalling US $12.3 million associated with the
acquisition of the XFund.
Year-to-date (twelve-month period) results of the Sagicor Jamaica Segment
analysis
Net segment income for the year closed at US $123.6 million, compared to
US $110.7 million in the prior year. This represents an increase of US $12.9
or 12%. As indicated before, the Sagicor Jamaica segment saw significant
growth during the year. In addition to strong organic growth across major
business lines, the Group expanded their investment in Property and
Casualty Insurance with the acquisition of a 60% interest in Advantage
General Insurance Company Limited (AGI). The 2019 results also include
activities for a full year relating to the Sagicor X-Fund Group (X-Fund)
of which the group was deemed to have effective control from the 4th
quarter of 2018. The Group also acquired TravelCash Jamaica Limited
(“TravelCash”) effective December 1, 2018.
Sagicor Financial Company Ltd | 2019 Annual Report
101
The Jamaica segment generated revenue of US $735.3 million in 2019
compared to revenue of US $585.9 million in the prior year, an increase of
US $149.4 million. Premium income totalled US $350.1 million for the year,
compared to US $309.7 million in 2018, an increase of US $40.4 million,
with growth in the life insurance and annuity business, in particular.
Despite the downward trend in interest rates in Jamaica, interest income
closed the year slightly above that reported for 2018. Interest income was
US $160.3 million for the year, compared to US $155.9 million in the prior
year, an increase of US $4.4 million.
Other investment income in Jamaica was US $52.1 million, compared to
US $13.8 million in the prior year, an increase of US $38.3 million. This
segment benefited from underlying growth in its investment portfolio
along with gains arising from appreciations in the Jamaica capital market.
The JSE Index moved from 379,790.86 points on December 31, 2018 to
509,916.44 points at December 31, 2019, an increase of 34%.
Fees and other revenue were US $144.3 million compared to
US $98.1 million, an increase by US $46.2 million or 47%. Fees and
other revenue now include hotel revenues of US $39.7 million for 2019,
associated with the consolidation of the Sagicor XFund. The Group was
deemed to have effective control of the Sagicor X Fund effective October
1, 2018; hence 2018’s results included only three months of income
amounting to US $9.7 million. In addition, the segment benefited from the
expansion of the fee-based services in the banking business, recording
growth of US $11.3 million (20%) over the prior year to close at US $
69.1 million.
Benefits totalled US $308.9 million and was higher than the prior year
amount of US $245.9 million, by US $63.0 million, reflecting business
growth. Net policy benefits totalled US $219.1 million for the year
compared to US $198.2 million reported in 2018 and represented an
increase of US $20.9 million. Net change in actuarial liabilities totalled
US $59.3 million compared to US $13.9 million reported in 2018 an increase
of US $45.4 million. In 2019 the increase in actuarial liabilities was driven
by inforce portfolio growth and lower yields. In addition, in 2018 the net
change in actuarial liabilities included actuarial releases from experience
gains which were not repeated at the same level in 2019.
Expenses and taxes incurred totalled US $238.9 million in 2019 compared
to US $193.8 million in 2018, an increase of US $45.1 million over the
prior year. Our Jamaica segment now includes hotel expenses totalling
US $32.4 million associated with the consolidation of the Sagicor X Fund,
representing a full year’s expenses. As previously indicated, the 2018
results included only three months of expenses totalling US $6.9 million.
2019 also reflects twelve months expenses for Travel Cash Jamaica
Limited when only one month was carried in 2018. Further, there are three
months of cost in 2019 for Advantage General Insurance Company Limited
which was acquired (60%) on September 30, 2019 Expenses associated
with banking and investment management business, also increased by
US $3.9 million over the prior year’s levels, as the business continues
to expand.
On September 30, 2019, the Jamaica segment acquired 60% of the share
capital of Advantage General Insurance Company Limited. Consequently,
the segment benefited from net premium growth during the last quarter
of 2019 and well as an increase in benefits and administrative expenses
associated with this portfolio. Overall the Property & Casualty business
contributed approximately US $1.1 million to segment’s net income. The fair
value of net assets acquired was US $39.0 million equivalent, of which our
share was US $23.4 million.
The following table summarises the financial position of the Sagicor
Jamaica segment as of December 31, 2019 and 2018.
Statement of Financial Position
December 31
(in millions of US $)
Sagicor Jamaica segment
Financial investments
Other assets
Inter-segment assets
Total assets
Policy liabilities
Other liabilities
Inter-segment liabilities
Total liabilities
Net assets
2019
2018
Change
2,670.3
795.8
15.9
3,482.0
865.9
1,673.1
6.1
2,545.1
936.9
2,344.1
745.3
15.0
3,104.4
753.8
1,526.2
5.6
2,285.6
818.8
14%
7%
6%
12%
15%
10%
9%
11%
14%
Financial investments totalled US $2,670.3 million (2018 – US $2,344.1
million) and comprised 77% (2018 - 76%) of the segment’s total
assets. Total assets closed at US $3,482.0 million, an increase of 12%
(US $377.6 million), due to normal business growth coupled with the
acquisition of AGI at September 30, 2019. Assets acquired totalled
US $ 105.4 million. Policy liabilities totalled US $865.9 million (2018 –
US $753.8 million) and other liabilities totalled US $1,673.1 (2018 – US
102
Sagicor Financial Company Ltd | 2019 Annual Report
to funds to assist if they need critical care. We offer a standard
interest crediting whole life product as well as an indexed universal
life product.
• Annuities – Currently all of Sagicor USA’s annuity offerings are single
premium products including such products as multi-year guaranteed,
fixed interest crediting, indexed crediting as well as immediate
annuities. Most of the products are focused on helping the customer
accumulate assets with little to no market risk to their initial premium.
Sagicor USA worked with approximately 5,570 independent agents in 2018
and 6,750 independent agents in 2019 across the United States.
Sagicor Life USA Highlights
NET PREMIUM REVENUE AND NET INCOME GROWTH
86.7
2017
390.0
2018
444.7
2019
s
n
o
i
l
l
i
m
$
S
U
Net Premium Revenue
13.3
2017
18.3
2018
35.4
2019
Net Income
Return on Total Equity
Return on Investments
2019
2018
2017
2019
2018
2017
Sagicor Life
USA segment
14.0%
7.8%
6.0%
6.8%
3.1%
7.1%
$1,526.2 million), representing 34% (2018 - 33.0%) and 66% (2018 - 67%) of
the segment’s total liabilities at the end of 2019, respectively.
Overall net assets grew by 14% from US $818.8 million in 2018 to
US $936.9 million at the end of 2019, driven by a strong financial
performance net of dividends distributed along with unrealised gains on
financial assets classified as FVOCI and currency translation gains
New initiatives and developments
On 30 September 2019, the Sagicor Jamaica segment acquired 60% of
the share capital of Advantage General Insurance Company Limited. Our
share net assets of US $23.4 million were acquired for a consideration of
US $31.2 million. Refer to note 37.1 to the SFCL’s 2019 audited financial
statements for details.
The acquired business contributed revenues of US $11.0 million and net
profits attributable to Group net income of $0.7 million for the year ended
31 December 2019. Had the company been acquired at the beginning
of the year, it would have contributed revenues of approximately
US $44.0 million and net profits of approximately US $5.4 million to the
Group for the year ended 31 December 2019.
Sagicor Life USA segment
Sagicor USA, Inc. and its operating entity, Sagicor Life Insurance Company,
(collectively, Sagicor USA) operate in 45 states and the District of
Columbia. Sagicor USA is focused on providing life and annuity products
to middle market America through independent producers and direct-to-
consumer platforms (SagicorNOW.com and PeaceAssured.com). Middle
market America has been defined broadly as individuals and families with
household incomes of $40,000 to $100,000 or retirees or near-retirees
with retirement portfolios of $100,000 to $1,000,000.
Sagicor USA’s products can be broadly placed in three categories:
• Periodic premium – This would include products such as several
variations of term insurance, non-participating whole life, indexed
universal life and no-lapse universal life. All of these products
usually allow the owner to pay premiums on a monthly, quarterly, or
annual basis.
• Single premium life – This category includes two products developed
to support an older demographic who are looking principally to
provide a larger legacy upon their death, while having access
Sagicor Financial Company Ltd | 2019 Annual Report
103
The following table summarises the results of the Sagicor Life USA
segment for the years ended December 31, 2019 and 2018.
Fourth quarter (three-month period) results of the Sagicor Life USA
Segment analysis
(in millions of
US $)
Sagicor Life
USA segment
Net premium
revenue
Gains/(losses) on
derecognition of
financial assets
measured at
FVOCI
Interest income
Other investment
income
Credit impairment
losses
Fees and other
revenue
Total revenue
Benefits
Expenses and
taxes
Depreciation and
amortisation
Inter-segment
expenses
Segment income/
(loss) before taxes
Income taxes
Net segment
income from
continuing
operations
Income
attributable to
shareholders
Quarterly Results
Year ended December 31
Q4
2019
Q4
2018
Change
2019 2018 Change
Sagicor Life USA performed well with net income improving over the same
period in the prior year. Net income for the Sagicor Life USA segment
totalled US $16.5 million and represented a 150% increase from the
US $6.6 million reported for the same period in 2018.
The latter half of 2019 was impacted by falling crediting rates on Sagicor
USA’s principal annuity products as the United States Federal Reserve
lowered the key lending rate three times during the year and corporate
bond yields saw precipitous declines. The US annuity industry saw the
consumer take a pause to evaluate the market. Instead of reducing the
margins that we would be willing to accept, Sagicor USA chose to reduce
crediting rates throughout the latter half of 2019 to maintain margins.
The Sagicor Life USA segment generated revenue of US $103.0 million
for the three-month period ended December 31, 2019, compared
US $142.6 million reported for the same period in 2018 representing a 28%
(US $39.6 million) decrease. While the lower crediting rates did slow the
amount of new annuity premiums submitted in the 4th quarter, Sagicor
USA saw the value of its investment portfolio, including the derivatives,
increase in value during the 4th quarter, in comparison to a decline in
market value of those assets during the same quarter of 2018.
Benefits, including specifically the net change in actuarial liabilities, were
significantly down in 2019 as compared to the same period in 2018. This
decrease was due to the lower annuity premium written in the 4th quarter
of 2019 as well as lower actuarial provisions needed to support the current
in force business due to improved market values.
Total expenses and taxes decreased by 18% due to the lower commission
levels related to lower new business compared to the same period in the
prior year.
Overall, net income was positively impacted by the significant
improvement in the net investment income results, the lower actuarial
provisions and the overall 18% drop in expenses.
70.9
151.5
(53%)
444.7 390.0
14%
1.5
15.8
0.8
15.8
88%
-
2.5
70.2
0.8
55.2
213%
27%
16.2
(24.5)
166%
46.9
(15.8)
397%
(0.5)
(0.6)
17%
(0.4)
(0.6)
33%
(0.9)
103.0
(64.5)
(0.4)
142.6
(113.8)
(125%)
(2.4)
(8.9)
561.5 420.7
(28%)
43% (448.3) (331.8)
73%
33%
(35%)
(15.9)
(19.2)
18%
(62.4) (62.2)
-
(1.3)
(0.9)
(44%)
(4.7)
(3.0)
(57%)
(0.4)
(0.2)
(100%)
(1.3)
(0.6)
117%
20.9
(4.4)
8.4
(1.8)
149%
44.8
23.1
94%
(144%)
(9.4)
(4.8)
(96%)
16.5
6.6
150%
35.4
18.3
93%
16.5
6.6
150%
35.4
18.3
93%
104
Sagicor Financial Company Ltd | 2019 Annual Report
Year-to-date (twelve-month period) results of the Sagicor Life USA
Segment analysis
The net segment income for the Sagicor Life USA segment closed at
US $35.4 million for the year ended December 31, 2019, a US $17.1 million
increase from US $18.3 million reported for the same period in 2018.
Revenue for the Sagicor Life USA segment closed the period at
US $561.5 million in 2019 compared to US $420.7 million an increase
of 33%. This increase was driven by a 14% increase in net premiums as
Sagicor USA discontinued the third-party reinsurance on annuities during
the 1st quarter of 2018 and sales of new annuity products introduced into
the market in 2018 remained strong in 2019. Investment income closed
the period at US $119.6 million compared to US $40.2 million in the prior
year. This represented an increase of 197% and was driven by a reversal of
the 2018 marked-to-market losses in the investment portfolio as well as
growth in the overall size of the portfolio due to new business growth. The
derivatives portfolio and a portion of the investment portfolio supports
the liabilities associated with the indexed business written by the company
and so related movements can be found in the net changes in actuarial
liabilities impacting total benefits.
Benefits including change in actuarial reserves was US $448.3 million
compared to US $331.8 million an increase of US $116.5 million or 35%.
The net change in actuarial liabilities was US $ 325.9 million compared
to US $222.5 million and was driven by the 14% increase in premiums
(majority were annuities) and the previously discussed increase due to the
market movement of the indices associated with the indexed products and
the supporting derivatives.
Total expenses and taxes of US $62.4 million compared to US $62.1 million
in the prior year.
The Sagicor Life USA segment had net assets of US $295.6 million in 2019
compared to US $246.5 million in 2018, an increase of 20%
Statement of Financial Position
Year ended December 31
(in millions of US $)
Sagicor Life USA segment
Financial investments
Other assets
Inter-segment assets
Total assets
Policy liabilities
Other liabilities
Inter-segment liabilities
Total liabilities
Net assets
2019
2018
Change
2,040.8
735.7
65.2
2,841.7
1,997.4
437.9
110.8
2,546.1
295.6
1,499.9
789.3
36%
(7%)
3.9
1,572%
2,293.1
1,602.6
374.0
70.1
2,046.6
246.5
24%
25%
17%
58%
24%
20%
Financial investments totalled US $2,040.8 million and comprised 72% of
the segment’s total assets, and policy liabilities totalled US $1,997.4 million
and comprised 79% of the segment’s total liabilities at the end of 2018.
Financial investments totalled US $1,499.9 million and comprised 65% of
the segment’s total assets, and policy liabilities totalled US $1,602.6 million
and comprised 78% of the segment’s total liabilities at the end of 2018.
Overall, Sagicor USA experienced a 24% increase in its total assets due to
its strong premium levels in 2019 and the positive market movements of its
investment portfolio.
Shareholders’ equity grew 20% due to the strong financial results, the
reversal of the unrealized losses in the portfolio at the end of 2018 and
strong unrealized gains in 2019.
Sagicor Financial Company Ltd | 2019 Annual Report
105
4. FINANCIAL POSITION
Capitalisation and Solvency
Capitalisation
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.
Capital resources
The principal capital resources of the Group are as follows:
2019
2018
2017
Restated
2016
Restated
2015
$’000s
Shareholders’ equity 1,154,051
600,869
624,592
537,080
506,046
Non-controlling
interests
Notes and loans
payable
Total financial
statement capital
resources
594,506
530,514
311,766
261,144
231,735
517,732
490,275
413,805
395,213
475,517
2,266,289 1,621,658 1,350,163 1,193,437
1,213,298
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.
At December 31, 2019, the Company’s capital closed US $2,266.3 million,
an increase of US $644.6 million over the December 31, 2018 position.
The significant increase resulted from the fact that on December 5, 2019
Sagicor and Alignvest announced they had completed the business
combination involving the transfer of all issued and outstanding shares in
Sagicor to Alignvest. This transaction raised over US $450 million in new
capital for the Group. As a result of the completion of the transaction, all
issued and outstanding shares in the Sagicor have been transferred to
Alignvest, with former shareholders of Sagicor receiving cash or shares in
Alignvest, which has been renamed Sagicor Financial Company Ltd. and
trades on the Toronto Stock Exchange under the symbol SFC. The Group
also experienced organic increases in capital due to operating income and
investment gains.
Financial Leverage and Coverage Ratio
As of December 31, 2019, Sagicor had a debt to equity ratio of 29.6%,
compared to 43.2% as of December 31, 2018, respectively. To determine
the debt to equity ratio, loans and notes payable, as presented note 16 to
the annual financial statements, is divided by total equity.
The Debt to Capital ratio was 22.8%, at December 31, 2019, compared
to 30.2% as of December 31, 2018. To determine the debt to capital
ratio, notes and loans payable as presented in note 16 to the financial
statements, is divided by total capital, where capital is the summation
of total equity (as presented in the statement of Financial Position in
the annual financial statements) and notes and loans payable, as at the
reporting date.
Both the debt to equity ratio and the debt to capital ratio experienced
improvements due to the new capital raised in 2019 from the
Alignvest transaction.
As at December 31, 2019, the coverage ratio excluding the Alignvest
transaction expenses was 5.7 times, compared to 5.0 times at December
31, 2018. The coverage ratio represents the Group’s earnings for the
year before interest and income taxes, divided by its interest and
dividend expenses.
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Sagicor Financial Company Ltd | 2019 Annual Report
Debt Ratios and Coverage Ratio
Sagicor Life Jamaica Limited
Debt ratios
Notes and Loans
Payable/capital
Notes and Loans
Payable/equity
2019
2018
2017
2016
2015
22.8%
30.2%
30.6%
33.1%
39.1%
29.6%
43.2%
44.2%
49.4%
64.3%
Coverage ratio
(times)
(number of times)
5.0
(a) Excludes the Alignvest transaction expenses
5.7(a)
Capital adequacy
4.6
4.9
4.3
Capital adequacy is managed at the operating company level. It is
calculated by the company’s Appointed Actuary and reviewed by
executive management, the audit committee and the board of directors
of the company. 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 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, Sagicor has adopted the Canadian
MCCSR standard. Jamaica and the United States have recognised capital
adequacy standards.
Sagicor’s consolidated MCCSR as of December 31, 2019 has been
estimated at 253%, compared to 234% at December 31, 2018, respectively.
This is the principal standard of capital adequacy used to assess Sagicor’s
overall strength. However, because of the variations in capital adequacy
standards across jurisdictions, the consolidated result should be regarded
as applicable to the life insurers of the Sagicor Group as a whole and not
necessarily applicable to each individual segment, insurance subsidiary or
insurance subsidiary branch.
Sagicor Life Jamaica is governed by the Jamaican MCCSR regime (based
on Canadian standards in effect in 2001), which requires an insurer to
maintain a minimum ratio of 150%. For the year ended December 31, 2018,
this ratio was 184%. At December 31, 2019, the ratio was 179%.
Sagicor Life Insurance Company (USA)
A risk-based capital (RBC) formula and model have been 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 USA looks to maintain at least 300% of the risk-based capital
amount and has maintained these ratios as of December 31, 2018 and
December 31, 2017, respectively.
Sagicor Investments Jamaica Limited and Sagicor Bank Jamaica Limited
The 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 Bank of Jamaica and the FSC require each
regulated entity to hold the minimum level of regulatory capital, and
Sagicor Financial Company Ltd | 2019 Annual Report
107
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 following table summarises the capital adequacy ratios. During 2019
and 2018, all applicable externally imposed capital requirements were
complied with.
Sagicor Investments
Actual capital base to risk weighted assets
Required capital base to risk weighted assets
Sagicor Bank
Actual capital base to risk weighted assets
Required capital base to risk weighted assets
Notes and Loans Payable
2019
2018
20%
10%
14%
10%
14%
10%
15%
10%
As of December 31, 2019, Sagicor had US $517.7 million in notes and loans
payable compared to US $490.3 million as of December 31, 2018.
(in millions of US $)
Notes and loans payable
December 31, 2019
Carrying
value
Fair
value
8.875% senior notes due 2022vii
318.2
330.2
8.25% convertible redeemable preference
shares due 2020 i
4.85% notes due 2019iv
5.10% unsecured bond due 2020ii
5.95% unsecured bond due 2020iii
5.00% notes due 2020v
6.75 notes due 2024v
Mortgage loans viii
Bank loans & other funding instruments vi
Total
(in millions of US $)
Notes and loans payable
-
-
33.7
42.9
16.9
16.6
75.0
14.4
517.7
-
-
34.3
44.8
17.3
15.8
77.0
14.4
533.8
December 31, 2018
Carrying
value
Fair
value
8.875% senior notes due 2022 vii
318.9
334.6
8.25% convertible redeemable preference
shares due 2020 i
4.85% notes due 2019 iv
Mortgage loans viii
11.1
75.0
77.0
8.3
490.3
11.1
74.1
77.0
8.3
505.1
Summary details of carrying values and fair values of notes and loans
payable as of December 31, 2019 and 2018, respectively are set out in the
following tables.
Bank loans & other funding instruments vi
Total
i. On March 2, 2017, Sagicor Bank Jamaica Limited issued Cumulative
redeemable preference shares with a tenor of three (3) years at
8.25% interest per annum. These were redeemed June 3, 2019.
ii. On September 18 and 26, 2019, Sagicor Financial Corporation
Limited issued US $30.6 million and US $3.4 million notes
respectively, carrying an annual rate of 5.10% with a maturity date of
October 26, 2020.
iii. On September 26, 2019, Sagicor Financial Corporation Limited
issued Jamaican $ notes in the amount of J$5,731,140,000.00
108
Sagicor Financial Company Ltd | 2019 Annual Report
carrying an annual interest rate of 5.95% per annum with a maturity
date of October 26, 2020.
iv. On August 12, 2019, Sagicor Financial Corporation Limited entered
into a US $76.0 million bridging loan carrying an annual interest
rate of 5.1% per annum, this loan was repaid from the proceeds of
the notes in (ii) and (iii) above. Also, on August 12, 2019, Sagicor
Financial Corporation Limited used the bridging loan to repay the
US $75 million 4.85% notes which were due to mature on August
14, 2019.
v. On August 16, 2019, Sagicor Investments Jamaica Limited issued
J$4.4 billion in two Tranches, Tranche A J$2.22 billion and
Tranche B J$2.18 billion, carrying an annual rate of 5.00% and
6.75% with a maturity date of September 16, 2020 and August 16,
2024 respectively.
vi. On May 24, 2019 Sagicor General Insurance Inc entered into a
US $12 million loan agreement. The interest rate is 3.50% per annum
and matures on July 31, 2024.
plus accrued and unpaid interest, if any, to the Redemption Date, in an
aggregate principal amount for all such redemptions not to exceed 35% of
the original aggregate principal amount of the Notes (including Additional
Notes); and,
Optional Redemption without an Applicable Premium - At any time on or
after August 11, 2019, the Group may redeem the Notes in whole or in part
at specified redemption prices, plus accrued and unpaid interest, if any, on
the Notes redeemed, to the applicable date of redemption.
The Group has estimated the fair value of this embedded derivative at
US $2.8 million as at December 31, 2019.
Mortgage loans
Sagicor Group Jamaica was deemed to have effective control of Sagicor X
Fund Group from October 1, 2018 based on its shareholding and influence
and from that date has accounted for Sagicor X Fund as a subsidiary as
required by IFRS 10. These amounts represent mortgage loans acquired on
that date. Refer to note 16 to the 2019 financial statements for details.
Valuation of Call Option Embedded Derivative
Outstanding Common Shares
As at December 31, 2019 the company had US $320 million principal
amount of senior unsecured notes (the “Notes”). The Notes are due
August 11, 2022 and bear interest at an annual rate of 8.875%. Pursuant to
the terms of the Notes, the Group may redeem the Notes under various
scenarios as summarized below and described in more detail herein:
Optional Redemption with an Applicable Premium (equal to a percentage
of the principal amount based on redemption date) - At any time prior to
August 11, 2019, the Group may redeem the Notes in whole or in part, at
a redemption price equal to 100% of the principal amount of such Notes
redeemed plus, the greater of
(i) 1% of the principal amount of the Notes to be redeemed; and,
(ii) the Applicable Premium, plus in each case accrued and unpaid
interest, if any, to the applicable date of redemption, to but excluding
the date of redemption (the “Redemption Date”);
Optional Redemption with Proceeds of Equity Offerings - At any time prior
to August 11, 2018, the Group may redeem the Notes with the net cash
proceeds received by the Group from any Equity Offering at a redemption
price equal to 108.875% of the aggregate principal amount thereof,
The authorised share capital of the Company is US$200,000,000
divided into 10,000,000,000 common shares of US$0.01 each and
10,000,000,000 preference shares of US$0.01 each.
The number of issued and outstanding common shares at December 31,
2019 was 147,789,000.
Common Shares
(In millions)
2019
2018
2017
Restated
2016
Restated
2015
Number of common
shares outstanding
147.8
306.6
306.6
304.5
302.2
On December 5, 2019 Sagicor and Alignvest completed the business
combination involving the transfer of all issued and outstanding shares in
Sagicor to Alignvest. This transaction raised over US $450 million in new
capital for the Group. As a result of the completion of the transaction, all
issued and outstanding shares in the Sagicor have been transferred to
Alignvest, with former shareholders of Sagicor receiving cash or shares
Sagicor Financial Company Ltd | 2019 Annual Report
109
in Alignvest, which has been renamed Sagicor Financial Company Ltd.
The following table shows the movement in outstanding common shares
for 2019.
Issued and fully paid:
Balance, beginning of year
Exchange of shares and repurchase of shares
New shares issued
Allotments arising from LTI
Balance, end of year
Number of shares
in millions
306.6
(238.6)
79.8
-
147.8
Securities convertible, exercisable or exchangeable into common
shares
Book Value per Common Shares
2019
2018
2017
Restated
2016
Restated
2015
Book value per
common shares
$ 7.81
$8.50
$2.04
$1.77
$1.66
Under the Alignvest transaction, Sagicor Financial Corporation Limited
common shares not purchased for cash, were exchanged for common
shares of Sagicor Financial Company Ltd on an exchange ratio of one
Sagicor Financial Company Ltd. common share for 4.328 of Sagicor
Financial Corporation Limited common shares (“Exchange Ratio”). This
exchange ratio has been used to convert the 2018 outstanding shares to
the Sagicor Financial Company Ltd equivalent. The book value per share
for 2018 has been adjusted to reflect the Exchange Ratio.
• The number of issued and outstanding options at December 31, 2019
Dividends
was 4,673.
• The number of issued and outstanding warrants at December 31,
2019 was 34,774,993.
Share Price and Market Capitalization
The Company’s share price closed the 2019 yearend at US $7.50, with
market capitalisation exceeding US $1,108.5 million.
Share Price and Market Capitalisation
2019
2018
2017
Restated
2016
Restated
2015
Share price
Market capitalisation
$7.50
$1.020
$0.895
$1,108.5 $467.5m $321.9m $306.0m $272.5m
$0.980
$1.005
In total, the Group paid out US $15.3 million in dividends to common
shareholders in 2019, closing the year with a dividend pay-out ratio of
37.6% before Alignvest transaction expenses.
Dividends
Dividends declared
and paid during the
year, per common
share
Dividend pay-out
ratio before Alignvest
transaction costs
Dividend pay-out ratio
2019
2018
2017
Restated
2016
Restated
2015
5.0 ¢
5.0 ¢
5.0 ¢
4.5 ¢
4.0 ¢
37.6%
18.9%
41.8%
41.8%
42.0%
42.0%
23.1%
23.1%
22.0%
22.0%
On February 3, 2020, the Board of Directors declared a dividend of US
$0.05625 per share, on issued and outstanding common shares held by
registered holders on record at the close of business on February 10, 2020.
Under the Alignvest transaction, Sagicor Financial Corporation Limited
common shares not purchased for cash, were exchanged for common
110
Sagicor Financial Company Ltd | 2019 Annual Report
shares of Sagicor Financial Company Ltd on an exchange ratio of one
Sagicor Financial Company Ltd. common share for 4.328 of Sagicor
Financial Corporation Limited common shares (“Exchange Ratio”). This
exchange ratio has been used to convert the 2018 outstanding shares to
the Sagicor Financial Company Ltd equivalent. The dividend pay-out ratio
for 2018 has been adjusted to reflect the Exchange Ratio.
Liquidity and Capital Resources
The following discussion is qualified by reference to the consolidated
statement of cash flows and note 36 of the annual financial statements.
Liquidity sources immediately available to the Sagicor Group include:
(i) existing cash and cash equivalents; (ii) the Group’s portfolio of highly
rated, highly liquid investments; (iii) cash flow from operating activities
which include net premiums receipts, fee income and investment income;
and (iv) borrowing facilities. These funds are used primarily to pay
current benefits and operating expenses, service the Group’s long-term
debt, purchase investments to support future benefits and maturing
obligations, and for distribution of dividends. Sagicor expects to have
sufficient liquidity to fund its operations and to meet its current business
plans. However, should the need arise, additional liquidity sources include
further bank loans and new issuances of debt or shares in the private or
public markets.
Cash flow
The following table summarise the Group’s cash flows for the years ended
December 31, 2019 and 2018, respectively.
(in US $millions)
Net cash flows
from
Operating
activities
Investing
activities
Financing
activities
Effect of exchange
rate changes
Net change in
cash and cash
equivalents -
discontinued
operation
Cash and
cash equivalents:
Beginning of
year
End of year
Q4
2019
Q4
2018 Change
2019
2018 Change
26.0
(40.2)
165%
41.5
46.3
(10%)
(5.5)
19.0
129%
(44.4)
(8.0)
(455%)
438.6
(29.3) 1,597%
443.9
(51.3)
965%
2.5
461.6
4.8
(48%)
(4.9)
(3.7)
(32%)
(45.6)
1,112%
436.1
(16.7) 2,711%
-
-
17.8
-
313.9
775.5
367.1
321.6
(15%)
141%
321.6
775.5
338.3
321.6
(5%)
141%
Fourth quarter (three-month period) - Cash flows analysis
For the three-month period ended December 31, 2019, Sagicor’s net cash
inflows associated with operating activities was US $26.0 million compared
to outflows of US $40.2 million for the same period in 2018. This increase
of US $66.2 million, or 165%, was primarily due to increased operating
cash inflows generated in the Company’s Jamaica and USA segments.
Our Jamaica segment benefitted from increased inflows from customer
deposits as the banking business continues to expand. In addition, lower
spends on the purchase of securities in both our Jamaica and USA
segments, contributed to the overall increase operating cash inflows.
Sagicor’s net cash used in investing activities was US $5.5 million
compared to inflows of US $19.0 million for the same period ended
December 31, 2018, a decrease of US $24.5 million. During the three-
month period, our Jamaica Segment increased its capital expenditure on
property, plant and equipment (US $9.1 million). In addition, in 2018, our
Jamaica segment benefited from net cash inflows associated with the
“Acquisition” of its subsidiary, Sagicor X Funds in October 2018.
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111
Sagicor’s net cash inflows from financing activities was US $438.6 million
during the 4th quarter of 2019, compared to outflows of US $29.3 million
for the same period in 2018, an increase of US $509.0 million. On
December 5, 2019 Sagicor and Alignvest completed the business
combination involving the transfer of all issued and outstanding shares
in Sagicor to Alignvest. This transaction raised over US $450 million in
new capital for the Group, thereby contributing to the significant increase
cash inflows from financing activities. In November 2018, the Sagicor Life
segment increased its interest in Sagicor General Inc for a cash payment of
US $12.6 million.
For the 2019 period under review, the effect of exchange rate changes was
a gain of US $2.5 million compared to a gain of US $4.8 million in the same
period in 2018.
Year-to-date (twelve-month period)- cash flows analysis
For the year ended December 31, 2019, Sagicor’s net cash from operating
activities was US $41.5 million compared to US $46.3 million for the same
period in 2018.
Sagicor’s net cash used in investing activities was US $44.4 million
compared to US $8.0 million for 2018, an increase of US $36.4 million.
During the year, our Jamaica Segment acquired a subsidiary company (US
$31.5) million, while during the same period in 2018, the Group recorded
net outflows associated with the disposal a subsidiary (US $14.5 million).
Sagicor’s net cash inflows from financing activities was US $443.9 million
for 2019, compared to outflows of US $51.3 million for the prior year, an
increase of US $495.2 million. The increase in cash flows was related to the
Alignvest transaction which raised capital of over US $450 million.
For the year ended December 31, 2019, net inflows from other notes
and loans payable totalled US $31.7 million compared to net outflows
of US $6.1 million in 2018. On June 3, 2019, our Jamaica segment early
redeemed the outstanding 8.25% Cumulative Preference Shares Class
B nominal value of US $10.8 million together with final dividend of
US $0.2 million. On August 16, 2019, Sagicor Investments Jamaica Limited
issued J$4.4 billion (US $32.7 million equivalent) in two Tranches, Tranche
A J$2.22 billion and Tranche B J$2.18 billion, carrying an annual rate of
5.00% and 6.75% with a maturity date of September 16, 2020 and August
16, 2024, respectively.
In 2019, the effect of exchange rate changes was a loss of US $4.9 million
compared to a loss of US $3.7 million in the same period in 2018.
In February 2019, the Group received cash flows of US $17.8 million from
the close out of discontinued operations.
Ratings
Sagicor Financial Corporation Limited, its principal operating subsidiaries,
and its debt financing vehicle, have been rated by the rating agencies AM
Best, Standards and Poor’s, or Fitch. The ratings as of the date of issue of
the 2019 financial statements are as follows.
Sagicor Life Inc
Financial Strength
Issuer Credit Rating
Sagicor Life Jamaica Limited
Financial Strength
Issuer Credit Rating
Sagicor Life Insurance Company (USA)
Financial Strength
Issuer Credit Rating
Sagicor Financial Corporation Limited
Issuer Credit Rating
Sagicor Finance (2015) Limited
Senior Unsecured
Sagicor General Insurance Inc
Financial Strength
Issuer Credit Rating
(a) Updated September 20, 2019.
AM Best Rating (a)
A - Stable
a- Stable
B++ Stable
bbb+ Stable
A- Stable
a- Stable
bbb- Stable
bbb Stable
A- Stable
a- Stable
Sagicor Financial Corporation Limited
Issuer Credit Rating
BB (Positive)
S&P Rating (b)
Fitch Rating (c)
Long-term Issuer Default Rating
Sagicor Finance (2015) Limited
Senior Unsecured
(b) Updated November 15, 2019
(c) Updated March 17, 2020.
BB (Stable)
BB (Positive)
BB- (Stable)
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Critical Accounting Estimates and Judgments
Certain accounting estimates and judgements are recognised as critical
because they require us to make particularly subjective or complex
judgments about matters that are inherently uncertain and significantly
different amounts could be reported under different conditions or using
different assumptions.
These accounting estimates and judgements are discussed in the sections
below. The notes to the annual financial statements outline the relevant
accounting policies or give specific relevant disclosure to the matters
identified in these sections. These notes are also referred to below.
1. Impairment of financial assets – IFRS 9
(note 2.9 of the financial statements)
In determining ECL (Expected Credit Losses), management is required to
exercise judgement in defining what is considered a significant increase
in credit risk and in making assumptions and estimates to incorporate
relevant information about past events, current conditions and forecasts of
economic conditions.
a) Establishing staging for debt securities and deposits
The Group’s internal credit rating model is a 10-point scale which allows for
distinctions in risk characteristics and is referenced to the rating scale of
international credit rating agencies.
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113
The scale is set out in the following table:
Category
t
l
u
a
f
e
d
-
n
o
N
Investment
grade
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
Substandard
Doubtful
C
D
C
C
C
DDD
DD
D
c
d
10
Loss
The Group uses its internal credit rating model to determine which of the
three stages an asset is to be categorized for the purposes of ECL.
Once the asset has experienced a significant increase in credit risk the
investment will move from Stage 1 to Stage 2. Sagicor has assumed that
the credit risk of a financial instruments has not increased significantly
since initial recognition if the financial instrument is determined to have
low credit risk at the reporting date. A financial asset that is investment
grade or Sagicor risk rating of 1-3 is considered low credit risk.
Stage 1 investments are rated (i) investment grade, or (ii) below investment
grade at origination and have not been downgraded more than 2 notches
since origination. Stage 2 investments are assets which (i) have been
downgraded from investment grade to below investment grade, or (ii) are
rated below investment grade at origination and have been downgraded
more than 2 notches since origination. Stage 3 investments are assets
in default.
b) Establishing staging for other assets measured at amortised cost, lease
receivables, loan commitments and financial guarantee contracts.
Exposures are considered to have resulted in a significant increase in credit
risk and are moved to Stage 2 when:
114
Sagicor Financial Company Ltd | 2019 Annual Report
Qualitative test
• accounts that meet the portfolio’s ‘high risk’ criteria and are subject
to closer credit monitoring.
Backstop Criteria
• accounts that are 30 calendar days or more past due. The 30 days
past due criteria is a backstop rather than a primary driver of moving
exposures into stage 2.
c) Forward looking information
When management determines the macro-economic factors that impact
the portfolios of financial assets, they first determine all readily available
information within the relevant market. Portfolios of financial assets
are segregated based on product type, historical performance and
homogenous country exposures. There is often limited timely macro-
economic data for Barbados, Eastern Caribbean, Trinidad and Jamaica.
Management assesses data sources from local government, International
Monetary Fund and other reliable data sources. A regression analysis is
performed to determine which factors are most closely correlated with
the credit losses for each portfolio. Where projections are available, these
are used to look into the future up to three years and subsequently the
expected performance is then used for the remaining life of the product.
These projections are re-assessed on a quarterly basis.
techniques. Broker quotes as obtained from the pricing sources may be
indicative and not executable or binding. The Group exercises judgement
on the quality of pricing sources used. Where no market data is available,
the Group may value positions using its own models, which are usually
based on valuation methods and techniques generally recognised as
standard within the industry. The inputs into these models are primarily
discounted cash flows.
The models used to determine fair values are periodically reviewed by
experienced personnel. The models used for debt securities are based on
net present value of estimated future cash flows, adjusted as appropriate
for liquidity, and credit and market risk factors.
3. Recognition and measurement of intangible assets
(note 2.7 of the financial statements)
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.
d) Impairment of Government of Barbados debt securities
4. Impairment of intangible assets
As further disclosed in note 41.3 (f) of the 2018 financial statements, the
Group participated in a debt exchange following the implementation of
a debt restructuring programme by the Government of Barbados. The
replacement debt securities are classified as purchased or originated
credit-impaired assets (POCI) and have been valued using an internally
generated yield curve derived from the Central Bank of Barbados base-line
yield curve to which management has applied a risk premium.
2. Fair value of securities not quoted in an active market
(note 41.8 of the financial statements)
The fair value of securities not quoted in an active market may be
determined using reputable pricing sources (such as pricing agencies),
indicative prices from bond/debt market makers or other valuation
(note 2.7 of the financial statements)
a) Goodwill
The assessment of goodwill impairment involves the determination of
the value of the cash generating business units to which the goodwill
has been allocated. Determination of the 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 the value in use methodology for testing goodwill impairment. For
the Sagicor Jamaica operating segment, the Group uses the fair value less
cost to sell methodology, and for Sagicor General Insurance Inc the value
in use methodology.
Sagicor Financial Company Ltd | 2019 Annual Report
115
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.
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, and the distribution of the reserve by policy, and other
individual components in the actuarial liabilities.
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.
5. Valuation of actuarial liabilities
(note 2.15 of the financial statements)
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, to which margins for adverse deviations
are added.
The Appointed Actuary (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.
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.
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 universal life
and 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 Canadian standards of practice.
The principal assumptions and margins used in the determination of
actuarial liabilities are summarised sub-sections c) to i) which follow.
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.
c) Process used to set actuarial assumptions and margins for adverse
deviations
At each date for valuation of actuarial liabilities, the AA of each insurer
reviews the assumptions made at the last valuation date. The AA reviews
the validity of each assumption by referencing 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 changes in actuarial standards and
practice are also incorporated in the current valuation.
The methodology produces the total reserve requirement for each policy
group fund. In general, the methodology is used to determine the net
d) Assumptions for mortality and morbidity
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Sagicor Financial Company Ltd | 2019 Annual Report
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 tables from the Canadian Institute
of Actuaries (CIA). 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.
e) 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 moving averages.
f) Assumptions for investment yields
Returns on existing variable rate securities, shares, investment property
and policy loans are linked to the current economic scenario. Yields on
reinvested assets are also tied to the current economic scenario. Returns
are, however, assumed to decrease and it is assumed that at the end of
twenty years from the valuation date, all investments, except policy loans,
are reinvested in long-term, default free government bonds.
g) 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. For income taxes levied on net
income, actuarial liabilities are adjusted for policy related recognised
deferred tax assets and liabilities.
h) Asset default
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
Sagicor’s 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.
i) 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:
(in US $millions)
Provisions for adverse deviations
Mortality and morbidity
Lapse
Investment yield and asset default
Operating expenses and taxes
Other
Total
6. Investment in associate
December 31
2019
95.2
76.4
66.0
10.0
13.9
261.5
2018
103.6
78.5
62.4
11.0
11.1
266.6
As at July 1, 2018 Sagicor Jamaica Group has a shareholding in Playa of
15%. From an accounting perspective, IAS 28 (Investments in Associate
and Joint Ventures) paragraph 5, 6 and 8 guidance was considered
as follows:
Where an entity holds 20% or more of the voting power (directly or
through subsidiaries) on an investee, it will be presumed the investor has
significant influence unless it can be clearly demonstrated that this is
not the case. If the holding is less than 20%, the entity will be presumed
not to have significant influence unless such influence can be clearly
demonstrated. A substantial or majority ownership by another investor
does not necessarily preclude an entity from having significant influence.
Sagicor Financial Company Ltd | 2019 Annual Report
117
The existence of significant influence by an entity is usually evidenced in
one or more of the following ways:
• representation on the board of directors or equivalent governing
body of the investee;
• participation in the policy-making process, including participation in
decisions about dividends or other distributions;
• material transactions between the entity and the investee;
interchange of managerial personnel; or
•
• provision of essential technical information.
In assessing whether potential voting rights contribute to significant
influence, the entity examines all facts and circumstances (including the
terms of exercise of the potential voting rights and any other contractual
arrangements whether considered individually or in combination) that
affect potential rights, except the intentions of management and the
financial ability to exercise or convert those potential rights. Management
has two representatives out of twelve on the Board who are also members
of two strategic Board committees.
Management has concluded, given its participation in the policy-making
decisions, significant involvement in, and influence over decision making
of Playa, this allows them to clearly demonstrate influence over Playa’s
financial and operating results even though Sagicor owns less than 20% of
Playa’s shares - rebuttable presumption.
Management has concluded after taking the above into consideration that
it has significant influence over Playa through its holding and as such is
of the view that its strategic investment in Playa should be treated as an
investment in associate in accordance with IAS 28.
7. Fair value of shares issued to Alignvest Acquisition II Corporation
shareholders, contingent shares and warrants issued.
Management determined the fair value of the common shares issued to
the SPAC shareholders. We considered various valuation methodologies
including observing the quoted un-adjusted price of SFCL prior to the
transaction being announced; the stated transaction price; the quoted
price of both the SPAC and SFCL prior to the transaction closing; the price
of the shares post closing of the transaction; the prices at which various
major investors invested in the SPAC; and the fairness opinion to the board
of directors given by an independent expert. Given the wide dispersion of
values, we have chosen to utilize the value that, in our judgement, reflects
the price at which valuation was most heavily negotiated for a significant
investment, that being the private placement by investors which enabled
Alignvest Acquisition II Corporation to satisfy its condition precedent
to deliver its minimum cash proceeds to the transaction and effectively
unlocked the transaction. Such estimates and assumptions are inherently
uncertain. Changes in these assumptions affect the fair value estimates
of shares.
The fair value of contingent shares issued were determined using market-
based valuation techniques. Assumptions are made and estimates are used
in applying the valuation techniques. These estimates include share price,
future volatility of the share price and the rate of forfeiture. Such estimates
and assumptions are inherently uncertain. Changes in these assumptions
affect the fair value of contingent shares.
As discussed in note 1, a listing expense arises to reflect the difference
between the estimated fair value of the SFC common shares, escrow
shares and warrants deemed to have been issued to the shareholders of
Alignvest less the fair value of the net assets acquired from Alignvest.
A change in fair value of shares issued has a direct impact on the listing
expense as outlined below:
Sensitivity – Listing expense
Per Note 1 of the 2019 Financial Statements
18,777
Revised Listing expense
expense / (income) 2019
Scenario
10% reduction in fair value ($6.19) of share
10% increase in fair value ($6.19) of share
20% increase in fair value of ($6.19) share
5. FINANCIAL INVESTMENTS
(28,584)
66,139
113,502
Each principal operating entity within the group has an investment policy
that provides a framework of maximizing investment yield subject to
the management of the ALM risks described above and the investment
regulations of each country.
As of December 31, 2019, Sagicor had US $6.7 billion of diversified financial
assets and net investment income of US $419.8 million, a net investment
118
Sagicor Financial Company Ltd | 2019 Annual Report
return of 7.2%. Since becoming a public company in 2002, Sagicor has had
positive and stable investment portfolio performance.
INVESTMENTS PORTFOLIO AS OF DECEMBER 31, 2019
CARRYING VALUE (AS % OF TOTAL)
Investments at
amortised cost - 35%
Investments at
FVTPL - 10%
Investments at
FVOCI - 55%
INVESTMENTS PORTFOLIO RISK EXPOSURE
BBB - 35%
B - 30%
AAA/AA - 11%
Un-rated and Other - 10%
A - 10%
BB - 4%
AAA/AA
A
BBB
BB
B Default
Un-rated and other
Carrying Values
The first table below shows the carrying value of Sagicor’s investment
portfolio for the years ended December 31, 2019 and 2018. The second
table below shows Sagicor’s net investment return for the years ended
December 31, 2019 and 2018.
