Wednesday 25 November, 2020

Zacca optimistic about ‘gradual reopening’ of the economy

President and CEO of Sagicor Group Jamaica, Christopher Zacca.

President and CEO of Sagicor Group Jamaica, Christopher Zacca.

Sagicor Group is reporting a 30 per cent reduction in net profit due to reduced capital gains and declines in the tourism and hospitality industry arising from the effects of the coronavirus (COVID-19) pandemic.

Speaking during a press conference via Zoom on Monday, President and CEO of Sagicor Group Jamaica, Christopher Zacca said: “All things considered Sagicor performed well.”

Zacca noted that the company has been focusing on increasing the effectiveness of digital channels in line with clients’ needs.

Sixty per cent of staff, he noted, are now working “effectively and productively” from home. The company, he said has no plans to close any branches.

The CEO, in commenting on plans to reopen the economy in Jamaica, said he expected that a gradual reopening could be beneficial to the economy and to Jamaicans.

The group generated net profit attributable to stockholders of $1.88 billion, equivalent to a $0.82 billion (30 per cent) decrease when compared to the first quarter in 2019.

The earnings per share reduced to $0.48 from $0.69.

Total revenue before unrealized capital losses increased by 15 per cent or $3.05 billion.

Zacca highlighted the improved performance of the group’s insurance businesses, which saw new business and portfolio growth resulting in net premium income and fee income moving upwards by 24 per cent and 34 per cent, respectively.

The group, however, experienced significant unrealized capital losses driven by the broad decline in bond and equity prices.

Company comments posted on the Jamaica Stock Exchange (JSE) said, “We believe this downturn is temporary and anticipate some reversal as the effects of COVID-19 are mitigated.”

Overall, there were significant unrealized IFRS 9 Expected Credit Losses (ECL) on investment securities and the loan portfolios and COVID-19 and the resulting travel restrictions adversely impacted investments in hotel operations.

During the quarter,  the group recognized a significant share of loss from its investment in associate (Playa); as well as an impairment charge on its investment in Playa and an impairment charge relating to the goodwill that arose on the acquisition of the X-Fund Group in 2018.

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The group statement said, despite these negative effects, the operating cash flow of the company has increased by $4.40 billion and the group’s cash position has improved by $6.10 billion.

In comments on the margin, Zacca said that pensioners, especially those who reside abroad, are being negatively affected by the depreciation of the Jamaican dollar, but Sagicor itself continues to seek returns which were above inflation, for their benefit.

Zacca also expressed confidence that the Bank of Jamaica (BOJ) was doing all it could to normalise the foreign exchange market, noting that the reserves held by the central bank and the recently secured International Monetary Fund (IMF) loan would serve towards this end.

The dollar has declined in value by 10.5 per cent since January 2, 2020, selling for J$147 for one US dollar on May 18.

Zacca said he was proud of the Sagicor team, which has been successfully navigating changes occurring.

Fee and other income of $3.90 billion grew by 30 per cent over 2019 due mainly to Sagicor Bank’s Payments channels business.  The Individual Life segment posted net profits of $1.27 billion, 112 per cent better than 2019.

Net premium income of $6.93 billion was 12 per cent higher than the comparative 2019 period. This was driven by higher new sales in 2020 for both Jamaica and Cayman, resulting in the policies growing by seven per cent to almost 600,000 policies.

Large unrealized capital losses were mainly for the segregated funds and an increase of $0.78 billion in benefits accrued or paid to policyholders due to withdrawals from segregated policy funds, primarily driven by a change in the investment stance of clients.

The company reported that actuarial liabilities were positively influenced by improvements in morbidity and lapse experience.

For the first quarter, the employee benefits segment produced profits of $1.09 billion, being 13 per cent less than in 2019. Overall new sales for the segment improved with annualized new premium income showed 42 per cent growth over 2019.

The company noted that despite the effect of unrealized losses on investment securities, group assets of $458.46 billion showed a “minor” decline from December 2019 and significant growth of 13 per cent over the prior year.

Stockholders’ equity of $87.09 billion, as at March 2020, increased by 10 per cent, or $7.60 billion over the prior year.

As regards dividends, Zacca said the group intended to make a payout based on the latest guidance from the BOJ [which permits payments to be made to shareholders owning less than one per cent of company shares]. Some 12,700 shareholders will benefit, Zacca noted.

The group CEO stated, “We are just awaiting approval of five shareholders of Sagicor who fall within the group. Once we get that, we will move to advise the stock exchange. For those over per cent, we await the policy change by the BOJ.”

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