Sagicor posts strong Q3 results
Buoyed by strong third quarter results, Sagicor Jamaica President Chris Zacca is boasting that the local financial conglomerate has not had any capital flight, even with growing concerns about asset quality in the financial sector.
Arguing that many assets in the local financial sector have taken a hit because of COVID19, Zacca conceded that Sagicor has not been spared but was quick to point out its asset quality is “in great shape”.
“We have had no flight [of capital] to safety as most other financial companies are doing,” Zacca told the Jamaica observer in an exclusive interview looking at the company’s just-released September quarter financials.
He pointed out that the biggest hit on assets came from Sagicor’s investments in the tourism sector, which is slowly returning from full closure in April with most of the company’s properties now open and bookings on the rise.
The news was not so good on the loan portfolio, given the increased provision that has to be made based on the impact of COVID-19 on borrowers.
In its September quarter report, Sagicor stated that “the group has recorded substantial expected credit losses on its portfolios of loans and domestic and international investment securities. The group has continued to strengthen provisions on loans and investments, given the slow economic recovery projected”.
Zacca said, “On the loan side is where the attention is. We are managing the portfolio, we are in constant contact with clients, helping them to work through this difficult time, keeping on top of their payment. We have it under constant control but there is still the potential for volatility.”
The group generated very strong net profit, attributable to stockholders, of $5.97 billion for the quarter under review, more than doubling the $2.47 billion earned for the June quarter. For the quarter ended September last year the group made $4.47 billion.
For the nine-month period, profits were $10.33 billion, a five per cent decline compared to prior year. Total revenue decreased by 11 per cent or $7.27 billion, a decrease of four per cent ($2.95 billion) when adjusted for unrealised capital losses. Net premium income amounted to $37.25 billion, a 10 per cent jump over 2019.
There was an increase of four per cent when normalised for premiums from
Advantage General Insurance Company (AGIC), which was acquired in September 2019. Net investment income of $13.35 billion was recorded for the quarter, an improvement of seven per cent over last year.
The individual life segment came out the big winner, posting improved net profits of $5.91 billion compared to $3.78 billion in 2019. Net premium income of $20.65 billion was six per cent higher than the comparative 2019 period. This was driven by new policy sales, both in Jamaica and the Cayman Islands, with significant improvement seen in the third quarter.
There were large unrealised capital losses related mainly to the segregated funds and an increase of $1.96 billion in benefits to policyholders. The increase in benefits is mainly due to withdrawals from segregated policy funds, primarily driven by a change in the investment stance of clients.
The commercial banking arm, Sagicor Bank, contributed net profits of $1.50 billion for the current period, a 23 per cent reduction when compared to 2019. The results were impacted by higher expected credit losses on loans as a result of the impact of COVID-19 on tourism, entertainment, and energy sector loans and the slower than expected recovery of the economy.
Fee-based income of $2.89 billion was two per cent less than prior year. Payments channels, loans and credit cards business slowed appreciably in 2020 as a direct result of the decline in consumer activity caused by COVID-19.
The investment banking segment, unlike the banking arm, showed strong profitability during the period, contributing $2.19 billion — excluding the share of AGIC earnings — to the group, nine per cent higher than prior year. This segment benefited from increased market activity in the last quarter, recording higher trading gains and improvement in its net investment income, contributing to total revenue of $5 billion, which is 11 per cent above 2019.
Fee income was down compared to the similar period in the prior year as less corporate financing deals were closed and asset management fees were reduced in line with the reduction in value of assets under management.
This quarter, there has been a steady rise in market values causing a significant increase in management fees over prior quarter.