Analysis of Financial Investments
(in millions of US $,
except percentages)
Investments at FVOCI:
Debt securities and money market
funds
Equity securities
Investments at FVTPL:
Debt securities
Equity securities
Derivative financial instruments
Mortgage loans
Investments at amortised cost:
Debt securities
Mortgage loans
Policy loans
Finance loans
Securities purchased for re-sale
Deposits
2019
2018
Carrying
value
% of
Total
Carrying
value
% of
Total
3,673.4
55% 2,633.6
49%
1.3
3,674.7
-
0.3
55% 2,633.9
-
49%
243.1
370.2
36.9
28.9
679.1
4%
5%
1%
1%
11%
198.8
267.2
7.7
30.1
4%
5%
-
-
503.8
9%
1,148.7
17%
1,097.2
362.5
151.5
595.3
10.9
62.8
5%
2%
9%
-
1%
337.0
147.0
514.5
7.2
107.1
21%
6%
3%
10%
-
2%
2,331.7
34%
2,210.0
42%
Total financial investments
6,685.5
100%
5,347.7
100%
The pie charts below represent a breakdown of the carrying value and risk
exposure of Sagicor’s consolidated investments portfolio as of December
31, 2019.
Sagicor Financial Company Ltd | 2019 Annual Report
119
NET INVESTMENT INCOME
(in millions of US $)
Income from financial investments
Interest income:
Debt securities
Mortgage loans
Policy loans
Finance loans and finance leases
Securities purchased for resale
Deposits, cash and other items
Interest Income (FVOCI):
2019
2018
81.7
20.5
10.5
60.9
0.5
1.4
175.5
84.5
20.8
10.0
58.3
0.8
3.1
177.5
NET INVESTMENT INCOME (Continued)
(in millions of US $)
Income from financial investments
IFRS 9 basis
Investment income
Investment property income and fair value gains /
(losses)
Other investment income
Investment expenses:
Direct operating expenses of investment property
Debt securities and money market funds
132.5
113.5
Other direct investment expenses
2019
2018
421.1
296.2
7.9
(0.3)
5.5
0.5
428.7
302.1
6.3
2.6
8.9
6.0
2.3
8.3
FVTPL investments:
Fair value changes and interest income from debt
securities
Fair value changes and dividend income from equity
securities
Derivative financial instruments
Fair value changes and interest income from
mortgage securities
Other income measured on an IFRS 9 basis
Income from financial instruments
25.3
(0.9)
49.3
35.7
2.5
112.8
0.3
421.1
15.8
(11.4)
0.9
4.4
0.8
296.2
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Sagicor Financial Company Ltd | 2019 Annual Report
Net investment income
419.8
293.8
6. RISK MANAGEMENT
Sagicor is in the business of taking risks and must manage those risks
effectively to generate profitable growth, safeguard its reputation and
protect its solvency. In its management of risks, the Group seeks to
optimize the relationship between risk and reward across the entire
enterprise and to limit possible losses resulting from its risk exposure.
Enterprise Risk Management (ERM) at Sagicor has been ongoing for
many years, having appointed its first Chief Risk Officer in 2005. For
about a decade, a standardized risk taxonomy and dictionary has been
utilized across the Group and group-wide exposures to key financial risks
(credit, interest rate, liquidity and currency risks) have been aggregated
and reported to the Board. Further, each of the Group’s major operating
segments has implemented ERM appropriate to the nature, scale and
complexity of their operations. Sagicor continues to evolve its ERM
especially as it relates to strategic and operational risks.
The Group defines risk is an event that causes a deviation from its strategic
plan. Risk is also viewed holistically recognizing that one risk event
may cause downside deviations in several business segments but also
simultaneously causes upside deviations in one or more other business
segments or may also be highly correlated with a second risk event.
Lastly, the Group considers risks defined by source (e.g., data breach) as
opposed to intermediate (e.g., reputation damage) or ultimate (e.g., lower
earnings) outcomes. This not only provides the necessary specific context
for risk assessment but also facilitates complete assessment of any and all
downstream outcomes resulting from the risk.
Non-key risks are monitored for any changes in likelihood and/or severity
and, if warranted, elevated to key risk status.
ERM Process
Sagicor’s ERM process is depicted graphically below:
RISK
IDENTIFICATION
RISK
MESSAGING
RISK
ASSESSMENT
RISK
DECISION MAKING
Identified risks are categorized as illustrated in the table below and further
classified as key risks or non-key risks.
FINANCIAL
INSURANCE
OPERATIONAL
STRATEGIC
MARKET
CREDIT
PRICING
HUMAN
RESOURCES
STRATEGY
UNDERWRITING TECHNOLOGY
EXECUTION
LIQUIDITY
RESERVING
LITIGATION
COMPETITOR
ECONOMIC
COMPLIANCE
LEGISLATIVE/
REGULATORY
FRAUD
SUPPLIER
DISASTERS
GOVERNANCE
PROCESSES
EXTERNAL
RELATIONS
STRATEGIC
RELATIONSHIPS
INTERNATIONAL
Risk are assessed both qualitatively and quantitatively. Certain key
financial risk exposures (credit, interest rate, currency and liquidity) are
quantified quarterly and communicated to the Board. Credit risk exposures
are tracked for each of the investment portfolio, the lending portfolio and
the reinsurance portfolio. Credit concentration risk is also tracked by the
ultimate parent of each counterparty. Liquidity risk exposures are tracked
by both asset-liability maturity profile and 24-month cashflow projections.
Interest rate risk exposures are tracked using asset and liability durations
for each major yield curve exposure. Currency risk exposures are tracked
by stress testing net currency positions for major currency exposure.
Risk information is regularly communicated to external stakeholders
including regulators, rating agencies, and the public. The Group files an
Own Risk Solvency Assessment (ORSA) Summary Report with the Texas
Department of Insurance. It also meets regularly with rating agencies
(S&P, Fitch and A.M. Best) providing them with a description of our ERM
framework and key risk exposures. Sagicor also provides extensive risk
disclosures in its Notes to the Financial Statements.
Roles and Responsibilities
Responsibility for ERM permeates the organization. Business and
functional units are responsible for monitoring and managing risks within
their respective areas. The Group’s Corporate ERM teams’ responsibilities
include but are not limited to the key ERM tools and techniques, oversight
over all key ERM activities, ensuring consistent ERM definitions, concepts,
and terminology, acting as a central clearing house for coordinating
ERM information, monitoring individual and enterprise risk exposures,
and providing key ERM information to the Board Investment and Risk
Committees (both Group and subsidiary level).
The Board Investment and Risk Committees oversee key risks and
exposures and approve key ERM decisions and policies. Internal audit
provides independent verification of policies and procedures.
1. Credit risk
The Group takes on exposure to credit risk, which is the risk that a
counterparty will be unable to pay amounts in full when due. Credit
risks are primarily associated with financial investments and reinsurance
contracts held. Credit risk is the possibility that counterparties may not be
Sagicor Financial Company Ltd | 2019 Annual Report
121
able to meet payment obligations when they become due. As premiums,
deposits and other receivables are received, these funds are invested to
pay for future policyholder and other obligations.
expected credit loss (ECL) staging (see critical accounting estimates and
judgements – 1. impairment of financial assets).
Credit exposure – December 31, 2019
ECL Staging
Stage 1
12-month
ECL
Stage 2
life-time
ECL
Stage 3
life-time
ECL POCI (c)
Total
3,458.2
(2.5)
3,455.7
70.7
(5.7)
65.0
988.3
(1.4)
986.9
4.6
(0.8)
3.8
151.7
(0.2)
151.5
-
-
-
-
-
-
-
-
-
-
-
30.1
3,559.0
-
(8.2)
30.1
3,550.8
158.4
1,151.3
(0.4)
(2.6)
158.0
1,148.7
-
-
-
151.7
(0.2)
151.5
(in US $millions)
FVOCI (b)
debt securities:
Gross value
Loss allowance
Net value
Debt securities (a)
Gross value
Loss allowance
Net value
Policy loans(a)
Gross value
Loss allowance
Net value
The Group in most, but not all, instances bears the risk for investment
performance, i.e. return of principal and interest. Any credit defaults
or other reductions in the value of debt securities, loans, deposits and
receivables could have a material adverse effect on Sagicor’s business,
results of operations and financial condition.
The investment committees of Group operating companies establish
policies to manage credit risk. Specific limits are set for concentration
by asset class and issuer, in addition to minimum standards for asset
quality. Further, Sagicor deals only with highly rated reinsurers in to
contain counterparty risk. The Group minimises credit risk from financial
investments through holding a diversified portfolio of investments,
purchasing securities and advancing loans only after careful assessment
of borrowers, and placing deposits with financial institutions that have a
strong capital base. Sagicor’s policy is to not invest more than 10% of the
debt of a single borrower, unless security is held for the debt.
However, many jurisdictions mandate that the operating companies invest
a portion of the assets supporting the policy liabilities in government
instruments such as treasury bills and bonds.
The Group has significant concentrations of credit risk with respect to
its holding of bonds and treasury bills issued by the governments of
Jamaica, Barbados and Trinidad and Tobago. In the United States, Sagicor
has significant exposure to United States Government issued and/or
government-backed investments (including state and local governments)
and Guggenheim Partners reinsurance assets.
In Sagicor Jamaica’s banking business, the Group is exposed to credit risk
in both its securities and lending activities. In connection with securities
activities, Sagicor Investments trades on a “delivery versus payment”
policy where Government of Jamaica securities are accepted on a mark-to-
market basis with its counterparties. Exposure limits are also established
and monitored. In its lending activities, Sagicor Bank seeks to adequately
collateralise its loans, particularly where they exceed certain thresholds.
Loan applicants undergo a thorough screening and credit analysis process.
The following tables summarise credit exposure of the Group’s financial
investments as of December 31, 2019. It shows the gross carrying value,
the accumulated loss allowance and the net carrying value, analysed by
122
Sagicor Financial Company Ltd | 2019 Annual Report
Credit exposure – December 31, 2019
ECL Staging
Stage 1
12-month
ECL
Stage 2
life-time
ECL
Stage 3
life-time
ECL POCI (c)
Total
300.6
(0.6)
300.0
579.9
(3.8)
576.1
10.9
-
10.9
62.5
(0.3)
62.2
38.8
(0.3)
38.5
13.0
(0.7)
12.3
-
-
-
0.6
(0.1)
0.5
25.0
(0.9)
24.1
12.7
(5.8)
6.9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
364.4
(1.8)
362.6
605.6
(10.3)
595.3
10.9
-
10.9
63.1
(0.4)
62.7
(in US $millions)
Mortgage loans(a)
Gross value
Loss allowance
Net value
Finance loans (a)
Gross value
Loss allowance
Net value
Securities purchased
for re-sale (a)
Gross value
Loss allowance
Net value
Deposits (a)
Gross value
Loss allowance
Net value
liabilities in operating currencies. Management believes that this strategy
adequately meets Sagicor’s asset and liability management goals with
respect to currencies and in the long-term is likely to either maintain
capital value or provide satisfactory returns.
The Sagicor Group operates and issues contracts in the currencies
prevailing in the countries where it conducts business. Most of these
currencies are pegged to the US dollar and their rates of conversion to the
US dollar have been stable for many years. However, there are exceptions.
The exchange rates to the US dollar of the currencies which float against
the US dollar, and which are significant to Sagicor’s operations, are
summarised in the following table for the periods indicated.
Currency exchange rate of US $1.00:
Barbados dollar
Eastern Caribbean dollar
Jamaica dollar
Trinidad & Tobago dollar
Currency exchange rate of US $1.00:
Barbados dollar
Eastern Caribbean dollar
Jamaica dollar
Trinidad & Tobago dollar
2019 closing
rate
2018 closing
rate
2.0000
2.7000
2.0000
2.7000
132.5324
127.3996
6.7624
6.7804
2019 average
rate
2018 average
rate
2.0000
2.7000
2.0000
2.7000
132.8772
128.5468
6.7510
6.7460
(a) Financial investments carried at amortised cost.
(b) FVOCI – fair value through other comprehensive income classification.
(c) POCI - purchased or originated credit impaired.
2. Foreign exchange risk
The Group is exposed to foreign exchange risk as a result of fluctuations
in exchange rates since Sagicor’s 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, Sagicor seeks
to maintain investments and cash in each operating currency sufficient to
match liabilities denominated in the same currency. Sagicor also invests
limited amounts in United States dollar assets, which are held to pay
Sagicor Financial Company Ltd | 2019 Annual Report
123
The following tables shows the Group’s significant foreign exchange exposure as of December 31, 2019 and 2018 by presenting assets and liabilities by
the currency in which they are denominated for its continuing operations.
December 31, 2019
(in US $millions)
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
Lease liabilities
Deposit and security liabilities
Provisions
Accounts payable and accruals
Total monetary liabilities
Other liabilities (2)
Total liabilities of continuing operations
Net position
US $million equivalents of balances denominated in
Barbados $
Jamaica $
Trinidad $
Eastern
Caribbean $
US $
Other
Currencies
341.2
6.7
22.8
21.2
391.9
199.2
591.1
438.5
80.6
31.6
14.4
2.8
1.3
11.9
40.7
621.8
18.7
640.5
(49.4)
1,344.1
3.8
69.4
91.6
1,508.9
477.8
1,986.7
411.4
55.8
81.8
104.4
23.3
684.2
25.2
116.9
1,503.0
32.5
1,535.5
451.2
474.2
4.8
10.3
26.5
515.8
90.8
606.6
366.1
32.8
182.9
-
2.3
1.1
12.9
18.1
616.3
15.2
631.5
(24.9)
150.1
2.1
15.7
9.7
177.6
20.8
198.4
79.4
12.2
53.4
-
0.1
15.3
0.0
1.9
162.4
5.1
167.4
31.0
3,879.2
681.6
14.8
165.4
4,741.0
425.8
5,166.8
2,194.6
31.7
65.3
398.9
6.4
1,033.1
2.3
57.4
3,789.8
42.2
3,832.0
1,334.8
125.4
0.4
5.0
47.2
178.0
1.3
179.3
114.6
14.7
9.3
-
0.8
17.6
7.4
5.4
169.9
2.2
172.1
7.2
Total
6,314.2
699.4
138.0
361.6
7,513.2
1,215.7
8,728.9
3,604.7
227.9
424.3
517.7
35.7
1,752.7
59.8
240.3
6,863.1
116.0
6,979.1
1,749.8
(1) Monetary balances only
(2) Non-monetary balances, income tax balances and retirement plan assets
124
Sagicor Financial Company Ltd | 2019 Annual Report
December 31, 2018
(in US $millions)
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
US $million equivalents of balances denominated in
Barbados $
Jamaica $
Trinidad $
Eastern
Caribbean $
US $
Other
Currencies
335.1
6.6
12.1
9.1
362.9
194.2
557.1
393.7
78.0
32.9
2.7
2.2
29.3
40.7
579.5
17.7
597.2
(40.1)
1,017.5
3.2
50.2
84.5
1,155.4
360.4
1,515.8
362.2
26.1
63.6
42.8
560.5
24.1
92.2
1,171.5
17.3
1,188.8
327.0
424.5
6.1
8.9
51.3
490.8
76.1
566.9
318.8
33.3
162.3
-
1.2
12.4
20.5
548.5
23.0
571.5
(4.6)
145.7
4.1
9.0
10.0
168.8
21.0
189.8
59.3
12.5
48.7
-
15.1
(0.6)
27.2
162.2
4.3
166.5
23.3
3,026.1
679.1
14.8
159.6
3,879.6
419.5
4,299.1
1,791.9
40.3
75.6
444.7
1,078.4
2.2
55.8
3,488.9
28.0
3,516.9
782.2
131.2
0.7
4.7
44.2
180.8
(1.5)
179.3
98.6
13.0
7.3
-
16.6
6.8
4.3
146.6
2.3
148.9
30.4
Total
5,080.1
699.8
99.7
358.7
6,238.3
1,069.7
7,308.0
3,024.5
203.2
390.4
490.2
1,674.0
74.2
240.7
6,097.2
92.6
6,189.8
1,118.2
(1) Monetary balances only
(2) Non-monetary balances, income tax balances and retirement plan assets
Sagicor Financial Company Ltd | 2019 Annual Report
125
re-pricing or maturity dates. Insurance liabilities are categorised by their
expected maturities.
Interest exposure – December 31, 2019
Less than
1 year
1 to 5
years
After
5 years
Not
exposed
to
interest
Total
8.1
3.9
49.3
166.6
227.9
346.2
60.4
17.7
0.1
424.4
419.6
6.5
395.4
804.9
6.8
511.3
-
6.6
27.1
19.0
9.8
0.2
-
-
-
-
1.1
2,506.5
1.1
121.5
71.5
4.2
12.6
-
-
-
-
-
-
155.3
(0.4)
5.9
0.2
3.0
-
1.5
0.3
-
517.8
35.6
418.0
808.1
6.8
512.8
0.3
6.6
238.2
415.4
240.4
3,198.7
(in US $millions)
Other insurance
liabilities
Investment contract
liabilities
Notes and loans
payable
Lease liabilities
Other funding
instruments
Customer deposits
Structured products
Securities sold for
re-purchase
Derivative liabilities
Bank overdrafts
Accounts payable
and accrued
liabilities
Total
3. Interest rate risk
Sagicor is exposed to interest rate risk, which arises when the returns
earned from invested assets decrease.
The return on investments may be variable, fixed for a term or fixed to
maturity. Upon reinvestment of a matured investment, the returns available
on new investments may be significantly different from the returns
formerly achieved. Sagicor guarantees minimum returns on the cash
values of certain types of policies, for example universal life and annuity
contracts, and decreased investment returns may be insufficient to pay
these guaranteed returns.
Sagicor is thereby exposed to the effects of fluctuations in the prevailing
levels of market interest rates on Sagicor’s 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.
Movements in short-term and long-term interest rates affect the level
and timing of recognition of gains and losses on securities Sagicor holds,
and cause changes in realised and unrealised gains and losses. Generally,
Sagicor’s investment income will be reduced during sustained periods of
lower interest rates as higher yielding fixed income securities are called,
mature, or are sold and the proceeds reinvested at lower rates. During
periods of rising interest rates, the market value of Sagicor’s existing
fixed income securities will generally decrease and Sagicor’s realised
gains on fixed income securities will likely be reduced. Realised losses
will be incurred following significant increases in interest rates only if the
securities are sold; otherwise the losses will be unrealised as assets are
fairly matched to similar duration liabilities and may be held to maturity.
Conversely, declining interest rates result in unrealised gains in the value of
fixed income securities Sagicor continues to hold, as well as realised gains
to the extent the relevant securities are sold.
Sagicor’s primary interest rate exposures relate to Sagicor’s long term
insurance and annuities liabilities as well as funds on deposit. Sagicor may
incur a loss on certain contracts where the investment return does not
exceed the interest credited to the policyholder.
The tables following summarise the exposures to interest rates on the
Group’s monetary insurance and financial liabilities (excluding actuarial
liabilities), for the years ended December 31, 2019 and 2018. They set out
liabilities at carrying amounts, categorised by the earlier of contractual
126
Sagicor Financial Company Ltd | 2019 Annual Report
Interest exposure – December 31, 2018
Interest exposure – December 31, 2019
Less than
1 year
1 to 5
years
After
5 years
Not
exposed
to
interest
Total
(in US $millions)
Less than
1 year
1 to 5
years
After 5
years
Not
exposed
to
interest
Total
Debt securities
1,308.2
727.1
2,969.8
60.2
5,065.3
9.3
4.0
50.9
138.8
203.0
333.0
44.3
13.1
-
390.4
96.0
338.2
56.1
(0.1)
490.2
439.7
691.3
48.0
422.8
0.2
2.2
10.9
27.5
16.7
-
0.1
-
0.3
1.0
10.4
-
-
-
-
-
-
0.6
2.8
-
461.6
721.6
64.7
1.0
423.8
-
-
0.3
2.2
239.4
240.7
Equity securities
Mortgage loans
Policy loans
Finance loans
Securities purchased
for
re-sale
Deposits
Derivative assets
Reinsurance assets:
other
Premiums receivable
Other assets and
receivables
Cash resources
-
77.7
4.4
572.4
10.9
57.9
0.3
0.2
0.1
2.8
220.5
-
30.3
14.1
15.6
-
2.7
-
-
-
1.2
-
-
371.5
281.2
131.8
5.7
-
1.8
-
0.2
-
-
-
2.3
1.2
1.6
-
0.3
36.6
37.3
57.5
74.5
141.0
371.5
391.5
151.5
595.3
10.9
62.7
36.9
37.7
57.6
78.5
361.5
(in US $millions)
Other insurance
liabilities
Investment contract
liabilities
Notes and loans
payable
Other funding
instruments
Customer deposits
Structured products
Securities sold for
re-purchase
Derivative liabilities
Bank overdrafts
Accounts payable
and accrued
liabilities
Total
2,042.8
442.7
130.5
382.5
2,998.5
Total
2,255.4
791.0
3,390.5
784.0
7,220.9
The tables following summarise the exposures to interest rate and
reinvestment risks of the Group’s monetary insurance and financial assets,
for the years ended December 31, 2019 and 2018. 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.
Sagicor Financial Company Ltd | 2019 Annual Report
127
The Group diversifies its liability portfolio by limiting concentrations of
liabilities in each market segment. Where practical, given the Group’s
operating environment, Sagicor seeks to match maturities of assets and
liabilities while maintaining a portfolio of short-term, highly liquid securities
to meet funding gaps. The Group monitors its daily, weekly and monthly
liquidity risk and manages its maturing asset and liability portfolios.
The Group purchases custom options (hedges) that are selected to
materially replicate the policy benefits that are associated with the
equity indexed components of certain of its products. These options are
appropriate to reduce or minimise the risk of movements in the equity
market (market risk). The hedging transactions are accounted for as call
options and are originally valued at the premium paid, with the statement
carrying value being adjusted to fair value. To minimise potential
counterparty risk from the purchase of these customised contracts from
broker dealers, the Group only transacts with banks and brokers carrying
an unsecured debt rating of at least A or P-1 by either Standard and Poor’s
or Moody’s.
The Group’s monetary insurance liabilities mature in periods which are
summarised in the following tables for the years ended December 31,
2019 and 2018. 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.
Interest exposure – December 31, 2018
(in US $millions)
Less than
1 year
1 to 5
years
After 5
years
Not
exposed
to
interest
Total
Debt securities
621.3
632.0
2,618.9
57.3
3,929.5
-
267.5
Equity securities
Mortgage loans
Policy loans
Finance loans
Securities purchased
for
re-sale
Deposits
Derivative assets
Reinsurance assets:
other
Premiums receivable
Other assets and
receivables
Cash resources
-
57.6
3.7
489.9
7.2
104.7
-
-
-
2.2
152.7
-
39.7
13.5
17.0
-
1.1
-
-
-
1.1
-
267.5
367.2
147.0
514.4
7.2
107.1
7.7
46.2
51.6
2.2
4.5
2.1
-
0.3
7.7
46.0
51.6
44.9
206.0
48.2
358.7
267.7
125.3
5.4
-
1.0
-
0.2
-
-
-
Total
1,439.3
704.4
3,018.5
690.1
5,852.3
4. Liquidity risk
Liquidity risk is inherent in much of the Group’s business. Liquidity risk
is risk stemming from a lack of marketability in Sagicor’s assets. Some
liabilities may be surrendered at the call of the contract-holder, while
some assets have low liquidity such as mortgage loans and real estate. In
order to manage liquidity risks, the Group seeks to maintain levels of cash
and short-term deposits in each of its operating currencies that can meet
expected short-term obligations.
The Group is exposed to daily demands on its available cash resources for
payment of policy benefits and withdrawals, operating expenses and taxes,
loan drawdowns, repayment of borrowings, maturing deposit liabilities and
other security obligations. The Group maintains cash resources to meet
what it predicts it will have to pay as policy benefits. Demands on its cash
resources may exceed the Group’s projections.
128
Sagicor Financial Company Ltd | 2019 Annual Report
December 31, 2019 Expected discounted cash flows
December 31, 2019
Contractual un-discounted cash flows
127.1
387.1
30.5
70.3
227.9
Notes / loans payable
1,034.8
2,410.6
3,832.5
Lease liabilities
(in US $millions)
Maturing
within
1 year
Maturing
1 to 5
Years
Maturing
after
5 years
Total
Actuarial liabilities
260.0
1,004.3
2,340.3
3,604.6
Other insurance
liabilities
Total
December 31, 2018
(Restated)
(in US $millions)
Expected discounted cash flows
Maturing
within
1 year
Maturing
1 to 5
Years
Maturing
after
5 years
Total
Actuarial liabilities
201.4
769.8
2,053.3
3,024.5
Other insurance
liabilities
Total
107.0
308.4
44.2
814.0
51.9
2,105.2
203.1
3,227.6
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.
On
demand
or within
1 year
1 to 5
years
After
5 years
347.9
445.9
8.3
397.1
815.4
6.8
514.6
0.3
6.6
66.5
45.3
25.6
14.1
0.3
-
-
-
-
22.2
68.3
13.2
19.9
-
-
-
-
-
Total
436.6
559.5
47.1
431.1
815.7
6.8
514.6
0.3
6.6
238.6
2,781.5
1.3
153.1
0.4
240.3
124.0
3,058.6
(in US $millions)
Financial liabilities:
Investment contracts
Other funding instruments
Customer deposits
Structured products
Securities sold for
re-purchase
Derivative liabilities
Bank overdrafts
Accounts payable &
accrued liabilities
Total liabilities
Off balance
sheet commitments:
Loan commitments
66.6
11.0
Non-cancellable lease and
rental payments
Customer guarantees and
letters of credit
Investments and
Investment management
fees
Capital commitments
Total commitments
0.5
14.4
14.3
17.9
113.7
1.1
-
78.7
0.5
-
9.0
11.4
34.8
4.8
-
24.8
-
-
12.5
19.1
17.9
151.0
Total
2,895.2
177.9
136.5
3,209.6
Sagicor Financial Company Ltd | 2019 Annual Report
129
December 31, 2018
Contractual un-discounted cash flows
December 31, 2019
Contractual un-discounted cash flows
On
demand
or within
1 year
1 to 5
years
After
5 years
(in US $millions)
Financial liabilities:
Investment contracts
Notes / loans payable
Other funding instruments
Customer deposits
Structured products
Securities sold for
re-purchase
Derivative liabilities
Bank overdrafts
Accounts payable &
accrued liabilities
334.5
114.7
402.6
695.3
48.6
424.7
0.2
2.2
237.6
48.9
445.2
55.5
30.0
17.1
-
0.1
-
1.9
Off balance
sheet commitments:
Loan commitments
Non-cancellable operating
lease and rental payments
Customer guarantees and
letters of credit
Capital commitments
Total commitments
42.6
4.7
20.6
19.4
87.3
11.6
5.7
1.1
-
18.4
Total
399.0
627.0
475.8
725.3
65.7
(in US $millions)
Financial assets:
Debt securities
Mortgage loans
Policy loans
Finance loans and finance
leases
Securities purchased for
re-sale
424.7
Deposits
0.3
2.2
Derivative assets
Reinsurance assets: share of
actuarial liabilities
15.6
67.1
17.7
-
-
-
-
-
Other assets and
receivables
8.3
62.5
Cash resources
Maturing
within
1 year
Maturing
1 to 5
years
Maturing
after
5 years
Total
1,166.9
21.2
5.3
774.1
39.0
14.3
3,124.2
5,065.2
331.4
131.9
391.6
151.5
184.4
286.6
124.3
595.3
10.9
58.3
36.9
70.6
37.4
57.6
75.9
361.5
-
2.7
-
279.5
-
-
2.1
-
-
1.8
-
311.7
0.2
-
0.5
-
10.9
62.8
36.9
661.8
37.6
57.6
78.5
361.5
Total
2,086.9
1,398.3
4,026.0
7,511.2
-
10.4
13.6
-
21.9
35.3
19.4
127.6
Total liabilities
2,260.4
598.7
101.7
2,960.8
Premiums receivable
1.3
240.8
Reinsurance assets: other
Total
2,347.7
617.1
123.6
3,088.4
The contractual maturity periods of monetary financial assets and the
expected maturity periods of monetary insurance assets are summarised
in the following tables for the years ended December 31, 2019 and 2018.
Amounts are stated at their carrying values recognised in the financial
statements. For this table, monetary insurance assets comprise policy
loans and reinsurance assets.
130
Sagicor Financial Company Ltd | 2019 Annual Report
December 31, 2018
Contractual un-discounted cash flows
(in US $millions)
Financial assets:
Debt securities
Mortgage loans
Policy loans
Finance loans and finance
leases
Securities purchased for
re-sale
Deposits
Derivative assets
Reinsurance assets: share
of actuarial liabilities
Reinsurance assets: other
Premiums receivable
Other assets and
receivables
Cash resources
Total
Maturing
within
1 year
Maturing
1 to 5
years
Maturing
after
5 years
Total
563.2
652.9
2,713.3
3,929.4
22.5
4.6
41.3
13.8
303.4
128.7
367.2
147.1
193.3
243.4
77.9
514.6
7.2
105.1
7.6
75.3
46.0
51.6
47.3
358.7
-
1.0
0.1
-
1.0
-
7.2
107.1
7.7
260.1
318.3
653.7
-
-
-
-
0.2
-
0.6
46.2
51.6
47.9
-
358.7
1,482.4
1,212.6
3,543.4
6,238.4
5. Insurance 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 Group. In the discussion below, the term
insurer refers to the Group subsidiary issuing insurance contracts.
Risks are priced to achieve an adequate return on capital on the
insurer’s business. 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, from insurance market softening
conditions, or from future changes in the economic environment.
The underwriting process has established pricing guidelines; and may
include specific enquiries which determine the insurer’s assessment of
the risk. Insurers may also establish deductibles and coverage limits for
property, casualty and health risks which will limit the potential claims
incurred. The pricing of a contract therefore consists of establishing
appropriate premium rates, deductibles and coverage limits. For long-term
insurance contracts, Sagicor assesses the future cash flows attributable to
the contract.
Sagicor carries significant underwriting risks concentrated in certain
countries within the Caribbean, namely Antigua, Barbados, Cayman
Islands, Curacao, Jamaica, St. Lucia and Trinidad and Tobago. In these
countries, Sagicor insures a substantial proportion of the insured
population (life, annuity, health).
6. Insurance claims risk
a) Life, annuity and health contracts
The principal claims risks for these contracts are mortality, longevity and
morbidity risk. For long-term contracts, principal risks affecting claims and
benefits also include lapse, expense and investment risk.
For long-term contracts in force, Sagicor invests in assets with cash flow
characteristics that closely match the cash flow characteristics of the
related policy liabilities. The primary purpose of this matching is to seek to
ensure that cash flows from these assets are synchronised with the timing
and the amounts of payments that must be paid to policyholders.
Policy benefits payable under long-term contracts may be triggered by
an insurable event (such as a death, disability or critical illness claim) a
specified time (such as for an annuity settlement or a policy maturity) or
on the exercise of a surrender or withdrawal request by the policyholder.
While settlement of these benefits is therefore expected over the
remaining lives of the insureds and annuitants, Sagicor remains subject to
uncertainty related to the timing of future benefit cash outflows.
For long-term insurance contracts, significant risks arise from mortality
and morbidity experience. Worsening mortality and morbidity will increase
the incidence of death and disability claims. Improving mortality (i.e.
longevity) will lengthen the pay-out period of annuities.
Policy benefits payable under short-term contracts are generally triggered
by an insurable event, i.e., a medical expense or a death claim. Settlement
of these benefits is expected generally within a short period.
Sagicor Financial Company Ltd | 2019 Annual Report
131
For Sagicor’s health insurance contracts, significant risk exposures arise
from mortality and morbidity experience.
contractual obligations and that generally have high credit ratings, which
ratings Sagicor monitors, or Sagicor requires that a trust account be
maintained as collateral for the obligations.
b) Property and casualty contracts
Claims payable under property and casualty contracts are triggered by an
insurable event and may be categorised as:
• attritional losses, which are expected to be of reasonable frequency
•
and are less than established threshold amounts;
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 is refined over time until final settlement occurs. In
addition, from the pricing methodology used for risks, it is assumed that at
any date, there are claims incurred but not reported (IBNR).
Under reinsurance contracts, the Group retains some part of the risk
(amounts below the “retention limit”) and coverage in excess of these
limits is ceded to reinsurers. The retention programs used are summarised
in notes 42.3 and 43.3 of the annual financial statements. Sagicor also
maintains catastrophic reinsurance coverage whereby reinsurance
coverage is obtained for multiple claims arising from one event or
occurring within a specified time period.
8. Fiduciary risk
Sagicor provides investment management, insurance and pension
administration, and corporate trust services to corporate customers.
Investment management services requires the Group to make allocation,
purchase and sale decisions in relation to a wide range of investments on
behalf of these corporate customers. These services may expose Sagicor
to claims for maladministration or underperformance of these investments.
As of December 31, 2019, the Group administered US $3,427.7 million in
assets on behalf of these corporate customers.
Claims risk is the risk that incurred claims may exceed expected losses.
Claims risk may arise from
1. Derivative Financial Instruments
Additional Financial Disclosures
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 very many claims.
Concentration of risk is mitigated through risk selection, line sizes, event
limits, quota share reinsurance and excess of loss reinsurance. The Group
takes reinsurance cover to mitigate the geographic concentrations of its
property risks.
7. Reinsurance risk
To limit Sagicor’s loss exposure on insurance policies, Sagicor may cede
some risk to reinsurers that have well-established capability to meet their
The Group’s derivative activities give rise to open positions in portfolios
of derivatives. These positions are managed to seek 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.
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. The contract or notional amounts of derivatives and their
fair values are set out in the following table.
132
Sagicor Financial Company Ltd | 2019 Annual Report
Contract/
notional
amount
(in US $millions)
December 31, 2019:
Fair Value
4. Alignvest Acquisition
Asset
Liability
Equity indexed options
807.0
December 31, 2018:
Equity indexed options
768.3
36.9
7.7
0.3
0.2
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 to the
annual financial statements), 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.
For certain universal life and annuity insurance contracts, a Group
subsidiary 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.
2. Related Party Transactions
Note 47 of the annual financial statements provide additional information
on related party transactions.
3. Breach of Insurance Regulations – Related Party Balances
As at December 31, 2019, one of the Group’s subsidiaries, Sagicor Life
Jamaica Limited exceeded the regulated 5% maximum of related party
balances to total assets of the company. Management is in discussions with
the Regulator, Financial Services Commission, in relation to this matter. The
regulator has not imposed any penalty.
On December 5, 2019, the Company completed its proposed transaction
between Alignvest Acquisition II Corporation (“Alignvest”) and Sagicor
Financial Corporation Limited (“SFCL”) pursuant to which, among other
things, Alignvest acquired all of the issued and outstanding shares of SFCL
by way of an Ontario court approved plan of arrangement and a Bermuda
court approved scheme of arrangement (the “Arrangement”). On closing,
Alignvest changed its name to Sagicor Financial Company Ltd. (“Sagicor”)
and owns 100% of the shares in the capital of SFCL.
As part of this transaction, subject to certain limitations, each of SFCL’s
eligible previous shareholders (excluding the Company’s management
team and continuing directors, all of whom elected to roll 100% of their
equity into this transaction) had the option of tendering up to 10,000
shares for $1.75 of cash, up to a total cash share purchase of $205,000 less
certain other amounts, as per the Arrangement. SFCL common shares not
purchased for cash were exchanged for common shares of Sagicor on an
exchange ratio of one Sagicor common share for 4.328 of SFCL common
shares (“Exchange Ratio”).
On closing of the transaction, 11,548,327 common shares of SFCL were
tendered for purchase by the previous shareholders of SFCL. Sagicor
purchased 11,548,327 common shares of SFCL for total cash consideration
of $20,046 and the remaining 295,007,317 common shares of SFCL
were exchanged for 67,992,191 common shares of Sagicor in accordance
with the Arrangement. All share and per share amounts for all periods
presented in these financial statements have been adjusted retrospectively
to reflect the Exchange Ratio.
On closing, the common shares and warrants of Sagicor were listed on
the Toronto Stock Exchange and are traded under the symbols “SFC” and
“SFC.WT”, respectively. With a listing on the Toronto Stock Exchange,
SFCL’s common shares, formerly listed on the Barbados Stock Exchange,
the Trinidad and Tobago Stock Exchange and the London Stock Exchange,
have ceased trading and are being delisted from these exchanges.
While Alignvest is the legal acquirer of SFCL, SFCL has been identified
as the acquirer for accounting purposes. As Alignvest does not meet
the definition of a business as defined in IFRS 3 - Business Combinations
(“IFRS 3”), the acquisition is not within the scope of IFRS 3 and is
accounted for as a share-based payment transaction in accordance with
IFRS 2 – Share-based Payments (“IFRS 2”). The consolidated financial
statements represent the continuance of SFCL and reflects the identifiable
Sagicor Financial Company Ltd | 2019 Annual Report
133
assets acquired and the liabilities assumed of Alignvest at fair value. Under
IFRS 2, the transaction was measured at fair value of the common shares,
escrowed shares and warrants deemed to have been issued by SFCL in
order for the ownership interest in the combined entity to be the same
as if the transaction had taken the legal form of SFCL acquiring 100% of
Alignvest. Any difference in the fair value of the common shares, escrowed
shares and warrants deemed to have been issued by SFCL and the fair
value of Alignvest’s identifiable net assets acquired and liabilities assumed
represents a listing expense.
As a result of this reverse asset acquisition, listing expense and transaction
related expenses of US $43.4 million has been recorded to reflect the
difference between the estimated fair value of the SFCL common shares,
escrowed shares and warrants deemed issued to the shareholders of
Alignvest less the net fair value of the assets of Alignvest acquired and
common shares repurchased. Transaction related expenses of $24,619
were expensed as incurred. Transaction related expenses were comprised
of professional fees of $6,279, cash bonus and other contact benefits paid
to executives of $2,736, common shares issued to executives of $5,994,
arranger’s fee of $8,585 and other costs of $1,025. Details of the listing
expense and transaction related expenses are shown at note 1 to the
Sagicor Financial Company Ltd.’s 2019 audited financial statements.
The fair value of the consideration transferred to acquire Alignvest under
reverse takeover accounting was $493,683 calculated as 72,433,368
common shares at $6.19 per common share, 6,444,877 escrowed
common shares with fair value of $3.93 per escrowed common share and
34,774,993 warrants with fair value of $0.58 per warrant. The fair value per
common share is based on the fair value of SFCL common shares.
The fair value of escrowed common shares was determined using
probability weighted model with a market price per common share of $6.19
resulting in total fair value of $25,328.
The fair value of warrants was determined based on the market closing
price of $0.58 per warrant.
As a result of the closing of this transaction, 147,938,907 common shares
of Sagicor were issued and outstanding immediately after the closing.
5. Subsequent events
Subsequent to the end of the financial year, the World Health Organization
declared COVID-19 a world health pandemic. This pandemic has affected
many countries and all levels of society and has affected our economic
environment in significant ways.
As the COVID-19 situation evolves, many of the markets in which Sagicor
operates have implemented public health safety protocols. Most Caribbean
countries have largely shut down air and sea traffic. Similar procedures
have also been applied in the United States, Canada and elsewhere.
The COVID-19 pandemic has caused significant economic and financial
turmoil both in the U.S. and around the world and has fuelled concerns that
it will lead to a global recession. These conditions are expected to continue
and worsen in the near term.
We believe that the pandemic will have a significant impact on our
business, results of operations, financial condition and liquidity. The extent
of these impacts will depend on future developments which cannot be
accurately predicted at this time, as new information is emerging each day.
Increased economic uncertainty and increased unemployment resulting
from the economic impacts of the spread of COVID-19 may also result in
policyholders seeking sources of liquidity and withdrawing from insurance
policy arrangements at rates greater than we previously expected.
Accordingly, policyholder lapse and surrender rates could exceed our
expectations, which could lead to an adverse effect on our business,
financial condition, results of operations, liquidity and cash flows. The
economic environment could also have an adverse effect on our sales of
new policies.
Our investment portfolio and our investments matching our pension
liabilities may be adversely affected as a result of market developments
from the COVID-19 pandemic and uncertainty regarding its outcome.
Changes in interest rates, reduced liquidity or a continued slowdown in
global economic conditions may also adversely affect the values and
cash flows of these investments. Investments in mortgages and finance
loans could be negatively affected by delays or failures of borrowers to
make payments of principal and interest when due. Equity investments
have declined substantially in value. The Group has an investment in Playa
Hotels and Resorts; travel restrictions, the impact on tour and holiday
bookings and cancellations, may result in a downturn in revenues and
profits which could result in a write-down of this asset.
The Group will continue to monitor the impact of COVID-19.
134
Sagicor Financial Company Ltd | 2019 Annual Report
Historical Financial Disclosures
The following table provides a summary of Sagicor’s results from continuing operations for the five most recently completed years.
In US $millions, unless otherwise noted
Net premium revenue
Net investment and other income
Total revenue
Benefits and expenses
Other
Income before tax
Income tax
Net income before Alignvest transaction expenses
Alignvest transaction expenses
Net income
Net income attributable to common shareholders
Basic EPS before Alignvest transaction expenses
Basic EPS (a)
Diluted EPS before Alignvest transaction expenses
Diluted EPS(a)
Annualised return on common shareholders’ equity before Alignvest
transaction expenses
Annualised return on common shareholders’ equity
Dividends paid per common share
Total assets
Total equity attributable to common shareholders
(a) – Earnings per share ratios for 2015 to 2017 have not been
restated for the conversion to the current capital structure
2019
1,241.5
625.8
1,867.3
2018
Restated
1,054.1
332.5
1,386.6
(1,663.6)
(1,260.4)
3.0
206.7
(59.7)
153.9
(43.4)
103.6
44.0
114.3¢
57.5¢
107.5¢
54.1¢
14.0%
6.8%
5.0 ¢
8,728.9
1,154.1
20.3
146.5
(50.7)
95.8
-
95.8
36.5
N/A
51.7¢
N/A
50.8¢
N/A
6.2%
5.0 ¢
7,308.2
600.9
2017
Restated
745.6
463.2
1,208.8
(1,095.8)
12.1
125.1
(19.3)
105.8
-
105.8
62.3
N/A
20.5 ¢
N/A
20.0 ¢
N/A
11.3%
5.0 ¢
6,804.5
624.6
2016
664.0
464.7
1,128.7
(984.5)
5.4
149.6
(41.7)
107.9
-
107.9
60.3
N/A
19.5¢
N/A
18.7¢
N/A
12.3%
4.5 ¢
6,531.9
536.1
2015
673.9
424.9
1,098.8
(980.6)
5.4
123.6
(25.1)
98.5
-
98.5
56.3
N/A
18.2¢
N/A
17.3¢
N/A
11.7%
4.0 ¢
6,399.9
506.0
Sagicor Financial Company Ltd | 2019 Annual Report
135
2019
2018
Restated
2017
Restated
2016
2015
60.9
61.4
35.4
(113.7)
44.0
87.4
39.6
55.7
18.3
(77.1)
36.5
36.5
64.7
46.6
13.3
(62.3)
62.3
64.8
44.3
10.5
(59.3)
60.3
62.3
60.3
69.5
39.3
6.6
(59.1)
56.3
56.3
Historical Financial Disclosures (continued)
In US $millions, unless otherwise noted
Net income attributable to common shareholders by
operating segment:
Sagicor Life
Sagicor Jamaica
Sagicor Life USA
Head office, other & inter-segment eliminations
Net income attributable to common shareholders
Net income attributable to common shareholders before Alignment
transaction expenses
As discussed in the “Introduction”, the information above, in respect of the
years 2016, 2015 and 2014, has not been restated to include certain prior
year adjustments applied retrospectively to January 1, 2017. Management
does not believe these adjustments are material to impact the ability of
the users of the financial information, to assess the performance and/
or the financial position of the Group. Further, as allowed, on adoption
of IFRS 9 – Financial Instruments and IFRS 15 – Revenue from Contracts
with Customers, on January 1, 2018, comparative figures in prior years,
have not been adjusted. On January 1, 2019, the Group adopted IFRS 16 –
Leases using the modified retrospective method with no restatement of
comparative information as allowed by the standard.
136
Sagicor Financial Company Ltd | 2019 Annual Report
INDEX TO
FINANCIAL
STATEMENTS
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
Appointed Actuary’s Report
Independent Auditor’s Report
Consolidated Financial Statements:
Consolidated Statements of Financial Position
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
1 General Information
2 Accounting Policies
3 Critical Accounting Estimates and Judgements
4 Segments
5
Investment Property
6 Associates and Joint Ventures
7 Property, Plant and Equipment
8
Intangible Assets
9 Financial Investments
10 Reinsurance Assets
11
Income Tax Assets
12 Miscellaneous Assets and Receivables
13 Actuarial Liabilities
14 Other Insurance Liabilities
15
Investment Contract Liabilities
16 Notes and Loans Payable
17 Deposit and Security Liabilities
18 Other Liabilities / Retirement Benefit Liabilities
19
Income Tax Liabilities
20 Accounts Payable and Accrued Liabilities
21 Common Shares
22 Reserves
142
143
148
148
149
150
151
153
154
156
182
186
197
198
203
204
207
209
209
209
210
213
214
214
217
217
217
218
219
220
23 Participating Accounts
24 Premium Revenue
25 Policy Benefits & Change in Actuarial Liabilities
26 Net Investment Income
27 Fees and Other Revenue
28 Interest and Finance Costs
29 Employee Costs
30 Equity Compensation Benefits
31 Employee Retirement Benefits
32 Income Taxes
33 Deferred Income Taxes
34 Earnings per Common Share
35 Other Comprehensive Income (OCI)
36 Cash Flows
37 Changes in Subsidiary and Associate Holdings
38 Discontinued Operation
39 Contingent Liabilities
40 Fair Value of Property
41 Financial Risk
42 Insurance Risk - Property & Casualty Contracts
43 Insurance Risk - Life, Annuity & Health Contracts
44 Fiduciary Risk
45 Statutory Restrictions on Assets
46 Capital Management
47 Related Party Transactions
222
222
222
223
224
225
225
226
229
233
234
236
237
238
240
244
245
246
246
294
299
304
304
305
310
48 Breach of Insurance Regulations – Related Party Balances 310
49 Transition to IFRS 16 - Leases
50 Reclassification of Comparative Figures
51 Subsequent Events
311
313
313
140
Sagicor Financial Company Ltd | 2019 Annual Report
ACRONYMS
Certain acronyms have been used throughout the financial statements and notes
thereto to substitute phrases.
The more frequent acronyms and associated phrases are set out below.
Acronym
AA
EAD
ECL
FVOCI
FVTPL
IAS
IFRS
IFRS 9
IFRS 16
LGD
MCCSR
OCI
PD
POCI
SICR
SPPI
Phrase
Appointed Actuary
Exposure at Default
Expected Credit Losses
Fair Value through Other Comprehensive Income
Fair Value through Profit and Loss
International Accounting Standards
International Financial Reporting Standards
International Financial Reporting Standard No.9 – Financial Instruments
International Financial Reporting Standard No.16 – Leases
Loss Given Default
Minimum Continuing Capital and Surplus Requirement
Other Comprehensive Income
Probability of Default
Purchased or Originated Credit-Impaired
Significant Increase in Credit Risk
Solely Payments of Principal and Interest
Sagicor Financial Company Ltd | 2019 Annual Report
141
ACTUARY’S REPORT
142
Sagicor Financial Company Ltd | 2019 Annual Report
AUDITOR’S REPORT
Sagicor Financial Company Ltd | 2019 Annual Report
143
AUDITOR’S REPORT
144
Sagicor Financial Company Ltd | 2019 Annual Report
AUDITOR’S REPORT
Sagicor Financial Company Ltd | 2019 Annual Report
145
AUDITOR’S REPORT
146
Sagicor Financial Company Ltd | 2019 Annual Report
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As of December 31, 2019 and December 31, 2018
SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited)
Amounts expressed in US $000
Note
2019
2018
Note
2019
2018
ASSETS
Investment property
Property, plant and equipment
Associates and joint ventures
Intangible assets
Financial investments
Financial investments repledged
Reinsurance assets
Income tax assets
Miscellaneous assets and receivables
Cash
Restricted cash
Assets of discontinued operation
Total assets
5
7
6
8
9
9
10
11
12
38
95,577
289,870
230,558
106,864
93,494
262,288
236,132
97,312
6,080,758
4,794,399
604,886
724,237
26,594
208,059
273,072
88,396
-
553,264
714,597
54,365
143,647
261,899
96,788
17,239
8,728,871
7,325,424
These financial statements have been approved for issue by the Board of Directors on April 23, 2020.
LIABILITIES
Actuarial liabilities
Other insurance liabilities
Investment contract liabilities
Total policy liabilities
Notes and loans payable
Lease liabilities
Deposit and security liabilities
Other liabilities / retirement benefit liabilities
Income tax liabilities
Accounts payable and accrued liabilities
Total liabilities
EQUITY
Share capital
Share premium
Reserves
Retained earnings
Total shareholders’ equity
Participating accounts
Non-controlling interests
Total equity
13
14
15
16
49
17
18
19
20
21
21
22
23
4.4
3,604,653
3,024,464
286,960
424,340
247,577
390,397
4,315,953
3,662,438
517,732
35,700
490,275
-
1,752,689
1,674,033
59,795
56,889
74,287
48,236
240,333
240,694
6,979,091
6,189,963
1,477
762,015
(9,023)
399,582
1,154,051
1,223
3,061
300,665
(76,995)
374,138
600,869
4,078
594,506
530,514
1,749,780
1,135,461
………………………………………………
Director
………………………………………………
Director
Total liabilities and equity
8,728,871
7,325,424
4
148
Sagicor Financial Company Ltd | 2019 Annual Report
CONSOLIDATED STATEMENTS OF INCOME
Year ended December 31, 2019 and December 31, 2018
SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited)
Amounts expressed in US $000
Note
2019
2018
Note
2019
2018
REVENUE
Premium revenue
Reinsurance premium expense
Net premium revenue
Gain on derecognition of amortised cost investments
Gain on derecognition of assets carried at FVOCI
Interest income earned from financial assets measured at
amortised cost and FVOCI
Other investment income
Credit impairment losses
Fees and other revenue
Total revenue, net
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 costs
Total benefits
EXPENSES
Administrative expenses
Commissions and related compensation
Premium and asset taxes
Finance costs
Depreciation and amortisation
Listing expense and other transaction costs
Total expenses
24
24
26
26
27
25
25
28.1
28.2
1
1,323,252
(81,708)
1,241,544
12,920
29,954
308,014
111,800
(4,877)
167,971
1,141,429
(87,388)
1,054,041
10,434
9,339
290,988
2,832
(95,519)
114,482
1,867,326
1,386,597
1,169,640
(107,308)
1,062,332
54,192
1,116,524
333,236
120,155
14,560
43,633
35,506
43,396
728,360
(15,555)
712,805
52,521
765,326
303,071
117,316
13,956
36,511
24,277
-
590,486
495,131
OTHER
(Loss) / gain arising on business combinations,
acquisitions and divestitures
37
Gain arising on acquisition of insurance business
13.2
Share of operating income of associates and joint
ventures
6
Total other income
INCOME BEFORE TAXES
FROM CONTINUING OPERATIONS
Income taxes
NET INCOME FROM CONTINUING
OPERATIONS
Net income from discontinued operation
NET INCOME FOR THE YEAR
Net income is attributable to:
Common shareholders:
From continuing operations
From discontinued operation
Participating policyholders
Non-controlling interests
Basic earnings per common share:
From continuing operations
From discontinued operation
32
38
4.1
34
Fully diluted earnings per common share:
34
From continuing operations
From discontinued operation
(379)
-
3,347
2,968
163,284
(59,710)
103,574
517
104,091
43,981
517
44,498
(1,937)
61,530
104,091
57.5 cents
0.7 cents
58.2 cents
54.1 cents
0.6 cents
54.7 cents
11,820
6,418
2,145
20,383
146,523
(50,702)
95,821
7,129
102,950
36,521
7,129
43,650
7,222
52,078
102,950
51.7 cents
10.1 cents
61.8 cents
50.8 cents
9.9 cents
60.7 cents
5
Sagicor Financial Company Ltd | 2019 Annual Report
149
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year ended December 31, 2019 and December 31, 2018
SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited)
Amounts expressed in US $000
OTHER COMPREHENSIVE INCOME
Note
2019
2018
TOTAL COMPREHENSIVE INCOME
2019
2018
Items net of tax that may be reclassified subsequently
to income:
35
Financial assets measured at FVOCI:
Gains / (losses) on revaluation
Gains transferred to income
Net change in actuarial liabilities
Retranslation of foreign currency operations
Other reserves
Items net of tax that will not be reclassified
subsequently to income:
35
(Losses) / gains on revaluation of owner-occupied and
owner-managed property
Gains on equity securities designated at FVOCI
Gains / (losses) on defined benefit plans
168,707
(20,374)
(94,999)
(16,641)
(3,212)
33,481
(971)
18
11,198
10,245
(82,864)
(1,891)
41,614
(25,185)
-
(68,326)
6,894
73
(2,685)
4,282
OTHER COMPREHENSIVE INCOME / (LOSS) FROM
CONTINUING OPERATIONS
43,726
(64,044)
Net income
Other comprehensive income / (loss)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Total comprehensive income / (loss) is attributable to:
Common shareholders:
From continuing operations
From discontinued operation
Participating policyholders
Non-controlling interests
104,091
43,726
147,817
80,671
517
81,188
(2,655)
69,284
147,817
102,950
(64,044)
38,906
2,917
7,129
10,046
6,356
22,504
38,906
6
150
Sagicor Financial Company Ltd | 2019 Annual Report
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Year ended December 31, 2019 and December 31, 2018
SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited)
Amounts expressed in US $000
Share Capital
(note 21)
Share Premium
(note 21)
Reserves
(note 22)
Retained
Earnings
Total
Shareholders’
Equity
Participating
Accounts
(note 23)
Non-controlling
Interests
Total
Equity
2019
Balance, December 31, 2018
3,061
300,665
(76,995)
374,138
Total comprehensive income from continuing operations
Total comprehensive income from discontinued operation
Transactions with holders of equity instruments:
Exchange of shares (note 1)
Repurchase of shares (note 1)
New share issue (note 1)
Movements in treasury shares
Allocated to warrant reserve
Changes in reserve for equity compensation benefits
Dividends declared (note 21)
Acquisition/disposal of subsidiary and insurance business
Transfers and other movements
Balance, December 31, 2019
-
-
(2,270)
(116)
798
4
-
-
-
-
-
-
-
2,270
(19,930)
478,818
192
-
-
-
-
-
28,030
52,641
-
-
-
-
-
20,062
9,187
-
-
517
-
-
-
-
-
(938)
(15,316)
-
10,693
(11,460)
600,869
80,671
517
-
(20,046)
479,616
196
20,062
8,249
(15,316)
-
(767)
4,078
(2,655)
530,514
1,135,461
69,284
147,300
-
-
-
-
-
-
-
-
-
(200)
1,223
-
-
-
-
-
-
24
517
-
(20,046)
479,616
196
20,062
8,273
(21,539)
(36,855)
17,070
(847)
17,070
(1,814)
594,506
1,749,780
1,477
762,015
(9,023)
399,582
1,154,051
7
Sagicor Financial Company Ltd | 2019 Annual Report
151
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Year ended December 31, 2019 and December 31, 2018
SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited)
Amounts expressed in US $000
Share Capital
(note 21)
Share Premium
(note 21)
Reserves
(note 22)
Retained
Earnings
Total
Shareholders’
Equity
Participating
Accounts
(note 23)
Non-controlling
Interests
Total
Equity
2018
Balance, December 31, 2017
3,059
300,470
(47,388)
368,451
Transition adjustment on adoption of IFRS 9
-
-
(217)
(10,442)
Balance, January 1, 2018
3,059
300,470
(47,605)
358,009
-
-
2
-
-
-
-
-
-
-
-
195
-
-
-
-
-
-
(29,634)
-
-
(787)
-
-
-
(935)
1,966
32,551
7,129
-
-
-
(3,092)
935
(6,094)
3,061
300,665
(76,995)
374,138
(15,300)
(15,300)
624,592
(10,659)
613,933
2,917
7,129
197
(787)
-
(3,092)
-
(4,128)
600,869
865
(2,930)
(2,065)
6,356
-
-
-
-
-
-
-
(213)
4,078
311,766
(2,352)
309,414
22,504
-
-
(28)
(18,554)
222,755
(9,581)
(2,221)
6,225
937,223
(15,941)
921,282
31,777
7,129
197
(815)
(33,854)
222,755
(12,673)
(2,221)
1,884
530,514
1,135,461
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)
Acquisition/disposal of subsidiary and insurance business
Changes in ownership interest in subsidiaries
Disposal of interest in subsidiaries
Transfers and other movements
Balance, December 31, 2018
8
Sagicor Financial Company Ltd | 2019 Annual Report
152
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31, 2019 and December 31, 2018
SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited)
Amounts expressed in US $000
Note
2019
2018
Note
2019
2018
OPERATING ACTIVITIES
Income before taxes from continuing operations
163,284
Adjustments for non-cash items, interest and dividends
36.1
172,204
Interest and dividends received
Interest paid
Income taxes paid
318,564
(95,332)
(53,060)
146,523
65,655
303,371
(89,029)
(31,720)
Net increase in investments and operating assets
Net increase in operating liabilities
Net cash flows - operating activities
36.1
36.1
(582,684)
(580,553)
118,499
41,475
232,016
46,263
INVESTING ACTIVITIES
Property, plant and equipment, net
36.2
(7,493)
Associates and joint ventures, net
Dividends received from associates and joint ventures
Purchase of intangible assets
Changes in subsidiary and associate holdings,
net of cash and cash equivalents
Sale of subsidiaries, net
Net cash flows - investing activities
-
640
(4,738)
(32,779)
-
(44,370)
(326)
(146)
600
(4,795)
10,422
(13,795)
(8,040)
FINANCING ACTIVITIES
Allotment of common shares
Repurchase of shares
Purchase of treasury shares
Redemption of SFCL preference shares
Shares issued to / (purchased from) non-controlling
interests
Changes in ownership of subsidiaries
Notes and loans payable, net
Lease liability principal paid
Dividends paid to common shareholders
Dividends paid to non-controlling interests
Net cash flows - financing activities
474,906
(20,046)
(371)
-
(1,562)
-
31,695
(4,225)
(15,003)
(21,539)
443,855
-
-
(202)
(1)
1,967
(12,673)
(6,134)
-
(14,959)
(19,337)
(51,339)
36.3
36.5
Effects of exchange rate changes
(4,933)
(3,672)
NET CHANGE IN CASH AND CASH EQUIVALENTS -
CONTINUING OPERATIONS
Net change in cash and cash equivalents – discontinued
operation
436,027
(16,788)
17,756
-
Cash and cash equivalents, beginning of year
321,561
338,349
CASH AND CASH EQUIVALENTS, END OF YEAR
36.4
775,344
321,561
9
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153
1 GENERAL INFORMATION
1 GENERAL INFORMATION (continued)
Sagicor Financial Company Ltd. (TSX: SFC, "SFC" or the “Company”) is a leading financial services
provider in the Caribbean, with almost 180 years of history. SFC’s registered office is located at
Clarendon House, 2 Church Street, Hamilton, HM 11, Bermuda, with its principal office located at Cecil
F De Caires Building, Wildey, St. Michael, Barbados.
On November 27, 2018, Sagicor Financial Corporation Limited ("SFCL") entered into a definitive
arrangement agreement as amended on January 28, 2019 with Alignvest Acquisition II Corporation
(“Alignvest”), a special purpose acquisition company ("SPAC") , pursuant to which on December 5,
2019, Alignvest acquired all of the issued and outstanding shares of SFCL by way of an Ontario court
approved plan of arrangement and a Bermuda court approved scheme of arrangement (the
“Arrangement”). On closing, Alignvest changed its name to Sagicor Financial Company Ltd. and owns
100% of the shares in the capital of SFCL whose operations continue as SFC.
As part of this transaction, subject to certain limitations, each of SFCL’s eligible previous shareholders
(excluding the Company’s management team and continuing directors, all of whom elected to roll 100%
of their equity into this transaction) had the option of tendering up to 10,000 shares for $1.75 of cash,
up to a total cash share purchase of $205,000 less certain other amounts, as per the Arrangement.
SFCL common shares not purchased for cash were exchanged for common shares of Sagicor on an
exchange ratio of one Sagicor common share for 4.328 of SFCL common shares (“Exchange Ratio”).
On closing of the transaction, 11,548,327 common shares of SFCL were tendered for purchase by the
previous shareholders of SFCL. Sagicor purchased 11,548,327 common shares of SFCL for total cash
consideration of $20,046 and the remaining 295,007,317 common shares of SFCL were exchanged for
67,992,191 common shares of Sagicor in accordance with the Arrangement. All earnings per share
amounts for all periods presented in these financial statements have been adjusted retrospectively to
reflect the Exchange Ratio.
On closing, the common shares and warrants of Sagicor were listed on the Toronto Stock Exchange
and are traded under the symbols “SFC” and “SFC.WT”, respectively. With a listing on the Toronto
Stock Exchange, SFCL’s common shares, formerly listed on the Barbados Stock Exchange, the
Trinidad and Tobago Stock Exchange and the London Stock Exchange, have ceased trading and are
being delisted from these exchanges.
While Alignvest is the legal acquirer of SFCL, SFCL has been identified as the acquirer for accounting
purposes. As Alignvest does not meet the definition of a business as defined in IFRS 3 - Business
Combinations (“IFRS 3”), the acquisition is not within the scope of IFRS 3 and is accounted for as a
share-based payment transaction in accordance with IFRS 2 – Share-based Payments (“IFRS 2”).
These consolidated financial statements represent the continuance of SFCL and reflects the identifiable
assets acquired and the liabilities assumed of Alignvest at fair value. Under IFRS 2, the transaction was
measured at fair value of the common shares, escrowed shares and warrants deemed to have been
issued by SFCL in order for the ownership interest in the combined entity to be the same as if the
transaction had taken the legal form of SFCL acquiring 100% of Alignvest. Any difference in the fair
value of the common shares, escrowed shares and warrants deemed to have been issued by SFCL
and the fair value of Alignvest’s identifiable net assets acquired and liabilities assumed represents a
listing expense.
As a result of this reverse asset acquisition, listing expense of $18,777 has been recorded to reflect the
difference between the estimated fair value of the common shares, escrowed shares and warrants
deemed issued to the shareholders of Alignvest less the net fair value of the assets of Alignvest
acquired. Transaction related expenses of $24,619 were expensed as incurred. Transaction related
expenses were comprised of professional fees of $6,279, cash bonus and other contact benefits paid
to executives of $2,736, common shares issued to executives of $5,994, arranger’s fee of $8,585 and
other costs of $1,025.
154
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Sagicor Financial Company Ltd | 2019 Annual Report
10
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 1 GENERAL INFORMATION (continued)
1 GENERAL INFORMATION (continued)
The details of the listing expense and transaction related expenses are as follows:
Fair Value of consideration transferred:
Common shares
Escrowed common shares
Warrants
Total fair value of consideration transferred
Fair value of net assets acquired and shares repurchased:
Cash
Cash for the repurchase of shares
Total fair value of net assets acquired and shares repurchased
Listing expense
Transaction related expenses
Listing expense and other transaction costs
2019
448,293
25,328
20,062
493,683
454,860
20,046
474,906
18,777
24,619
43,396
The fair value of the consideration transferred to acquire Alignvest under reverse takeover accounting
was $493,683 calculated as 72,433,368 common shares at $6.19 per common share, 6,444,877
escrowed common shares with fair value of $3.93 per escrowed common share and 34,774,993
warrants with fair value of $0.58 per warrant. The fair value per common share is based on the fair value
of SFCL common shares.
The fair value of escrowed common shares was determined using probability weighted model with an
estimated fair value per common share of $6.19 resulting in total fair value of $25,328.
The fair value of warrants was determined based on the market closing price of $0.58 per warrant.
As a result of the closing of this transaction, 147,838,907 common shares of the Company were issued
and outstanding immediately after the closing.
Sagicor and its subsidiaries (“the Group”) operate across the Caribbean and in the United States of
America (USA). There was a discontinued operation in the United Kingdom. Details of Sagicor’s
holdings and operations are set out in notes 4 and 38.
The principal activities of the Sagicor Group are as follows:
•
•
•
Life and health insurance,
Annuities and pension administration services,
Banking and investment management services,
and its principal operating companies are as follows:
•
•
•
•
Sagicor Life Inc (Barbados and Trinidad & Tobago),
Sagicor Life Jamaica Limited (Jamaica),
Sagicor Bank Jamaica Limited (Jamaica),
Sagicor Life Insurance Company (USA).
The Group also underwrites property and casualty insurance and provides hospitality 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.
These consolidated financial statements for the year ended December 31, 2019 have been approved
by the Board of Directors on April 23, 2020. Neither the Company’s owners nor others have the power
to amend the financial statements after issue.
11
Sagicor Financial Company Ltd | 2019 Annual Report
Sagicor Financial Company Ltd | 2019 Annual Report
155
155
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
2 ACCOUNTING POLICIES
2.1 Basis of preparation (continued)
The principal accounting policies adopted in the preparation of these consolidated financial statements
are set out below. These policies have been consistently applied to the years presented, unless
otherwise stated.
2.1 Basis of preparation
These consolidated financial statements are prepared in accordance with and comply with International
Financial Reporting Standards (IFRS).
The Group has adopted accounting policies for the computation of actuarial liabilities of life insurance
and annuity contracts using approaches consistent with the principles of the Canadian standards of
practice. As no specific guidance is provided by IFRS for computing actuarial liabilities, management
has judged that the Canadian standards of practice 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, financial assets carried at
fair value through other comprehensive income, financial asset and liabilities held at fair value through
income, discontinued operations, 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 Group’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.
Adoption of IFRS 16 - Leases
Effective January 1, 2019, the Sagicor Group adopted IFRS 16. The Group has implemented IFRS 16 –
Leases using the modified retrospective method with no restatement of comparative information. As a
result, the comparatives for 2018 have not been restated. For contracts entered into before January 1,
2019, the Group, as lessor, relied on its assessment made in applying IAS 17 - Leases and IFRIC 4 -
Determining whether an arrangement contains a lease. Accordingly, the Group has also elected not to
reassess whether a contract in effect before January 1, 2019, is, or contains a lease.
As of January 1, 2019, the Group, as lessee, has recognised right-of-use assets and lease liabilities for the
operating leases previously entered into. The impact of this change is summarised in note 49.
The accounting policy for leases is set out in note 2.10.
Amendments to existing IFRS and IAS effective January 1, 2019
The Group has adopted the amendments to IFRS and IAS set out in the following tables. None of these
amendments have a material effect on the Group’s financial statements.
Standard
Description of amendment
IFRS 9 –
Financial
Instruments
The amendment “Financial instruments on prepayment features with negative
compensation” enables companies to measure at amortised cost some pre-
payable financial assets with negative compensation. The assets affected, would
otherwise have been measured at FVTPL. Negative compensation arises where
the contractual terms permit the borrower to repay the instrument before its
contractual maturity, but the prepayment amount could be less than unpaid
amounts of principal and interest. However, to qualify for amortised cost
measurement, negative compensation must be reasonable compensation for early
termination of the contract.
156
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Sagicor Financial Company Ltd | 2019 Annual Report
12
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 2.1 Basis of preparation (continued)
Standard
Description of amendment
2.2 Basis of consolidation
(a) Subsidiaries
IFRIC 23 –
Uncertainty
over Income
Tax
Treatments
IAS 28 –
Investments in
Associates and
Joint Ventures
IAS 19 –
Employee
Benefits
Annual
Improvements
13
This interpretation clarifies how to apply the recognition and measurement
requirement in IAS-12 “Income Taxes” when there is uncertainty over income tax
treatments. This interpretation applies to the determination of taxable profit
(taxable loss), tax bases, unused tax losses, unused tax credits and tax rates when
there is doubt as to the tax treatments to be used in accordance with IAS-12.
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
can affect those returns through its power over the entity. Subsidiaries are consolidated from the date
on which control is transferred to the Group, and subsidiaries are de-consolidated from the date on
which control ceases.
The amendment “Long-term Interest in Associates and Joint Ventures” clarifies the
situation where an entity applies the equity method and owns long-term interests
that meet the criteria to be qualified in substance as long-term net investments.
This amendment applies more specifically to shares when there are losses that
must be absorbed by long-term interests.
The amendment “Plan Amendment, Curtailment or Settlement” clarifies, for
defined benefit pension plans, when changes require a revaluation of the net cost
of assets and liabilities involved. The amendment requires the entity to use the
adjusted assumptions resulting from the reassessment to determine the cost of
services rendered during the period and the net interest for the period following the
changes made to the pension plans or the revaluation. This amendment applies
prospectively.
The Annual Improvements clarify situations specific to four standards:
• IFRS-3 “Business Combinations” relates to the fact that a business combination
achieved in stages is applicable when a party to a joint arrangement obtains
control of a business that is a joint operation, and this improvement will apply
prospectively;
• IFRS-11 “Joint Arrangements” relates to the fact that an interest previously
owned by an entity in a joint operation is not remeasured when the entity obtains
joint control of the joint operation, and this improvement will apply prospectively;
• IAS-12 “Income Taxes” relates to the recognition of income taxes on dividend
liabilities to be paid, and this improvement will apply retrospectively;
• IAS-23 “Borrowing Costs” relates to the fact that an entity shall exclude from the
calculation of capitalized borrowing costs the borrowing costs for the period during
the completion of the assets, and this improvement will apply prospectively.
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 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.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
2 .2 Basis of consolidation (continued)
Non-controlling interest balances represent the equity in a subsidiary not attributable to Sagicor’s
interest.
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.
(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. As of December 31, 2018, the future price adjustments relating
to the discontinued operation are disclosed in the statement of financial position at their estimated
undiscounted value.
(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.
2 .2 Basis of consolidation (continued)
(d) Associates and joint ventures
The investments in associated companies, which are not majority-owned or controlled but where
significant influence exists, are included in these consolidated financial statements under the equity
method of accounting. Investments in companies are accounted for as associates in instances when
significant influence exists even though the shareholding may be less than 20%.
Investments in associate and joint venture companies are originally recorded at cost and include
intangible assets identified on acquisition.
Accounting policies of associates and joint ventures have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the Group. Assets of certain associates include
significant proportions of investment property and financial instruments invested in investment property
which are carried at fair value in accordance with the valuation procedures outlined in note 2.5.
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. The Group recognises an impairment of its net investment in an associate or a
joint venture when there is objective evidence that the carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of the associate’s or joint venture’s fair value less costs to sell
and its value in use.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 2 .2 Basis of consolidation (continued)
(e) Pension and investment funds
2.3 Foreign currency translation
(a) Functional and presentational currency
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 segregated pension funds, mutual funds and unit trusts. These funds are
segregated and investment returns on these funds accrue directly to unitholders. 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
either consolidates the assets, liabilities and activity of the fund and accounts for any non-controlling
interest as a financial liability or accounts for the fund as an associate.
(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.
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.
The consolidated financial statements are presented in thousands of United States dollars, which is the
Group’s presentational currency.
(b) Reporting units
Income, other comprehensive income, movements in equity and cash flows are translated
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)
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. Exchange rates of the other principal operating currencies
to the United States dollar are set out in the following table.
2019 closing
2019 average
2018 closing
2018 average
Barbados dollar
Eastern Caribbean dollar
2.0000
2.7000
2.0000
2.7000
2.0000
2.7000
2.0000
2.7000
Jamaica dollar
132.5324
132.8772
127.3996
128.5468
Trinidad & Tobago dollar
6.7624
6.7510
6.7804
6.7460
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159
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
2.3 Foreign currency translation (continued)
2.5 Investment property
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 of the foreign entity and translated at the rate ruling on December 31.
(c) Transactions and balances
Foreign currency transactions are translated into the functional currency at the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses, 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 FVOCI are reported
as part of the fair value gain or loss in other comprehensive income.
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 the valuation date. Fair values are derived using the market value approach and the income
capitalisation approach, which reference market-based evidence, using comparable prices adjusted for
specific factors such as nature, location and condition of property.
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 in accordance with note 2.10(a).
2.4 Segments
2.6 Property, plant and equipment
Reportable operating segments have been defined in accordance with performance and resource
allocation decisions of the Group’s Chief Executive Officer.
Property, plant and equipment are recorded initially at cost. Subsequent expenditure is capitalised when
it will result in future economic benefits to the Group.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 2.6 Property, plant and equipment (continued)
Owner-occupied properties and owner-managed hotel properties are re-valued at least every three
years to their 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 properties include 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 the 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 certain property, plant and
equipment. Income from these activities is recognised in accordance with note 2.10(a) in accordance with
IFRS 16 - Leases. Until December 31, 2018, income from operating leases was 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
Estimated useful life
Owner-occupied buildings
Owner-managed hotel buildings
40 to 50 years
40 to 50 years
Furnishings and leasehold improvements
10 years or lease term
Computer and office equipment
Vehicles
Right-of-use assets
3 to 10 years
4 to 5 years
1.5 to 12 years
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161
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
2.9 Financial investments
(a) Classification of financial assets
The Group utilises a principles-based approach to the classification of financial assets. Debt
instruments, including hybrid contracts, are measured at fair value through profit or loss (“FVTPL”), fair
value through other comprehensive income (“FVOCI”) or amortized cost based on the nature of the
cash flows of these assets and the Group’s business model. Equity instruments are measured at
FVTPL, unless they are not held for trading purposes, in which case an irrevocable election can be
made on initial recognition to measure them at FVOCI with no subsequent reclassification to profit or
loss.
Financial assets are measured on initial recognition at fair value and are classified as and subsequently
measured either at amortised cost, at FVOCI or at FVTPL. Financial assets are recognised when the
Group becomes a party to the contractual provision of the instrument. Regular way purchases and sales
of financial assets are recognised on trade-date, the date on which the Group commits to purchase or
sell the asset.
(b)
Classification of debt instruments
Classification and subsequent measurement of debt instruments depend on:
•
•
the Group’s business model for managing the asset; and
the cash flow characteristics of the asset.
Based on these factors, the Group classifies its debt instruments into one of the following three
measurement categories.
Measured at amortised cost
Debt instruments that are held to collect the contractual cash flows and that contain contractual terms
that give rise on specified dates to cash flows that are solely payments of principal and interest, such
as most loans and advances to banks and customers and some debt securities, are measured at
amortised cost. In addition, most financial liabilities are measured at amortised cost. The carrying value
of these financial assets at initial recognition includes any directly attributable transactions costs.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 2.9 Financial investments (continued)
Measured at fair value through other comprehensive income (FVOCI)
2.9 Financial investments (continued)
Solely payments of principal and interest (“SPPI”)
Debt instruments held for a business model that is achieved by both collecting contractual cash flows
and selling and that contain contractual terms that give rise on specified dates to cash flows that are
solely payments of principal and interest are measured at FVOCI. These comprise primarily debt
securities and money market funds.
Measured at fair value through profit and loss (FVTPL)
Where the business model is hold assets to collect contractual cash flows or to collect contractual cash
flows and sell, the Group assesses whether the financial instruments’ cash flows represent solely
payments of principal and interest. In making this assessment, the Group considers whether the
contractual cash flows are consistent with a basic lending arrangement. Where the contractual terms
introduce exposure to risk or volatility that are inconsistent with a basic lending arrangement, the related
financial assets are classified and measured at FVTPL.
Debt instruments are classified in this category if they meet one or more of the criteria set out below
and are so designated irrevocably at inception:
•
•
the use of the designation removes or significantly reduces an accounting mismatch;
when the performance of group of financial assets is evaluated on a fair value basis, in
accordance with a documented risk management or investment strategy;
when the debt instruments are held for trading and 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.
•
(c) Unit linked funds fair value model
The Group’s liabilities include unit linked funds which are components of insurance contracts issued or
unit linked investment contracts issued with terms that the full investment return earned on the backing
assets accrue to the contract-holders. Where these liabilities are accounted for at FVTPL, the financial
investments backing these liabilities are consequently classified as and measured at FVTPL. This is to
eliminate any accounting mismatch.
Business model assessment
(d)
Impairment of financial assets measured at amortized cost and FVOCI
Business models are determined at the level which best reflects how the Group manages portfolios of
assets to achieve business objectives. Judgement is used in determining business models, which is
supported by relevant, objective evidence including:
•
•
•
•
The nature of liabilities, if any, funding a portfolio of assets;
The nature of the market of the assets in the country of origination of a portfolio of assets;
How the Group intends to generate profits from holding a portfolio of assets;
The historical and future expectations of asset sales within a portfolio.
At initial recognition of a financial asset, allowance (or provision in the case of some loan commitments
and financial guarantees) is required for Expected Credit Losses (ECL) resulting from default events
that are possible within the next 12 months (or less, where the remaining life is less than 12 months)
(’12-month ECL’).
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
2.9 Financial investments (continued)
2.9 Financial investments (continued)
In the event of a significant increase in credit risk (SICR), an allowance (or provision) is required for
ECL resulting from all possible default events over the expected life of the financial instrument (‘lifetime
ECL’). Financial assets where 12-month ECL are recognised are defined as ‘Stage 1’; financial assets
which are considered to have experienced a significant increase in credit risk are in ‘Stage 2’; and
financial assets for which there is objective evidence of impairment are defined as being in default or
otherwise credit-impaired are in ‘Stage 3’. Purchased or originated credit-impaired financial assets
(“POCI”) are treated differently as set out below.
To determine whether the life-time credit risk has increased significantly since initial recognition, the
Group considers reasonable and supportable information that is available including information from the
past and forward-looking information. Factors such as whether payments of principal and interest are
in default, an adverse change in credit rating of the borrower and adverse changes in the borrower’s
industry and economic environment are considered in determining whether there has been a significant
increase in the credit risk of the borrower.
(e) Purchased or originated credit-impaired assets (POCI)
Financial assets that are purchased or originated at a deep discount that reflects the incurred credit
losses are considered to be POCI. These financial assets are credit-impaired on initial recognition. The
Group calculates the credit adjusted effective interest rate, which is calculated based on the fair value
origination of the financial asset instead of its gross carrying amount and incorporates the impact of
expected credit losses in estimated future cash flows. Their ECL is always measured on a life-time
basis.
At each reporting date, the Group shall recognise in profit or loss the amount of the change in lifetime
expected credit losses as an impairment gain or loss. The Group will recognize favorable changes in
lifetime expected credit losses as an impairment gain, the gain occurs when the lifetime expected credit
losses are less than the amount of expected credit losses that were included in the estimated cash flows
on initial recognition.
(f)
Definition of default
The Group determines that a financial instrument is credit-impaired and in Stage 3 by considering
relevant objective evidence, primarily whether:
•
•
•
contractual payments of either principal or interest are past due for 90 days or more;
there are other indications that the borrower is unlikely to pay such as that a concession has been
granted to the borrower for economic or legal reasons relating to the borrower’s financial condition;
and
the financial asset is otherwise considered to be in default.
If such unlikeliness to pay is not identified at an earlier stage, it is deemed to occur when an exposure
is 90 days past due.
(g) Write-off
Financial assets (and the related impairment allowances) are normally written off, either partially or in
full, when there is no realistic prospect of recovery. Where loans are secured, this is generally after
receipt of any proceeds from the realisation of security. In circumstances where the net realisable value
of any collateral has been determined and there is no reasonable expectation of further recovery, write-
off may be earlier.
(h) The general approach to recognising and measuring ECL
The measurement of ECL reflects:
• An unbiased and probability-weighted amount that is determined by evaluating a range of possible
outcomes;
• The time value of money;
• Reasonable and supportable information that is available without undue cost or effort at the
reporting date about past events, current conditions and forecasts of future economic conditions.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 2.9 Financial investments (continued)
2.9 Financial investments (continued)
Measurement
Expected credit losses are calculated by multiplying three main components, being the probability of
default (“PD”), loss given default (“LGD”) and the exposure at default (“EAD”), discounted at the original
effective interest rate. Management has calculated these inputs based on the historical experience of
the portfolios adjusted for the current point in time. A simplified approach to calculating the ECL is
applied to contract and other receivables which do not contain a significant financing component.
Generally, these receivables are due within 12 months unless there are extenuating circumstances.
Under this approach, an estimate is made of the lifetime ECL on initial recognition (i.e. Stage 3). For
ECL provisions modelled on a collective basis, a grouping of exposures is performed on the basis of
shared risk characteristics, such that risk exposures within a group are homogeneous.
The PD, LGD and EAD models which support these determinations are reviewed regularly in light of
differences between loss estimates and actual loss experience; but given that ECL criteria has been
applied since January 1, 2018, the historical period for such review is limited. Therefore, the underlying
models and their calibration, including how they react to forward-looking economic conditions remain
subject to review and refinement. This is particularly relevant for lifetime PDs, which have not been
previously used in regulatory modelling and for the incorporation of ‘downside scenarios’ which have
not generally been subject to experience gained through stress testing. The exercise of judgement in
making estimations requires the use of assumptions which are highly subjective and sensitive to the
risk factors, and particularly to changes in economic and credit conditions across wide geographical
areas. Many of the factors have a high degree of interdependency and there is no single factor to which
loan impairment allowances are sensitive. Therefore, sensitivities are considered in relation to key
portfolios which are particularly sensitive to a few factors and the results should not be further
extrapolated.
The main difference between Stage 1 and Stage 2 expected credit losses is the respective PD horizon.
Stage 1 estimates will use a maximum of a 12-month PD while Stage 2 estimates will use a lifetime PD.
Stage 3 estimates will continue to leverage pre-January 1, 2018 processes for estimating losses on
impaired loans; however, these processes will be updated as experience develops, including the
requirement to consider multiple forward-looking scenarios. An expected credit loss estimate will be
produced for each individual exposure, including amounts which are subject to a more simplified model
for estimating expected credit losses.
The measurement of expected credit losses for each stage and the assessment of significant increases
in credit risk must consider information about past events and current conditions as well as reasonable
and supportable forecasts of future events and economic conditions. The estimation and application of
forward-looking information will require significant judgment.
For a revolving commitment, the Group includes the current drawn balance plus any further amount that
is expected to be drawn up to the current contractual limit by the time of default, should it occur.
For defaulted financial assets, based on management’s assessment of the borrower, a specific provision
of expected lifetime losses which incorporates collateral recoveries, is calculated and recorded as the
ECL. The resulting ECL is the difference between the carrying amount and the present value of expected
cash flows discounted at the original effective interest rate.
Forward looking information
The estimation and application of forward-looking information will require significant judgment. PD, LGD
and EAD inputs used to estimate Stage 1 and Stage 2 credit loss allowances are modelled based on
the macroeconomic variables (or changes in macroeconomic variables) that are most closely correlated
with credit losses in the relevant portfolio.
Each macroeconomic scenario used in the expected credit loss calculation will have forecasts of the
relevant macroeconomic variables – including, but not limited to, unemployment rates and gross
domestic product, for a three-year period, subsequently reverting to long-run averages. Our estimation
of expected credit losses in Stage 1 and Stage 2 will be a discounted probability-weighted estimate that
considers a minimum of three future macroeconomic scenarios. Our base case scenario will be based
on macroeconomic forecasts where available. Upside and downside scenarios will be set relative to our
base case scenario based on reasonably possible alternative macroeconomic conditions.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
2.9 Financial investments (continued)
Scenario design, including the identification of additional downside scenarios will occur on at least an
annual basis and more frequently if conditions warrant. Scenarios will be probability-weighted according
to our best estimate of their relative likelihood based on historical frequency and current trends and
conditions. Probability weights will be updated on a quarterly basis.
(i) Modification of loans
The Group sometimes renegotiates or otherwise modifies the contractual cash flows of loans to
customers and debt instruments. When this happens, the Group assesses whether the new terms are
substantially different to the original terms. The Group does this by considering, among others, the
following factors:
•
If the borrower is in financial difficulty, whether the modification merely reduces the contractual
cash flow to amounts the borrower is expected to be able to pay.
2.9 Financial investments (continued)
(k) Classification of equity instruments
The Group classifies and subsequently measures all equity investments at FVTPL, except where the
Group’s management has elected, at initial recognition, to irrevocably designate an equity investment
at FVOCI. The Group’s policy is to designate equity investments as FVOCI when those investments are
held for purposes other than to generate investment returns.
(l)
Embedded derivatives
The Group may hold debt securities and preferred equity securities which may contain embedded
derivatives. The embedded derivative of a financial investment is classified in the same manner as the
host contract.
• Whether any substantial new terms are introduced, such as a profit share/equity-based return
(m) Presentation in the statements of income and other comprehensive income (OCI)
•
•
•
•
that substantially affects the risk profile of the loan.
Significant extension of the loan term when the borrower is not in financial difficulty.
Significant change in the interest rate.
Change in the currency the loan is denominated in.
Insertion of collateral, other security or credit enhancements that significantly affect the credit
risk associated with the loan.
If the terms are substantially different, the Group derecognises the original financial investment and
recognises a new investment at fair value and recalculates the new effective interest rate for the
investment. The date of negotiation is consequently considered to the be the date of initial recognition
for impairment calculation purposes and the purpose of determining if there has been a significant
increase in credit risk.
(j)
Re-classified balances
The Group reclassifies debt securities when and only where its business model for managing those
investments changes. The reclassification takes place from the start of the first reporting period following
the change. Such changes are expected to be very infrequent.
Financial instruments measured at FVTPL
Realised changes in fair value, unrealised changes in fair value, interest income and dividend
income are included in other investment income.
Financial instruments at amortized cost
•
•
•
Interest income is included in interest income earned from financial assets measured at
amortised cost in the consolidated statement of income.
Credit impairment losses are included in the consolidated statement of income.
Gain or loss on de-recognition of debt securities is presented in the consolidated statement
of income.
Financial instruments measured at FVOCI
•
•
•
•
Interest income is included in interest income earned from financial assets measured at
FVOCI in the consolidated statement of income.
Credit impairment losses are included in the consolidated statement of income.
Unrealised gains and losses arising from changes in fair value are presented in OCI.
On de-recognition, the cumulative fair value gain or loss is transferred from OCI and is
presented in the consolidated statement of income.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 2.9 Financial investments (continued)
Equity securities measured at FVOCI
2.10 Leases (continued)
(b)
Leases held as lessee
•
•
•
Dividend income is included in other investment income.
Unrealised changes in fair value presented in OCI. Any impairment losses are included
with fair value changes.
On de-recognition, the cumulative gain or loss in OCI remains in the fair value reserve for
FVOCI assets.
For a contract that contains a lease, the Group may account for the lease component separately from the
non-lease component. As a practical expedient, the Group elected, by class of underlying asset, not to
separate the non-lease and lease components, and instead account for the contract as a lease.
As of the date the asset is available for use by the Group (the commencement date), a right-of-use asset
and a corresponding lease liability are recognised.
2.10 Leases
(a)
Leases held as lessor
The Group holds 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. Impairment of finance lease receivables is measured
in accordance with the requirements for amortised cost debt instruments.
The Group holds operating leases primarily for the rental of investment property and certain owner-
occupied property. The Group recognises revenue from these activities on a straight-line basis or on
another systematic basis if that basis is more representative of the pattern of use of the underlying
asset.
(b)
Leases held as lessee
The cost of the right-of-use asset comprises:
(a)
(b)
(c)
(d)
the amount of the initial measurement of the lease liability;
any lease payments made at or before the commencement date, less any lease incentives
received;
any initial direct costs incurred by the Group; and
restoration costs.
The Group recognises the costs described in paragraph(d) as part of the cost of the right-of-use asset
when it incurs an obligation for those costs.
Right-of-use assets are presented within property, plant and equipment and are subsequently measured
at cost less depreciation. Right-of-use assets are generally depreciated over the shorter of the asset's
useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a
purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life.
At the inception of a rental contract for office space or a contract for the use of an asset, the Group
assess whether the contract contains a lease. A contract is, or contains, a lease if it conveys to the
Group the right to control the use of the office space or asset for a time period in exchange for
consideration. The Group has elected to use the exemption for lease periods with a term of 12 months
or less, or those whose underlying asset has a low value, in which case the lease payments are
recognised in administrative expenses. Low value assets comprise IT equipment and small items of
office furniture.
At the commencement date, the Group measures the lease liability as the present value of the lease
payments that are not paid at that date. The lease payments are discounted using the interest rate implicit
in the lease, if that rate can be readily determined. If that rate cannot be readily determined, which is
generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the
rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of
similar value to the right-of-use asset in a similar economic environment with similar terms, security and
conditions.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
2.10 Leases (continued)
2.11 Financial liabilities
At the commencement date, the lease payments included in the measurement of the lease liability
comprise the following payments for the right to use the underlying asset during the lease term that are
not paid at the commencement date:
During the ordinary course of business, the Group issues investment contracts or otherwise assumes
financial liabilities that expose the Group to financial risk.
(a)
(b)
(c)
fixed payments, less any lease incentives receivable;
amounts expected to be payable by the lessee under residual value guarantees;
payments of penalties for terminating the lease, if the lease term reflects the lessee exercising
an option to terminate the lease.
Extension and termination options are included in a number of property and equipment leases across the
Group. These terms are used to maximize operational flexibility in terms of managing contracts. The
extension and termination options need to be approved by Lessor. There are no variable lease payments
and there were no residual value guarantees on leases.
Lease payments are allocated between principal and finance cost. The Group recognises interest on the
lease liability in each accounting period during the lease term which is the amount that produces a
constant periodic rate of interest on the remaining balance of the lease liability.
After the commencement date, the lease liability is measured by:
(a)
(b)
(c)
increasing the carrying amount to reflect interest on the lease liability;
reducing the carrying amount to reflect the principal portion of lease payments made; and
remeasuring the carrying amount to reflect reassessment or lease modifications, or to reflect
revised fixed lease payments.
Lease liabilities are included in lease liabilities in the statement of financial position. The associated
interest is included in finance costs in the statement of income. Leases give rise to lease liability principal
elements and interest elements in the statement of cash flows.
Classification
Financial liabilities are measured at initial recognition at fair value and are classified as and subsequently
measured either at amortised cost, or at fair value through profit and loss (FVTPL). Financial liabilities
are recognised when the Group becomes a party to the contractual provision of the instrument.
Financial liabilities are derecognised when they are extinguished (i.e. when the obligation specified in
the contract is discharged, cancelled or expires).
The financial liabilities described under the unit linked fair value model (note 2.9 (c)) are classified and
measured at FVTPL as the Group is obligated to provide investment returns to the unit holder in direct
proportion to the investment returns on a specific portfolio of assets, which are also carried at FVTPL.
Derivative financial liabilities are carried at FVTPL (note 2.12). All other financial liabilities are carried at
amortised cost. It is noted that the financial liabilities measured at FVTPL do not have a cumulative own
credit adjustment gain or loss.
The recognition and measurement of the Group’s principal types of financial liabilities are disclosed in
note 2.14(b) (vii) and in the following paragraphs.
(a) Securities sold for re-purchase
Securities sold for re-purchase are treated as collateralised financing transactions and are recorded at
the amount at which the securities were sold. Securities sold subject to repurchase are not
derecognised but are treated as pledged assets when the transferee has the right by contract or custom
to sell or re-pledge the collateral. 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.
The liability is extinguished when the obligation specified in the contract is discharged, assigned,
cancelled or has expired.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 2.11 Financial liabilities (continued)
2.12 Derivative financial instruments and hedging activities
(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. Loan obligations undertaken for the purposes of providing funds for on-lending,
leasing or portfolio investments are classified as deposit and security liabilities.
(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.
(e) Presentation in the statement of income
For notes and loans payable measured at amortised cost, the associated interest is included in finance
costs.
For deposit and security liabilities measured at amortised cost, the associated interest expense is
included within interest costs.
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.
For financial liabilities measured at FVTPL, the associated interest and fair value changes are included
within interest costs.
2.13 Offsetting financial instruments
Financial assets and financial 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.
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169
169
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
2.14 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.
2.14 Policy contracts (continued)
Certain 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.
A reinsurance contract is an insurance contract in which an insurance entity cedes assumed risks to
another insurance entity.
Residual gains in the participating accounts constitute discretionary participation features which the
Group classifies as equity (see also note 2.21).
(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 COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 2.14 Policy contracts (continued)
2.14 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.
Commissions and premium taxes payable are recognised on the same basis as premiums earned. At
the date of the financial statements, commissions and premium taxes 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 individual contract basis and
recognised when the reinsurance premium is recorded.
(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 2.15.
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.
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 2.15.
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171
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
2.14 Policy contracts (continued)
2.14 Policy contracts (continued)
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.
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 afore-mentioned 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.
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 2.15.
Reinsurance contracts assumed by an insurer are accounted for in a similar manner as if the insurer
has assumed the risk directly 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.
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.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 2.14 Policy contracts (continued)
(vii) Deposit administration and other investment contracts
2.14 Policy contracts (continued)
(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 profit and loss (FVTPL) where the insurer is obligated to provide
investment returns to the pension scheme in direct proportion to the investment returns on
specified blocks of assets.
•
Deposit administration contributions are recorded directly as liabilities. Withdrawals are deducted
directly from the liability. The interest or investment return provided is recorded as an interest expense.
In addition, the Group may provide pension administration services to the pension schemes. The Group
earns fee income for both pension administration and investment services.
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 2.15.
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.
2.15 Actuarial liabilities
(a) Life insurance and annuity contracts
The determination of actuarial liabilities of long-term insurance contracts has been done using
approaches consistent with the principles of the Canadian standards of practice. 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.
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.
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173
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
2.15 Actuarial liabilities (continued)
2.15 Actuarial liabilities (continued)
The improvement of mortality rates is an accepted trend that is occurring in developed and developing
countries around the world. All segments within the Group had previously recognized this trend in their
reserving assumptions with the exception of the Sagicor Jamaica operating segment. Effective January
1, 2018, Sagicor Jamaica incorporated mortality improvement into its reserve calculations. The
foregoing is part of a wider initiative across the Group to harmonize reserving practices across the
segments.
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 profit and loss 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.
2.16 Presentation of current and non-current assets and liabilities
In note 41.5, 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 and 33 are non-
current unless otherwise stated in those notes.
Net insurance contract liabilities represent the amount which, together with estimated future premiums
and net investment income, will be sufficient to pay projected future benefits, policyholder dividends and
refunds, taxes (other than income taxes) and expenses on policies in-force net of reinsurance premiums
and recoveries.
The determination of net insurance liabilities is based on an explicit projection of cash flows using current
assumptions plus a margin for adverse deviation for each material cash flow item. Investment returns
are projected using the current asset portfolios and projected reinvestment yields. The period used for
the projection of cash flows is the policy lifetime for most individual insurance contracts.
The Group segments assets to support liabilities by major product segment and geographic market and
establishes investment strategies for each liability segment. Projected net cash flows from these assets
and the policy liabilities being supported by these assets are combined with projected cash flows from
future asset purchases to determine expected rates of return on these assets for future
years. Investment strategies are based on the target investment policies for each segment and the
reinvestment returns are derived from current and projected market rates for fixed income
investments. Investment return assumptions for each asset class make provision for expected future
asset credit losses, expected investment management expenses and 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 financial investments, 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 changes in 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 FVOCI.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 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 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.
Where a minimum funding requirement exists, the Group assesses the obligation, to determine whether
the additional contributions would affect the measurement of the defined benefit asset or liability.
(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 other comprehensive
income and retained earnings or non-controlling interest in the period in which they arise.
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 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.
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175
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 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.
Premium tax rates
Barbados
Jamaica
Trinidad and Tobago
Life insurance and
non-registered
annuities
Health
insurance
3% - 6%
Nil
Nil
4%
Nil
Nil
Nil
Property and
casualty
insurance
3% - 5%
Nil
Nil
Nil
United States of America
0.75% - 3.5%
Premium tax is recognised gross in the statement of income.
(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 0.25% 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 0.35% of adjusted assets held at the end of a period. Taxes are accrued monthly.
(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.
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
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 service. 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
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.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 2.18 Taxes (continued)
2.19 Other liabilities / Retirement benefit liabilities
Income tax rates
Life insurance and
non-registered annuities
Registered
annuities
Other lines of
business
Barbados
2% of profit before tax
Jamaica
25% of profit before tax
Nil
Nil
2% of profit before
tax
1%, 25% - 33.33 %
of profit before tax
Nil
30% of net income
15% (deductions granted only in
respect of expenses pertaining to
long-term business investment
income)
21% of net income
Nil
Nil
Trinidad and Tobago
United States of
America
(i) Current income taxes
Liabilities are recognised when the Group has a legal or constructive obligation, as a result of past
events, if it is probable that an outflow of resources will be required to settle the obligation, and a reliable
estimate of the amount can be made.
2.20 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.
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.
On the declaration by the Company’s directors of common share dividends payable, the total value of
the dividend is recorded as an appropriation of retained earnings.
(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 relate to the same entity. Deferred tax, related to fair value re-measurement of FVOCI 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.
2.21 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.
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177
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
2.21 Participating accounts (continued)
2.21 Participating accounts (continued)
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.
(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.
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.
2.22 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.
2.23 Interest income and interest expense
Interest income (expense) is computed by applying the effective interest rate based to the gross carrying
amount of a financial asset (liability), except for financial assets that are purchased, originated or
subsequently become credit impaired. For credit-impaired financial assets, the effective interest rate is
applied to the net carrying amount of the financial asset (i.e. after deduction of the loss allowance).
Interest includes coupon interest and accrued discount and premium on financial instruments. Dividend
income is recorded when declared.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 2.24 Fees and other revenue
The Group earns fee income from:
•
•
•
the management and administration of third-party investment funds, pension plans and
insurance benefit plans (managed funds or administrative service only (ASO) benefit
plans);
certain of its insurance and investment contracts;
the provision of corporate finance, stockbroking, trust and related services.
Other revenue includes:
•
•
•
•
commission income on insurance contracts;
hotel revenue;
rental income from owner-occupied property
foreign exchange gains / (losses).
Service contract revenue
Revenues from service contracts include management and administrative fees and hotel revenue from
guest reservations. These service contracts generally impose single performance obligations, each
consisting of a series of similar related services to the customer. The Group’s performance obligations
within these service arrangements are generally satisfied over time as the customers simultaneously
receive and consume contracted benefits.
Revenue from service contracts with customers is recognised when or as the Group satisfies the
performance obligation. For obligations satisfied over time, revenue is recognised monthly or over the
applicable period. For performance obligations satisfied at a point in time, service contract revenue is
recognised at that point in time.
2.25 Cash flows
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,
• money market funds,
•
•
other liquid balances with maturities of three months or less from the acquisition date,
less bank overdrafts which are repayable on demand.
Cash equivalents are subject to an insignificant risk of change in value and excludes restricted cash.
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179
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
2.26 Future accounting developments and reporting changes
2.26 Future accounting developments and reporting changes (continued)
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 3 – Definition of a business, effective January 1, 2020
Amendments to IAS 1 – Liabilities as current or non -current, effective January 1, 2022
Subject / Comments
In January 2020, the IASB amendments to IAS 1 ‘Presentation of financial statements’ to clarify
the criteria for classifying a liability as non-current. These are to be applied retroactively.
Subject / Comments
This standard will have no material effect on the Group.
This amendment revises the definition of a business. According to feedback received by the IASB,
application of the current guidance is commonly thought to be too complex, and it results in too
many transactions qualifying as business combinations.
This standard will have no material effect on the Group.
IAS 1 and IAS 8 – The definition of material, effective January 1, 2020
Subject / Comments
These amendments to IAS 1, ‘Presentation of financial statements’, and IAS 8, ‘Accounting
policies, changes in accounting estimates and errors’, and consequential amendments to other
IFRSs: i) use a consistent definition of materiality throughout IFRSs and the Conceptual
Framework for Financial Reporting; ii) clarify the explanation of the definition of material; and iii)
incorporate some of the guidance is IAS 1 about immaterial information.
Conceptual Framework for Financial Reporting, effective January 1, 2020
Subject / Comments
The Conceptual Framework was revised because important issues were not addressed, and some
indications were outdated or unclear. This revised version includes, among other things, a new
chapter on valuation, guidance on the presentation of financial performance and improved
definitions of an asset and a liability and guidance in support of those definitions. The Conceptual
Framework helps entities to develop their accounting method when no IFRS is applicable to a
specific situation. The provisions will apply prospectively to financial statements beginning on or
after January 1, 2020.
This standard will have no material effect on the Group.
Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest, effective January 1, 2020
This standard will have no material effect on the Group.
Subject / Comments
These amendments provide certain reliefs in connection with interest rate benchmark reform. The
reliefs relate to hedge accounting and have the effect that IBOR reform should not generally cause
hedge accounting to terminate. However, any hedge ineffectiveness should continue to be
recorded in the income statement. Given the pervasive nature of hedges involving IBOR-based
contracts, the reliefs will affect companies in all industries.
This standard will have no material effect on the Group.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 2.26 Future accounting developments and reporting changes (continued)
2.26 Future accounting developments and reporting changes (continued)
IFRS 17 – Insurance Contracts, effective January 1, 2023
IFRS 17 – Insurance Contracts, effective January 1, 2023 (continued)
Subject / Comments
Subject / Comments
Sagicor has established a Group wide project for the implementation of this standard and has
allocated substantial resources to this exercise. Project activities involve the establishment of
various technical and oversight teams, and the evaluation and assessment of the Group’s
business. The Group is carrying out internal training programs, workshops and assessments of all
areas affected by the standard as we work towards implementation. Project work is ongoing in all
areas.
IFRS 17 was issued in May 2017 as replacement for IFRS 4 - Insurance Contracts. A further
exposure draft (ED) was issued in June 2019 and the final standard is now expected to be released
by mid 2020. It requires a current measurement model where estimates are re-measured each
reporting period. Contracts are measured using the building blocks of:
•
•
•
discounted probability-weighted cash flows
an explicit risk adjustment, and
a contractual service margin (“CSM”) representing the unearned profit of the contract
which is recognised as revenue over the coverage period.
The standard allows a choice between recognising changes in discount rates either in the income
statement or directly in other comprehensive income. The choice is likely to reflect how insurers
account for their financial assets under IFRS 9.
An optional, simplified premium allocation approach is permitted for the liability for the remaining
coverage for short duration contracts, which are often written by non-life insurers.
There is a modification of the general measurement model called the ‘variable fee approach’ for
certain contracts written by life insurers where policyholders share in the returns from underlying
items. When applying the variable fee approach the entity’s share of the fair value changes of the
underlying items is included in the contractual service margin.
The new rules will affect the financial statements and key performance indicators of all entities that
issue insurance contracts or investment contracts with discretionary participation features.
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181
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
3.1 Impairment of financial assets (continued)
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
In determining ECL (defined in note 2.9(d)), management is required to exercise judgement in defining
what is considered a significant increase in credit risk and in making assumptions and estimates to
incorporate relevant information about past events, current conditions and forecasts of economic
conditions. Further information about the judgements involved is included in note 2.9 under sections
'Measurement' and 'Forward-looking information'.
(a) Establishing staging for debt securities and deposits
The Group’s internal credit rating model is a 10-point scale which allows for distinctions in risk
characteristics and is referenced to the rating scale of international credit rating agencies.
The scale is set out in the following table:
Category
Sagicor
Risk
Rating
Investment
grade
t
l
u
a
f
e
d
-
n
o
N
Non-
investment
grade
Watch
Default
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
A
Moderate risk
BBB
Acceptable risk
BB
Average risk
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
The Group uses its internal credit rating model to determine which of the three stages an asset is to
be categorized for the purposes of ECL.
Once the asset has experienced a significant increase in credit risk the investment will move from
Stage 1 to Stage 2. Sagicor has assumed that the credit risk of a financial instrument has not increased
significantly since initial recognition if the financial instrument is determined to have low credit risk at
the reporting date. A financial asset that is investment grade or Sagicor risk rating of 1-3 is considered
low credit risk.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
3.1 Impairment of financial assets (continued)
3.1 Impairment of financial assets (continued)
Stage 1 investments are rated (i) investment grade, or (ii) below investment grade at origination and
have not been downgraded more than 2 notches since origination. Stage 2 investments are assets
which (i) have been downgraded from investment grade to below investment grade, or (ii) are rated
below investment grade at origination and have been downgraded more than 2 notches since
origination. Stage 3 investments are assets in default.
(b) Establishing staging for other assets measured at amortised cost, finance lease receivables,
loan commitments and financial guarantee contracts
Exposures are considered to have resulted in a significant increase in credit risk and are moved to stage
2 when:
Qualitative test
•
accounts that meet the portfolio’s ‘high risk’ criteria and are subject to closer credit
monitoring.
Backstop criteria
•
accounts that are 30 calendar days or more past due. The 30 days past due criteria is a
backstop rather than a primary driver of moving exposures into stage 2.
(c)
Forward looking information
When management determines the macro-economic factors that impact the portfolios of financial assets,
they first determine all readily available information within the relevant market. Portfolios of financial
assets are segregated based on product type, historical performance and homogenous country
exposures. There is often limited timely macro-economic data for Barbados, Eastern Caribbean, Trinidad
and Jamaica. Management assesses data sources from local government, International Monetary Fund
and other reputable data sources. A regression analysis is performed to determine which factors are most
closely correlated with the credit losses for each portfolio. Where projections are available, these are
used to look into the future up to three years and subsequently the expected performance is then used
for the remaining life of the product. These projections are re-assessed on a quarterly basis.
(d)
Impairment of Government of Barbados debt securities
As further disclosed in note 41.4 (g) in 2018, the Group participated in a debt exchange following the
implementation of a debt restructuring programme by the Government of Barbados. The replacement
debt securities are classified as purchased or originated credit-impaired assets (POCI) and have been
valued using an internally generated yield curve derived from the Central Bank of Barbados base-line
yield curve to which management has applied a risk premium.
3.2 Fair value of securities not quoted in an active market
The fair value of securities not quoted in an active market may be determined using reputable pricing
sources (such as pricing agencies), indicative prices from bond/debt market makers or other valuation
techniques. Broker quotes as obtained from the pricing sources may be indicative and not executable
or binding. The Group exercises judgement on the quality of pricing sources used. Where no market
data is available, the Group may value positions using its own models, which are usually based on
valuation methods and techniques generally recognised as standard within the industry. The inputs into
these models are primarily discounted cash flows.
The models used to determine fair values are periodically reviewed by experienced personnel. The
models used for debt securities are based on net present value of estimated future cash flows, adjusted
as appropriate for liquidity, and credit and market risk factors.
3.3 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.
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183
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
3.4 Impairment of intangible assets
3.5 Valuation of actuarial liabilities (continued)
(a) Goodwill
The assessment of goodwill impairment involves the determination of the value of the cash
generating business units to which the goodwill has been allocated. Determination of the 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 the value in use methodology for testing goodwill
impairment. For the Sagicor Jamaica operating segment, the Group uses the fair value less cost to
sell methodology, and for Sagicor General Insurance Inc the value in use methodology.
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.
3.5 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 to which margins for adverse deviations are added.
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 and the distribution of the reserve
by policy, and other individual components in the actuarial liabilities.
Further details of the inputs used are set out in note 43.
(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.
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 universal life and 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 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.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 3.6
Investment in associate
3.7 Fair value of shares issued to Alignvest Acquisition II Corporation shareholders, contingent
As at July 1, 2018 Sagicor Jamaica Group had a shareholding in Playa of 15%. From an accounting
perspective, IAS 28 (Investments in Associate and Joint Ventures) paragraph 5, 6 and 8 guidance was
considered as follows:
Where an entity holds 20% or more of the voting power (directly or through subsidiaries) on an investee,
it will be presumed the investor has significant influence unless it can be clearly demonstrated that this
is not the case. If the holding is less than 20%, the entity will be presumed not to have significant influence
unless such influence can be clearly demonstrated. A substantial or majority ownership by another
investor does not necessarily preclude an entity from having significant influence.
The existence of significant influence by an entity is usually evidenced in one or more of the following
ways:
•
•
representation on the board of directors or equivalent governing body of the investee;
participation in the policy-making process, including participation in decisions about dividends
or other distributions;
material transactions between the entity and the investee;
interchange of managerial personnel; or
provision of essential technical information
•
•
•
In assessing whether potential voting rights contribute to significant influence, the entity examines all
facts and circumstances (including the terms of exercise of the potential voting rights and any other
contractual arrangements whether considered individually or in combination) that affect potential rights,
except the intentions of management and the financial ability to exercise or convert those potential rights.
Management has two representatives out of twelve on the Board who are also members of two strategic
Board committees.
Management has concluded, given its participation in the policy-making decisions, significant
involvement in, and influence over decision making of Playa, this allows them to clearly demonstrate
influence over Playa’s financial and operating results even though Sagicor owns less than 20% of Playa’s
shares.
Management has concluded after taking the above into consideration that it has significant influence
over Playa through its holding and as such is of the view that its strategic investment in Playa should be
treated as an investment in associate in accordance with IAS 28.
shares and warrants issued.
Management determined the fair value of the common shares issued to the SPAC shareholders. We
considered various valuation methodologies including observing the quoted un-adjusted price of SFCL
prior to the transaction being announced; the stated transaction price; the quoted price of both the SPAC
and SFCL prior to the transaction closing; the price of the shares post closing of the transaction; the
prices at which various major investors invested in the SPAC; and the fairness opinion to the board of
directors given by an independent expert. Given the wide dispersion of values, we have chosen to utilize
the value that, in our judgement, reflects the price at which valuation was most heavily negotiated for a
significant investment, that being the private placement by investors which enabled Alignvest Acquisition
II Corporation to satisfy its condition precedent to deliver its minimum cash proceeds to the transaction
and effectively unlocked the transaction. Such estimates and assumptions are inherently uncertain.
Changes in these assumptions affect the fair value estimates of shares.
The fair value of contingent shares issued were determined using market-based valuation techniques.
Assumptions are made and estimates are used in applying the valuation techniques. These estimates
include share price, future volatility of the share price and the rate of forfeiture. Such estimates and
assumptions are inherently uncertain. Changes in these assumptions affect the fair value of contingent
shares.
As discussed in note 1, a listing expense arises to reflect the difference between the estimated fair value
of the SFC common shares, escrow shares and warrants deemed to have been issued to the
shareholders of Alignvest less the fair value of the net assets acquired from Alignvest. A change in fair
value of shares issued has a direct impact on the listing expense as outlined below:
Sensitivity – Listing expense
Per Note 1
Scenario
10% reduction in fair value ($6.19) of share
10% increase in fair value ($6.19) of share
20% increase in fair value of ($6.19) share
Revised Listing expense
expense / (income)
2019
18,777
(28,584)
66,139
113,502
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185
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
4 SEGMENTS
4 SEGMENTS (continued)
The management structure of the Group 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 Group 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 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
This group comprises Sagicor Life Inc, its branches and associates, and certain of its subsidiaries in
Barbados, Trinidad & Tobago, Eastern Caribbean, Dutch Caribbean, Bahamas and Central America.
Sagicor Life
Segment Companies
Principal Activities
Life and health insurance,
annuities and pension
administration services
Life and health insurance,
annuities and pension
administration services
Life and health insurance,
annuities and pension
administration services
Sagicor Life Inc
Sagicor Life
(Eastern Caribbean) Inc. (1)
Sagicor Life Aruba NV
Capital Life Insurance
Company Bahamas Limited
Country of
Incorporation
Effective
Shareholders’
Interest
Barbados
100%
St. Lucia
100%
Aruba
100%
Life insurance
The Bahamas
100%
100%
Sagicor Panamá, SA
Life and health insurance
Panamá
Nationwide Insurance
Company Limited
Sagicor International
Management Services Inc
Life insurance
Trinidad & Tobago
100%
Investment management
USA
100%
(1)
Sagicor Life (Eastern Caribbean) Inc became a subsidiary of Sagicor Financial Corporation
Limited on October 10, 2014 and a subsidiary of the Group on October 10, 2014. The company
commenced operations on May 31, 2019.
The companies comprising this segment are set out in the following table.
Associates
FamGuard Corporation
Limited
Investment holding
company
The Bahamas
20%
Principal operating company:
Family Guardian Insurance
Company Limited
Life and health insurance
and annuities
The Bahamas
20%
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
4 SEGMENTS (continued)
4 SEGMENTS (continued)
Associates
RGM Limited
Property ownership and
management
Trinidad &
Tobago
Primo Holding Limited
Property investment
Barbados
33%
38%
(b) Sagicor Jamaica
This segment comprises the Sagicor Jamaica Group of companies, which conduct life, health, annuity,
property and casualty insurance business, pension administration services, banking and financial
services, hospitality and real estate investment services in Jamaica, Cayman Islands Costa Rica and
USA. 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%
Sagicor Life Jamaica
Limited
Life and health insurance
and annuities
Life insurance
Jamaica
49.11%
The Cayman
Islands
49.11%
Sagicor Life of the
Cayman Islands Limited
Sagicor Pooled
Investment Funds Limited
Employee Benefits
Administrator Limited
Sagicor Re Insurance
Limited
Sagicor Insurance Brokers
Limited
Pension fund management
Jamaica
49.11%
Pension administration
services
Property and casualty
insurance
Jamaica
49.11%
The Cayman
Islands
49.11%
Insurance brokerage
Jamaica
49.11%
Sagicor International
Administrators Limited
Group insurance
administration
Jamaica
49.11%
Sagicor Jamaica
Segment Companies (continued)
Principal Activities
Country of
Incorporation
Sagicor Insurance Managers
Limited
Captive insurance
management services
The Cayman
Islands
Effective
Shareholders’
Interest
49.11%
Sagicor Property Services Limited
Property management
Jamaica
49.11%
Sagicor Investments Jamaica
Limited
Investment banking
Jamaica
49.11%
Sagicor Bank Jamaica Limited
Commercial banking
Jamaica
49.11%
LOJ Holdings Limited
Insurance holding
company
Jamaica
100%
Sagicor Securities Jamaica Limited
Securities trading
Jamaica
49.11%
Travel Cash Jamaica Limited
Microfinance
Jamaica
25.05%
Sagicor Real Estate X-Fund
Limited
X Fund Properties Limited
Investment in real
estate activities
Hospitality and real
estate investment
St. Lucia
14.39%
Jamaica
14.39%
X Fund Properties LLC
Hospitality
USA
14.39%
Jamziv MoBay Jamaica Portfolio
Limited (1)
Holding Company
Jamaica
8.75%
Phoenix Equity Holdings Limited (3) Holding Company
Barbados
49.11%
Advantage General Insurance Co.
Limited (note 37)
Property and casualty
insurance
Jamaica
29.47%
Bailey Williams Limited (note 37)
Associate and joint venture
Real estate
development
Jamaica
34.38%
Sagicor Costa Rica SCR, S.A.
Life insurance
Playa Hotel & Resorts N.V. (2)
Hospitality
Costa Rica
Netherlands
24.56%
1.31%
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187
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
4 SEGMENTS (continued)
(b) Sagicor Jamaica (continued)
Control of Sagicor Group Jamaica Limited is established through the following:
•
•
•
The Group’s effective shareholder’s interest gives it the power to appoint the directors of
the company and thereby direct relevant activities.
The Group is exposed to the variable returns from its effective shareholder's interest.
The Group has the ability to use the power to affect the amount of investor's returns.
(1)
(2)
(3)
This company became a subsidiary of Sagicor Real Estate X-Fund Limited on July 1, 2018
and a subsidiary of the Group on October 1, 2018.
The company became an associated company of Sagicor Real Estate X-Fund Limited on July
1, 2018 and an associate of the Group on October 1, 2018.
The company became a subsidiary of Sagicor Investments Jamaica Limited on July 19, 2019
and a subsidiary of the Group on July 19, 2019.
(c) Sagicor Life USA
This segment comprises Sagicor’s life insurance operations in the USA and comprises the following:
Principal Activities
Country of
Incorporation
Effective
Shareholders’
Interest
Sagicor Life USA
Segment Companies
Sagicor Life Insurance
Company
Sagicor USA Inc
4 SEGMENTS (continued)
(d) Head office function and other operating companies
Head office and other Group
Companies
Principal Activities
Country of
Incorporation
Sagicor Financial Company Ltd (1) Group parent company
Bermuda
Sagicor Financial Corporation
Limited
Holding company
Bermuda
Sagicor General Insurance
Inc (2)
Property and casualty
insurance
Loan and lease financing,
and deposit taking
Barbados
St. Lucia
Investment management
Trinidad & Tobago
100%
Sagicor Asset Management Inc.
Investment management
Barbados
Effective
Shareholders’
Interest
100%
100%
98%
70%
100%
100%
Sagicor Finance Inc
Sagicor Asset Management
(T&T) Limited
Sagicor Asset Management
(Eastern Caribbean) Limited
Barbados Farms Limited
Investment management
Barbados
Farming and real estate
development
Mutual fund holding
company
Financial services holding
company
Barbados
77%
Barbados
100%
Barbados
73%
Life insurance and annuities
USA - Texas
100%
Sagicor Funds Incorporated
Insurance holding company
USA - Delaware
100%
The Mutual Financial Services Inc
Sage Distribution, LLC
Life insurance and annuities
USA - Delaware
100%
Sagicor Finance Limited
Group financing vehicle
The Cayman Islands
100%
Sage Partners, LLC
Life insurance and annuities
USA - Delaware
100%
Sagicor Financial Partners,
LLC
Life insurance and annuities
USA - Delaware
51%
Sagicor Finance (2015) Limited
Group financing vehicle
The Cayman Islands
100%
(1)
(2)
Sagicor Financial Company Ltd formerly Alignvest Acquisition II Corporation effective December
5, 2019, became a member of the Group.
Prior to November 23, 2018, the effective shareholders’ interest was 53%.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 4 SEGMENTS (continued)
(d) Head office function and other operating companies
Head office and other Group
Companies
Principal Activities
Country of
Incorporation
Sagicor Reinsurance Bermuda
Ltd (1)
Reinsurance
Bermuda
1222948 B.C. Ltd. (2)
Corporate management
Canada
The Estates Group Holdings
Limited (3)
The Estates (Senior Care
Services) Limited (3)
The Estates (Senior Care
Properties) Limited (3)
The Estates (Residential
Properties) Limited (3)
The Estates (Management
Services) Limited (4)
Holding company
Barbados
Retirement Community
Barbados
100%
Retirement Community
Barbados
100%
Retirement Community
Barbados
100%
Retirement Community
Barbados
100%
Effective
Shareholders’
Interest
100%
100%
100%
Sagicor Reinsurance Bermuda Ltd became a subsidiary of Sagicor Financial Corporation Limited on
October 4, 2017 and a subsidiary of the Group on October 4, 2017. As of December 31, 2019, the
company had not yet commenced writing insurance business.
1222948 B.C. Ltd. became a subsidiary of Sagicor Financial Corporation Limited on September 11,
2019.
The Estates Group Holdings Limited became a subsidiary of Sagicor Life Inc on September 26, 2018
and a subsidiary of the Group on September 26, 2018. The Estates (Senior Care Services) Limited,
The Estates (Senior Care Properties) Limited, and The Estates (Residential Properties) Limited became
subsidiaries of The Estates Group Holdings Limited on September 26, 2018.
The Estates (Management Services) Limited became a subsidiary of The Estates Group Holdings
Limited on October 22, 2019.
(1)
(2)
(3)
(4)
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189
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
4.1 Statement of income by segment
2019
Net premium revenue
Net gain/(losses) on derecognition of financial assets measured at amortised cost
Gain on derecognition of assets carried at FVOCI
Interest income earned from financial assets measured at amortised cost and FVOCI
Other investment income
Credit impairment losses
Fees and other revenue
Inter-segment revenue
Total revenue, net
Net policy benefits
Net change in actuarial liabilities
Interest costs
Administrative expenses
Commissions and premium and asset taxes
Finance costs
Depreciation and amortisation
Listing expense and other transaction costs
Inter-segment expenses
Total benefits and expenses
Loss arising on business combinations, acquisitions and divestitures
Share of operating income of associates and joint ventures
Segment income / (loss) before taxes
Income taxes
Segment net income / (loss) from continuing operations
Net income/(loss) attributable to non-controlling interests
Total comprehensive income/(loss) attributable to shareholders - continuing operations
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Sagicor Life
Sagicor
Jamaica
Sagicor Life
USA
Head office
and other
Adjustments
Total
409,161
455
6,158
74,164
10,845
1,434
11,027
19,965
533,209
221,331
94,082
15,951
77,908
48,273
57
7,394
-
5,025
470,021
(379)
3,980
66,789
(7,868)
58,921
-
68,734
350,054
13,285
21,299
160,322
52,146
(6,089)
144,293
-
735,310
219,056
59,270
30,611
180,410
50,704
7,806
20,385
-
2,456
570,698
-
(633)
163,979
(40,426)
123,553
62,184
74,568
444,697
(30)
2,497
70,201
46,923
(415)
(2,355)
-
561,518
115,237
325,930
7,121
35,611
26,253
518
4,730
-
1,311
516,711
-
-
44,807
(9,410)
35,397
-
37,632
(790)
-
3,327
2,470
193
17,152
41,692
101,676
21,925
-
509
36,934
9,485
35,252
2,997
43,396
19,281
169,779
-
-
(68,103)
(2,170)
(70,273)
(654)
-
-
-
-
(584)
-
(2,146)
(61,657)
(64,387)
-
5,501
-
2,373
-
-
-
-
1,241,544
12,920
29,954
308,014
111,800
(4,877)
167,971
-
1,867,326
577,549
484,783
54,192
333,236
134,715
43,633
35,506
43,396
(28,073)
(20,199)
-
1,707,010
-
-
(44,188)
164
(44,024)
-
(379)
3,347
163,284
(59,710)
103,574
61,530
80,671
48,259
(67,680)
(43,210)
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 4.1 Statement of income by segment
2018
Net premium revenue
Net gain/(losses) on derecognition of financial assets measured at amortised cost
Gain / (loss) on derecognition of assets carried at FVOCI
Interest income earned from financial assets measured at amortised cost and FVOCI
Other investment income
Credit impairment losses
Fees and other revenue
Inter-segment revenue
Total revenue, net
Net policy benefits
Net change in actuarial liabilities
Interest costs
Administrative expenses
Commissions and premium and asset taxes
Finance costs
Depreciation and amortisation
Inter-segment expenses
Total benefits and expenses
Gain / (loss) arising on business combinations, acquisitions and divestitures
Gain arising on acquisition of insurance business
Share of operating income of associates and joint ventures
Segment income / (loss) before taxes
Income taxes
Segment net income / (loss) from continuing operations
Net income/(loss) attributable to non-controlling interests
Total comprehensive income/(loss) attributable to shareholders - continuing operations
Sagicor Life
Sagicor
Jamaica
Sagicor Life
USA
Head office
and other
Adjustments
Total
320,517
309,729
389,974
33,821
(279)
454
74,091
3,420
(82,266)
8,503
15,675
340,115
217,732
(62,053)
11,152
73,182
43,140
-
6,811
2,863
292,827
458
6,418
2,632
56,796
(9,560)
47,236
-
34,040
10,279
8,436
155,934
13,750
(10,245)
97,985
-
585,868
198,171
13,941
33,820
141,476
49,941
2,399
11,266
2,226
453,240
11,833
-
(487)
143,974
(33,237)
110,737
54,994
39,945
(7)
774
54,229
(14,771)
(571)
(8,894)
-
420,734
103,710
222,537
5,514
32,783
29,167
181
3,024
681
397,597
-
-
-
23,137
(4,859)
18,278
-
6,969
441
(14)
6,734
563
(2,437)
17,504
94,129
150,741
18,767
-
2,035
53,698
9,024
33,931
3,176
15,090
135,721
(471)
-
-
14,549
(3,155)
11,394
(2,916)
11,034
-
-
(311)
-
(130)
-
(616)
(109,804)
(110,861)
-
-
-
1,932
-
-
-
1,054,041
10,434
9,339
290,988
2,832
(95,519)
114,482
-
1,386,597
538,380
174,425
52,521
303,071
131,272
36,511
24,277
(20,860)
(18,928)
-
1,260,457
-
-
-
(91,933)
109
(91,824)
-
(89,071)
11,820
6,418
2,145
146,523
(50,702)
95,821
52,078
2,917
Where necessary certain comparative numbers have been adjusted to conform with the presentation in the current year as outlined in note 50. Fees and other revenue of $578 and administrative expenses of $130 previously eliminated in
the Sagicor Life segment are now reflected in Adjustments. Finance costs of $33,936 were also reclassified from Adjustments to Head office and other.
47
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191
191
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
4.2 Variations in segment income
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) Credit impairment losses - financial investments
The determination of ECL involves judgement in establishing various assumptions based on economic
conditions and historical trends. Changes in assumptions will impact the ECL allowances recorded in
the income statement.
Significant changes in borrowers classified as Stage 3 will be triggered by changes affecting individual
borrowers or groups of borrowers, leading to significant variations in losses recorded in the income
statement.
(ii) Fair value gains / (losses) of financial investments
4.2 Variations in segment income (continued)
(iii) Gains on acquisitions and 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 recognized directly in the statement of income. Similarly, on
sale if the consideration received exceeds the carrying value of the business or portfolio a gain is
recognised in the statement of income. As acquisitions and disposals occur infrequently and with no
consistent trend, the gain or loss recorded in the income statement may vary significantly from year to
year.
(iv) Foreign exchange gains and losses
Movements in foreign exchange rates may generate significant exchange gains or losses when the
foreign currency denominated monetary assets and liabilities are re-translated to the relevant functional
currency at the date of the financial statements.
Significant gains and losses may be triggered by changes in market prices of assets carried at fair value.
(v) Movements in actuarial liabilities arising from changes in assumptions
For FVOCI investments, management may be able to time the disposal of such investments and
consequently, impact the quantum of the realised gain or loss recognised in the statement of income.
For FVTPL investments, management may also able to time the disposal of such investments.
However, since the majority of these assets fund unit linked liabilities, the impact to Group net income
is mitigated by any increased return due to the holders of the unit linked liabilities.
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.
192
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48
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 4.2 Variations in segment income (continued)
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
Inc
Sagicor
Jamaica
Sagicor Life Head Office
and Other
USA
Total
Sagicor Life
Inc
Sagicor
Jamaica
Sagicor Life
USA
Head Office
and Other
Total
2019
2018
Credit impairment losses
1,434
(6,089)
(415)
Gain / (loss) on derecognition of assets
carried at FVOCI
6,158
21,299
2,497
193
-
(4,877)
(82,266)
(10,245)
(571)
(2,437)
(95,519)
29,954
454
8,436
774
Foreign exchange gains / (losses)
(3,261)
3,647
(1,491)
(1,105)
(2,129)
(1,384)
(325)
476
(471)
9,339
(3,037)
18,238
-
-
(379)
-
(379)
6,876
11,833
Gains / (losses) on acquisitions/
divestitures
Decrease / (increase) in actuarial
liabilities from changes in
assumptions
-
-
-
-
(20,584)
10,781
(94,291)
(104,094)
91,635
23,088
40,828
-
155,551
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193
193
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
4.3 Other comprehensive income
4.3 Other comprehensive income (continued)
Variations in other comprehensive income may arise also from non-recurring or other significant factors.
The most common are as follows:
(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.
(i) Unrealised investment gains and losses
Fair value investment gains and losses are recognised on the revaluation of debt and equity securities
classified as FVOCI. Therefore, significant gains and losses may be triggered by changes in market
prices.
(iv) Defined benefit plans’ gains and losses
Experience adjustments and changes in actuarial assumptions gives rise to gains or losses on defined
benefit plans.
(ii) Changes in actuarial liabilities
Changes in unrealised investment gains identified in (i) above may also generate significant, but off-
setting, changes in actuarial liabilities as a result of the use of asset liability matching in the liability
estimation process.
The table below summarises by segment the individual line items within other comprehensive income from continuing operations which are impacted by the foregoing factors.
2019
Unrealised investment gains
Changes in actuarial liabilities
Retranslation of foreign currency operations
Gains on defined benefit plans
2018
Unrealised investment losses
Changes in actuarial liabilities
Retranslation of foreign currency operations
Gains / (losses) on defined benefit plans
Variations in other comprehensive income by segment
Sagicor Life
Sagicor Jamaica
Sagicor Life
USA
Head office
and other
Adjustments
Total
28,630
(22,513)
545
6,624
(12,163)
8,693
(585)
(2,948)
66,127
(14,510)
(17,889)
4,304
(36,316)
8,215
(24,170)
2,786
73,026
(57,976)
-
-
(33,133)
24,706
-
-
924
-
407
270
(1,252)
-
(873)
(2,523)
-
-
296
-
-
-
443
-
168,707
(94,999)
(16,641)
11,198
(82,864)
41,614
(25,185)
(2,685)
194
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50
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 4.4 Statement of financial position by segment
2019
Financial investments
Other external assets
Inter-segment assets
Total assets
Policy liabilities
Other external liabilities
Inter-segment liabilities
Total liabilities
Net assets
Net assets attributable to non-controlling interests
2018
Financial investments
Other external assets
Assets of discontinued operation
Inter-segment assets
Total assets
Policy liabilities
Other external liabilities
Inter-segment liabilities
Total liabilities
Net assets
Net assets attributable to non-controlling interests
Sagicor Life
Sagicor Jamaica
Sagicor Life USA
Head office
and other
Adjustments
Total
1,438,618
341,370
335,784
2,115,772
1,379,761
77,259
120,000
1,577,020
538,752
-
1,418,031
324,345
-
266,094
2,008,470
1,235,415
160,824
124,122
1,520,361
488,109
-
2,670,339
795,798
15,903
3,482,040
865,914
1,673,057
6,097
2,545,068
936,972
577,429
2,344,113
745,357
-
14,976
3,104,446
753,793
1,526,230
5,617
2,285,640
818,806
512,922
2,040,771
735,747
65,224
2,841,742
1,997,405
437,936
110,835
2,546,176
295,566
-
1,499,927
727,401
-
65,754
2,293,082
1,602,601
373,901
70,085
2,046,587
535,916
170,312
141,760
847,988
72,873
474,886
321,739
869,498
(21,510)
17,077
85,592
163,419
17,239
109,595
375,845
70,629
466,570
256,595
793,794
246,495
(417,949)
-
17,592
-
-
(558,671)
(558,671)
-
-
(558,671)
(558,671)
-
-
-
-
-
(456,419)
(456,419)
-
-
(456,419)
(456,419)
-
-
6,685,644
2,043,227
-
8,728,871
4,315,953
2,663,138
-
6,979,091
1,749,780
594,506
5,347,663
1,960,522
17,239
-
7,325,424
3,662,438
2,527,525
-
6,189,963
1,135,461
530,514
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195
195
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
4.5 Segment cash flows
(a) 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:
Sagicor Life
Sagicor Jamaica
Sagicor Life USA
Head office and other
2019
2018
5,771
23,697
1,753
1,342
7,858
208,072
2,571
1,283
32,563
219,784
4.6 Products and services
Total external revenues relating to the Group’s products and services are summarised as follows:
2019
2018
Life, health and annuity insurance contracts issued to individuals
1,214,656
855,983
Life, health and annuity insurance and pension administration
contracts issued to groups
Property and casualty insurance
317,892
284,281
61,960
44,652
Banking, investment management and other financial services
192,246
167,764
Hospitality services
Unallocated revenues
41,693
38,879
8,142
25,775
1,867,326
1,386,597
(b) Summarised cash flows of the Sagicor Jamaica segment
4.7 Geographical areas
Set out below are the summarised cash flows of the Sagicor Jamaica segment which has material non-
controlling interests.
Net cash flows:
Operating activities
Investing activities
Financing activities
Effects of exchange rate changes
Net change in cash and cash equivalents for the year
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
2019
2018
70,626
(13,772)
(37,024)
(26,704)
(1,812)
5,086
124,736
129,822
17,364
(39,525)
(2,961)
(38,894)
163,630
124,736
The Group operates in certain geographical areas which are determined by the location of the subsidiary
or branch initiating the business. Group operations in geographical areas include certain non-current
assets comprising investment property, property, plant and equipment, associates and intangible
assets. Total external revenues and non-current assets by geographical area are summarised below.
Barbados
Jamaica
Trinidad & Tobago
Other Caribbean
USA
External revenue
Non-current assets
2019
2018
2019
2018
178,959
657,191
239,463
191,084
600,629
118,186
179,905
181,163
549,070
141,973
147,174
139,904
69,382
27,291
97,677
65,927
26,197
432,263
304,318
318,262
1,867,326
1,386,597
722,869
689,226
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 4.8 Revenues from service contracts with customers
5 INVESTMENT PROPERTY
The following table discloses service contract revenues from customers by reportable segment.
The movement in investment property for the year is as follows:
Year ended December 31, 2019
Sagicor Life
Sagicor Jamaica
Sagicor USA
Service contract revenues originated
- at a point
in time
- over
time
Total
-
7,909
7,909
57,857
73,078
130,935
224
-
224
58,081
80,987
139,068
Balance, beginning of year
Additions at cost
Amounts assumed on acquisition (note 37)
Transfer from real estate developed for resale (note 12)
Disposals
Fair value changes recorded in net investment income
Effects of exchange rate changes
2019
2018
93,494
82
5,530
-
(2,238)
(566)
(725)
80,816
50
16,444
(125)
(2,613)
(1,090)
12
Service contract revenues originated
Balance, end of year
95,577
93,494
Year ended December 31, 2018
- at a point
in time
- over
time
Total
Sagicor Life
Sagicor Jamaica
Sagicor USA
Head office and other companies
-
44,682
219
-
7,578
43,941
-
(13)
7,578
88,623
219
(13)
Investment property includes $9,516 (2018 - $9,903) which represents the Group’s proportionate
interest in joint operations summarised in the following table.
Country
Description of property
Barbados
Freehold lands
Freehold office buildings
25% -33%
Percentage
ownership
recognised
50%
44,901
51,506
96,407
Trinidad & Tobago
Freehold office building
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.
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197
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
6 ASSOCIATES AND JOINT VENTURES
6.1 Interests in Associates and Joint Ventures
Name of Entity
Country of Incorporation
% interest recognised
RGM Limited
FamGuard Corporation Limited (1)
Primo Holding Limited
Sagicor Costa Rica SCR, S.A.
Playa Hotels and Resorts N.V. (2)
Trinidad & Tobago
Bahamas
Barbados
Costa Rica
United States
2019
33%
20%
38%
50%
15%
2018
33%
20%
38%
50%
15%
Nature of
relationship
Measurement
Method
Carrying Amount
2019
2018
Associate
Associate
Associate
Equity Method
Equity Method
Equity Method
Joint Venture
Equity Method
Associate
Equity Method
25,315
16,703
318
3,293
184,929
230,558
23,497
15,332
324
2,596
194,383
236,132
(1)
(2)
FamGuard Corporation Limited is listed on the Bahamas International Securities Exchange. The proportionate share of market value calculated on the basis of the year-end closing rate of $7.60 per share
was $15,000 (2018 – $12,600).
On October 1, 2018, Sagicor Jamaica Group (SGJ) obtained control over Sagicor Real Estate X-Fund Limited, which in turn controlled a shareholding of 15% in Playa Hotels and Resorts NV (Playa). The
management of SGJ Jamaica has two representatives (out of twelve) on the Board of Playa and these two representatives are also members of two strategic board committees of Playa. The management of
SGJ has concluded that, given its participation in the policy-making decisions of Playa, SGJ has significant influence over Playa’s financial and operating results even though SGJ controls less than 20% of
Playa.
The effective interest in Playa attributable to the shareholders of Sagicor Financial Company Ltd. is 1.31% of the 15% interest recognised in the financial statements (2018 - 1.31% of the 15% interest
recognised). The remainder interest of 13.69% (2018 – 13.69%) is for the benefit of non-controlling shareholding interests of SGJ.
As of December 31, the proportionate share of market value of Playa, calculated based on quoted prices by the National Association of Securities Dealers Automated Quotation (NASDAQ), was $166,282
(2018 - $143,129).
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 6.1 Interests in Associates and Joint Ventures (continued)
The reconciliation of carrying amounts for the year of the investment in associates and joint ventures is as follows:
RGM Limited
FamGuard Corporation
Limited
Primo Holding
Limited
Sagicor Costa Rica
SCR, S.A.
Sagicor Real Estate
X-Fund Limited (1)
Playa Hotels and
Resort N.V.
2019
2018
2019
2018
2019
2018
2019
2018
2018
2019
2018
Investment, beginning of year
23,497
22,348
15,332
15,088
324
330
2,596
Additions
Amounts assumed on acquisition
Dividends received
Share of income / (loss)
Share of amortisation or impairment of
intangible assets which were identified
on acquisition
Share of income taxes
Share of OCI
Disposal of interest
Effects of exchange rate changes
Investment, end of year
-
-
-
-
-
-
2,290
1,591
-
(531)
-
-
59
-
(375)
-
-
(67)
-
-
(640)
1,696
(10)
-
325
-
-
-
-
(600)
1,047
(10)
-
(193)
-
-
-
-
-
(6)
-
-
-
-
-
-
-
-
(6)
-
-
-
-
-
25,315
23,497
16,703
15,332
318
324
3,293
110
140
-
-
-
-
-
686
-
(99)
2,860
146
-
-
-
-
(485)
-
(65)
2,596
-
-
-
-
-
-
-
-
-
-
-
56,597
194,383
-
-
-
-
-
-
-
-
200,853
-
1,609
(743)
(2,236)
-
-
-
-
-
-
3,455
(8,802)
6,118
(59,914)
(1,747)
-
91
-
(10,352)
-
184,929
194,383
(1) On October 1, 2018, Sagicor Group Jamaica obtained control over Sagicor Real Estate X Fund, which resulted in the accounting treatment changing from investment in associate to a subsidiary.
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199
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
6.2 Impairment
An impairment assessment of Playa Hotels and Resorts N.V and FamGuard Corporation Limited was performed at the end of the year as their values based on quoted market prices are lower than their carry values
recorded by the Group.
Playa Hotels and Resorts N.V.
In conducting the impairment assessment, management determined a recoverable value for Playa, using the value in use method. The value in use method is a discounted cash flow technique that utilizes a significant
amount of judgement in estimating key variables such as earnings before interest, taxes, depreciation and amortization (EBITDA), terminal growth rates and a discount factor. Value in use calculations are very sensitive
to changes in these estimates.
In arriving at its estimates for EBITDA, management also considered the impact of the following events and circumstances:
Increase in room inventory, consequent on the completion of renovation works at two hotels;
•
• Negative press from incidents with tourists in the Dominican Republic; and
• Negative perceptions about the level of crime in Mexico.
The estimates for EBITDA did not contemplate the potential impact of the corona virus. As at December 31, 2019, there was a limited number of cases of an unknown virus communicated to the World Health Organisation
(WHO). There was also no explicit evidence of human-to-human transmission at that date. The subsequent spread of the virus, and its identification as a new corona virus, the imposition of travel restrictions, the
downsizing of flights on certain routes etc. do not provide additional evidence about conditions impacting Playa at December 31, 2019 and are therefore non-adjusting events.
Management’s value in use calculations did not identify any impairment.
FamGuard Corporation Limited
In conducting the impairment assessment, management determined a recoverable value for Famguard, using the value in use method. To determine the value in use management used an actuarial embedded value
technique which incorporates appropriate discount rates and solvency capital requirements to determine the present value of future distributable profits. Management’s value in use calculations did not identify any
impairment.
6.3 Commitments
Commitments at the year-end if called are $764 (2018 –$969).
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 6.4 Summarised Financial Information
Summarised financial information from the financial statements of associates and joint ventures are set out in the two tables which follow.
RGM Limited
FamGuard Corporation
Limited
Primo Holding Limited
Sagicor Costa Rica SCR,
S.A.
Playa Hotels and Resorts
N.V.
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
ASSETS
Property, plant and equipment
Financial investments
Cash resources
Other investments and assets
Total assets
LIABILITIES
Policy liabilities
Notes and loans payable
Other liabilities
Total liabilities
-
-
4,727
124,696
129,423
-
-
4,686
125,992
130,678
39,086
261,221
20,415
20,354
37,824
297,970
8,091
24,993
341,076
368,878
-
-
-
-
-
-
1,000
1,000
1,000
1,000
-
-
-
-
240,005
232,328
-
-
53,478
53,478
60,183
60,183
13,966
13,206
253,971
245,534
-
-
236
236
-
-
251
251
749
600
11,705
926
15,636
28,867
13,600
6,007
2,708
22,315
285
1,917,329
1,819,424
10,371
1,415
13,526
-
20,717
243,603
-
115,810
209,411
25,597
2,181,649
2,144,645
11,747
6,132
2,524
-
1,061,620
316,815
-
984,769
304,502
20,403
1,378,435
1,289,271
764
6,552
5,194
803,214
855,374
Net Assets
75,945
70,495
87,105
123,344
With respect to Playa Hotels and Resorts N.V. current liabilities exceeded current assets by $127,154.
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201
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
6.4 Summarised Financial Information (continued)
RGM Limited
FamGuard Corporation
Limited
Primo Holding Limited
Sagicor Costa Rica
SCR, S.A.
Sagicor Real Estate X-
Fund Limited
Playa Hotels and
Resort N.V.
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Summarised statement of
comprehensive income
REVENUE
Net premium revenue
Hotel revenue
Net investment and other income
Total revenue
BENEFITS AND EXPENSES
Benefits
Hotel expenses
Finance costs
Other expenses
Total benefits and expenses
INCOME BEFORE TAXES FROM
CONTINUING OPERATIONS
-
-
26,209
26,209
-
-
3,975
14,948
18,923
-
-
100,427
98,414
-
-
26,823
31,887
32,827
26,823
132,314
131,241
-
-
-
85,040
83,532
-
-
-
-
21,507
39,899
39,659
21,507
124,939
123,191
7,286
5,316
7,375
8,050
Income taxes
(1,593)
(1,126)
-
-
NET INCOME FOR THE YEAR
5,693
4,190
7,375
8,050
Other comprehensive income
-
-
Total comprehensive income
5,693
4,190
276
7,651
(498)
7,552
-
-
-
-
-
-
-
16
16
(16)
-
(16)
-
(16)
-
-
-
-
-
-
-
17
17
(17)
-
(17)
-
(17)
17,702
12,444
-
217
-
1,231
17,919
13,675
8,294
7,953
-
428
8,853
-
313
4,944
17,575
13,210
344
(125)
219
1,371
1,590
465
(185)
280
(1,096)
(816)
DIVIDENDS RECEIVED
-
-
640
600
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
61,611
635,510
616,904
2,470
-
2,821
64,081
635,510
619,725
-
-
-
42,718
610,333
526,611
7,628
7,177
44,020
62,232
3,195
-
57,523
657,548
588,843
6,558
(22,038)
30,882
(1,817)
17,194
(12,197)
4,741
(4,844)
18,685
17,147
(30,551)
21,888
(35,395)
41,074
59,759
-
-
-
202
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 7 PROPERTY, PLANT AND EQUIPMENT
Owner -
Owner-
occupied managed hotel
properties
properties
2019
Office
furnishings,
equipment &
vehicles
Right-of-use
assets
Total
Owner-
occupied
properties
Owner-
managed
hotel
properties
2018
Office
furnishings, Right-of-use
equipment &
vehicles
assets
Net book value, beginning of year
104,629
98,974
58,685
-
262,288
113,697
Recognised on adoption of IFRS 16
(note 49)
Additions at cost
Additions arising from acquisitions
(note 37)
Transfer to intangible assets (note 8)
Other transfers
Disposals and divestures
Fair value changes recorded in OCI
Depreciation charge
Effects of exchange rate changes
-
906
7,411
-
1,375
(6,180)
3,580
(1,009)
(540)
Net book value, end of year
110,172
-
145
-
-
-
-
545
(2,506)
(550)
96,608
Represented by:
Cost or valuation
Accumulated depreciation
112,465
104,120
(2,293)
110,172
(7,512)
96,608
-
23,853
23,853
-
12,965
14,350
28,366
2,337
179
11,425
-
-
51,863
-
1,252
(3,031)
(1,183)
(192)
-
-
-
-
(2,247)
-
8,663
(3,031)
192
(8,619)
4,125
(13,922)
(6,644)
(24,081)
57
(1,886)
-
-
-
(9,286)
(226)
(1,344)
(549)
103,183
16,773
-
-
-
-
(535)
(3,853)
98,974
(3,527)
(61)
(4,210)
-
(12,502)
(1,076)
58,685
29,369
289,870
104,629
36,024
417,894
106,670
104,574
159,602
(6,655)
(128,024)
(2,041)
(5,600)
(100,917)
53,721
29,369
289,870
104,629
98,974
58,685
(853)
53,721
165,285
(111,564)
Total
165,560
-
13,941
119,956
(3,527)
(61)
(13,496)
(226)
(14,381)
(5,478)
262,288
370,846
(108,558)
262,288
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Owner-occupied properties consist mainly of commercial offices but include lands of $ 35,636 (2018 – 35,232) utilised largely in farming operations.
Owner-occupied properties, equipment & vehicles include operating leases held as lessor.
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203
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
8 INTANGIBLE ASSETS
8.1 Analysis of intangible assets and changes for the year
2019
Goodwill
Customer &
broker
relationships
Trade Names Software
Total
Goodwill
2018
Trade
Names
Customer &
broker
relationships
Software
Total
Net book value, beginning of year
56,455
13,199
2,590
25,068
44,234
12,391
Additions at cost
Assumed on acquisition
Transfer from property, plant and equipment
(note 7)
Identified on acquisition (note 37):
-
-
-
-
-
-
-
-
-
Advantage General Insurance Company Ltd
7,795
5,599
933
694
15,021
97,312
4,738
-
4,738
-
3,031
3,031
-
-
-
-
-
-
-
-
-
-
-
-
(127)
(76)
(9,282)
(11,415)
(361)
(1,823)
3,320
23,888
106,864
-
-
-
-
1,396
1,478
9,584
-
-
(237)
56,455
-
-
-
-
1,732
1,128
-
-
(1,795)
(258)
-
-
-
-
-
-
31
2,560
-
(1)
1
25,089
4,795
3,527
-
-
-
-
120
(120)
(8,090)
(253)
25,068
13,198
2,591
7,021
85,309
195,160
56,455
38,634
6,308
78,813
(3,701)
(61,421)
(88,296)
-
(25,436)
(3,717)
(53,745)
3,320
23,888
106,864
56,455
13,198
2,591
25,068
81,714
4,795
3,527
-
-
3,128
2,637
12,264
(120)
(9,886)
(747)
97,312
180,210
(82,898)
97,312
Harmony General Insurance Company Ltd
Travel Cash Jamaica Limited
Sagicor Real Estate X Fund Limited
Subsidiary acquisitions and disposals
Amortisation/impairment charges
Effects of exchange rate changes
Net book value, end of year
Represented by:
Cost or valuation
Accumulated depreciation and impairments
-
-
-
-
-
(925)
63,325
63,325
-
63,325
-
-
-
-
(2,006)
(461)
16,331
39,505
(23,174)
16,331
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 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.
For those CGU’s which the fair value less costs of disposal methodology is used, 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 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. As disclosed in note 2.7(a) goodwill is allocated to the Group’s reportable
operating segments.
8.2 Impairment of intangible assets (continued)
(i) Years ended December 31, 2019 & 2018
An actuarial appraisal value technique was adopted to test goodwill impairment. The principal
assumptions included the following:
•
•
•
•
•
Discount rates of 10% (2018, 10%) for individual life and annuity in force business,
New individual life and annuity business was included for the seven-year period 2020 to
2026, (seven year period 2019 to 2025),
Annual growth rate for new individual life and annuity business was 10.0% - 47.0% for 2020
and 3.0% – 11.0 % from 2021 to 2026 (2018 - 6.0% - 23.0% for the year 2019 and 5.0% to
17.0% from 2020 to 2025),
Discount rates of 14% (2018, 14%) for new individual life and annuity business,
Required Minimum Continuing Capital and Surplus Ratio (MCCSR) of 175% (2018 – 175%).
The Group obtains independent professional advice in order to select the relevant discount factors,
residual growth rates and earnings multiples.
Sensitivity
The carrying values of goodwill and the impairment test factors used are considered in the following
sections.
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.
(a) Sagicor Life operating segment
Sagicor Life Inc Segment
MCCSR target ratio
2019
2018
Discount rate
Inforce
New business
Low
150%
Mid
175%
High
200%
Carrying value of goodwill
26,552
26,526
Low
Mid
High
8%
10%
12%
12%
14%
16%
256,481
249,021
241,383
84,128
71,679
58,941
(43,469)
(59,147)
(75,164)
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205
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
8.2 Impairment of intangible assets (continued)
8.2 Impairment of intangible assets (continued)
(b) Sagicor Jamaica operating segment
(c) Sagicor General Insurance Inc
Carrying value of goodwill
31,092
24,248
Carrying value of goodwill
5,681
5,681
2019
2018
2019
2018
The fair value less costs of disposal methodology was adopted to test goodwill impairment in both years.
The after-tax multiple used for the segment 11.2 (2018– 9.9) which was derived from a pre-tax factor of
8.4 (2018 – 7.7) using an iterative method.
Sensitivity
The Group recognised goodwill on the acquisition of its interest in Sagicor General Insurance Inc.
Additional goodwill was recognised on the acquisition of Harmony General Insurance Company Ltd
during 2018 (note 37.6). This company was amalgamated with Sagicor General Insurance during
2018. The value in use methodology has been used to test goodwill impairment in both years. The
pre-tax discount factor was 18.0% (2018 – 19.9%) which was derived from an after-tax factor of 14.0%
(2018 – 16.0%) using an iterative method. The residual growth rate was 2.5% (2018 – 2.5%).
The possible impairment of goodwill is sensitive to changes in earnings multiples and after-tax earnings.
This is illustrated in the following table.
Sensitivity
2019 test
Scenario 1
Scenario 2
Scenario 3
The possible impairment of goodwill is sensitive to changes in the after-tax discount factor and residual
growth rate. This is illustrated in the following table.
After tax earnings multiples
Reduction in forecast earnings
11.2
n/a
9.5
10%
Excess of recoverable amount (of 49.11% interest)
308,039
191,851
Impairment (of 49.11% interest)
Nil
Nil
6.7
10%
35,708
Nil
After tax discount factor
Residual growth rate
Excess of recoverable amount
Impairment
2019 test
Scenario 1
Scenario 2
Scenario 3
14.0
2.5
250
Nil
15.0
2.5
Nil
15.0
2.3
Nil
(3,410)
(3,360)
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 9 FINANCIAL INVESTMENTS
9.1 Analysis of financial investments
9.1 Analysis of financial investments (continued)
2019
2018
Non-derivative investments at FVTPL
Carrying
value
Fair
value
Carrying
value
Fair
value
Investments at FVOCI:
Debt securities and money market funds
3,673,421
3,673,421
2,633,633
2,633,633
2019
Equity securities
Debt securities
Equity securities
1,291
1,291
271
271
Mortgage loans
Investments at FVTPL :
Debt securities
Equity securities
3,674,712
3,674,712
2,633,904
2,633,904
243,107
243,107
198,807
198,807
370,173
370,173
267,234
267,234
Derivative financial instruments
36,891
36,891
7,696
7,696
28,933
28,933
30,143
30,143
-
-
8
8
679,104
679,104
503,888
503,888
2018
Equity securities
Debt securities
Mortgage loans
Deposits
FVTPL
mandatory
designation
FVTPL
designation
by election
286,764
115,104
-
83,409
128,003
28,933
401,868
240,345
169,754
62,528
56
-
97,480
136,279
30,087
8
Total
370,173
243,107
28,933
642,213
267,234
198,807
30,143
8
232,338
263,854
496,192
2019
2018
1,148,739
1,361,973
1,097,041
1,219,042
Debt securities:
362,547
362,341
337,020
336,873
Government & government-guaranteed debt securities
1,849,154
1,668,061
151,533
181,902
147,046
171,421
Collateralised mortgage obligations
595,307
602,512
514,486
500,261
Corporate debt securities
Securities purchased for re-sale
10,904
10,904
7,170
7,170
Money market funds and other securities
Deposits
62,798
62,798
107,108
107,108
Total financial investments
6,685,644
6,936,246
5,347,663
5,479,667
2,331,828
2,582,430
2,209,871
2,341,875
Included in financial investments are:
Debt securities issued by associates
Mutual funds managed by the Group
572,128
438,382
2,072,446
1,717,041
571,539
105,997
5,065,267
3,929,481
25,278
217,170
26,587
180,249
Mortgage loans
Deposits
Investments at amortised cost :
Debt securities
Mortgage loans
Policy loans
Finance loans
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207
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
9.2 Financial investments repledged
9.3 Collateral assets
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. Of the assets pledged as security, the following represents the total for those assets
pledged for which the transferee has the right by contract or custom to sell or re-pledge the collateral.
Debt and equity securities include $20,644 (2018 - $218,447) 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 $16,114
(2018 - $13,361), and mortgages and mortgage backed securities having a total market value of $391,141
(2018 - $329,942).
9.4 Financial investments held under the unit linked fair value model
Financial investments include the following amounts for which the full income and capital returns accrue to
the holders of unit linked insurance and investment contracts. These investments are measured at FVTPL
and amortised cost for mortgages.
2019
604,886
2018
553,264
6,080,758
4,794,399
604,886
553,264
6,685,644
5,347,663
2019
2018
Pledged
value
Pledged
value
Debt securities
Equity securities
Mortgage loans
Deposits
2019
2018
154,111
225,276
58,154
-
126,156
160,627
61,491
8
437,541
348,282
Financial investments repledged
Balance sheet presentation
Financial investments
Financial investments repledged
Analysis of financial investments repledged
Investments at FVOCI:
Debt securities and money market funds
602,288
526,162
Investments at amortised cost :
Debt securities
Securities purchased for re-sale
Deposits
Financial investments repledged
2,188
37
373
2,598
604,886
23,693
37
3,372
27,102
553,264
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 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
11 INCOME TAX ASSETS
Deferred income tax assets (note 33)
Income and withholding taxes recoverable
2019
2018
661,811
653,722
28,700
24,828
8,898
39,085
14,727
7,063
724,237
714,597
2019
2018
6,494
20,100
26,594
27,583
26,782
54,365
Net defined benefit assets (note 31)
Real estate developed or held for resale
Prepaid and deferred expenses (i)
Premiums receivable
Legal claim (note 20)
Service contract receivables
Finance leases
Other assets and accounts receivable
Amounts due from managed funds included in receivables
Amounts expected to be realised within one year included in
real estate developed or held for resale
(i) Amounts are expected to be realised within one year.
2019
9,040
28,571
33,583
57,584
1,073
1,411
768
76,029
208,059
4,537
8,153
2018
3,538
13,850
26,495
51,633
963
1,245
-
45,923
143,647
6,052
8,779
Income and withholding taxes recoverable are expected to be recovered within one year of
the financial statements date.
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209
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
13 ACTUARIAL LIABILITIES
13.1 Analysis of actuarial liabilities
Gross liability
Reinsurers’ share
2019
2018
2019
2018
Contracts issued to individuals:
Life insurance - participating policies
194,551
205,566
66
65
Life insurance and annuity
- non-participating policies
Health insurance
Unit linked funds
2,590,528
2,057,098
647,417
638,201
12,511
14,760
236
350
288,504
241,690
-
-
-
-
Reinsurance contracts held
32,585
34,699
Contracts issued to groups:
Life insurance
Annuities
Health insurance
3,118,679
2,553,813
647,719
638,616
28,862
26,406
107
111
428,050
414,253
13,837
14,854
29,062
29,992
148
141
485,974
470,651
14,092
15,106
Total actuarial liabilities
3,604,653
3,024,464
661,811
653,722
The following notes are in respect of the foregoing table:
•
•
•
Life insurance includes coverage for disability and critical illness.
Actuarial liabilities include $77,391 (2018 - $71,840) 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.
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13.2 Movement in actuarial liabilities
Gross liability
Reinsurers’ share
2019
2018
2019
2018
Balance, beginning of year
3,024,464
2,944,700
653,722
736,547
Changes in actuarial liabilities:
Recorded in income (note 25)
492,875
91,568
8,092
(82,857)
Recorded in OCI
110,409
(48,181)
Assumed on acquisition of portfolio
(note 13.2)
-
42,865
De-recognised on divestiture
(8,292)
-
Other movements
163
3,153
Effect of exchange rate changes
(14,966)
(9,641)
-
-
(2)
-
(1)
-
-
-
31
1
Balance, end of year
3,604,653
3,024,464
661,811
653,722
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 and
improvements
Changes in margins for adverse
deviations
Other items
Total
453,393
216,074
2,719
(85,599)
104,094
(155,551)
1,093
(6,323)
(1,560)
(11,831)
2,715
-
-
-
-
-
44,642
(5,305)
603,284
43,387
4,280
8,092
9,065
(82,857)
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 13.2 Movement in actuarial liabilities (continued)
Acquisition of insurance portfolio
During 2018, qualifying life insurance and annuity policies of British American Insurance Company
(Barbados) Limited (BAICO) were transferred to Sagicor Life Inc. BAICO was under the management
of a judicial manager and the transfer was approved by the Supreme Court of Barbados. The portfolio
consisted of 11,259 of individual life and annuity insurance policies in Barbados. The acquisition has
been accounted for as a portfolio acquisition and the effects of the transaction are summarized below.
Given the distressed nature of the portfolio the Group was able to negotiate assets to be transferred in
excess of the liabilities assumed. Accordingly, the excess assets have been treated as a gain in the
income statement.
2018
Financial investments
Other assets
Total assets
Actuarial liabilities
Other policy liabilities
Total liabilities
Net assets acquired
Consideration
Gain on acquisition
Fair value
49,688
-
49,688
42,865
405
43,270
6,418
-
6,418
13.3 Assumptions – life insurance and annuity contracts
(a) Process used to set actuarial assumptions and margins for adverse deviations
At each date for valuation of actuarial liabilities, the Appointed Actuary (AA) of each insurer reviews the
assumptions made at the last valuation date. The AA reviews the validity of each assumption by
referencing 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 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 tables from the Canadian Institute of Actuaries. 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 reflecting insurer and industry experience.
(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 moving averages.
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211
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
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 over time, 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 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.
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.
(g) Margins for adverse deviations
Ultimate rate of return
2019
2018
Barbados
Jamaica
Trinidad & Tobago
Other Caribbean
USA
7.50%
5.50%
5.00%
7.50%
6.00%
5.00%
4.50% - 7.00%
4.50% - 7.00%
Lapse
0.85% - 3.50%
0.85% - 3.60%
Investment yields and asset default
Mortality and morbidity
Operating expenses and taxes
Other
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
2019
2018
95,203
76,390
65,971
10,019
13,889
103,650
78,453
62,363
11,042
11,093
261,472
266,601
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 significant claim settlements are anticipated after one
year from the date of the financial statements.
(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. For income taxes levied on net income, actuarial liabilities are adjusted for policy related
recognised deferred tax assets and liabilities.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 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
2019
2018
61,518
62,979
166,350
140,163
59,092
44,435
Gross liability
Reinsurers’ share
2019
2018
2019
2018
Movement for the year:
Balance, beginning of year
140,163
127,801
39,085
41,571
Subsidiary and insurance portfolio
acquisitions
27,090
6,122
351
2,331
286,960
247,577
Policy benefits incurred
682,891
644,757
107,425
109,375
Policy benefits paid
(683,339)
(637,981)
(117,894)
(115,144)
Effect of exchange rate changes
(455)
(536)
(267)
952
Balance, end of year
166,350
140,163
28,700
39,085
Gross liability
Reinsurers’ share
2019
2018
2019
2018
14.3 Provision for unearned premiums
Analysis of policy benefits payable:
Life insurance and annuity benefits
97,364
99,332
16,916
24,526
Health claims
Property and casualty claims
5,252
4,677
63,734
36,154
2,846
8,938
166,350
140,163
28,700
1,552
13,007
39,085
Gross liability
Reinsurers’ share
2019
2018
2019
2018
Analysis of the provision:
Property and casualty insurance
56,986
36,115
24,828
14,727
Health insurance
2,106
8,320
-
-
59,092
44,435
24,828
14,727
The provision for unearned premiums is expected to mature within a year of the financial
statements’ date.
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213
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
14.3 Provision for unearned premiums (continued)
16 NOTES AND LOANS PAYABLE
Gross liability
Reinsurers’ share
The following table presents the carrying values and estimated fair values of notes and loans payable.
2019
2018
2019
2018
Amounts in US $000
2019
2018
Movement for the year:
Balance, beginning of year
44,435
32,614
14,727
11,561
Subsidiary and insurance portfolio
acquisitions
Premiums written
Premium revenue
22,278
3,489
7,650
1,502
97,235
87,102
45,844
36,844
(104,980)
(78,739)
(43,446)
(36,176)
Effect of exchange rate changes
124
(31)
53
996
Balance, end of year
59,092
44,435
24,828
14,727
15 INVESTMENT CONTRACT LIABILITIES
Liabilities at amortised cost:
Deposit administration liabilities
Other investment contracts
Liabilities at FVTPL:
Unit linked deposit administration
liabilities
2019
2018
Carrying
value
Fair
value
Carrying
Value
Fair
value
113,767
148,188
261,955
113,767
110,585
110,585
149,928
130,670
130,669
263,695
241,255
241,254
162,385
162,385
149,142
149,142
424,340
426,080
390,397
390,396
Carrying
value
Fair
value
Carrying
value
Fair
Value
Liabilities at amortised cost:
8.875% senior notes due 2022 (g)
318,227
330,197
318,910
334,625
8.25% convertible redeemable
preference shares due 2020 (a)
5.10% unsecured bond due 2020 (b)
5.95% unsecured bond due 2020 (c)
4.85% notes due 2019 (d)
5.00% notes due 2020 (e)
6.75% notes due 2024 (e)
Mortgage loans (h)
Bank loans and other funding
instruments (f)
-
-
11,115
11,105
33,700
42,904
-
16,857
16,589
75,019
34,256
44,826
-
-
-
-
-
75,039
74,124
17,257
15,845
77,034
-
-
-
-
76,952
76,952
14,436
14,436
8,259
8,259
517,732
533,851
490,275
505,065
(a) On March 2, 2017, Sagicor Bank Jamaica Limited issued cumulative redeemable preference
shares with a tenor of three (3) years at 8.25% interest per annum. These were redeemed
June 3, 2019.
(b) On September 18 and 26, 2019, Sagicor Financial Corporation Limited issued US$30.6 million
and US$3.4 million notes respectively, carrying an annual rate of 5.10% with a maturity date
of October 26, 2020.
(c) On September 26, 2019, Sagicor Financial Corporation Limited issued Jamaican $ notes in
the amount of J$5,731,140,000 carrying an annual interest rate of 5.95% per annum with a
maturity date of October 26, 2020.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 16 NOTES AND LOANS PAYABLE (continued)
(d) On August 12, 2019, Sagicor Financial Corporation Limited entered into a US$76.0 million
bridging loan carrying an annual interest rate of 5.1% per annum, this loan was repaid from
the proceeds of the notes in (b) and (c) above. Also on August 12, 2019, Sagicor Financial
Corporation Limited used the bridging loan to repay the US$75 million 4.85% notes which
were due to mature on August 14, 2019.
(e) On August 16, 2019, Sagicor Investments Jamaica Limited issued J$4.4 billion in two
Tranches, Tranche A J$2.22 billion and Tranche B J$2.18 billion, carrying an annual rate of
5.00% and 6.75% with a maturity date of September 16, 2020 and August 16, 2024
respectively.
(f) On May 24, 2019 Sagicor General Insurance Inc entered into a US$12 million loan
agreement. The interest rate is 3.50% per annum and matures on July 31, 2024.
16 NOTES AND LOANS PAYABLE (continued)
(g) Valuation of Call Option Embedded Derivative (continued)
Optional Redemption with Proceeds of Equity Offerings - At any time prior to August 11,
2018, the Group may redeem the Notes with the net cash proceeds received by the Group
from any Equity Offering at a redemption price equal to 108.875% of the aggregate principal
amount thereof, plus accrued and unpaid interest, if any, to the Redemption Date, in an
aggregate principal amount for all such redemptions not to exceed 35% of the original
aggregate principal amount of the Notes (including Additional Notes); and,
Optional Redemption without an Applicable Premium - At any time on or after August 11,
2019, the Group may redeem the Notes in whole or in part at specified redemption prices,
plus accrued and unpaid interest, if any, on the Notes redeemed, to the applicable date of
redemption.
The Group has estimated the fair value of this embedded derivative at US $2.8 million as at
December 31, 2019.
(g) Valuation of Call Option Embedded Derivative
(h) Mortgage Loans
As at December 31, 2019 the Group had US$320 million principal amount of senior
unsecured notes (the “Notes”). The Notes are due August 11, 2022 and bear interest at an
annual rate of 8.875%. Pursuant to the terms of the Notes, the Group may redeem the Notes
under various scenarios as summarized below and described in more detail herein:
Optional Redemption with an Applicable Premium (equal to a percentage of the principal
amount based on redemption date) - At any time prior to August 11, 2019, the Group may
redeem the Notes in whole or in part, at a redemption price equal to 100% of the principal
amount of such Notes redeemed plus, the greater of
(i)
(ii)
1% of the principal amount of the Notes to be redeemed; and,
the Applicable Premium, plus in each case accrued and unpaid
interest, if any, to the applicable date of redemption, to but excluding
the date of redemption (the “Redemption Date”);
Issuer / mortgagor
2019
2018
4.90% USD mortgage notes due 2025
X Fund Properties LLC
45,741
46,527
3.75% USD mortgage notes due 2019
4.75% USD mortgage notes due 2021
Sagicor X-Fund Real Estate
Limited
Sagicor X-Fund Real Estate
Limited
-
1,496
2,112
2,055
5.00% USD mortgage notes due 2020
X Fund Property Limited
4,255
4,245
8.75% JMD mortgage notes due 2020
X Fund Property Limited
10,136
10,372
9.00% JMD mortgage notes due 2048
X Fund Property Limited
8.00% JMD mortgage notes due 2021
X Fund Property Limited
10.00% JMD mortgage notes due 2026
X Fund Property Limited
3.61% mortgage notes due 2026
X Fund Property Limited
Development loan (1)
X Fund Property Limited
3,598
3,548
3,511
996
1,122
3,735
3,782
3,704
1,036
-
75,019
76,952
(1)
This note is interest free with annual forgiveness of debt over ten years, if certain conditions
are met.
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215
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
16 NOTES AND LOANS PAYABLE (continued)
16 NOTES AND LOANS PAYABLE (continued)
X Fund Properties LLC
The 4.90% USD mortgage note is secured by the investment in hotel property. Interest on the mortgage
note is paid monthly through to maturity upon which the outstanding principal is due and payable. The
Group may prepay the mortgage note prior to the maturity date only in conjunction with the sale of a
property or as a result of casualty or condemnation. The note is payable on October 6, 2025 and attracts
a fixed rate interest of 4.9%.
The mortgage note contains a debt service coverage ratio test and, upon failing to meet the debt service
coverage ratio, substantially all the cash flows from the hotel must be directed to accounts controlled
by the lender. As at December 31, 2019, X Fund Properties LLC was compliant with the debt service
coverage ratio.
Movement for the year to December 31,
Balance, beginning of year
Assumed on acquisition
Valuation of call option embedded derivative
Additions:
Gross Principal
less Expenses
Repayments:
Principal
Interest
X Fund Properties Limited
These mortgage notes are secured by:
•
•
a charge over Jamziv MoBay Jamaica Portfolio Limited allocated to X Fund Properties Limited,
a charge over the assets and undertakings of X Fund Properties Limited.
Finance leases reclassified to lease liabilities
Transfer from related party
Amortisation during the year
Accrued Interest
Effects of exchange rate changes
Balance, end of the year
2019
490,275
-
(2,831)
197,114
(967)
196,147
(164,452)
(37,871)
(202,323)
(4,255)
-
2,974
38,282
(537)
517,732
2018
413,805
77,497
-
1,380
-
1,380
(7,514)
(30,517)
(38,031)
-
2,698
1,898
30,892
136
490,275
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 17 DEPOSIT AND SECURITY LIABILITIES
18 OTHER LIABILITIES / RETIREMENT BENEFIT LIABILITIES
Liabilities at amortised cost:
Other funding instruments
Customer deposits
Securities sold for re-purchase
Bank overdrafts
Liabilities at FVTPL:
Structured products
Derivative financial instruments (note 41.9)
2019
2018
Carrying
value
Fair
value
Carrying
value
Fair
value
418,047
808,119
512,857
6,646
418,932
811,715
512,857
6,646
461,572
462,223
721,634
726,136
423,772
423,790
2,158
2,158
1,745,669
1,750,150
1,609,136
1,614,307
6,756
264
7,020
6,756
264
7,020
64,650
64,650
247
247
64,897
64,897
1,752,689
1,757,170
1,674,033
1,679,204
Other funding instruments consist of loans from banks and other financial institutions and include balances
of $375,219 (2018 - $315,250) 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.
Net defined benefit liabilities (note 31)
Cash settled share-based payment liabilities (1)
Other provisions
2019
2018
59,597
67,522
-
198
6,627
138
59,795
74,287
(1)
As of April 01, 2019, certain options are recorded using the equity-settled method of accounting.
This resulted in a transfer of $4,367 from Other liabilities / Retirement benefit liabilities to reserves
at that date.
19 INCOME TAX LIABILITIES
Deferred income tax liabilities (note 33)
Income taxes payable
2019
2018
51,198
5,691
56,889
28,958
19,278
48,236
Income taxes payable are expected to be settled within a year of the financial statements’ date.
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217
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
20 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Amounts due to policyholders
Amounts due to reinsurers
Legal claim (i)
Service contract payables
Other accounts payable and accrued liabilities
2019
2018
46,257
17,993
1,073
-
175,010
240,333
54,470
9,364
963
1,254
174,643
240,694
(i) On March 17, 2014 the Supreme Court of Jamaica granted judgement in favour of a claimant in a
case brought against Sagicor Bank Jamaica Limited (formerly RBC Royal Bank Jamaica Limited).
This claim pre-dated the acquisition of the Bank by Sagicor Group Jamaica Limited, and pre-dated
the acquisition of control of the Bank by RBTT from Finsac Limited (“Finsac”) in 2001.
By virtue of the Share Sale Agreement entered between Finsac, RBTT Financial Holdings Limited
and RBTT International Limited, Finsac agreed to fully indemnify RBTT International Limited against
any loss the bank may suffer in this matter. As the current owner of Sagicor Bank Jamaica Limited,
Sagicor Group, is the current beneficiary of the Indemnity. The Indemnity from Finsac is further
supported by a Government of Jamaica Guarantee on a full indemnity basis.
Sagicor appealed the Supreme Court decision and judgment was delivered on July 31, 2018 which
ruled that the award previously awarded to the Claimant be reduced with costs to the Claimant
subject to an accounting exercise to determine the apportionment of costs between the parties. This
reduced award took into account lower interest rates applying simple interest rather than
compounding interest. The issue of costs remains to be determined by the courts following a
subsequent application to amend the judgment which was delivered in January 2019. An appeal
to the Privy Council on this matter by the Claimant is pending.
The amount previously awarded to the Claimant is recorded as payable to the claimant plus accrued
interest and a corresponding receivable from Finsac/Government of Jamaica is recorded (note 12).
218
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 21
COMMON SHARES
The authorised share capital of the Company is US$200,000,000 divided into 10,000,000,000 common shares of US$0.01 each and 10,000,000,000 preference shares of US$0.01 each.
The common shares issued are as follows:
Number in 000’s
2019
Share
capital
Share premium
Total
Number in 000’s
2018
Share
capital
Share premium
Total
Issued and fully paid:
Balance, beginning of year
Exchange of shares (note 1)
Repurchase of shares (note 1)
Allotments arising from:
New share issue (note 1)
Balance, end of year
Treasury shares:
Shares held for LTI and ESOP, end of year (Note 30.1)
Total
306,556
(227,016)
(11,548)
67,992
79,847
147,839
(50)
147,789
3,066
(2,270)
(116)
680
798
1,478
(1)
1,477
301,132
304,198
306,556
3,066
301,132
304,198
2,270
-
(19,930)
(20,046)
-
-
-
-
-
-
-
-
283,472
284,152
306,556
3,066
301,132
304,198
478,818
479,616
-
762,290
763,768
306,556
(275)
(276)
762,015
763,492
(441)
306,115
-
3,066
(5)
3,061
-
-
301,132
304,198
(467)
(472)
300,665
303,726
Common share dividends declared, paid and proposed are set out in the following table.
2019
2018
Per share
Total
Per share
Total
Dividends declared and paid during the year
5.0¢
15,316
5.0¢
15,300
Second interim dividend proposed for the
current year and payable in the next year
Final dividend proposed for the current year
and payable in the next year
5.625¢
8,355
-
-
-
-
2.5 ¢
7,664
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219
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
Fair value reserves
Owner-occupied
and owner-
managed
property
FVOCI
assets
Actuarial
liabilities
Currency
translation
reserves
Warrant
reserve
Other
reserves
Total
reserves
23,163
1,514
(27,525)
117,758
9,362
(116,953)
(83,392)
(7,569)
-
-
-
-
-
-
-
-
-
-
-
474
25,151
4,037
94,270
(4,677)
101
(78,707)
(124,421)
20,062
-
-
20,062
-
-
-
34,958
(281)
-
12,998
(3,811)
10,758
54,622
(76,995)
28,030
20,062
12,998
(3,811)
10,693
(9,023)
22 RESERVES
2019
Balance, December 31, 2018
Total comprehensive income from continuing operations
Transactions with holders of equity instruments:
Allocated to warrant reserve
Allocated to reserve for equity compensation benefits
Eliminated from reserve for equity compensation benefits
Transfers to retained earnings and other movements
Balance, December 31, 2019
220
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 22 RESERVES (continued)
2018
Balance, December 31, 2017
Transition adjustment on adoption of IFRS 9
Balance, January 1, 2018
Fair value reserves
Owner-occupied
and owner-
managed property
FVOCI
assets
Available for
sale assets
Actuarial
liabilities
Currency
translation
reserves
Other
reserves
Total
reserves
25,153
-
25,153
-
34,414
(27,959)
(109,725)
30,729
(47,388)
30,407
30,407
(34,577)
5,423
(105)
(1,365)
(217)
(163)
(22,536)
(109,830)
29,364
(47,605)
Other comprehensive income allocated to reserves
3,655
(58,063)
Transactions with holders of equity instruments:
Allocated to reserve for equity compensation benefits
Eliminated from reserve for equity compensation benefits
Disposal of interest in subsidiaries
Transfers to retained earnings and other movements
Balance, December 31, 2018
-
-
-
-
-
-
(5,645)
131
23,163
(27,525)
-
-
-
-
-
163
-
31,897
(7,123)
-
(29,634)
-
-
-
1
-
-
-
-
4,428
(5,215)
(935)
7,316
4,428
(5,215)
(935)
1,966
9,362
(116,953)
34,958
(76,995)
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221
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
23 PARTICIPATING ACCOUNTS
23 PARTICIPATING ACCOUNTS (continued)
The movements in the participating accounts during the year and the amounts in the financial
statements relating to participating accounts were as follows:
Consequently, the participating policies in the Eastern Caribbean were converted to non-participating
policies on May 31, 2019 with the level of participating benefits in the form of bonuses and or dividends
being guaranteed at conversion.
Closed participating
account
Open participating
account
2019
2018
2019
2018
24 PREMIUM REVENUE
Movement for the year:
Balance, beginning of year
2,774
(1,547)
1,304
2,412
Gross premium
Ceded to reinsurers
2019
2018
2019
2018
-
(1,046)
-
(1,884)
460,623
442,629
29,992
Transition adjustment on adoption of
IFRS 9
Balance, beginning of year as
adjusted
Total comprehensive income / (loss)
(1,872)
5,367
(783)
Return of transfer to support profit
distribution, to shareholders
-
-
(200)
(213)
2,774
(2,593)
1,304
528
989
Life insurance
Annuity
Health insurance
592,400
455,927
179,101
172,830
Property and casualty insurance
91,128
70,043
1,323,252
1,141,429
30,580
15,874
4,758
36,176
87,388
283
5,974
45,459
81,708
Balance, end of year
902
2,774
321
1,304
25 POLICY BENEFITS AND CHANGE IN ACTUARIAL LIABILITIES
Financial statement amounts:
Assets
Liabilities
Revenues
Benefits
Expenses
Income taxes
65,913
65,011
7,004
7,523
511
84
74,061
71,286
3,339
(2,272)
162
109
151,907
172,179
151,586
170,876
19,751
18,798
1,522
254
2,393
(108)
147
472
The Group no longer sells participating policies in the Eastern Caribbean. As a result, the size of the
participating policyholders fund in this region has been decreasing annually and has reached a size
where it is no longer beneficial to the policyholders to continue to maintain a separate fund.
Gross benefit
Ceded to reinsurers
2019
2018
2019
2018
Life insurance benefits
236,624
236,966
Annuity benefits
270,376
242,387
Health insurance claims
140,748
131,713
Property and casualty claims
29,017
25,726
13,523
78,864
4,834
1,995
16,542
70,182
4,954
6,734
Total policy benefits
676,765
636,792
99,216
98,412
Change in actuarial liabilities (note 13.2)
492,875
91,568
8,092
(82,857)
Total policy benefits and change in
actuarial liabilities
1,169,640
728,360
107,308
15,555
222
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 26 NET INVESTMENT INCOME
26 NET INVESTMENT INCOME (continued)
2019
2018
2019
2018
Investment income:
Interest income (amortised cost assets):
Debt securities
Mortgage loans
Policy loans
Finance loans
Securities purchased for resale
Deposits, cash and other items
Interest Income (FVOCI assets):
81,695
20,458
10,519
60,941
542
1,320
84,477
20,780
10,003
58,308
853
3,089
175,475
177,510
Debt securities and money market funds
132,539
113,478
Fair value changes and interest income (FVTPL assets):
Debt securities
Equity securities
Mortgage loans
Derivative financial instruments
Other items
25,319
49,298
2,524
35,701
27
112,869
(898)
15,869
930
(11,407)
8
4,502
Other income measured on an IFRS 9 basis
253
813
Income from financial investments measured on an
IFRS 9 basis
421,136
296,303
Income from financial investments measured on an
IFRS 9 basis
421,136
296,303
Investment income
Investment property – rental income
Investment property – realised gains
Investment property – unrealised gains
Other investment income
Total investment income
Investment expenses:
Direct operating expenses of investment property that
generated rental income
Other direct investment expenses
8,406
27
(566)
(259)
6,621
(148)
(942)
370
428,744
302,204
6,319
2,611
8,930
6,042
2,342
8,384
Net investment income
419,814
293,820
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223
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
27 FEES AND OTHER REVENUE
2019
Service contract revenue
Fee income – assets under administration
Commission income on reinsurance contracts
Other fees and commission income
Finance lease income
Foreign exchange losses
Hotel revenue
Other operating and miscellaneous income
2018
Service contract revenue
Fee income – assets under administration
Commission income on reinsurance contracts
Other fees and commission income
Foreign exchange losses
Hotel revenue
Other operating and miscellaneous income
224
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80
Fees Recognised
at a point in time
over time
Other Revenue
Total
37,600
-
-
9,349
-
-
10,908
224
58,081
46,415
-
-
5,786
-
-
28,786
-
80,987
37,542
39,236
-
-
4,427
-
2,600
332
44,901
-
-
5,168
-
7,102
-
51,506
3,419
2,968
7,932
8,876
62
(1,105)
-
6,751
28,903
2,851
3,045
91
5,471
(3,037)
-
9,654
18,075
87,434
2,968
7,932
24,011
62
(1,105)
39,694
6,975
167,971
79,629
3,045
91
15,066
(3,037)
9,702
9,986
114,482
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 28 INTEREST AND FINANCE COSTS
29 EMPLOYEE COSTS
28.1 Interest costs
Included in administrative expenses, commissions and related compensation are the following:
2019
2018
Administrative and hotel staff salaries, directors’ fees
and short-term benefits
Social security and defined contribution retirement costs
Equity-settled compensation benefits (note 30.1 to 30.2)
Cash-settled compensation benefits (note 30.1)
Defined benefit expense (note 31 (b))
2019
2018
137,432
115,911
10,409
15,142
-
7,707
10,342
6,404
5,104
9,317
170,690
147,078
Interest expense (amortised cost liabilities):
Investment contracts
Other funding instruments
Customer deposits
Securities sold for re-purchase
Insurance contracts and other items
Fair value changes and interest expense (FVTPL liabilities)
Total interest costs
28.2 Finance costs
8.875% senior notes due 2022
8.25% convertible redeemable preference shares due 2020
4.85% notes due 2019
5.10% unsecured bond due 2020
5.95% unsecured bond due 2020
5.00% notes due 2020
6.75% notes due 2024
Mortgage loans
Lease liabilities(1)
Bank loans & other funding instruments
Total finance costs
7,950
9,934
10,168
13,814
1,966
43,832
10,360
54,192
2019
30,297
428
2,324
604
794
316
419
5,180
2,423
848
9,567
8,561
11,805
12,019
1,715
43,667
8,854
52,521
2018
29,983
1,169
3,748
-
-
-
-
1,229
-
382
43,633
36,511
(1) Interest expense arising from lease liabilities is recognised from 2019 in conformity with IFRS 16.
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225
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
30 EQUITY COMPENSATION BENEFITS
30.1 Sagicor Financial Company Ltd. (continued)
30.1 Sagicor Financial Company Ltd.
(a)
LTI plan – restricted share grants
Effective December 31, 2005, SFCL introduced the LTI plan and the ESOP. A total of 26,555,274
common shares of SFCL (or 10% of shares then in issue) has been set aside for the purposes of the
LTI plan and the ESOP.
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.
In 2017, the shareholders of SFCL approved the increase in the number of SFCL’s shares reserved for
the LTI and ESOP from 26,555,274 common shares to 40,400,000 common shares.
The movement in restricted share grants during the year is as follows:
On December 5, 2019, concurrent with the closing of the transaction between Alignvest Acquisition II
Corporation (“Alignvest”) and Sagicor Financial Corporation Limited (“SFCL”) , restricted share grants,
share options and ESOP awards were exchanged for grants, options and awards in SFC using the
Exchange Ratio as defined in note 1. 3,680,687 restricted share grants were exchanged for 850,276
restricted share grants and 2,297,517 ESOP awards were exchanged for 526,831 ESOP awards in SFC
(the "Replacement Grants"). 20,250,604 options were exchanged for 4,678,152 options to purchase
common shares of Sagicor Financial Company Ltd (the “Replacement Options”) . The Replacement
Options provide an optionee the ability to purchase common shares of Sagicor Financial Company Ltd
at a price of per share linked to the award year (as adjusted by the exchange ratio), and the terms and
conditions of the Replacement Options have remained the same as the initial terms and conditions. The
terms of the Replacement Grants remain unchanged. Since these modifications did not increase the
total fair value of the Replacement Options or the Replacement Grants, the Group continues to account
for the cost of compensation services received as consideration for the equity instruments granted as if
the replacement had not occurred.
The fair value of stock options granted is estimated at the date of grant using the Black-Scholes option
pricing model as disclosed in section (b) below.
2019
2018
Number of
grants
‘000
Weighted
average
price
Number of
grants
‘000
Weighted
average
price
Balance, beginning of year
656
US$4.50
1,090
US$4.42
Grants issued
Grants vested
Grants lapsed/forfeited
Balance, end of year
1,056
US$6.28
632
US$4.46
(779)
US$5.54
(1,044)
US$4.37
(77)
856
US$4.07
US$4.50
(22)
656
US$4.20
US$4.50
226
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 30.1 Sagicor Financial Company Ltd. (continued)
(a)
LTI plan – restricted share grants (continued)
30.1 Sagicor Financial Company Ltd. (continued)
(b) LTI plan – share options (continued)
Grants issued may be satisfied out of new shares issued by Sagicor Financial Company Ltd or by shares
acquired in the market. The shares acquired in the market and/or distributed during the year were as
follows:
The movement in share options for the year and details of the share options and assumptions used in
determining their pricing are as follows:
2019
2018
Number
in 000’s
$000
Number
in 000’s
$000
Balance, beginning of year
Shares acquired
Shares distributed
Balance, end of year
40
-
-
40
206
-
-
206
40
40
(40)
40
206
202
(202)
206
During 2019, a cash settlement was made in lieu of share issue
(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 SFCL shares at the time that the option was
granted. From 2009, options are granted at the fair market price of SFCL 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.
2019
2018
Number of
options
‘000
Weighted
average
exercise
price
Number of
options
‘000
Weighted
average
exercise
price
Balance, beginning of year
Options granted
Options exercised
Options lapsed/forfeited
Balance, end of year
3,814
US$5.24
1,782
US$4.42
-
US$3.90
(923)
US$5.50
4,673
US$4.85
Exercisable at the end of the year
2,568
US$5.06
4,317
1,012
(869)
(646)
3,814
1,884
US$5.41
US$4.89
US$3.90
US$6.58
US$5.24
US$5.93
Share price at grant date
US$3.72 – 10.82
US$3.72 – 10.82
Fair value of options at grant date
US$0.67 – 2.99
Expected volatility
Expected life
Expected dividend yield
Risk-free interest rate
18.3% - 35.8%
7.0 years
2.6% - 4.7%
4.5% - 6.8%
US$0.67 – 2.99
18.3% - 35.8%
7.0 years
2.6% - 4.7%
4.5% - 6.8%
The expected volatility of options is based on statistical analysis of monthly share prices over the 7
years prior to grant date.
As disclosed in Note 18, share options cash-settled are now settled in the Company’s shares.
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227
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
30.1 Sagicor Financial Company Ltd. (continued)
(c) ESOP
From 2006, SFCL approved awards under the ESOP in respect of permanent administrative employees
and sales agents of SFCL and certain subsidiaries. The ESOP is administered by Trustees under a
discretionary trust. The amount awarded is used by the Trustees to acquire Sagicor Financial Company
Ltd 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:
2019
2018
Number
in 000’s
63
53
(106)
10
$000
266
371
(567)
70
Number
in 000’s
116
18
(71)
63
$000
463
84
(281)
266
Balance, beginning of year
Shares acquired
Shares distributed
Balance, end of year
30.2 Sagicor Group Jamaica Limited
(a)
Long-term incentive plan
Sagicor Group Jamaica Limited offers stock grants and stock options to senior executives as part of its
long-term incentive plan. The group has set aside 150,000,000 of its authorised but un-issued shares
at no par value for the stock grants and stock options.
In January 2007, the group introduced a new long term incentive (LTI) plan which replaced the previous
Stock Option plan. Under the LTI plan, executives are entitled but not obliged to purchase the group
stock at a pre-specified price at some future date. The options are granted each year on the date of
the Board of Directors Human Resources Committee meeting following the performance year at which
the stock option awards are approved. Stock options vest in 4 equal instalments beginning the first
December 31 following the grant date and for the next three December 31 dates thereafter (25% per
year).
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(a)
Long-term incentive plan (continued)
Options are not exercisable after the expiration of 7 years from the date of grant. The number of stock
options in each stock option award is calculated based on the LTI opportunity via stock options
(percentage of applicable salary) divided by the Black-Scholes value of a stock option of Sagicor Group
Jamaica Limited stock on 31 March of the measurement year. The exercise price of the options is the
closing bid price on 31 March of the measurement year.
Details of the share options outstanding are set out in the following table. J$ represents Jamaica dollars.
2019
2018
Number of
options
‘000
Weighted
average
exercise
price
Number of
options
‘000
Weighted
average
exercise
price
Balance, beginning of year
14,614
J$13.60
Options granted
Options exercised
Options lapsed/forfeited
Balance, end of year
3,375
J$36.45
(7,174)
J$12.00
(1,215)
J$25.52
21,881
2,713
(8,321)
(1,659)
J$10.61
J$34.10
J$9.55
J$15.75
9,600
J$23.44
14,614
J$13.60
Exercisable at the end of the year
5,742
J$18.98
9,672
J$12.59
Further details of share options and the assumptions used in determining their pricing are as follows:
2019
2018
Fair value of options outstanding
J$30,190,000
J$24,080,000
Share price at grant date
Exercise price
J$7.11 – 36.45
J$7.11 - 34.10
J$7.11 – 36.45
J$7.11 - 34.10
Standard deviation of expected share price returns
27.0%
26.0%
Remaining contractual term
Risk-free interest rate
0.25 - 7 years
0.25 - 7 years
4.6%
6.5%
The expected volatility is based on statistical analysis of daily share prices over seven years.
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 30.2 Sagicor Group Jamaica Limited (continued)
(b) Employee share purchase plan
Sagicor Group Jamaica Limited 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 $2,017 (2018 – $821).
31 EMPLOYEE RETIREMENT BENEFITS
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 administrative
employees provide defined contribution benefits. The plans for administrative 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:
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.
31 EMPLOYEE RETIREMENT BENEFITS (continued)
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 (f) of this note relate only to defined benefit plans.
(a) Amounts recognised in the statement of financial position
2019
2018
Present value of funded pension obligations
316,471
283,525
Fair value of retirement plan assets
(326,582)
(285,172)
(10,111)
(1,647)
Present value of unfunded pension obligations
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
37,453
23,215
50,557
60,944
(1,347)
59,597
(9,040)
50,557
43,847
21,784
63,984
66,179
1,343
67,522
(3,538)
63,984
Pension plans have purchased annuities from insurers in the Group to pay benefits to plan retirees.
These obligations which amount to $36,490 (2018- $32,348) are included in actuarial liabilities in the
statement of financial position and are included as retirement plan assets in this note.
Funded Plans
Unfunded Plans
Present value of unfunded medical and life benefits
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229
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
31 EMPLOYEE RETIREMENT BENEFITS (continued)
(b) Movements in balances
2019
2018
Medical and
life benefits
Retirement
obligations
Retirement plan
assets
Total
Medical and
life benefits
Retirement
obligations
Retirement plan
assets
Total
Net liability / (asset), beginning of year
21,784
327,372
(285,172)
63,984
27,931
301,013
(257,893)
71,051
Current service cost
Interest expense / (income)
Past service cost and gains / losses on settlements
667
1,472
-
6,067
18,962
-
Net expense recognised in income
2,139
25,029
(Gains) / losses from changes in assumptions
(Gains) / losses from changes in experience
Return on plan assets excluding interest income
Change in asset ceiling excluding interest expense
/(income)
Net (gains) / losses recognised in other
comprehensive income
Contributions made by the Group
Contributions made by employees and retirees
Benefits paid
Other items
Effect of exchange rate movements
Other movements
-
(19,336)
(125)
(19,461)
(316)
(12,512)
25
201
6,734
1,098
(125)
7,707
(8,026)
(4,156)
25
(1,094)
1,415
2,136
-
3,551
6,115
(14,399)
-
-
5,911
18,945
764
25,620
9,695
(4,700)
-
-
-
(19,854)
-
(19,854)
(104)
638
4,480
(400)
7,326
1,227
764
9,317
15,706
(18,461)
4,480
(400)
(1,052)
(239)
-
-
(6,658)
8,595
-
(1,295)
(1,291)
642
(12,602)
(13,251)
(8,284)
4,995
4,614
1,325
-
-
-
6,980
(813)
(14,846)
-
1,396
583
5,857
2,890
881
(10,007)
(10,007)
(6,980)
14,794
(3,495)
(3,659)
(9,347)
-
(865)
2,362
627
(7,883)
-
-
(745)
-
(669)
(1,414)
-
6,322
(16,956)
9,917
(3,539)
(4,256)
(8,850)
(6,322)
16,528
(17,056)
3,661
(8,850)
-
(1,173)
(7,139)
(547)
(12,039)
(17,709)
Net liability / (asset), end of year
23,215
353,924
(326,582)
50,557
21,784
327,372
(285,172)
63,984
230
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
31 EMPLOYEE RETIREMENT BENEFITS (continued)
31 EMPLOYEE RETIREMENT BENEFITS (continued)
(c) Retirement plan assets
(d) Significant actuarial assumptions
2019
2018
The significant actuarial assumptions for the principal geographic areas as of December 31, 2019 were
as follows:
Equity unit linked pension funds under Group management:
Sagicor Equity Fund (Barbados)
Sagicor Bonds Fund (Barbados)
Sagicor Eastern Caribbean Fund (St. Lucia)
Sagicor Pooled Investment Funds (Jamaica):
Equity Funds
Mortgage & Real Estate Fund
Fixed Income Fund
Foreign Currency Funds
Money Market Fund
Other Funds
Other assets
Total plan assets
(39,155)
(21,706)
(3,624)
(80,993)
(33,196)
(21,443)
(25,290)
(1,865)
(39,216)
(23,113)
-
(63,823)
(35,757)
(16,347)
(23,030)
(2,383)
(10,212)
(13,196)
(237,484)
(216,865)
(89,098)
(68,307)
(326,582)
(285,172)
The equity unit linked pension funds are funds domiciled in Barbados and Jamaica. Annual reports of
these funds are available to the public.
Pension plans
Barbados &
Eastern
Caribbean
Jamaica
Trinidad
Discount rate - local currency benefits
7.75%
Discount rate - US$ indexed benefits
Expected return on plan assets
Future promotional salary increases
Future inflationary salary increases
Future pension increases
Future increases in National
Insurance Scheme Ceilings
n/a
7.75%
0.00%
2.00%
2.00%
3.50%
Mortality table
Termination of active members
Early retirement
UP94 with
projection scale
AA
3% - 18.40% up to
age 30, reducing
to 1 – 7.2% at age
50, 0% at age 51
100% at the
earliest possible
age to receive
unreduced
benefits
7.50%
5.00%
4.00%
9.00%
9.00%
0.50%
n/a
American 1994
Group Annuitant
Mortality (GAM
94) table with 5
year improvement
2% - 5.8% up to
age 30, to 3.8% -
5.8% at age 50,
2.7% - 3.8% at
age 51
n/a
5.00%
n/a
5.00%
0.00%
2.00%
0.00%
4.00%
UP94 with
projection scale
AA
3% up to age 30,
reducing to 1% at
age 50, 0% at age
51
100% at the
earliest possible
age to receive
unreduced
benefits
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231
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
31 EMPLOYEE RETIREMENT BENEFITS (continued)
31 EMPLOYEE RETIREMENT BENEFITS (continued)
Group medical and life plans
Barbados
Jamaica
(e) Sensitivity of actuarial assumptions
Long term increase in health costs
4.25%
5.00%
The sensitivity of the medical and life benefits obligations to individual changes in actuarial assumptions
is summarised below:
(e) Sensitivity of actuarial assumptions
Jamaica
The sensitivity of the pension retirement benefit obligations to individual changes in actuarial
assumptions is summarised below:
Base medical and life obligation
23,215
Barbados &
Eastern
Caribbean
Jamaica
Trinidad
Base pension obligation
91,216
210,451
14,804
Change in absolute assumption
Increase / (decrease) in pension obligations
Decrease discount rate by 1.0%
8,226
14,563
1,482
Increase discount rate by 1.0%
(6,525)
(10,987)
(1,026)
Decrease salary growth rate by 0.5%
Increase salary growth rate by 0.5%
Increase average life expectancy by 1 year
(561)
563
1,302
(2,306)
2,474
994
Decrease average life expectancy by 1 year
(1,968)
(1,035)
(238)
288
461
(188)
Change in absolute assumption
Decrease discount rate by 1.0%
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
Decrease average life expectancy by 1 year
Increase / (decrease) in medical
and life obligations
4,037
(3,189)
(115)
123
671
(678)
(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.
For the 2020 financial year, the total Group contributions to its defined benefits pension plans are
estimated at $14,146.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 32 INCOME TAXES
32 INCOME TAXES (continued)
Group companies are taxed according to the taxation rules of the countries where the operations are
carried out. The principal rates of taxation are summarised in note 2.18(c). The income tax expense is
set out in the following table.
Income tax on the total income subject to taxation differs from the theoretical amount that would arise
as follows:
Current tax:
Current tax on profits for the year
Adjustments to current tax of prior periods
Total current tax expense
Deferred tax:
Decrease/(increase) in deferred tax assets
(Decrease)/increase in deferred tax liabilities
Total deferred tax expense
Share of tax of associated companies
Total tax expense
2019
2018
37,968
42,213
(654)
(77)
37,314
42,136
7,879
13,986
21,865
2,417
5,774
8,191
531
375
59,710
50,702
2019
2018
Income before income tax expense
163,284
146,523
Taxation at the applicable rates on income subject to tax
60,546
61,406
Adjustments to current tax for items not subject to / allowed for
tax
(10,888)
(29,630)
Other current tax adjustments
Adjustments for current tax of prior periods
Movement in unrecognised deferred tax assets
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
Tax on distribution of profits from policyholder funds
Other taxes
(193)
(587)
5,330
(20)
1,505
229
42
3,746
59,710
(95)
162
15,207
(84)
1,252
(524)
1,341
1,667
50,702
In addition to the above, the income tax on items in other comprehensive income is set out in note 35.
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233
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
33 DEFERRED INCOME TAXES
33. DEFERRED INCOME TAXES (continued)
The analysis and movement for the year of deferred tax asset balances are set out in the following table.
Unrecognised tax losses and potential deferred income tax assets are as follows.
Defined
benefit
liabilities
Unrealised
losses on
financial
investments
Unused tax
losses
Other items
Total
Expiry period for
unrecognised tax losses:
2019
2020
2021
2022
2023
2024
2025
2026
No specified expiry date
2019
2018
-
24,763
19,882
71,162
87,442
60,566
64,077
79,220
559
27,571
24,863
20,164
71,162
79,622
55,627
62,371
-
-
Total unrecognised tax losses
407,671
341,380
Potential deferred income tax assets
25,442
19,514
2019
Balance, beginning of year
6,207
10,700
7,105
3,571
27,583
(Charged)/credited to:
Income
Other comprehensive income
Directly to equity
Amounts assumed on acquisition
Effect of exchange rate changes
Balance, end of year
Balance to be recovered within one year
2018
116
(868)
-
-
(242)
5,213
15
(6,122)
(1,888)
(11,869)
-
-
(433)
(1,587)
-
-
-
(288)
695
609
-
1
(120)
2,173
(7,879)
(12,128)
-
1
(1,083)
6,494
(464)
Balance, beginning of year
7,100
(574)
13,541
410
20,477
(Charged)/credited to:
Income
Other comprehensive income
Directly to equity
Amounts assumed on acquisition
Effect of exchange rate changes
Balance, end of year
Balance to be recovered within one year
622
(1,394)
-
34
(155)
6,207
(1,893)
13,056
-
-
111
10,700
(6,120)
-
-
-
(316)
7,105
4,974
(2,019)
191
-
15
(2,417)
9,643
191
34
(345)
3,571
27,583
1,984
234
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 33 DEFERRED INCOME TAXES (continued)
The analysis and movement for the year of deferred tax liability balances are set out in the following table.
2019
Balance, beginning of year
Charged/(credited) to:
Income
Other comprehensive income
Amounts assumed on acquisition
Effect of exchange rate changes
Balance, end of year
Balance to be settled within one year
2018
Balance, beginning of year
Charged/(credited) to:
Income
Other comprehensive income
Amounts assumed on acquisition
Effect of exchange rate changes
Balance, end of year
Balance to be settled within one year
Accelerated
tax
depreciation
Policy
liabilities
taxable in the
future
Defined
benefit assets
Accrued
interest
Unrealised
gains on
financial
investments
Off-settable tax
assets relating to
unused tax losses
and other items
Other Items
Total
3,106
48,046
325
1,128
1,302
(25,451)
502
28,958
259
113
134
109
6,647
(15,411)
-
-
3,721
39,282
1,666
32,431
104
-
1,704
(368)
3,106
9,048
6,567
-
-
48,046
(822)
1,184
(705)
1
(17)
334
-
37
(46)
-
325
177
-
195
1
1,309
23,859
759
14
3,317
-
-
-
3,099
(2,091)
34
58
1,501
27,243
(22,134)
1,602
1,111
10,646
(22,115)
123
-
(106)
-
126
(9,471)
-
1
(3,642)
(67)
373
-
1,128
1,302
(25,451)
399
15
-
-
88
502
13,986
7,654
417
183
51,198
13,274
24,472
5,774
(2,934)
1,925
(279)
28,958
7,618
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235
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
34 EARNINGS PER COMMON SHARE
Effective December 5, 2019, the date of completion of the transaction between Alignvest Acquisition II
Corporation and Sagicor Financial Corporation Limited, common shares not purchased for cash were
exchanged for common shares in Sagicor Financial Company Ltd. using an exchange ratio (note 1). In
the table below the prior year comparatives have been amended using the exchange ratio.
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). In computing diluted earnings
per share, the weighted average number of common shares is adjusted by the dilutive impacts of the
afore-mentioned share grants and options.
Income attributable to common shareholders
44,498
43,650
2019
2018
Weighted average number of shares in issue
(in thousands)
LTI restricted share grants (in thousands)
ESOP shares (in thousands)
Share warrants
Adjusted weighted average number of shares in issue
(in thousands)
Basic earnings per common share
Attributable to continuing operations
Attributable to discontinued operation
Fully diluted earnings per common share
Attributable to continuing operations
Attributable to discontinued operation
76,452
70,680
1,724
541
2,572
737
491
-
81,289
71,908
58.2¢
57.5¢
0.7¢
54.7¢
54.1¢
0.6¢
61.8¢
51.7¢
10.1¢
60.7¢
50.8¢
9.9¢
236
236
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 35 OTHER COMPREHENSIVE INCOME (OCI)
Analysis of OCI:
2019
After tax OCI is attributable to
2018
After tax OCI is attributable to
OCI tax
impact
Shareholders
Participating
policyholders
Non-
controlling
interests
Total after
tax OCI
OCI tax
impact
Shareholders
Participating
policyholders
Non-
controlling
interests
Total after
tax OCI
2,716
15,410
-
-
(18,203)
130,440
(12,691)
(83,392)
(7,569)
(281)
26,507
4,828
(1,253)
(4,223)
33,439
(6,430)
(7,384)
168,707
(20,374)
(94,999)
(70)
(9,002)
(16,641)
-
(2,931)
(718)
7,692
(3,212)
33,481
22,325
(1,702)
(6,567)
-
5
(57,961)
(6,436)
(18,467)
(82,864)
(138)
31,897
(7,123)
-
-
5,536
34
-
(1,753)
4,181
(1,891)
41,614
(18,096)
(25,185)
-
-
14,061
(33,325)
(866)
(34,135)
(68,326)
Items that may be reclassified
subsequently to income:
FVOCI assets:
Gains / (losses) arising on revaluation
(36,329)
(Gains) / losses transferred to income
Net change in actuarial liabilities
Retranslation of foreign currency
operations
Other
Items that will not be reclassified
subsequently to income:
Gains / (losses) arising on revaluation of
owner-occupied and owner-managed
property
Gains on equity securities designated at
FVOCI
Defined benefit plan gains / (losses)
474
1,514
-
9
(2,053)
(1,579)
8,660
10,183
-
-
-
-
(2,485)
(971)
695
3,655
9
2,538
62
18
11,198
10,245
-
36
(1,360)
(665)
(3,970)
(279)
-
-
-
-
3,239
6,894
37
1,285
4,561
73
(2,685)
4,282
Total OCI movements
(19,782)
36,690
(718)
7,754
43,726
13,396
(33,604)
(866)
(29,574)
(64,044)
Allocated to equity reserves
Allocated to retained earnings
28,030
8,660
36,690
(29,634)
(3,970)
(33,604)
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237
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
36 CASH FLOWS
36.1 Operating activities
Adjustments for non-cash items, interest and
dividends:
Income from financial investments
(464,010)
(316,076)
2019
2018
Loss / (gain) from disposal of interests in subsidiaries and
associates
Net increase in actuarial liabilities
Interest costs and finance costs
Credit impairment losses
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
379
(18,238)
484,783
174,425
97,825
4,877
35,506
4,532
8,312
172,204
89,032
95,519
24,277
8,655
8,061
65,655
1,253
2,563
(379,645)
(644,838)
(55,711)
(8,023)
(3,782)
(114,788)
6,772
9,808
(38,568)
(6,396)
147
(3,704)
(62,818)
(5,974)
9,506
130,961
(582,684)
(580,553)
36.1 Operating activities (continued)
The gross changes in investment property, debt securities and equity securities are as follows.
Investment property:
Purchases
Disposal proceeds
Debt securities:
Purchases
Disposal proceeds
Equity securities:
Purchases
Disposal proceeds
Net increase/(decrease) in operating liabilities:
Insurance liabilities
Investment contract liabilities
Other funding instruments
Deposits
Securities sold for re-purchase
Other liabilities and payables
2019
2018
(82)
1,335
1,253
(50)
2,613
2,563
(3,025,432)
(1,679,517)
2,645,787
1,034,679
(379,645)
(644,838)
(200,101)
144,390
(55,711)
(9,660)
36,643
(11,480)
43,841
97,583
(38,428)
118,499
(56,378)
49,982
(6,396)
15,716
14,429
186,063
81,371
(48,606)
(16,957)
232,016
238
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 36.2 Investing activities
Property, plant and equipment:
Purchases
Disposal proceeds
36.3 Financing activities
Notes and loans payable:
Proceeds
Repayments
36.4 Cash and cash equivalents
Cash
Call deposits, money market funds and other liquid
balances included in financial investments
Bank overdrafts
36.5 Lease liability payments (1)
Principal paid
Interest paid
2019
2018
(14,016)
(13,941)
6,523
(7,493)
13,615
(326)
2019
2018
196,147
(164,452)
31,695
1,380
(7,514)
(6,134)
2019
2018
273,072
261,899
508,918
61,820
(6,646)
775,344
(2,158)
321,561
2019
(4,225)
(1,316)
(5,541)
(1) For 2019, lease liability payments are allocated between principal and interest in conformity
with IFRS 16.
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239
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
37 CHANGES IN SUBSIDIARY AND ASSOCIATE HOLDINGS
37.1 Advantage General Insurance Company Limited (AGI)
Effective September 30, 2019, the Group acquired 60% of the share capital of Advantage General
Insurance Company Limited.
37.1 Advantage General Insurance Company Limited (AGI) (continued)
The acquiree’s net income and total revenue are as follows:
Total Revenue
Net Income
43,222
10,973
4,364
1,076
Details of the net assets acquired, purchase consideration and goodwill, determined on a provisional
basis, were as follows:
For the year ended December 31, 2019
Consolidated from October 1, 2019 to December 31, 2019
37.2 Bailey Williams Limited
On November 30, 2019, Sagicor Life Jamaica Limited purchased 70% of the issued share capital of
Bailey Williams Limited. The transaction was accounted for an asset purchase, as at the time of the
acquisition, Bailey Williams was not a business, as defined by IFRS 3. In accounting for the asset
purchase, the purchase consideration for the shares was allocated among the identifiable assets in
proportion to their relative fair values. There was no fair valuation of the identifiable assets which were
recognised on acquisition. As stipulated by IFRS 3 for asset acquisitions, no goodwill or negative goodwill
was recognised. Non-controlling interest in the transaction was determined by reference to the non-
controlling interest’s proportionate share of the value of the assets recognised. This was a related party
transaction.
Fair Value
5,530
8,663
7,226
62,811
7,793
3,027
8,916
1,847
(49,367)
(5,945)
(1,515)
(416)
(9,597)
38,973
23,383
31,178
7,795
Net assets acquired:
Investment property (note 5)
Property, plant and equipment (note 7)
Intangible assets
Financial investments
Reinsurance assets
Income tax assets
Miscellaneous assets and receivables
Cash resources
Other insurance liabilities
Deposit and security liabilities
Other liabilities / Retirement benefit liabilities
Income tax liabilities
Accounts payable and accrued liabilities
Total net assets
Share of net assets acquired
Purchase consideration
Goodwill arising on acquisition (note 8)
240
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 37.2 Bailey Williams Limited (continued)
37.3 Disposal of insurance portfolios
Details of the net assets acquired and the purchase consideration, determined on a provisional basis,
were as follows:
2019
Net assets acquired:
Income tax assets
Land developed for resale
Cash resources
Deposit and security liabilities
Accounts payable and accrued liabilities
Total net assets
Purchase consideration
Non-controlling interest
1
5,329
7
(352)
(49)
4,936
3,455
1,481
4,936
On April 8, 2019, the Group disposed of its insurance portfolios in the territories of Anguilla, Montserrat
and St Maarten. The disposal was concluded by contractual agreement and transferred assets to the
purchaser in exchange for the assumption of the insurance liabilities by the purchaser. The Group
recorded a loss on the sale of these branches of $379.
The net loss recorded by the Group in its consolidated statement of income for the period to sale in
2019 and for the year ended December 2018 is as follows:
Total net loss
Loss attributable to shareholders
St Maarten
Anguilla
Montserrat
Period to
April 8, 2019
Year to
December 31, 2018
(589)
(589)
(364)
(61)
(164)
(589)
(795)
(795)
(932)
238
(101)
(795)
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241
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
37.4 Sagicor Real Estate X Fund Limited
37.4 Sagicor Real Estate X Fund Limited (continued)
Certain events took place on October 1, 2018 which deemed Sagicor Group Jamaica (SGJ) to have
taken effective control of Sagicor Real Estate X Fund Limited and its subsidiaries (the Sagicor X Fund
Group) with its 29.31% interest. As required by IFRS 10 – Consolidation of Financial Statements, the
events triggered the accounting for Sagicor X Fund Group to be changed from an associate to a
subsidiary, using Step-Acquisition for full consolidation.
Step 1 - The carrying value of the investment in Sagicor X Fund Group on SGJ’s balance sheet as at
September 30, 2018 was compared to the SGJ’s share of the market value of Sagicor X Fund Group
using the listed share price (deemed proceeds) along with recycling of currency translation reserves in
OCI of SGJ relating to Sagicor X Fund Group as an associate. The accumulated unrealized fair value
amount for revaluation of the owner-occupied property of the associate in the SGJ’s books was also
transferred from OCI to retained earnings.
Step 2 – SGJ then recorded the net identifiable assets and liabilities, at fair value, of Sagicor X Fund
Group as a subsidiary and compared its share (new deemed proceeds) to the new carrying value of
the investment in subsidiary. The non-controlling interest amount was adjusted accordingly.
These transactions gave rise to a net gain on disposal of the associate of $11,832, an identifiable
intangible asset of $2,680 and a goodwill amount of $9,584 on acquisition of the subsidiary in SGJ’s
books. Computations for the two steps are set in the following table:
Step 1: Deemed disposal of associate
Net realized gain on the step acquisition:
Fair value of SGJ’s holding in Sagicor X Fund Group as at September 30, 2018
Carrying value of investment in X Fund as an Associate on Balance Sheet of
SGJ as at September 30, 2018
2018
68,684
(59,914)
The accumulated unrealised revaluation gain of $5,645 for the associate in the owner-occupied property
reserve in OCI was transferred to retained earnings.
Step 2: Summary net assets acquired
Fair Value
Investment property (note 5)
Property, plant and equipment
Investment in associated companies (note 6)
Intangible assets (note 8)
Financial investments
Miscellaneous assets and receivables
Cash resources
Notes and loans payable
Income tax liabilities
Accounts payable and accrued liabilities
Non-controlling interest
Total net assets
Share of net assets acquired
Purchase consideration
Goodwill arising on acquisition (note 8)
16,444
119,939
200,853
2,680
10,005
17,821
16,153
(81,228)
(8,439)
(13,867)
(78,719)
201,642
59,100
68,684
9,584
The Sagicor X Fund Group total revenue and net income were as follows:
Revenue
Net Income
56,453
17,541
2,878
7,404
Recycle of accumulated unrealized gains from investment in Sagicor X Fund
Group as an associate.
8,770
For the year ended December 31, 2018
Consolidated from September 1, 2018 to December 31, 2018
Currency translation reserves
Total gain on deemed disposal of associate
3,062
11,832
242
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
37.5 Travel Cash Jamaica Limited
37.6 Harmony General Insurance Company Ltd. (HG)
Effective December 1, 2018, the Sagicor Jamaica group acquired 51% of the share capital of
Travel Cash Jamaica Limited. The summary net assets acquired were as follows
2018
Fair Value
On September 1, 2018 the Sagicor General Insurance Inc. acquired 100% of the shareholding of HG,
a property and casualty insurer incorporated and operating in Barbados. The acquisition was by way of
legal amalgamation, and the amalgamated entity continuing as Sagicor General Insurance Inc. The
summary net assets acquired were as follows:
Net assets acquired:
Property, plant and equipment
Intangible assets (note 8)
Financial investments
Deposit and security liabilities
Total net assets
Share of net assets acquired
Purchase consideration
Goodwill arising on acquisition (note 8)
The acquiree’s net income and total revenue are as follows:
5
1,159
3,054
(1,167)
3,051
1,556
3,034
1,478
For the year ended December 31, 2018
Consolidated from December 1 to 31, 2018
Revenue
Net income
147
147
88
88
Net assets acquired:
Property, plant and equipment
Intangible assets
Financial investments
Reinsurance assets
Income tax assets
Miscellaneous assets and receivables
Cash resources
Other insurance liabilities
Other liabilities / Retirement benefit liabilities
Income taxes
Accounts payable and accrued liabilities
Total net assets
Share of net assets acquired
Purchase consideration
Goodwill arising on acquisition (note 8)
Fair Value
16
1,732
4,377
3,833
34
2,584
2,051
(9,611)
(117)
150
(1,695)
3,354
3,354
4,750
1,396
99
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243
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
37.6 Harmony General Insurance Company Ltd. (HG) (continued)
38 DISCONTINUED OPERATION
The acquiree’s net income and total revenue are as follows:
Total
Revenue
Net Income
/ (Loss)
On July 29, 2013, SFCL 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.
For the eight months January 1, 2018 to August 31, 2018
4,846
(5,854)
The operations of the Sagicor Europe operating segment are presented as discontinued operations in
these financial statements.
37.7 Globe Finance Inc.
On September 4, 2018 the Sagicor Group divested its 51% holding in Globe Finance Inc.
The terms of the sale required SFCL to take certain actions and provide certain commitments which
included future price adjustments to the consideration up to December 31, 2018, 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.
The net (loss) / income of Globe Finance Inc. for the period to sale in 2018 and for the year ended
December 2017 were as follows:
Movement in Price Adjustments
Period to
September 4,
2018
Year to
December 31,
2017
Total net (loss) / income from Globe Finance Inc
Income attributable to shareholders
(2,953)
(1,772)
190
114
37.8 Ownership Changes – Sagicor General Inc
Effective November 23, 2018 Sagicor Life Inc acquired the 45% interest held by Goddard Enterprises
Ltd in Sagicor General Inc for a cash payment. The payment made by the company amounted to
$12,673 resulting in a transfer to retained earnings of $3,092. The net loss and other movements in
equity are disclosed in the consolidated statement of equity.
Balance receivable, beginning of year
Payment received
Experience gain
Net currency movements
Receivable, end of year
2019
(17,239)
17,756
-
(517)
-
2018
(10,110)
-
(7,801)
672
(17,239)
The price adjustments were subject to a limit based on the terms of the agreement. These results were
subject to further underwriting, investment and foreign currency adjustments constrained by the limit as
the experience develops.
The net gain / (loss) recognised in the statement of income is as follows.
As a consequence of this transaction the Group increased its total interest in Sagicor General Inc from
53% to 98%.
Currency translation gain / (loss)
Movement in price adjustment
Net gain and total comprehensive gain
244
244
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2019
517
-
517
2018
(672)
7,801
7,129
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 38 DISCONTINUED OPERATION (continued)
Cash Flows
Net Cash flows - Operating Activities
2019
17,756
2018
-
On February 12, 2019, Sagicor Financial Corporation Limited completed a review of the consideration,
related to the price adjustments to December 31, 2018, and entered into a Deed of Release with
AmTrust to close this exposure. The final settlement amount of £13.5 million was received on
February 26, 2019.
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:
2019
2018
39. CONTINGENT LIABILITIES (continued)
(a) Legal proceedings (continued)
Significant matters are outlined below:
(i) Suit has been filed by a customer against one of the Group’s subsidiaries for breach of contract,
and breach of trust in the amount of US$8,928 being loss allegedly suffered as a result of what
the claimants say is the unlawful withholding of insurance proceeds by the subsidiary. No
provision was made in these financial statements for this claim as the outcome of this matter
cannot be properly assessed until it has been heard.
(ii) Suit has been filed by an independent contractor against one of the Group’s subsidiaries for
breach of contract arising from alleged contractual agreement. The Claimant alleges that the
company failed to pursue initiatives contemplated by the contract with a third party and that by
not doing so, it caused the Claimant company significant losses which they have estimated at
over US$300,000. No provision was made in these financial statements for this claim as the claim
has been stayed to accommodate arbitration as required under the Agreement between the
parties coupled with the assessment by the Group of a probable favourable outcome.
Customer guarantees and letters of credit (1)
34,769
35,297
(b) Tax assessments
(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
The Group is subject to various claims, disputes and legal proceedings, as part of the normal course
of business. Provision is made for such matters when, in the opinion of management and its
professional advisors, it is probable that a payment will be made by the Group, and the amount can
be reasonably estimated.
In respect of claims asserted against the Group which, according to the principles outlined above,
have not been provided for, management is of the opinion that such claims are either without merit,
can be successfully defended, cannot be reasonably estimated or will result in exposure to the Group
which is immaterial to both the financial position and results of operations.
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.
101
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245
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
40 FAIR VALUE OF PROPERTY
40 FAIR VALUE OF PROPERTY (continued)
Investment property, owner-occupied property and owner-managed hotel 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.
For Level 3 investment property, reasonable changes in fair value would affect net income. For
Level 3 owner-occupied properties and owner-manged hotel properties, reasonable changes in
fair value would affect other comprehensive income. The movements for the year in investment
property, owner-occupied properties and owner-managed hotel properties are set out in notes 5
and 7.
41 FINANCIAL RISK
The Group’s activities of issuing insurance contracts, of accepting funds from depositors, of
investing insurance premium and deposit receipts in a variety of 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.
Disclosures in this note, notes 42 and 43, exclude amounts of the discontinued operation.
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 are as follows:
2019
Investment property
Owner-occupied properties
Owner-managed hotel properties
2018
Investment property
Owner-occupied properties
Owner-managed hotel properties
Level 1
Level 2
Level 3
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
95,577
95,577
110,172
110,172
96,608
96,608
302,357
302,357
93,494
93,494
104,629
104,629
98,974
98,974
297,097
297,097
246
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102
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 41.1 Credit risk
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 associated primarily with financial
investments and reinsurance assets.
41.1 Credit risk (continued)
Renegotiated assets
Credit risk from financial investments is minimised through:
• holding a diversified portfolio of investments;
• purchasing quality securities;
• advancing loans only after careful assessment of the borrower and obtaining collateral;
• placing deposits with financial institutions with a strong capital base;
• placing limits on the amount of exposure in relation to any one borrower;
• obtaining collateral and guarantees from borrowers.
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.
For mortgage loans, the collateral is real estate property, and the approved loan limit is 75% 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 50% to 100% of the collateral value. Unsecured
finance loans and finance leases are only granted when the initial amount is less than $4,900.
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.
Rating of financial assets
The Group’s credit rating model (note 3.1) applies a rating scale to three categories of exposures:
• Investment portfolios, comprising debt securities, deposits, securities purchased for re-sale, and
cash;
• 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).
For lending portfolios, the three default ratings of 8, 9 and 10 are utilised, while for investment portfolios
and reinsurance assets, one default rating (8) is utilised.
The Group may foreclose on overdue mortgage loans and finance loans and finance leases by
repossessing the pledged asset. The Group will seek to dispose of the pledged asset by sale. In some
instances, the Group may provide re-financing to a new purchaser on customary terms.
In sections 41.2, 41.3 and 41.4, we set out for the Group its credit risk exposures and credit
impairments.
Policy loans are advanced on the security of the underlying insurance policy cash values. Cash loans
are advanced to a maximum of 80% to 100% of the cash surrender value. Automatic premium loans
may be advanced to the extent of available cash surrender value.
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247
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.2 Credit risk exposure (continued)
The total credit risk exposures of the Group by operating segment is as follows:
2019
2018
Sagicor
Life
Sagicor
Jamaica
Sagicor
USA
Head
office &
other
Total
Sagicor
Life
Sagicor
Jamaica
Sagicor
USA
Head
office &
other
Total
Investment portfolios
Lending portfolios
Cash
Reinsurance assets
Receivables
1,045,244
1,697,644
1,770,475
513,997
5,027,359
1,070,908
1,620,107
1,379,293
368,576
88,905
6,968
39,480
681,736
189,433
4,752
74,598
82,652
40,236
679,605
17,685
42,894
8,084
6,546
15,473
1,150,649
361,468
699,409
136,097
36,891
368,026
102,506
5,351
20,354
-
589,819
187,471
4,611
59,474
247
68,322
36,208
677,077
4,100
7,449
63,581
18,386
32,502
12,831
15,836
-
4,133,889
1,044,553
358,687
699,870
99,764
7,696
Derivative financial assets
-
264
36,627
-
Total financial statement exposures
1,549,173
2,648,426
2,616,141
598,133
7,411,873
1,567,145
2,461,729
2,172,449
143,136
6,344,459
Lending commitments
Customer guarantees and letters of credit
Total off financial statement exposures
24,314
-
24,314
54,392
34,769
89,161
-
-
-
-
-
-
78,706
34,769
113,475
7,867
-
7,867
54,629
35,297
89,926
-
-
-
-
-
-
62,496
35,297
97,793
Total
1,573,487
2,737,587
2,616,141
598,133
7,525,348
1,575,012
2,551,655
2,172,449
143,136
6,442,252
248
248
Sagicor Financial Company Ltd | 2019 Annual Report
Sagicor Financial Company Ltd | 2019 Annual Report
104
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 41.2 Credit risk exposure (continued)
41.2 Credit risk exposure (continued)
The principal individual credit exposures of the Group are as follows:
Gov’t of Jamaica debt securities
Gov’t of Trinidad & Tobago debt securities
Gov’t of Barbados debt securities
(note 41.4 (g) & (h))
Federal National Mortgage Association (USA)
debt securities
Guggenheim Partners reinsurance asset
(note 41.4 (e))
Heritage Life Insurance reinsurance asset
(note 41.4 (f))
Sagicor
Risk
Rating
5
3
5
1
2
3
2019
2018
1,069,946
237,384
913,520
189,829
234,261
231,521
153,395
127,430
458,483
464,231
For assets measured at FVOCI or amortised cost, credit risk exposure is the gross carrying amount.
For assets measured at FVTPL, the Group’s credit risk exposure is the carrying amount. The
components of investment and lending portfolios by accounting classification are summarised below.
Investment portfolios:
Debt securities and money market funds at FVOCI
3,558,991
2,717,688
2019
2018
Debt securities at amortised cost
Securities purchased for resale
Deposits at amortised cost
Debt securities at FVTPL
Deposits at FVTPL
1,151,247
1,100,897
10,904
63,110
243,107
-
7,170
107,527
198,807
8
5,027,359
4,132,097
364,439
605,547
151,730
28,933
339,400
527,854
147,156
30,143
1,150,649
1,044,553
150,726
141,552
Lending portfolios:
Mortgage loans at amortised cost
Finance loans and finance leases at amortised cost
Policy loans at amortised cost
Mortgage loans at FVTPL
105
Sagicor Financial Company Ltd | 2019 Annual Report
Sagicor Financial Company Ltd | 2019 Annual Report
249
249
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.2 Credit risk exposure (continued)
Credit risk exposure – financial investments subject to impairment
Financial assets carried at amortised cost or FVOCI are subject to credit impairment losses which are recognised in the statement of income. The following tables analyse the credit risk exposure of financial
investments as at December 31 for which an ECL allowance is recognised.
Debt securities and money market funds – FVOCI
Debt securities – FVOCI
2019
ECL Staging
2018
ECL Staging
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
December 31:
Credit grade:
Investment
Non-investment
Watch
Default
2,780,003
4,085
678,149
66,421
-
-
189
-
Gross carrying amount
3,458,152
70,695
Loss allowance
Carrying amount
(2,484)
(5,734)
3,455,668
64,961
-
-
-
-
-
1
1
-
2,784,088
2,110,188
30,144
774,714
455,988
-
-
189
-
-
-
18,447
78,786
-
-
30,144
3,558,991
2,566,176
97,233
-
30,812
-
23,467
54,279
-
(8,217)
(1,646)
(8,011)
(19,555)
30,144
3,550,774
2,564,530
89,222
34,724
-
-
-
-
-
-
-
2,128,635
565,586
-
23,467
2,717,688
(29,212)
2,688,476
250
250
Sagicor Financial Company Ltd | 2019 Annual Report
Sagicor Financial Company Ltd | 2019 Annual Report
106
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 41.2 Credit risk exposure – financial investments subject to impairment (continued)
Debt securities – amortised cost
Debt securities – amortised cost
2019
ECL Staging
2018
ECL Staging
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
236,049
751,032
670
-
573
-
3,218
1,337
-
-
988,324
4,555
(1,378)
(759)
986,946
3,796
-
-
-
-
-
-
-
-
-
236,049
213,244
152,799
907,049
717,965
5,547
7,554
639
-
22
-
595
-
-
-
8,369
3,783
-
-
-
10
-
788
-
577
213,821
149,594
875,938
5,928
10,350
-
-
788
-
158,368
1,151,247
931,848
12,152
798
156,099
1,100,897
(371)
(2,508)
(1,855)
(1,228)
(161)
(612)
(3,856)
157,997
1,148,739
929,993
10,924
637
155,487
1,097,041
December 31:
Credit grade:
Investment
Non-investment
Watch
Default
Unrated
Gross carrying amount
Loss allowance
Carrying amount
107
Sagicor Financial Company Ltd | 2019 Annual Report
Sagicor Financial Company Ltd | 2019 Annual Report
251
251
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.2 Credit risk exposure – financial investments subject to impairment (continued)
Mortgage loans – amortised cost
Mortgage loans – amortised cost
2019
ECL Staging
2018
ECL Staging
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
December 31:
Credit grade:
Investment
210,652
19,929
388
Non-investment
89,906
17,710
2,563
Watch
Default
89
-
1,127
12,400
-
9,675
Gross carrying amount
300,647
38,766
25,026
Loss allowance
Carrying amount
(611)
(339)
(942)
300,036
38,427
24,084
-
-
-
-
-
-
-
230,969
210,885
110,179
86,713
9,673
6,861
28
811
13,616
9,675
48
-
545
12,597
-
11,239
364,439
297,646
17,079
24,675
(1,892)
(625)
(283)
(1,472)
362,547
297,021
16,796
23,203
-
-
-
-
-
-
-
220,586
94,385
13,190
11,239
339,400
(2,380)
337,020
252
252
Sagicor Financial Company Ltd | 2019 Annual Report
Sagicor Financial Company Ltd | 2019 Annual Report
108
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 41.2 Credit risk exposure – financial investments subject to impairment (continued)
Policy loans – amortised cost
Policy loans – amortised cost
2019
ECL Staging
2018
ECL Staging
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
144,556
7,174
151,730
(197)
151,533
-
-
-
-
-
-
-
-
-
-
-
--
-
-
-
144,556
7,174
79,658
67,498
151,730
147,156
(197)
(110)
151,533
147,046
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
79,658
67,498
147,156
(110)
147,046
December 31:
Credit grade:
Investment
Non-investment
Gross carrying amount
Loss allowance
Carrying amount
109
Sagicor Financial Company Ltd | 2019 Annual Report
Sagicor Financial Company Ltd | 2019 Annual Report
253
253
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.2 Credit risk exposure – financial investments subject to impairment (continued)
Finance loans – amortised cost
Finance loans and finance leases – amortised cost
2019
ECL Staging
2018
ECL Staging
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
1,444
-
578,412
10,927
1,444
1,519
-
589,339
495,580
12,291
2,048
-
-
-
12,716
2,048
12,716
-
-
2,942
-
15,522
605,547
497,099
15,233
15,522
(10,240)
(4,441)
(1,196)
(7,731)
595,307
492,658
14,037
7,791
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,519
507,871
2,942
15,522
527,854
(13,368)
514,486
December 31:
Credit grade:
Investment
Non-investment
Watch
Default
Gross carrying amount
579,856
12,975
12,716
Loss allowance
Carrying amount
(3,757)
(729)
(5,754)
576,099
12,246
6,962
254
254
Sagicor Financial Company Ltd | 2019 Annual Report
Sagicor Financial Company Ltd | 2019 Annual Report
110
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 41.2 Credit risk exposure – financial investments subject to impairment (continued)
Securities purchases for resale – amortised cost
Securities purchases for resale – amortised cost
2019
ECL Staging
2018
ECL Staging
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
10,904
10,904
-
10,904
-
-
-
-
-
-
-
-
-
-
-
-
10,904
10,904
-
7,170
7,170
-
10,904
7,170
-
-
-
-
-
-
-
-
-
-
-
-
7,170
7,170
-
7,170
December 31:
Credit grade:
Non-investment
Gross carrying amount
Loss allowance
Carrying amount
111
Sagicor Financial Company Ltd | 2019 Annual Report
Sagicor Financial Company Ltd | 2019 Annual Report
255
255
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.2 Credit risk exposure – financial investments subject to impairment (continued)
Deposits – amortised cost
Deposits – amortised cost
2019
ECL Staging
2018
ECL Staging
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
35,977
25,367
716
433
62,493
(261)
62,232
-
246
371
-
617
(51)
566
-
-
-
-
-
-
-
-
-
-
-
-
-
-
35,977
25,613
1,087
433
72,335
34,169
222
430
63,110
107,156
(312)
(355)
62,798
106,801
-
1
370
-
371
(64)
307
-
-
-
-
-
-
-
-
-
-
-
-
-
-
72,335
34,170
592
430
107,527
(419)
107,108
December 31:
Credit grade:
Investment
Non-investment
Watch
Unrated
Gross carrying amount
Loss allowance
Carrying amount
256
256
Sagicor Financial Company Ltd | 2019 Annual Report
Sagicor Financial Company Ltd | 2019 Annual Report
112
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 41.3 Credit impairment losses – financial investments subject to impairment
The allowance for ECL is recognised in each reporting period and is impacted by a variety
of factors, as described below:
•
•
•
•
•
Transfers between stages due to financial instruments experiencing significant
increases (or decreases) of credit risk or becoming credit-impaired during the
period;
Additional allowances for new financial instruments recognised during the
period, as well as releases for financial instruments de-recognised in the period;
Impact on the measurement of ECL due to inputs used in the calculation
including the effect of ‘step-up’ (or ‘step down’) between 12-month and life-time
ECL;
Impacts on the measurement of ECL due to changes made to models and
assumptions; and
Foreign exchange retranslations for assets denominated in foreign currencies
and other movements;
113
Sagicor Financial Company Ltd | 2019 Annual Report
Sagicor Financial Company Ltd | 2019 Annual Report
257
257
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.3 Credit impairment losses – financial investments subject to impairment (continued)
LOSS ALLOWANCES
Debt securities and money market funds – FVOCI
Debt securities – FVOCI
2019
ECL Staging
2018
ECL Staging
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Loss allowance, beginning of year
1,646
8,011
19,555
Transfers:
Stage 1 to Stage 2
Stage 1 to Stage 3
Stage 2 to Stage 1
Stage 2 to Stage 3
Securities originated or purchased
(70)
-
2
-
1,695
70
-
(2)
-
-
-
-
-
-
-
Securities fully derecognised
(609)
(3,481)
(19,257)
Write-offs
(9)
-
-
Changes in ECL inputs, models and / or
assumptions
(138)
1,251
(15)
Effect of exchange rate changes
(33)
(116)
(283)
Loss allowance, end of year
2,484
5,733
-
Credit impairment (loss) recorded in income
-
-
-
-
-
-
-
-
-
-
-
258
258
Sagicor Financial Company Ltd | 2019 Annual Report
Sagicor Financial Company Ltd | 2019 Annual Report
114
29,212
2,780
8,863
95
-
-
-
-
(54)
(759)
-
-
54
-
-
-
759
-
(1,303)
1,303
1,695
445
259
(23,347)
(581)
(1,832)
-
-
(92)
-
(163)
2,016
17,416
(22)
(46)
74
1,646
8,011
19,555
(9)
1,098
(432)
8,217
(3,626)
-
-
-
-
-
-
-
-
-
-
-
11,738
-
-
-
-
704
(2,505)
-
19,269
6
29,212
(17,697)
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 41.3 Credit impairment losses – financial investments subject to impairment (continued)
LOSS ALLOWANCES
Debt securities – amortised cost
Debt securities – amortised cost
2019
ECL Staging
2018
ECL Staging
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Loss allowance, beginning of year
1,855
1,228
161
612
3,856
1,928
8,581
Transfers:
Stage 1 to Stage 2
Stage 1 to Stage 3
Stage 2 to Stage 3
Securities originated or purchased
Securities fully derecognised
Changes in ECL inputs, models and / or
assumptions
Effect of exchange rate changes
Loss allowance, end of year
Credit impairment reduction in loss / (loss)
recorded in income
(12)
(108)
-
323
(152)
(505)
(23)
1,378
-
-
78
276
-
917
11,426
-
-
-
-
-
-
78
1,039
12
-
-
-
-
108
-
-
(51)
(270)
-
-
-
-
4
-
-
-
323
(469)
-
(78)
-
961
-
-
(276)
-
(657)
(7,502)
(1,173)
(65)
(9,397)
(429)
(1)
759
1
-
-
(245)
(1,178)
-
(24)
(281)
(18)
425
-
371
2,508
1,855
1,228
980
-
161
1,815
(318)
-
806
(18)
612
3,856
(72,179)
115
Sagicor Financial Company Ltd | 2019 Annual Report
Sagicor Financial Company Ltd | 2019 Annual Report
259
259
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.3 Credit impairment losses – financial investments subject to impairment (continued)
LOSS ALLOWANCES
Mortgage loans – amortised cost
Mortgage loans – amortised cost
2019
ECL Staging
2018
ECL Staging
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Loss allowance, beginning of year
625
283
1,472
Transfers:
Stage 1 to Stage 2
Stage 1 to Stage 3
Stage 2 to Stage 1
Stage 2 to Stage 3
Stage 3 to Stage 2
Stage 3 to Stage 1
Loans originated or purchased
Loans fully derecognised
Changes in ECL inputs, models and / or
assumptions
Effect of exchange rate changes
Loss allowance, end of year
Credit impairment (loss) recorded in income
(193)
(314)
97
-
-
145
580
50
(377)
(2)
611
193
-
(97)
(20)
46
-
-
(112)
48
(2)
339
-
314
-
20
(46)
(145)
-
(525)
(115)
(33)
942
-
-
-
-
-
-
-
-
-
-
-
-
2,380
941
309
1,149
(274)
(630)
101
-
-
4
107
(140)
516
-
625
274
-
(101)
(109)
10
-
18
(60)
(56)
(2)
283
-
630
-
109
(10)
(4)
85
(78)
(394)
(15)
1,472
-
-
-
-
-
-
580
(587)
(444)
(37)
1,892
(219)
-
-
-
-
-
-
-
-
-
-
-
-
2,399
-
-
-
-
-
-
210
(278)
66
(17)
2,380
(726)
260
260
Sagicor Financial Company Ltd | 2019 Annual Report
Sagicor Financial Company Ltd | 2019 Annual Report
116
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 41.3 Credit impairment losses – financial investments subject to impairment (continued)
LOSS ALLOWANCES
Policy loans – amortised cost
Policy loans – amortised cost
2019
ECL Staging
2018
ECL Staging
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Loss allowance, beginning of year
Changes in ECL inputs, models and / or
assumptions
Effect of exchange rate changes
Loss allowance, end of year
Credit impairment (loss) recorded in income
110
91
(4)
197
-
-
-
-
-
-
-
-
-
-
-
-
110
91
(4)
197
(92)
-
109
1
110
-
-
-
-
-
-
-
-
-
-
-
-
-
109
1
110
(109)
117
Sagicor Financial Company Ltd | 2019 Annual Report
Sagicor Financial Company Ltd | 2019 Annual Report
261
261
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.3 Credit impairment losses – financial investments subject to impairment (continued)
LOSS ALLOWANCES
Finance loans – amortised cost
Finance loans and finance leases – amortised cost
2019
ECL Staging
2018
ECL Staging
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Loss allowance, beginning of year
4,441
1,196
7,731
Transfers:
Stage 1 to Stage 2
Stage 1 to Stage 3
Stage 2 to Stage 1
Stage 2 to Stage 3
Stage 3 to Stage 2
Stage 3 to Stage 1
Loans / leases originated or purchased
Loans / leases fully derecognised
Write-offs
Changes in ECL inputs, models and / or
assumptions
Effect of exchange rate changes
Loss allowance, end of year
Credit impairment (loss) recorded in income
262
262
Sagicor Financial Company Ltd | 2019 Annual Report
Sagicor Financial Company Ltd | 2019 Annual Report
118
-
-
41
2,240
(862)
-
(1,470)
(147)
3,757
(299)
(530)
299
-
343
(343)
-
530
-
76
-
(41)
-
(76)
-
-
-
(374)
(2,698)
-
70
(43)
729
-
428
(272)
5,754
-
-
-
-
-
-
-
-
-
-
-
-
-
13,368
6,113
1,427
8,295
-
-
-
-
-
-
(248)
(26)
332
-
-
32
248
-
(332)
(256)
11
-
-
26
256
(11)
(32)
2,240
1,740
189
1,048
(3,934)
(2,071)
(735)
(2,611)
-
-
(1,316)
(115)
(1)
668
(23)
-
902
(142)
4,441
1,196
7,731
(972)
(462)
10,240
(2,865)
-
-
-
-
-
-
-
-
-
-
-
-
-
15,835
-
-
-
-
-
-
2,977
(5,417)
(1)
254
(280)
13,368
(4,939)
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 41.3 Credit impairment losses – financial investments subject to impairment (continued)
LOSS ALLOWANCES
Deposits – amortised cost
Deposits – amortised cost
2019
ECL Staging
2018
ECL Staging
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Loss allowance, beginning of year
355
64
Transfers:
Stage 1 to Stage 2
Deposits originated or purchased
(51)
121
51
-
Deposits fully derecognised
(224)
(65)
Changes in ECL inputs, models and / or
assumptions
Loss allowance, end of year
Credit impairment reduction in loss recorded in
income
60
261
1
51
-
-
-
-
-
-
-
-
-
-
-
-
419
506
51
-
121
-
294
(289)
(387)
(58)
355
61
312
110
-
-
-
13
64
-
-
-
-
-
-
-
-
-
-
-
-
557
-
294
(387)
(45)
419
131
119
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Sagicor Financial Company Ltd | 2019 Annual Report
263
263
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.3 Credit impairment losses – financial investments subject to impairment
41.3 Credit impairment losses – financial investments subject to impairment (continued)
(a) Economic variable assumptions
(a) Economic variable assumptions
During the year updates were made to the regression models. With the exception of the
utility and energy sector, the macroeconomic indicators for all sectors were updated to
produce regressions which are better fitted to explain the relationship between the
respective default rates and the macroeconomic variables.
The GBP USD and NZD USD currency pairs were introduced to enhance the explanation
of the default rates in the respective sectors. This was considered critical since currency
risk and sovereign risk vary among currency pairs and currency shocks can result in major
losses for companies and impact their ability to satisfy their debt and consequently result in
defaults.
In addition to the currency pairs, it is noted that market indices such as the S&P 500
Financial Index and the Dow Jones Industrial Average Index have demonstrated a stronger
correlation to the performance of our investments in the financial and industrial sectors.
The inclusion of the additional variables in the model has improved the robustness of the
model.
A comparison of the sensitivity analyses using the old and updated models produced,
especially for the financial sector, a more reliable and supportable fit between the default
rate and the macroeconomic variables.
Sagicor has selected eight economic factors which provide the overall macroeconomic environment in
considering forward looking information for base, upside and downside forecasts. These are as follows:
As of December 31, 2019
As of December 31, 2018
2020
2021
2022
2019
2020
2021
1.6%
2.2%
1.2%
3.4%
5.0%
2.5%
$5.62
$9.47
$3.45
1.8%
2.5%
1.4%
3.6%
5.3%
2.7%
$5.32
$9.47
$3.27
1.9%
2.5%
1.3%
3.6%
5.3%
2.7%
-
-
-
-
-
-
-
-
-
3.7%
5.4%
2.8%
3.7%
5.4%
2.8%
3.6%
5.4%
2.7%
$5.19
$9.47
$3.19
$4.80
$9.48
$2.95
$5.05
$9.48
$3.10
$5.15
$9.48
$3.16
GDP Growth (USA)
Base
Upside
Downside
World GDP
Base
Upside
Downside
WTI Oil Prices/10
Base
Upside
Downside
DOW Jones
Industrial
Average Index EPS
Base
Upside
$1,733.64
$1,885.49
$1,885.49
$2,450.69
$2,665.34
$2,665.34
Downside
$1,045.02
$1,136.56
$1,136.56
-
-
-
-
-
-
-
-
-
264
264
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120
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 41.3 Credit impairment losses – financial investments subject to impairment (continued)
41.3 Credit impairment losses – financial investments subject to impairment (continued)
(a) Economic variable assumptions (continued)
As of December 31, 2019
As of December 31, 2018
2020
2021
2022
2019
2020
2021
Sagicor's lending operations in Barbados, Trinidad, and Jamaica have limited readily available
information regarding economic forecasts. Management has examined the information within the market
and selected economic drivers that have the best correlation to the portfolio's performance. Economic
state is assigned to reflect the driver's impact on ECL.
S&P 500 Financial
Index - EPS
Base
Upside
Downside
GBP/USD
Base
Upside
Downside
NZD/USD
Base
Upside
Downside
Unemployment Rate
(USA)
Base
Upside
Downside
$38.46
$41.44
$41.44
$54.31
$25.42
$58.52
$27.39
$58.52
$27.39
$1.31
$1.43
$1.18
$1.32
$1.49
$1.15
$1.32
$1.54
$1.11
$0.65
$0.70
$0.59
$0.65
$0.73
$0.57
$0.65
$0.75
$0.74
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4.2%
4.0%
4.4%
4.3%
4.2%
4.7%
4.4%
4.3%
4.8%
Barbados
Unemployment rate
GDP growth
Trinidad & Tobago
Unemployment rate
GDP growth
Jamaica
Interest rate
Unemployment rate
Expected state for
the next 12 months
Base
Upside
Downside
Base
Upside
Downside
Expected state for
the next 12 months
Base
Upside
Downside
Base
Upside
Downside
Expected state for
the next 12 months
Base
Upside
Downside
Base
Upside
Downside
Scenario
Negative
Stable
Negative
Stable
Stable
Negative
Scenario
Negative
Stable
Negative
Stable
Positive
Negative
Scenario
Positive
Positive
Stable
Positive
Super Positive
Stable
121
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265
265
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.3 Credit impairment losses – financial investments subject to impairment (continued)
41.3 Credit impairment losses – financial investments subject to impairment (continued)
(b) Significant increase in credit risk (SICR)
(c) Loss given default (LGD) (continued)
The ECL impact of a SICR for debt securities has been estimated as follows.
SICR criteria
(see note 3.1)
Actual threshold
applied
Change in
threshold
Investments
2-notch downgrade
since origination
1-notch downgrade
since origination
ECL impact of change
in threshold
2019
2018
419
1,301
Our analysis showed that using Moody’s NPV method results in a loss given default (LGD) of
approximately 35% regardless of the inclusion of members CARICOM solely or all global defaults.
Furthermore, Barbados, the most recent defaulted bond issuer in the Caribbean suffered a maximum
loss of approximately 36% on the restructured domestic debt which is in line with the LGD using the
NPV method.
In light of the above, we adopted the NPV method for determining the LGD for Caribbean Sovereigns
and reduced the LGD to 35% as derived from the calculation.
The staging for lending products is based primarily on days past due with 30-day used as backstop, thus
sensitivity analysis is not performed.
The ECL impact of changes in LGD rates is summarised as follows:
(c) Loss given default (LGD)
From the inception of IFRS 9, the Group has used the LGD for sovereigns as provided by Moody’s. The
45% LGD in Moody’s current report represents the losses derived using the average trading prices
method for US denominated external debt. Due to the limited trading activity and the small percentage
of US denominated sovereign debt in our portfolio we do not believe it is appropriate to use the average
trading price method. An analysis of this calculation shows that this LGD includes losses for places such
as Greece, Russia and African countries and does not truly reflect a Caribbean experience.
During 2019, an analysis of the LGD calculation was done, still using Moody’s data as a base but
exploring different scenarios for deriving the LGD for Caribbean territories.
Sagicor Life Inc’s sovereign exposure is primarily in the Caribbean region where bond markets are very
thinly traded. For the majority of our sovereign exposures an internal valuation method is used to
produce accurate fixed income prices. To determine the accurate fair value for disclosure purposes in
financial reporting, we use the present value of the bond’s expected cash flows.
Debt securities
2019
LGD
ECL impact of
Rate
applied
Change
in rate
increase
in value
decrease in
value
Corporate
52%
( - /+ 5) %
Sovereign, excluding Barbados
and Jamaica
Sovereign - Barbados - BAICO
bonds
35%
( - /+ 5) %
17%
( - /+ 5) %
Sovereign - Jamaica
15%
( - /+ 5) %
826
317
25
254
(786)
(317)
(25)
(254)
266
266
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122
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 41.3 Credit impairment losses – financial investments subject to impairment (continued)
41.3 Credit impairment losses – financial investments subject to impairment (continued)
(c) Loss given default (LGD) (continued)
(d) Scenario design
The ECL impact of changes in LGD rates is summarised as follows:
The weightings assigned to each economic scenario as at December 31, 2019 are set out in the
following table. These weightings are unchanged from the prior year.
Debt securities
2018
LGD
ECL impact of
Rate
applied
Change
in rate
increase
in value
decrease in
value
Corporate
52%
( - /+ 5) %
1,016
( - /+ 5) %
333
(982)
(333)
Sovereign, excluding Barbados
and Jamaica
Sovereign - Barbados, external
Sovereign - Barbados - BAICO
bonds
45%
36%
17%
( - /+ 5) %
Sovereign - Jamaica
15%
( - /+ 5) %
Sagicor Life portfolios
Sagicor Jamaica portfolios
Sagicor Life USA
Base
Upside
Downside
80%
80%
80%
10%
10%
10%
10%
10%
10%
( - /+ 5) %
2,887
(2,629)
The results of varying the upside and downside scenarios are as follows.
41
236
(41)
(236)
Base – 80%
Upside – 5%
Downside – 15%
Base – 80%
Upside – 15%
Downside – 5%
Increase in ECL
Decrease in ECL
2019
2018
2019
269
43
280
190
($269)
($40)
2018
(280)
(189)
Debt securities
Lending products
123
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267
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.4 Gross Carrying Values – financial investments subject to impairment
The following tables explain the movement in the gross carrying amounts of investments and in the ECL classifications for the year. Gross carrying amounts represent the maximum exposure to credit risk.
Debt securities and money market funds – FVOCI
Debt securities – FVOCI
2019
ECL Staging
2018
ECL Staging
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Gross carrying amount, beginning of year
2,566,176
97,233
54,279
-
2,717,688
2,061,339
136,393
2,330
-
2,200,062
Transfers:
Stage 1 to Stage 2
Stage 1 to Stage 3
Stage 2 to Stage 1
Stage 2 to Stage 3
(4,147)
4,147
-
267
-
-
(267)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(18,305)
18,305
-
(18,070)
-
-
-
-
18,070
-
(34,849)
34,849
30,140
1,729,194
946,087
4,591
-
Securities originated or purchased
1,699,054
Securities fully derecognised
(717,305)
(30,568)
(53,493)
Write-offs
-
-
Changes in principal and interest
(57,536)
1,183
-
-
Effect of exchange rate changes
(28,357)
(1,033)
(786)
-
-
-
4
(801,366)
(322,793)
(19,696)
(2,258)
-
(1,791)
-
-
(56,353)
(70,846)
(6,845)
1,191
(30,172)
(9,445)
(666)
97
Gross carrying amount, end of year
3,458,152
70,695
-
30,144
3,558,991
2,566,176
97,233
54,279
268
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124
-
-
-
-
-
-
-
-
-
-
-
-
-
-
950,678
(344,747)
(1,791)
(76,500)
(10,014)
2,717,688
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.4 Gross Carrying Values – financial investments subject to impairment (continued)
Debt securities – amortised cost
Debt securities – amortised cost
2019
ECL Staging
2018
ECL Staging
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Gross carrying amount, beginning of year
931,848
12,152
798
156,099
1,100,897
813,354
225,621
Transfers:
Stage 1 to Stage 2
Stage 1 to Stage 3
Stage 2 to Stage 3
Stage 3 to Stage 2
(180)
(305)
-
-
Securities originated or purchased
225,588
180
-
-
-
-
-
305
-
-
-
-
-
-
-
-
-
-
-
-
(4,009)
-
-
550
226,138
304,702
-
-
(545)
(450)
(100)
-
-
4,009
545
450
12,708
1,051,683
-
-
-
-
-
-
-
-
-
150,724
455,326
Securities fully derecognised
(135,291)
(7,294)
(1,100)
(86)
(143,771)
(122,604)
(208,998)
(4,000)
(7,053)
(342,655)
Changes in principal and interest
(20,044)
(483)
(3)
1,805
(18,725)
(54,663)
(3,375)
(206)
(280)
(58,524)
Effect of exchange rate changes
(13,292)
-
Gross carrying amount, end of year
988,324
4,555
-
-
-
(13,292)
(4,932)
(1)
-
-
(4,933)
158,368
1,151,247
931,848
12,152
798
156,099
1,100,897
125
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Sagicor Financial Company Ltd | 2019 Annual Report
269
269
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.4 Gross Carrying Values – financial investments subject to impairment (continued)
Mortgage loans – amortised cost
Mortgage loans – amortised cost
2019
ECL Staging
2018
ECL Staging
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Gross carrying amount, beginning of year
297,646
17,079
24,675
Transfers:
Stage 1 to Stage 2
Stage 1 to Stage 3
Stage 2 to Stage 1
Stage 2 to Stage 3
Stage 3 to Stage 2
Stage 3 to Stage 1
Loans originated or purchased
(31,398)
31,398
-
(8,080)
-
8,080
6,559
(6,559)
-
-
(3,258)
648
2,318
68,059
-
-
-
3,258
(648)
(2,318)
-
Loans fully derecognised
(12,622)
(3,749)
(7,483)
Write-offs
-
-
(21)
Changes in principal and interest
(19,884)
3,305
Effect of exchange rate changes
(1,951)
(98)
(318)
(199)
Gross carrying amount, end of year
300,647
38,766
25,026
-
-
-
-
-
-
-
-
-
-
-
-
-
270
270
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126
339,400
270,719
17,567
29,934
-
-
-
-
-
-
(12,297)
12,297
-
(1,688)
-
1,688
7,176
(7,176)
-
-
-
967
(3,158)
3,158
688
-
815
(688)
(967)
399
68,059
52,606
(23,854)
(28,472)
(4,730)
(8,334)
(21)
(16,897)
(2,248)
-
12,170
(3,535)
-
550
226
(35)
(242)
(238)
364,439
297,646
17,079
24,675
-
-
-
-
-
-
-
-
-
-
-
-
-
318,220
-
-
-
-
-
-
53,820
(41,536)
(35)
12,478
(3,547)
339,400
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 41.4 Gross Carrying Values – financial investments subject to impairment (continued)
Finance loans – amortised cost
Finance loans and finance leases – amortised cost
2019
ECL Staging
2018
ECL Staging
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Gross carrying amount, beginning of year
497,099
15,233
15,522
Transfers:
Stage 1 to Stage 2
Stage 1 to Stage 3
Stage 2 to Stage 1
Stage 2 to Stage 3
Stage 3 to Stage 2
Stage 3 to Stage 1
(9,367)
9,367
-
(3,838)
-
3,838
5,050
(5,050)
-
-
75
(848)
-
-
-
-
848
-
(75)
-
Loans / leases originated or purchased
233,332
Loans / leases fully derecognised
(97,897)
(3,674)
(4,996)
Write-offs
-
-
(79)
Changes in principal and interest
(29,312)
(1,608)
(1,865)
Effect of exchange rate changes
(15,286)
(445)
(477)
Gross carrying amount, end of year
579,856
12,975
12,716
-
-
-
-
-
-
-
-
-
-
-
-
-
527,854
544,414
12,236
19,946
-
-
-
-
-
-
(15,608)
15,608
-
(2,196)
-
2,196
2,058
(2,058)
-
-
-
48
(4,583)
4,583
16
-
(16)
(48)
233,332
200,491
3,411
3,186
(106,567)
(183,391)
(8,480)
(14,241)
(79)
(26)
(20)
(32,785)
(40,726)
(889)
(1)
83
(16,208)
(7,965)
(8)
(166)
605,547
497,099
15,233
15,522
-
-
-
-
-
-
-
-
-
-
-
-
-
576,596
-
-
-
-
-
-
207,088
(206,112)
(47)
(41,532)
(8,139)
527,854
127
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271
271
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.4 Gross Carrying Values – financial investments subject to impairment (continued)
Securities purchased for resale – amortised cost
Securities purchased for resale – amortised cost
2019
ECL Staging
2018
ECL Staging
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Gross carrying amount, beginning of year
7,170
Securities originated or purchased
Securities fully derecognised
Changes in principal and interest
Effect of exchange rate changes
Gross carrying amount, end of year
1,772,783
(1,769,238)
(38)
227
10,904
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,170
16,518
1,772,783
354,086
(1,769,238)
(363,168)
(38)
227
10,904
(17)
(249)
7,170
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16,518
354,086
(363,168)
(17)
(249)
7,170
272
272
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 41.4 Gross Carrying Values – financial investments subject to impairment (continued)
Deposits – amortised cost
Deposits – amortised cost
2019
ECL Staging
2018
ECL Staging
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Gross carrying amount, beginning of year
107,156
371
Transfers:
Stage 1 to Stage 2
Deposits originated or purchased
(616)
41,932
616
-
Deposits fully derecognised
(79,081)
(371)
Changes in principal and interest
Effect of exchange rate changes
(6,071)
(827)
1
-
Gross carrying amount, end of year
62,493
617
-
-
-
-
-
-
-
-
-
-
-
-
-
-
107,527
111,034
370
-
-
41,932
60,746
(79,452)
(52,170)
(6,070)
(11,426)
(827)
(1,028)
-
1
-
-
-
63,110
107,156
371
-
-
-
-
-
-
-
-
-
-
-
-
-
-
111,404
-
60,747
(52,170)
(11,426)
(1,028)
107,527
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273
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.4 Gross Carrying Values – financial investments subject to impairment (continued)
Policy loans
2019
Policy loans
2018
ECL Staging
ECL Staging
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Stage 1
12-month
ECL
Stage 2
lifetime
ECL
Stage 3
lifetime
ECL
POCI
Total
Gross carrying amount, beginning of year
147,156
Policy loans originated or purchased
Policy loans fully derecognised
Changes in principal and interest
Effect of exchange rate changes
Gross carrying amount, end of year
5,990
(1,265)
(8)
(143)
151,730
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
147,156
142,132
5,990
6,311
(1,265)
(1,287)
(8)
(143)
169
(169)
151,730
147,156
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
142,132
6,311
(1,287)
169
(169)
147,156
274
274
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130
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 41.4 Gross Carrying Values – financial investments subject to impairment (continued)
41.4 Gross Carrying Values – financial investments subject to impairment (continued)
(e) Reinsurance asset – Guggenheim Partners
The reinsurance asset held in the name of Guggenheim Partners is secured by assets held in a
trust. The excess of the fair value of the trust assets over the reinsurance asset is as follows:
Fair value of trust assets
Carrying value of reinsurance asset
2019
2018
526,146
574,731
(458,483)
(464,231)
67,663
110,500
(f) Reinsurance asset – Heritage Life Insurance Company
The reinsurance asset held in the name of Heritage Life Insurance Company is secured by assets
held in a trust. The excess of the fair value of the trust assets over the reinsurance asset is as
follows:
Fair value of trust assets
Carrying value of reinsurance asset
2019
2018
168,524
185,166
(150,726)
(141,552)
17,798
43,614
(g) Government of Barbados debt securities in default – Events in 2018
During the month of June 2018, the Government of Barbados (GOB) suspended all payments to
creditors of its external commercial debt which is denominated primarily in US dollars. Interest
payments due on June 5, 2018 and June 15, 2018 were not made. Principal payments on matured
domestic debt which is denominated in Barbados dollars were suspended and debt holders were
required to roll-over principal balances.
The announcement of the suspended payments was evidence that the financial assets were credit-
impaired and consequently, in June Sagicor re-classified its GOB debt security holdings to Stage 3 with a
probability of default of 100%. Some GOB debt instruments were purchased more recently and therefore
there were instruments that had not yet experienced a significant increase in credit risk relative to the
initial credit risk and moved from Stage 1 to Stage 3 upon the announcement.
On September 7, 2018 the GOB announced its debt restructuring program which is being done in
conjunction with the economic recovery plan and an IMF programme. The IMF programme will allow
Barbados to reduce its current debt service cost substantially and it is expected that the manageability of
the restructured cash flows will improve the credit quality of the instrument offered in the debt exchange.
As at September 30, 2018 the negotiations of the new bond were materially completed and on October 1,
2018 Sagicor signed an agreement with the Government of Barbados which outlined the terms of the debt
exchange. In exchange for its debt, the Group has accepted the following securities, the majority of which
are series G:
Series G
A 50-year amortising bond which includes a 15-year grace period on principal payments. The interest
rates on the bond range from 4% per annum for the first 15 years to 8% for years 26 through 50 with
interest capitalisation of 100% for the first five years.
Series C
A 15-year amortising bond with interest rates ranging from 1.0% for the first 3 years to 3.75% for years 5
through to maturity. Interest on these bonds is to be paid quarterly with the first payment due on December
31, 2018. The principal will be repaid in four equal quarterly instalments commencing one year prior to
maturity.
Series D
A 35-year amortising bond with interest rates ranging from 1.5% for the first 5 years to 7.5% for years 16
through to maturity. Interest on these bonds is paid quarterly with the first payment due on November 30,
2018. The principal will be repaid in three equal instalments commencing one year prior to maturity with
the final payment on August 31, 2053.
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275
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.4 Gross Carrying Values – financial investments subject to impairment (continued)
41.4 Gross Carrying Values – financial investments subject to impairment (continued)
Credit impairment loss and de-recognition of original domestic debt securities
GOB Debt Securities
Domestic
debt
External
debt
Total
As a result of the debt restructure outlined above, a credit impairment loss has been recognised in the
statement of income. In addition, the domestic debt securities were de-recognised since the maturity
profile and interest rates of the replacement debt securities were materially different. In November 2018,
management derived a yield curve from which the initial fair values of the replacement securities were
determined. The yield curve was derived from the Central Bank of Barbados base-line yield curve to
which management applied a further risk premium considering
•
•
•
•
the GOB credit rating relative to investment grade,
the potential for further default,
the lack of liquidity of the debt, and
the economic uncertainty as Barbados enters a period of severe economic reform and
structural adjustment.
The risk premium derived is summarised in the following table.
Years
0-10
11-
21
22-24
25-29
30-50
Spread
(basis points)
25
50
75
100
150
Gross carrying value prior to default
275,805
50,741
326,546
Loss allowance prior to default
(7,890)
(1,645)
(9,535)
Net carrying value prior to default
267,915
49,096
317,011
Accrued interest and other adjustments
2,664
7,975
10,639
Credit impairment loss arising from the default
(75,394)
(16,508)
(91,902)
Carrying value as of October 1, 2018
195,185
40,563
235,748
Accrued interest and other adjustments
Domestic debt not included in restructure (1)
Adjusted carrying value on restructure
1,014
(49,765)
146,434
Fair value on recognition of replacement securities
147,250
Gain on de-recognition of original securities
816
(1) As part of the acquisition of the British American Insurance Company (BAICO) insurance portfolio (note
13.2), Sagicor received bonds issued by the Government of Barbados of US$46.6 million to support
the policyholder liabilities transferred. In order to safeguard the interest of policyholders these bonds
were issued with a protective clause in accordance with the sale and purchase agreement approved
by the Supreme Court which prevented the Government of Barbados from restructuring these bonds
at any time. Accordingly, these bonds have been excluded from the Government of Barbados’s
restructuring plan, and, have been classified as Stage 1.
The replacement debt securities are classified as “originated credit-impaired” (POCI).
Sensitivity
The consequential movement in the carrying values of GOB debt for the period referred to above is
summarised in the table which follows:
If the risk premium at all durations was increased / decreased by 15 / 25 basis points, the value of the
POCI debt instruments on exchange would decrease / increase by 2% / 4%.
276
276
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 41.4 Gross Carrying Values – financial investments subject to impairment (continued)
41.4 Gross Carrying Values – financial investments subject to impairment (continued)
(h) Government of Barbados debt securities in default – Update for 2019
External Debt
The consequential movement in the carrying values of the external debt from the default in 2018
to the restructure in 2019 is summarised as follows:
The negotiations for the exchange of the external debt were completed on December 11, 2019. In
exchange for its debt, the Group has accepted the following:
GOB Debt Securities
Cash in the amount of $264.
Gross carrying value prior to default in June 2018
-
-
-
Government of Barbados 6.5% 2021 bond offered in exchange for the accrued or past due interest
outstanding (PDI). The interest rate on the bond is 6.5% per annum from October 1, 2019 to, but
excluding February 1, 2021 with interest payable on October 1, 2020 and February 1, 2021. The
final maturity date on this bond is February 1, 2021.
Government of Barbados 6.5% 2029 bond offered in exchange for the principal outstanding. The
interest rate on the bond is 6.5% per annum from October 1, 2019 to, but excluding October 1,
2029 with interest payable each on April 1 and October 1, commencing on April 1, 2020. The final
maturity date on this bond is October 1, 2029.
Fair value of FVOCI Government of Barbados debt securities
The fair value of the restructured instruments was determined with reference to the price at which the
securities were traded at immediately subsequent to the issue of the restructured securities. These
trades were between third parties conducted at arm’s length and the prices at which the trades occurred
was independently verified.
Loss allowance prior to default
Net carrying value prior to default
Accrued interest and other adjustments
Credit impairment loss recognised in 2018 arising from the default
Carrying value as of October 3, 2018
Disposals and adjustments recognised in 2019 before restructure
Adjusted carrying value on restructure as of December 11, 2019
Fair value on recognition of replacement securities
Gain on de-recognition of original securities
External
debt
50,741
(1,645)
49,096
7,975
(16,508)
40,563
(12,978)
27,585
30,107
2,522
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277
277
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.5 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.
(a) Insurance liabilities
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.
2019
Actuarial liabilities
Other insurance liabilities
Total
2018
Actuarial liabilities
Other insurance liabilities
Total
Maturing
within
1 year
260,048
127,054
387,102
201,360
106,982
308,342
Expected discounted cash flows
Maturing
1 to 5
years
1,004,307
30,549
1,034,856
769,778
44,241
814,019
Maturing
after
5 years
2,340,298
70,265
2,410,563
2,053,326
51,919
2,105,245
Total
3,604,653
227,868
3,832,521
3,024,464
203,142
3,227,606
278
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134
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 41.5 Liquidity risk (continued)
(b) Financial liabilities and commitments
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.
Financial liabilities:
Investment contract liabilities
Notes and loans payable
Lease liabilities
Deposit and security liabilities:
Other funding instruments
Customer deposits
Structured products
Securities sold for re-purchase
Derivative financial instruments
Bank overdrafts
2019 - Contractual un-discounted cash flows
2018 - 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
347,937
445,894
8,289
397,057
815,410
6,842
514,594
264
6,646
66,481
45,297
25,638
14,110
278
-
-
-
-
22,160
68,286
13,164
19,918
-
-
-
-
-
436,578
559,477
47,091
431,085
815,688
6,842
514,594
264
6,646
334,537
114,673
-
402,596
695,300
48,563
424,658
187
2,158
48,948
445,239
-
55,505
30,054
17,095
-
60
-
15,562
67,133
-
17,707
-
-
-
-
-
399,047
627,045
-
475,808
725,354
65,658
424,658
247
2,158
Accounts payable and accrued liabilities
238,569
1,291
473
240,333
237,584
1,898
1,342
240,824
Total financial liabilities
2,781,502
153,095
124,001
3,058,598
2,260,256
598,799
101,744
2,960,799
Off financial statement commitments:
Loan commitments
Non-cancellable lease and rental payments
Investments and Investment management fees
Customer guarantees and letters of credit
Capital commitments
Total off financial statement commitments
Total
135
66,614
485
14,330
14,385
17,931
113,745
2,895,247
10,999
1,093
-
-
11,375
-
78,706
485
19,152
34,769
17,931
-
4,822
9,009
-
24,830
177,925
12,468
151,043
136,469
3,209,641
2,347,578
42,630
4,735
-
20,596
19,361
87,322
11,590
5,737
-
1,064
-
18,391
617,190
8,276
-
-
13,637
-
62,496
10,472
-
35,297
19,361
21,913
127,626
123,657
3,088,425
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279
279
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.5 Liquidity risk (continued)
(c) Financial and insurance assets
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.
2019 – Contractual or expected discounted cash flows
2018 – 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
Debt securities and money market funds
1,166,928
774,148
3,124,191
5,065,267
563,247
652,926
2,713,308
3,929,481
21,172
5,264
38,956
14,343
184,442
286,589
-
2,741
-
331,352
131,926
124,276
-
1,802
-
391,480
151,533
595,307
10,904
62,798
36,891
303,389
128,703
77,855
-
367,163
147,046
514,486
7,170
1,047
107,116
-
7,696
22,513
4,585
41,261
13,758
193,259
243,372
-
1,033
60
7,170
105,036
7,636
75,276
45,957
51,633
47,318
279,520
311,713
661,811
-
-
2,083
-
189
-
544
-
37,598
57,584
78,513
361,468
358,687
260,139
318,307
653,722
-
-
-
-
191
-
614
-
46,148
51,633
47,932
358,687
2,086,781
1,398,380
4,025,993
7,511,154
1,482,317
1,212,549
3,543,414
6,238,280
10,904
58,255
36,891
70,578
37,409
57,584
75,886
361,468
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
280
280
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136
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 41.6
Interest rate risk
41.6
Interest rate risk (continued)
The Group manages its interest rate risk by various 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 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 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.
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281
281
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.6
Interest rate risk (continued)
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
2019
Exposure
after
5 years
Other insurance liabilities
Investment contract liabilities
Notes and loans payable
Lease liabilities
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
8,074
346,154
419,647
6,527
395,444
804,901
6,756
511,309
-
6,646
1,074
3,897
60,441
27,052
19,036
9,798
216
-
-
-
-
1,074
49,277
17,657
71,479
4,232
12,569
-
-
-
-
-
-
Not
exposed to
interest
166,620
88
(446)
5,905
236
3,002
-
Total
227,868
424,340
517,732
35,700
418,047
808,119
6,756
1,548
512,857
264
-
264
6,646
238,185
240,333
Exposure
within
1 year
Exposure
1 to 5
years
9,310
333,037
4,042
44,274
96,000
338,234
-
-
439,732
691,337
47,989
422,786
187
2,158
338
10,905
27,498
16,661
-
60
-
964
2018
Exposure
after
5 years
50,947
13,079
56,107
-
10,366
-
-
-
-
-
-
Not
exposed to
interest
138,843
7
(66)
-
569
2,799
-
986
-
-
Total
203,142
390,397
490,275
-
461,572
721,634
64,650
423,772
247
2,158
239,392
240,694
Total
2,506,532
121,514
155,214
415,402
3,198,662
2,042,874
442,638
130,499
382,530
2,998,541
282
282
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138
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 41.6
Interest rate risk (continued)
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.
Exposure
within
1 year
Exposure
1 to 5
years
2019
Exposure
after
5 years
Not
exposed
to interest
Total
Exposure
within
1 year
Exposure
1 to 5
years
2018
Exposure
after
5 years
Not
exposed
to interest
Total
Debt securities and money market funds
1,308,182
727,057
2,969,807
60,221
5,065,267
621,338
631,971
2,618,873
57,299
3,929,481
Equity securities
Mortgage loans
Policy loans
Finance loans and finance leases
Securities purchased for re-sale
Deposits
Derivative financial instruments
Reinsurance assets: other
Premiums receivable
-
77,676
4,400
572,442
10,871
57,918
264
151
105
-
30,276
14,141
15,574
-
2,733
-
-
-
Other assets and accounts receivable
2,804
1,179
-
371,464
371,464
2,345
1,201
1,626
33
345
36,627
37,258
57,479
74,530
391,480
151,533
595,307
10,904
62,798
36,891
37,598
57,584
78,513
281,183
131,791
5,665
-
1,802
-
189
-
-
-
-
57,558
3,713
489,930
7,170
-
39,711
13,513
17,028
-
104,683
1,098
-
-
-
-
-
-
2,190
1,066
-
267,505
267,505
267,696
125,321
5,383
-
1,047
-
191
-
-
-
2,198
4,499
2,145
367,163
147,046
514,486
-
7,170
288
107,116
7,696
45,957
51,633
44,875
7,696
46,148
51,633
48,131
206,031
358,687
Cash resources
Total
220,494
-
140,974
361,468
152,656
-
2,255,307
790,960
3,390,437
784,103
7,220,807
1,439,238
704,387
3,018,511
690,126
5,852,262
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283
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.6
Interest rate risk (continued)
41.6
Interest rate risk (continued)
The table below summarises the average interest yields on certain financial investments and financial
liabilities held during the year.
Sagicor Investments Jamaica Limited and Sagicor Bank Jamaica Limited
2019
2018
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 investments carried at FVOCI
and amortised cost:
Debt securities and money market funds
Mortgage loans
Policy loans
Finance loans and finance leases
Securities purchased for re-sale
Deposits
Financial liabilities carried at amortised cost:
Investment contract liabilities
Notes and loans payable
Other funding instruments
Deposits
Securities sold for re-purchase
a) Sensitivity
5.1%
6.0%
7.3%
11.6%
6.2%
1.6%
2.6%
8.1%
2.3%
1.3%
3.0%
5.8%
6.0%
7.2%
11.4%
7.5%
2.9%
4.8%
8.4%
2.3%
1.6%
3.4%
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
financial assets carried at FVOCI 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
2019
Effect on
net
income
Effect on
TCI
Change in
interest rate
JMD
USD
2018
Effect on
net
income
Effect on
TCI
- 1%
- 0.5%
2,501
21,906
- 1%
- 0.5%
4,713
23,850
+1%
+ 0.5%
(2,501)
(30,360)
+1%
+ 0.5%
(4,663)
(21,879)
41.7 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 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.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 41.7 Foreign exchange risk (continued)
2019
US$ 000 equivalents of balances denominated in
Barbados $
Jamaica $
Trinidad $
Eastern
Caribbean $
US $
Other
Currencies
Total
ASSETS
Financial investments (1)
Reinsurance assets (1)
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
Lease liabilities
Deposit and security liabilities
Other liabilities / Retirement benefit liabilities
Accounts payable and accruals
Total monetary liabilities
Other liabilities (2)
Total liabilities of continuing operations
Net position
341,196
1,344,085
474,248
150,089
3,879,177
125,385
6,314,180
6,739
22,843
21,158
391,936
199,216
591,152
438,452
80,640
31,632
14,436
2,764
1,276
11,901
40,699
621,800
18,749
640,549
(49,397)
3,774
69,362
91,584
1,508,805
477,784
1,986,589
411,439
55,802
81,800
104,402
23,251
684,219
25,238
116,864
1,503,015
32,529
1,535,544
451,045
4,767
10,309
26,510
515,834
90,844
606,678
366,143
32,844
182,907
-
2,317
1,087
12,871
18,115
616,284
15,199
631,483
(24,805)
2,146
15,746
9,658
177,639
20,828
198,467
79,372
12,187
53,405
-
128
681,582
14,785
165,368
4,740,912
425,766
5,166,678
2,194,599
31,725
65,321
398,894
6,392
15,316
1,033,146
46
1,902
2,294
57,389
162,356
3,789,760
5,079
42,210
167,435
3,831,970
31,032
1,334,708
401
5,023
47,190
177,999
1,308
179,307
114,648
14,670
9,275
-
848
17,645
7,445
5,364
169,895
2,215
172,110
7,197
699,409
138,068
361,468
7,513,125
1,215,746
8,728,871
3,604,653
227,868
424,340
517,732
35,700
1,752,689
59,795
240,333
6,863,110
115,981
6,979,091
1,749,780
(1) Monetary balances only
(2) Non-monetary balances, income tax balances and retirement plan assets
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285
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.7 Foreign exchange risk (continued)
2018
US$ 000 equivalents of balances denominated in
Barbados $
Jamaica $
Trinidad $
Eastern
Caribbean $
US $
Other
Currencies
Total
ASSETS
Financial investments (1)
Reinsurance assets (1)
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
Other liabilities / Retirement benefit liabilities
Accounts payable and accruals
Total monetary liabilities
Other liabilities (2)
Total liabilities of continuing operations
Net position
335,070
1,017,543
424,508
145,714
3,026,132
131,191
5,080,158
6,611
12,113
9,135
362,929
194,218
557,147
3,206
50,227
84,474
1,155,450
360,401
1,515,851
393,705
362,175
77,959
32,876
2,698
2,236
29,285
40,696
579,455
17,680
597,135
(39,988)
26,081
63,615
42,845
560,476
24,148
92,226
1,171,566
17,373
1,188,939
326,912
6,132
8,926
51,294
490,860
76,096
566,956
318,810
33,295
162,334
-
1,211
12,443
20,529
548,622
22,974
571,596
(4,640)
4,124
9,033
9,996
168,867
21,002
189,869
59,314
12,545
48,678
-
15,111
(592)
27,160
679,093
14,771
159,566
3,879,562
419,456
4,299,018
1,791,859
40,275
75,558
444,732
1,078,395
2,234
55,819
162,216
3,488,872
4,305
28,038
166,521
3,516,910
23,348
782,108
704
4,694
44,222
180,811
(1,467)
179,344
98,601
12,987
7,336
-
16,604
6,769
4,264
146,561
2,301
148,862
30,482
699,870
99,764
358,687
6,238,479
1,069,706
7,308,185
3,024,464
203,142
390,397
490,275
1,674,033
74,287
240,694
6,097,292
92,671
6,189,963
1,118,222
(1) Monetary balances only
(2) Non-monetary balances, income tax balances and retirement plan assets
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142
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 41.7 Foreign exchange risk (continued)
41.7 Foreign exchange risk (continued)
(a) Sensitivity
JMD currency risk
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, 2019 and for the year then ended are considered in the following table.
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 27).
Amounts denominated in
JMD
USD
Total
amounts
Effect of a 10%
depreciation
Financial position:
Assets
Liabilities
Net position
Represented by:
2,208,196
937,728
3,145,924
1,450,652
893,419
2,344,071
757,544
44,309
801,853
•
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:
564,841
92,273
657,114
(52,065)
(277,767)
(15,621)
(293,388)
(185,294)
(23,246)
(208,540)
(43,325)
58,455
-
(43,325)
53,406
111,861
Currency risk relating to the future cash flows of monetary balances
Currency risk of reported results of foreign operations
(220,819)
(145,065)
(75,754)
(75,754)
27,777
18,529
4,332
(1,427)
4,419
(5,846)
(1,427)
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.
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287
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.8 Fair value of financial instruments
41.8 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 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 FVOCI securities include corporate and government agency debt instruments issued in the
Caribbean, primarily 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. The fair value of FVOCI Government of Barbados debt securities have been
determined as set out in note 41.4 (h).
Level 3 assets designated as FVTPL include mortgage loans, debt securities and equities for which the
full income and capital returns accrue to holders of unit linked liabilities. 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 be used in determining the fair value of Level 3 instruments.
288
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144
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 41.8 Fair value of financial instruments (continued)
(a) Financial instruments carried at fair value
2019
2018
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
FVOCI securities:
Debt securities and money market funds
488,832
3,184,589
754
491
489,586
3,185,080
-
46
46
3,673,421
1,291
646,960
1,986,673
223
-
3,674,712
647,183
1,986,673
Equity securities
FVTPL investments:
Debt securities
Equity securities
Derivative financial instruments
Mortgage loans
Deposits
Total assets
Total assets by percentage
FVTPL investment contracts:
Unit linked deposit administration liabilities
FVTPL deposit and security liabilities:
Structured products
Derivative financial instruments
Total liabilities
Total liabilities by percentage
-
48
48
78,526
24,267
7,449
30,143
-
140,385
140,433
2,633,633
271
2,633,904
198,807
267,234
7,696
30,143
8
503,888
3,137,792
17,719
85,389
-
-
-
103,108
592,694
14%
-
-
-
-
-
0%
104,123
262,344
264
-
-
366,731
3,551,811
121,265
22,440
36,627
28,933
-
209,265
209,311
243,107
370,173
36,891
28,933
-
679,104
4,353,816
15,949
32,677
-
-
-
104,332
210,290
247
-
8
48,626
314,877
695,809
2,301,550
81%
5%
100%
23%
73%
4%
100%
-
-
264
264
264
0%
162,385
162,385
6,756
-
6,756
6,756
264
7,020
169,141
169,405
-
-
-
-
-
100%
100%
0%
-
-
247
247
247
0%
149,142
149,142
64,650
-
64,650
213,792
100%
64,650
247
64,897
214,039
100%
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289
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.8 Fair value of financial instruments (continued)
For Level 3 instruments, reasonable changes in inputs which could be applied to the valuation of FVOCI securities would affect other comprehensive income. Reasonable changes in inputs which could be applied to
the valuations of investments designated at FVTPL 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.
Level 3 Financial Instruments
2019
FVOCI
investments
FVTPL
investments
Derivative
instruments
Total
assets
Balance, beginning of year
48
132,936
7,449
140,433
2018
Total
assets
187,326
(17,187)
65,117
-
-
FVTPL
investment
contracts
2019
FVTPL
structured
products
2018
Total
liabilities
Total
liabilities
149,142
64,650
213,792
187,329
-
-
21,255
-
-
-
-
-
-
-
21,255
77,358
(10,825)
(57,367)
(68,192)
(51,882)
-
2,488
-
2,318
-
4,806
-
(1,121)
-
-
-
-
-
-
-
-
-
-
-
-
325
(2,845)
(2,520)
-
-
-
4,078
(1,970)
-
-
-
63,779
23,639
87,418
-
-
-
-
-
-
2,763
32,870
35,633
(7,338)
-
-
-
-
-
-
-
(75)
(26,093)
(27,331)
(53,424)
(90,704)
-
-
(747)
-
-
-
-
-
(749)
(10)
-
3,304
172,638
36,627
209,311
140,433
162,385
6,756
169,141
213,792
2,287
13,340
15,627
(9,746)
-
-
-
-
-
2,488
-
-
-
-
2,488
(1,121 )
Reclassifications on adoption of IFRS 9
Additions
Issues
Settlements
Fair value changes recorded in investment income
Fair value changes recorded in interest expense
Fair value changes recorded in OCI
Disposals
Transfers (out of) Level 3 classification
Transfers to instruments carried at amortised cost
Effect of exchange rate changes
Balance, end of year
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
-
-
-
-
-
-
-
-
-
-
(2)
46
-
-
290
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146
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 41.8 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, 2019 is set out in the following tables.
Financial assets
at amortised cost
Debt securities
Mortgage loans
Policy loans
Finance loans and finance leases
Securities purchased for resale
Level 1
Level 2
Level 3
Total
752,806
609,167
1,361,973
362,341
362,341
181,902
181,902
602,512
602,512
-
-
-
-
-
-
-
-
-
-
10,904
10,904
Customer deposits
752,806
1,766,826
2,519,632
Securities sold for repurchase
41.8 Fair value of financial instruments (continued)
Financial liabilities
at amortised cost
Investment contracts:
Deposit administration liabilities
Other investment contracts
Notes and loans payable
Deposit and security liabilities:
Other funding instruments
Level 1
Level 2
Level 3
Total
-
-
-
-
-
-
-
-
-
-
-
-
113,767
113,767
149,928
149,928
263,695
263,695
332,893
200,958
533,851
-
418,932
418,932
1,121
810,594
811,715
-
512,857
512,857
1,121
1,742,383
1,743,504
334,014
2,207,036
2,541,050
(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.
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291
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
41.8 Fair value of financial instruments (continued)
41.9 Derivative financial instruments and hedging activities (continued)
Sensitivity
The sensitivity to fair value changes in equity securities arises from those instruments which are
not held under the unit linked model. The table below sets out the source markets of such equity
securities and the effects of an across the board 20% change in equity prices on income before tax
(IBT) as at December 31, 2019.
Listed on Caribbean stock exchanges and markets
Listed on US stock exchanges and markets
Listed on other exchanges and markets
Carrying value
Effect of 20%
change
on IBT
46,777
87,716
10,404
144,897
9,355
17,543
2,081
28,979
2019
Derivatives held for trading:
Equity indexed options
2018
Derivatives held for trading:
Equity indexed options
Contract /
notional
amount
Fair value
Assets
Liabilities
807,020
807,020
36,891
36,891
768,342
768,342
7,696
7,696
264
264
247
247
41.9 Derivative financial instruments and hedging activities
(i) Equity indexed options
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.
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 in the table which follows.
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.
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.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 41.10 Offsetting Financial Assets and Liabilities
The Group is eligible to present certain financial assets and financial liabilities on a net basis in the statement of financial position pursuant to criteria described in note 2.13. The following table provides information on
(i) the impact of offsetting in the consolidated statement of financial position; (ii) the financial impact of netting for instruments which are subject to enforceable master netting arrangements or similar agreements, and
(iii) cash and financial instrument collateral which can be potentially offset.
Gross amounts of
financial assets
Gross amounts set
off in the statement
of financial position
Net amounts of
financial assets as
presented in the
statement of financial
position
Impact of master
netting arrangements
Impact of offsetting
financial instrument
collateral
Net amount
2019
ASSETS
Non-derivative financial investments
Derivative financial instruments
LIABILITIES
Non-derivative deposit and security liabilities
Derivative financial instruments
2018
ASSETS
Non-derivative financial investments
Derivative financial instruments
LIABILITIES
Non-derivative deposit and security liabilities
Derivative financial instruments
6,648,753
36,891
6,685,644
1,752,425
264
1,752,689
5,339,967
7,696
5,347,663
1,673,786
247
1,674,033
-
-
-
-
-
-
-
-
-
-
-
-
6,648,753
36,891
6,685,644
1,752,425
264
1,752,689
5,339,967
7,696
5,347,663
1,673,786
247
1,674,033
(512,857)
(264)
(513,121)
(512,857)
(264)
(513,121)
(441,340)
(247)
(441,587)
(437,160)
(247)
(437,407)
(396,952)
-
(396,952)
(386,981)
-
(386,981)
(517,319)
-
(517,319)
(412,615)
-
(412,615)
5,738,944
36,627
5,775,571
852,587
-
852,587
4,381,308
7,449
4,388,757
824,011
-
824,011
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293
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
42 INSURANCE RISK – PROPERTY & CASUALTY CONTRACTS
42.2 Claims risk
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 and Advantage General Insurance are the principal insurers within the
Group's continuing operations that issues property and casualty insurance contracts. They operate
mainly in Barbados, Trinidad and Tobago and Jamaica.
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. 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.
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;
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 is refined over time until final settlement occurs. In addition,
from the pricing methodology used for risks, it is assumed that at any 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 very many
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.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 42.2 Claims risk (continued)
Total insurance coverage
2019
2018
Property
Motor
Gross
9,918,290
8,613,754
Net
Gross
Net
1,685,857
1,419,817
985,202
628,383
449,467
433,491
Accident and liability
Gross
3,308,670
3,176,165
Total
Net
3,064,125
2,903,875
Gross
14,212,162
12,239,386
Net
5,378,365
4,757,183
The insurer assesses its exposures by modelling realistic disaster scenarios of potential catastrophic
events. Claims arising from windstorms, earthquakes and floods and events triggering multi-coverage
corporate liability claims are potential sources of catastrophic losses arising from insurance risks. A
realistic disaster scenario modelled for 2019 is presented below and results in estimated gross and net
losses.
Sagicor General Insurance (SGI)
A Barbados and St. Lucia windstorm having a 200-year return period.
248,089
5,000
Gross loss Net loss
Advantage General Insurance Co. Limited (AGI)
(subsidiary of Sagicor Group Jamaica Ltd)
A Jamaican windstorm having a 250-year return period for properties
103,824
500
Gross loss
Net loss
The occurrence of one or more catastrophic events in any year may have a material impact on the
reported net income of the Group.
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295
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
42.2 Claims risk (continued)
Development Claim Liabilities
In addition to sensitivity analysis, the development of insurance liabilities provides a measure of SGI and AGI's ability to estimate the ultimate value of claims. The table below illustrates how SGI and AGI's estimate of
the ultimate claims liability for accident years 2015 - 2019 has changed at successive year ends, up to 2019. Updated unpaid claims and adjustment expenses (ULAE) and IBNR estimates in each successive year, as
well as amounts paid to date are used to derive the revised amounts for the ultimate claims liability for each accident year, used in the development calculations. The most recent estimate is then reconciled to the liability
recognised in the statement of financial position.
Gross
Estimate of ultimate claims incurred:
At the end of financial reporting year
One year later
Two years later
Three years later
Four years later
2015
2016
2017
2018
2019
Total
42,992
38,875
54,767
46,076
43,104
40,969
43,374
60,442
47,058
42,083
42,348
61,790
39,849
42,999
39,579
-
-
-
-
-
-
-
-
-
-
Current estimate of cumulative claims
39,579
42,999
61,790
47,058
43,104
234,530
Cumulative payments to date
Liability recognised
Liability in respect of prior years and ULAE
Total liability (note 14.2)
(35,738)
(37,823)
(54,658)
(35,769)
(17,797)
(181,785)
3,841
5,176
7,132
11,289
25,307
52,745
10,989
63,734
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 42.2 Claims risk (continued)
Development Claim Liabilities (continued)
The reinsurers’ share of the amounts in the following table is set out below.
Reinsurance
Estimate of reinsurance recoveries:
At the end of financial reporting year
One year later
Two years later
Three years later
Four years later
Current estimate of reinsurance recoveries
Cumulative reinsurance receipts to date
Recoverable recognised
Recoverable in respect of prior years
Total recoverable from reinsurers (note 14.2)
2015
2016
2017
2018
2019
Total
12,883
12,091
12,488
11,592
11,312
11,312
(9,995)
13,480
14,143
12,756
12,763
-
11,268
15,011
15,217
-
-
4,193
4,534
-
-
-
2,393
-
-
-
-
12,763
15,217
4,534
2,393
46,219
(11,409)
(14,116)
(4,095)
(594)
(40,209)
1,317
1,354
1,101
439
1,799
6,010
2,928
8,938
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297
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
42.3 Reinsurance risk
42.3 Reinsurance risk (continued)
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
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 and Advantage General
for their property insurance class are summarised in the following table.
•
•
•
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.
Type of risk
Retention by Sagicor General Insurance - currency amounts in thousands
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.
Property
• maximum retention of $4,500 for a single event;
• maximum retention of $5,000 for a catastrophic event;
•
•
quota share retention to maximum of 20% in respect of treaty limits;
quota share retention is further reduced to a maximum of $375 per event.
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.
Type of risk
Retention by Advantage General Insurance Co. Limited - currency
amounts in thousands
Property
• maximum retention of $500 for a single event;
• maximum retention of $500 for a catastrophic event;
•
quota share retention to maximum of 10% in respect of treaty limits;
The effects of reinsurance ceded are disclosed in notes 14, 24 and 25 and information on reinsurance
balances is included in notes 10, 20 and 41.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 42.3 Reinsurance risk (continued)
43.1 Contracts without investment returns (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.
• Hurricane and earthquakes with a 250-year return period affecting Jamaica.
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
421,488
436,593
-
-
-
-
-
-
49%
51%
0%
0%
0%
0%
0%
0%
TOTAL
858,081
100%
43 INSURANCE RISK – LIFE, ANNUITY & HEALTH CONTRACTS
(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. 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.
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.
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.
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.
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).
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299
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 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.
2019 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
27,687
88,501
35,833
27,042
38
1,122
3,566
119
1,142
25
26,565
84,935
35,714
25,900
13
179,101
5,974
173,127
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.
Actuarial liability
Claims payable
2019
2018
Liability
5% increase
in liability
Liability
5% increase
in liability
41,573
5,252
46,825
2,079
263
2,342
44,752
4,677
49,429
2,238
234
2,472
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.
(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 pay-out 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 pay-out 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.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 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
very many 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
2019
2018
Barbados
Jamaica
Gross
Net
Gross
Net
4,386,200
1,260,085
4,261,357
1,197,963
4,113,950
1,204,619
3,966,925
1,147,578
9,571,001
7,032,326
8,882,015
6,653,054
9,438,735
6,929,672
8,757,886
6,576,574
Trinidad & Tobago
Gross
3,738,534
2,498,258
3,541,183
2,184,995
Net
3,159,462
2,348,251
2,959,623
2,072,894
Other Caribbean
Gross
8,376,550
1,526,610
8,165,280
1,595,521
43.2 Contracts with investment returns (continued)
Total liability under annuity contracts provide a good measure of longevity risk exposure.
Total liability
under annuity contracts
Individual
contracts
Group
contracts
Individual
contracts
Group
contracts
2019
2018
Barbados
Jamaica
Gross
Net
Gross
Net
Trinidad & Tobago
Gross
Net
Other Caribbean
Gross
USA
Total
Net
Gross
Net
Gross
Net
131,757
131,757
875
875
166,644
166,644
53,752
53,716
48,771
48,771
359,566
359,566
-
-
31
31
104,790
104,790
899
899
114,469
114,469
30,634
30,634
1,663,194
19,682
1,292,070
982,045
5,845
611,227
2,016,222
428,050
1,542,862
1,335,037
414,213
862,019
47,762
47,762
345,928
345,928
-
-
28
28
20,535
5,681
414,253
399,399
Net
Gross
Net
Gross
Net
7,414,626
1,338,472
7,170,958
1,409,095
7,414,643
3,356,037
33,354
32,466
6,970,364
2,800,085
35,427
33,969
33,486,928
12,350,633
31,820,199
11,666,960
27,482,810
11,853,480
25,655,477
11,240,110
USA
Total
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301
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 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 is 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 $175
Health insurance contracts with groups
Retention per individual to a maximum of $175
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 $500
43.4 Sensitivity arising from the valuation of actuarial liabilities
The estimation of actuarial liabilities is sensitive to the assumptions made. 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)).
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 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.
Sagicor Life Inc
segment
Sagicor Jamaica
segment
Sagicor Life USA
segment
2019
2018
2019
2018
2019
2018
Base net actuarial
liability
1,038,694 926,050
359,954
345,154
1,212,162
816,843
Scenario
Increase in net liability
Increase in net liability
Increase in net
liability
Worsening rate
of lapse
177,552
156,151
78,539
66,642
18,430
12,058
High interest rate
(97,634)
(97,608)
(116,591)
(115,773)
(72,194)
(49,675)
Low interest rate
163,321
169,985
97,115
110,246
83,064
57,482
Worsening mortality/
morbidity
42,585
39,692
56,942
48,267
16,980
16,030
Higher expenses
20,419
20,618
20,894
16,569
2,908
3,002
Sensitivity
Scenario
Sagicor Life Inc
segment
Sagicor Jamaica
Segment
Sagicor USA segment
Worsening
rate of lapse
Lapse rates were either doubled or halved, and
the more adverse result was selected.
High
interest rate
Assumed increases in the
investment portfolio yield
rates of 0.25% per year for
5 years, with the rates
remaining constant
thereafter.
Low interest Assumed decreases in
rate
investment portfolio yield
rates of 0.25% per year for
5 years, with the rates
remaining constant
thereafter.
Assumed
increases in the
investment
portfolio yield rates
of 0.5% for 10
years.
Assumed
decreases in
investment
portfolio yield
rates of 0.5% per
year for 10 years.
Worsening
mortality
and
morbidity
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, the mortality rates were
decreased by 3% of the base rate for 5 years.
Lapse rates were increased or
reduced by 30%, and the more
adverse result was selected.
A 1% increase was applied to
the investment portfolio rate.
A 1% decrease was applied to
the investment portfolio rate.
For life insurance and deferred
annuity products,
the base
assumed rates were increased
annually by 3% cumulatively
over the next 5 years. For pay-
out annuity products only, the
mortality rates were decreased
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.
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303
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 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.
The purpose of the DCAT is
•
•
•
to develop an understanding of the sensitivity of the total equity of the insurer and future
financial condition to changes in various experience factors and management policies;
to alert management to material, plausible and imminent threats to the insurer’s solvency;
and to describe possible courses of action to address these threats.
Full DCAT is conducted periodically by some insurers within the Group.
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.
2019
2018
Pension and insurance fund assets
2,469,920
2,166,463
Mutual fund, unit trust and other investment fund assets
1,665,672
1,261,247
4,135,592
3,427,710
45 STATUTORY RESTRICTIONS ON ASSETS
Insurers are registered to conduct insurance business under legislation in place in each relevant
jurisdiction. This legislation may prescribe 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 $1,431,443 (2018 - $1,185,805)
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.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 46 CAPITAL MANAGEMENT
46.2 Capital adequacy
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 interests’ equity
Notes and loans payable (debt)
2019
2018
1,154,051
594,506
517,732
600,869
530,514
490,275
Total financial statement capital resources
2,266,289
1,621,658
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.
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,
certain subsidiaries of the Group seek 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 life insurers of the Sagicor Group as of December 31 has been
estimated as 253.2% (2018 – 234%). This is the principal standard of capital adequacy used to assess
the overall strength of the life insurers 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 life insurers of the Group and not necessarily applicable to each individual segment,
insurance subsidiary or insurance subsidiary branch.
The Group complies with all regulatory capital requirements.
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305
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
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, 2019 and 2018, this ratio was 179.4%
and 183.8% respectively.
(ii) Sagicor Life Insurance Company (USA)
A risk-based capital (RBC) formula and model have been 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 a surplus of at least 300% of the RBC amount, and
the company has maintained these ratios as of December 31, 2019 and 2018 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 2019 and 2018, all applicable
externally imposed capital requirements were complied with.
Actual capital base to risk weighted assets
Required capital base to risk weighted assets
Sagicor
Investments
Jamaica
Sagicor Bank
Jamaica
2019
2018
2019
2018
20%
10%
14%
10%
14%
10%
15%
10%
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 46.3 Financial covenants
(a) 8.875% Senior Notes
Under the indenture entered into by the Group on the issue of these senior notes the Group has to
comply with a number of covenants as follows:
COVENANT
DESCRIPTION
Limitation of indebtedness
Limitation on restricted
payments covenant
Limitation on restricted
distributions from subsidiaries
Under this covenant, the Group is restricted to incremental
borrowing up to a prescribed level. The Group must maintain a
fixed charge coverage ratio, in excess of 2:1 in order to incur
additional debt.
This covenant limits cash outflows, dividends, acquisition and
investments by the Group. The Group must maintain a fixed
charge coverage ratio of 2:1 and an MCCSR capital ratio in
excess of 175%.
limits
This covenant
encumbrances or
distributions to the Parent.
the subsidiaries
restrictions on
their ability
from creating
to make
Limitation on sale of assets of
subsidiary stock
This covenant restricts
from selling material
the Group
subsidiary assets without using the proceeds to either reinvest
in the business or offer to buy back bondholders.
Limitation on affiliate
transactions
Change in control (1)
Limitation on liens
Optional Redemption
This covenant restricts affiliate transactions of the Group.
This covenant allows investors to put their bonds back to the
Group at a certain value when a specified event has changed
ownership/control of the Group.
This covenant restricts the Group’s ability to secure future debt
with the Group’s assets.
The notes are redeemable at the Group’s option after August
11, 2018 at specified redemption rates.
46.3 Financial covenants (continued)
(1)
On December 20, 2019 the Group made an Offer to purchase for cash, any and all of the
in connection with
outstanding $320.0 million aggregate principal amount of 8.875% Senior Notes
the completed business
due 2022. This offer was made
combination by Sagicor Financial Corporation Limited (the “Parent Guarantor”) with
Alignvest Acquisition II Corporation, a special purpose acquisition corporation listed on the
(the
Toronto Stock Exchange (“Alignvest”), completed on December 5, 2019
“Transaction”). As a result of the completion of the Transaction, all issued and
outstanding shares in the Parent Guarantor have been transferred to Alignvest, with
former shareholders of the Parent Guarantor receiving cash or shares in Alignvest,
which has been renamed Sagicor Financial Company Ltd. and trades on the Toronto
Stock Exchange under the symbol SFC. The Notes will continue to be guaranteed by
Parent Guarantor. On January 27, 2020, $1.9 million notes were tendered, purchased and
cancelled.
(b) 4.85% notes due 2019
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 SFCL 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 lien, this 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 do not exceed 10% of the consolidated net tangible assets (as is defined in the
indenture and trust deed).
The Group complied with all covenants up until August 12, 2019 when this loan was repaid.
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307
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
46.3 Financial covenants (continued)
46.3 Financial covenants (continued)
(c) 5.10% unsecured bond due 2020 and 5.95% unsecured bond due 2020
(d) Sagicor General Insurance Inc 3.50% loan agreement
Under a trust deed dated September 26, 2019 entered into by the Group on the issue of these securities,
the Group has to comply with a number of covenants as follows:
COVENANT
DESCRIPTION
Debt service coverage ratio
The guarantor subsidiary Sagicor Life Inc must maintain a
minimum debt service coverage ratio of 1.5 to 1.0.
Effective net worth
The subsidiary net worth must not fall below US $15.0 million.
Total funded debt to net worth
The total funded debt to net worth ratio of the subsidiary must
not exceed 1.0 to 1.0.
(e) 4.90% USD mortgage notes due 2025
COVENANT
DESCRIPTION
Debt service coverage ratio
The mortgage note contains a debt service coverage ratio
covenant and, upon failing to meet the debt service coverage
ratio, substantially all the cash flows from the hotel must be
directed to accounts controlled by the lender. The company
was compliant.
COVENANT
Change in control
Limitation on indebtedness
Limitation on indebtedness
Restrictions on dividends
Restrictions on dealing with
affiliates
DESCRIPTION
Under a change in control, each holder has the right to require
the issuer to purchase all or any part of the bonds.
SFCL will not create or permit to subsist any security interest on
any of its present of future assets without the prior consent in
writing of the Trustee.
SFCL will not seek to incur any additional indebtedness where
the incurrence of additional indebtedness will give rise to any
breach of the Financial Covenants except with the prior written
consent of the trustee.
Financial Covenants
SFCL will maintain the following rations:
(i)
Minimum Interest Services Coverage Ratio of
1.50%
(ii)
Maximum Debt to Equity Ratio of 75%
Except with the prior written consent of the Trustee, SFCL will
not pay any dividends while SFCL is in breach of any of the
financial covenants.
The covenant restricts affiliate transactions of the Group.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 46.3 Financial covenants (continued)
(f) 4.75% USD mortgage notes due 2021
COVENANT
DESCRIPTION
Interest coverage ratio, Debt to
EBIDTA ratio and a maximum
loan to security value ratio.
The company must maintain a minimum interest coverage of
1.35. The company was compliant at year end.
The company must maintain a maximum ratio of 4.75 for total
debt to EBITDA. The company was in breach at year end. As a
result, the non-current portion of the loans were reclassified to
current. There were no penalties incurred for this breach.
The company must maintain a maximum loan to security value
ratio of 75%. The company was compliant at year end.
46.3 Financial covenants (continued)
(g)
5.00% USD mortgage notes due 2020
8.75% JMD mortgage notes due 2020
9.00% JMD mortgage notes due 2048
8.00% JMD mortgage notes due 2021
10.00% JMD mortgage notes due 2026
3.61% mortgage notes due 2026
COVENANT
DESCRIPTION
Interest coverage
maximum debt to equity ratio
ratio and
The mortgage notes contain a minimum interest coverage of 1.5
which is EBITDA divided by interest charges. The company was
compliant at year end.
A maximum debt to equity ratio of 1.8 is to be maintained. The
company was compliant at year end. In 2018, the company
failed to meet its debt covenant for total debt to equity ratio. As
a result, the non-current portion of the loans were reclassified
to current. There were no penalties incurred for this breach.
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309
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
47 RELATED PARTY TRANSACTIONS
47 RELATED PARTY TRANSACTIONS (continued)
Other than as disclosed in notes 5, 9, 12, 27, 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:
Salaries, directors’ fees and other short-term benefits
26,174
25,340
2019
2018
Optional contract benefit
Equity-settled contract benefits (note 1)
Equity-settled compensation benefits
Pension and other retirement benefits
1,390
5,994
7,289
1,341
42,188
-
-
5,674
1,733
32,747
Balance, beginning of year
Advances
Repayments
Effects of exchange rate changes
Balance, end of year
Mortgage loans
Other loans
Total loans
4,750
675
(1,315)
(15)
4,095
1,317
1,925
(530)
(22)
2,690
6,067
2,600
(1,845)
(37)
6,785
Interest rates prevailing during the year
3.75% – 10.50%
4.00% – 16.50%
Investment advisory and management advisory agreement.
On April 10, 2019 Sagicor Financial Corporation Limited (Sagicor) entered into an Investment Advisory
and Management Agreement with Alignvest Management Corporation (Alignvest) for the provision of
investment advisory services and/or discretionary investment management services in respect of
Sagicor’s and its subsidiaries’ assets. Under this agreement Alignvest was appointed to provide
specified advisory services and has a right of first offer to provide other investment advisory services or
investment management services to Sagicor and its subsidiaries where Sagicor wishes to externalize
these services and provided that Alignvest or its affiliates have clearly defined, and relevant
core competencies. Any such services would be provided by Alignvest or its affiliates on arm’s length
commercial terms. As consideration for services rendered and performed under the agreement,
Alignvest or its applicable affiliates will receive a fee equal to $2.5 million, reduced annually for any fees
paid to Alignvest or its affiliates with respect to investment management services or other services
provided. The Agreement commenced on December 5, 2019, when Sagicor completed its proposed
transaction between Alignvest Acquisition II Corporation and will continue for an initial term of three
years unless terminated for cause. On December 5, 2019, Alignvest gave notice that it
has assigned its rights and obligations under the agreement to High Vest Partners Inc, a joint
venture between Alignvest and KGT Investments, LLC.
48 BREACH OF INSURANCE REGULATIONS – RELATED PARTY BALANCES
As at December 31, 2019, one of the Group’s subsidiaries, Sagicor Life Jamaica Limited exceeded the
regulated 5% maximum of related party balances to total assets of the company. Management is in
discussions with the Regulator, Financial Services Commission, in relation to this matter. The regulator
has not imposed any penalty.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 49 TRANSITION TO IFRS 16 - LEASES
49. TRANSITION TO IFRS 16 - LEASES (continued)
The Group leases various office space, equipment and motor vehicles. Rental contracts are typically
made for periods ranging from 1.5 to 12 years and these may be fixed term or have the option to be
renewed or extended. Lease terms are negotiated on an individual basis and contain a wide range of
different terms and conditions. The lease agreements do not impose any covenants, but leased assets
may not be used as security for borrowing purposes.
Until December 31, 2018, leases of property, plant and equipment were classified as ‘operating leases’
under the principles of IAS 17 - Leases. Payments made under these operating leases were charged
to the statement of income within administrative expenses, on a straight-line basis over the period of
the lease. From January 1, 2019, leases are recognised as a right-of-use asset and a corresponding
liability at the date at which the leased asset is available for use by the Group.
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had been
previously classified as operating leases in accordance with IAS 17 requirements. These liabilities were
measured at the present value of the remaining lease payments discounted using the lessee’s
incremental borrowing rate as of January 1, 2019. The weighted average lessee’s incremental
borrowing rate applied to the lease liabilities on January 1, 2019 was 7.36%.
For leases previously classified as finance leases the entity recognised the carrying amount of the lease
asset and lease liability immediately before transition as the carrying amount of the right-of-use asset
and the lease liability at the date of initial application. The measurement principles of IFRS 16 are only
applied after that date.
2019
27,325
24,244
4,255
(325)
(33)
(33)
28,108
7,844
20,264
28,108
Operating lease commitments as at December 31, 2018
Discounted using the lessee’s incremental borrowing rate at the date of initial
application
Add: finance lease liabilities recognised as at December 31, 2018
(Less): short-term leases recognised on a straight-line basis as expense
(Less): low-value leases recognised on a straight-line basis as expense
Add/(less): adjustments as a result of a different treatment of extension and
termination options
Lease liability recognised as at January 1, 2019
Of which are:
Current lease liabilities
Non-current lease liabilities
Lease liability recognised at December 31, 2019
Current lease liabilities
Non-current lease liabilities
7,748
27,952
35,700
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311
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
49 TRANSITION TO IFRS 16 – LEASES (continued)
49 TRANSITION TO IFRS 16 - LEASES (continued)
Right-of use assets were measured at the amount equal to the lease liability, adjusted by the amount
of any prepaid or accrued lease payments relating to that lease recognised on the balance sheet as
at December 31, 2018. There were no onerous lease contracts that would have required an adjustment
to the right-of-use assets at the date of initial application.
The recognised right-of-use assets relate to the following types of assets:
Land & buildings
Office furnishing, equipment & vehicles
Total right-of-use assets(1)
(1)Included in property, plant and equipment
December 31, 2019
January 1, 2019
29,058
311
29,369
23,434
419
23,853
Impact on segment disclosures and earnings per share
Adjusted EBITDA, segment assets and segment liabilities all increased as a result of the change
in accounting policy. The following segments were affected by the change in policy:
Life, health and annuity contracts issued
to individuals
Property and casualty insurance
Banking, investment management and
other financial services
Hotel, farming and unallocated revenues
Adjusted
EBITDA
Assets
Liabilities(2)
4,571
242
1,296
22
6,131
15,990
17,585
5,503
7,802
74
29,369
5,677
8,145
79
31,486
Earnings per share decreased by 8.02¢ per share for the year as a result of the adoption of IFRS 16.
(2) The impact due to finance lease liabilities existing at December 31, 2018 is $4,214.
The change in accounting policy affected the following items in the balance sheet on
January 1, 2019:
Transitions
Property, plant and equipment
Current lease liabilities
Lease liabilities
The net impact on retained earnings on January 1, 2019
Increase/ (Decrease)
23,853
5,365
18,488
-
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by
the standard:
(a)
(b)
(c)
(d)
(e)
the use of a single discount rate for a portfolio of leases with reasonably similar characteristics;
reliance on previous assessments on whether leases are onerous;
the accounting for operating leases with a remaining lease term of less than 12 months as at
January 1, 2019 as short-term leases;
the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of
initial application, and
the use of hindsight in determining the lease term where the contract contains options to extend
or terminate the lease.
The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial
application. Instead, for contracts entered into before the transition date the Group relied on its
assessment made applying IAS 17 Leases and IFRIC 4 Determining whether an Arrangement contains
a Lease.
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Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 50 RECLASSIFICATION OF COMPARATIVE FIGURES
51 SUBSEQUENT EVENTS
Subsequent to the end of the financial year, the World Health Organization declared COVID-19 a world
health pandemic. This pandemic has affected many countries and all levels of society and has affected
our economic environment in significant ways.
As the COVID-19 situation evolves, many of the markets in which the Group operates have implemented
public health safety protocols. Most Caribbean countries have largely shut down air and sea
traffic. Similar procedures have also been applied in the United States, Canada and elsewhere.
The COVID-19 pandemic has caused significant economic and financial turmoil both in the U.S. and
around the world and has fuelled concerns that it will lead to a global recession. These conditions are
expected to continue and worsen in the near term.
We believe that the pandemic will have a significant impact on our business, results of operations,
financial condition and liquidity. The extent of these impacts will depend on future developments which
cannot be accurately predicted at this time, as new information is emerging each day.
Increased economic uncertainty and increased unemployment resulting from the economic impacts of
the spread of COVID-19 may also result in policyholders seeking sources of liquidity and withdrawing
from insurance policy arrangements at rates greater than we previously expected. Accordingly,
policyholder lapse and surrender rates could exceed our expectations, which could lead to an adverse
effect on our business, financial condition, results of operations, liquidity and cash flows. The economic
environment could also have an adverse effect on our sales of new policies.
Where necessary certain comparative figures have been adjusted to conform with the changes in
presentation in the current year. These adjustments had no effect on the reported results of operations.
Consolidated Statement of Financial Position
An adjustment has been made to the Consolidated Statement of Financial Position for the year ended
December 31, 2018 to separately report financial investments repledged of $553,264. Financial
investments previously reported of $5,347,663 have been separated into Financial investments of
$4,794,399 and Financial investments repledged of $553,264.
An adjustment has been made to the Consolidated Statement of Financial Position for the year ended
December 31, 2018 to separately identify Restricted cash. Cash resources previously reported as
$358,687 has been separated into Cash of $261,899 and Restricted cash of $96,788.
Where applicable, comparative figures in the notes to the consolidated financial statements have been
adjusted to conform with these reclassifications.
Consolidated Statement of Income
Net investment income disclosed in the Consolidated Statement of Income for the year ended
December 31, 2018 of $295,965, has been restated to separately disclose interest income earned from
financial assets measured at amortised cost and FVOCI of $290,988, other investment income
of $2,832 and share of operating income of associates and joint ventures of $2,145, reclassified under
Other.
Credit impairment losses of $95,519 in the Consolidated Statement of Income for the year ended
December 31, 2018 have been reclassified from Expenses to Revenue.
Gain arising on business combinations, acquisitions and divestitures of $18,238 disclosed in the
Consolidated Statement of Income for the year ended December 31, 2018 has been separated to show
Gain arising on business combinations, acquisitions and divestitures of $11,820 and Gain arising on
acquisition of insurance business of $6,418. Where applicable, comparative figures in the notes to the
consolidated financial statements have been adjusted to conform with these reclassifications.
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313
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000
51 SUBSEQUENT EVENTS (continued)
Our investment portfolio and our investments matching our pension liabilities may be adversely affected
as a result of market developments from the COVID-19 pandemic and uncertainty regarding its
outcome. Changes in interest rates, reduced liquidity or a continued slowdown in global economic
conditions may also adversely affect the values and cash flows of these investments. Investments in
mortgages and finance loans could be negatively affected by delays or failures of borrowers to make
payments of principal and interest when due. Equity investments have declined substantially in value.
The Group has an investment in Playa Hotels and Resorts; travel restrictions, the impact on tour and
holiday bookings and cancellations, may result in a downturn in revenues and profits which could result
in a write-down of this asset.
The Group will continue to monitor the impact of COVID-19.
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170
Notes to the Financial Statements SAGICOR FINANCIAL COMPANY Ltd. (formerly Sagicor Financial Corporation Limited) Year ended December 31, 2019 and December 31, 2018 Amounts expressed in US $000 SHAREHOLDER
INFORMATION
SHAREHOLDER INFORMATION
DIVIDENDS
An interim dividend of US 2.5 cents per common share, approved by the
Directors of Sagicor Financial Corporation Limited was declared for the half-
year ended June 30, 2019, and paid on November 15, 2019 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 18, 2019.
With the exchange of shares of Sagicor Financial Corporation Limited for
shares in Sagicor Financial Company Ltd. (formerly Alignvest, Acquisition II
Corporation) in December 2019, the next dividend paid by the Group parent
was under the name of Sagicor Financial Company Ltd. A first quarterly
dividend of US 5.625 cents per common share, payable on February 28,
2020, was approved as part payment of the final dividend for the financial
year ended December 31, 2019 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 February 10, 2020.
CONNECT WITH SAGICOR FINANCIAL COMPANY LTD.
Investors may contact Sagicor directly:
By Email:
By Telephone:
investorrelations@sagicor.com
1-246-467-7500
STOCK EXCHANGE LISTINGS
Sagicor Financial Company Ltd. is listed on the Toronto Stock Exchange –
Symbol TSX:SFC.
Sagicor Financial Corporation Limited was delisted from the London Stock
Exchange and has applied to be delisted from the Trinidad and Tobago and
Barbados Stock Exchanges.
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
TRANSFER AGENT – SHAREHOLDER ASSISTANCE
For more information on managing your Sagicor shares, shareholders may
contact our Transfer Agent, TSX Trust Company.
AUDITOR
PricewaterhouseCoopers SRL
Investor & Account Assistance
Sign in to your TSX Trust account to access all the data related to your
account, including a summary of holdings, transaction history and, proxy
voting and more. For your convenience, the TSX has also created a list of
Frequently Asked Questions.
Connect with TSX Trust
By Telephone:
1-647-727-0851 (Outside of North America)
1-833-955-1277 (North American Toll Free)
By Google Hangout:
Use the call feature of Google Hangouts to reach a TSX Agent (calls only).
By Email:
By Mail:
Office Hours:
sagicor@tsxtrust.com
TSX Trust Company 301-100 Adelaide Street West
Toronto, ON, M5H 4H1
Attn: Investor Services
9:00 am to 5:00 pm Monday to Friday (Eastern Time)
LEGAL ADVISORS
Carrington & Sealy, Barbados
Conyers Dill & Pearman Limited, Bermuda
Barry L V Gale, QC, LLB (Hons), Barbados
Blakes, Cassels & Graydon LLP, Canada
Patterson K H Cheltenham, QC, LLM, Barbados
Hobsons, Trinidad and Tobago
Holman Fenwick Willan LLP, London, United Kingdom
Johnson, Camacho & Singh, Trinidad and Tobago
Lex Caribbean, Barbados
Paul Hastings LLP, USA
Paul Hastings (Europe) LLP
Shutts & Bowen LLP, Florida, USA
Stikeman Elliott LLP, Canada
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 New York Mellon
The Bank of Nova Scotia
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OFFICES
Sagicor Registered Office
SAGICOR FINANCIAL COMPANY Ltd
Clarendon House
2 Church Street
Hamilton HM11
Bermuda
Tel: (441) 295-1422
Fax: (441) 292-4720
SAGICOR FINANCIAL CORPORATION
LIMITED
Clarendon House
2 Church Street
Hamilton HM11
Bermuda
Tel: (441) 295-1422
Fax: (441) 292-4720
Sagicor Corporate Head Office
SAGICOR FINANCIAL COMPANY Ltd
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
SAGICOR FINANCIAL CORPORATION
LIMITED
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
Cecil F de Caires Building
Wildey, St Michael, Barbados
Tel: (246) 467-7500
Fax: (246) 436-8829
Email: contactus@sagicor.com
Website: www.sagicor.com
Sagicor Life Inc Branch Offices
Barbados
Sagicor Life Inc
Sagicor Financial Centre
Collymore Rock
St Michael
Tel: (246) 467-7500
Fax: (246) 436-8829
Antigua
Sagicor Financial Centre
#9 Sir Sydney Walling Highway
St John’s
Tel: (268) 480-5500
Fax: (268) 480-5520
Email: info_antigua@sagicor.com
Belize
Coney Drive Business Plaza
Coney Drive
Belize City, Belize
Tel: (501) 223-3147
Fax: (501) 223-7390
Email: info@sagicor.com
Curaçao
Schottegatweg Oost #11
Willemstad
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: info_trinidad@sagicor.com
Sagicor Life Inc Agencies
Curaçao
Guillen Insurance Consultants
P O Box 4929
Kaya E, Salas No 34
Tel: (599) 9 461-2081
Fax: (599) 9 461-1675
Email: chris-guillen@betlinks.an
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Dominica
WillCher Services Inc
44 Hillsborough Street
Corner Hillsborough & Independence Streets
Roseau
Tel: (767) 440-2562
Fax: (767) 440-2563
Sagicor Life (Eastern Caribbean) Inc
Branch Offices
Antigua
Sagicor Financial Centre
#9 Sir Sydney Walling Highway St John’s
Tel: (268) 480-5500
Fax: (268) 480-5520
Email: info_antigua@sagicor.com
Haiti
Cabinet d’Assurance
Fritz de Catalogne
Angles Rues de Peuple et des Miracles
Port-au-Prince
Tel: (509) 3701 1737
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
Sagicor Life Inc
S.V. Browne Agency Limited
Frenches
Kingstown
Tel: (784) 456-1159
Fax: (784) 456-2232
SAGICOR LIFE (EASTERN CARIBBEAN) INC
Sagicor Financial Centre
Choc Estate Castries, St Lucia
Tel: (758) 456-1700
Tel: (758) 450-3787
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
Sagicor Life (Eastern Caribbean) Inc
Agencies
Dominica
WillCher Services Inc
44 Hillsborough Street
Corner Hillsborough & Independence Streets
Roseau
Tel: (767) 440-2562
Fax: (767) 440-2563
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
Sagicor Life Inc
C/o Incorporated Agencies Limited Frenches
Kingstown
Tel: (784) 456-1159
Fax: (784) 456-2232
Sagicor General Insurance Registered Office
SAGICOR GENERAL INSURANCE INC
Cecil F DeCaries Building
Wildey, St Michael, Barbados
Tel: (246) 431-2800
Fax: (246) 228-8266
Email: sgi-info@sagicorgeneral.com
Sagicor General Insurance Inc
Haggatt Hall
St Michael
Barbados
Tel: (246) 431-2800
Fax: (246) 426-0752
(246) 228-8266
Email: sgi-info@sagicorgeneral.com
Antigua
Sagicor Life Inc
Sagicor Financial Centre
#9 Sir Sydney Walling Highway
St John’s
Tel: (268) 480-5500
Fax: (268) 480-5550
Email: info_dominica@sagicor.com
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St Lucia
Sagicor Life Inc
Sagicor Financial Centre
Choc Estate
Castries
St Lucia
Tel: (758) 452-0994
Fax: (758) 450-4870
Trinidad and Tobago
122 St Vincent Street
Port of Spain
Tel: (868) 623-4744
Fax: (868) 628-1639 or (868) 625-1927
Sagicor General Insurance Agencies
HHV Whitchurch & Company Limited
Old Street
P O Box 771
Roseau
Dominica
Tel: (767) 448-2182
Fax: (767) 448-5787
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
Orry J Sands & Co. Ltd.
300 east Shirley Street
Nassau, NP Bahamas
Tel: (242) 393-4300
Fax: (242) 393 6258
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 ASSET MANAGEMENT INC
Cecil F de Caires Building
Wildey, St Michael Barbados
Tel: (246) 467-7500
Fax: (246) 426-1153
Email: info@sagicor.com
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
SAGICOR BERMUDA RE LTD
30 Woodbourne Ave,
Pembroke, HM 08 P.O. Box HM 2020 Hamilton
HM HX Bermuda
Tel: (441) 296-1711
Fax: (441) 292-1540
CAPITAL LIFE INSURANCE COMPANY
BAHAMAS LIMITED
C/o Family Guardian Insurance Company
Limited
No 1 Shirley Street & Village Road
P O 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
Lyder Insurance Consultants
Seroe Blanco 56A
Tel: (297) 582-6133
LOJ HOLDINGS LIMITED
28-48 Barbados Avenue
Kingston 5, Jamaica
Tel: (876) 929-8920(-9)
Fax: (876) 960-1927
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SAGICOR GROUP JAMAICA LIMITED
28-48 Barbados Avenue
Kingston 5, Jamaica
Tel: (876) 929-8920(-9)
Fax: (876) 960-1927
Website: www.sagicorjamaica.com
SAGICOR LIFE JAMAICA 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 SERVICES LIMITED
63-67 Knutsford Boulevard
Kingston 5
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
SAGICOR INSURANCE BROKERS LIMITED
28-48 Barbados Avenue
Kingston, 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 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
17 Dominica Drive
Kingston, Jamaica
Tel: (876) 960-2340
Fax: (876) 929-7324
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
Website: www.sagicorlifeusa.com
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
Associated Companies
FAMGUARD CORPORATION LIMITED
No.1 Shirley Street & Village Road
P O 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
Other Offices
1222948 B.C. Ltd
Thomson Building
65 Queen Street West
Suite 400, Toronto
ON M5H 2M5
Email: investorrelations@sagicor.com
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