The Sagicor Jamaica Group made big strides in the second quarter with a 39 percent increase in the net profits of $1.56 billion versus reported profits for 2012 of $1.12 billion. It also represents a major recovery over the ‘NDXed’ first quarter results of only $620 million. Earnings per share came out at 42 cents, annualized $1.68.
“The improved results in second quarter reflect continued good new business and a higher pay-out of insurance benefits. We also recorded a “one-time” charge of $120 million for an adverse Privy Council judgment relating to a Cayman Islands legal claim. In first quarter we had the impact of the National Debt Exchange and Private Debt Exchange (NDX programme) which resulted in “one-time” realized capital losses of $1.2 billion,” management said in a release accompanying the results. Profit of $2.18 billion was realised for the six months to June against $2.60 billion in 2012 attributable to stockholders. Earnings per stock amounts to 58 cents, while in 2012 it amounted to 69 cents for the six months. Total Comprehensive Income including, net profit for the period and movements in reserves held in Equity, was $1.33 billion compared to $3 billion for 2012.
“Unrealized fair value losses on available for-sale securities exceeded unrealized foreign exchange gains. The unrealized fair value losses emerged from lower bond prices as interest rates rose, especially USA corporate bonds. Following the NDX programme we now carry a large portion of GOJ securities with lower market values, lower coupon rates and extended tenors” the report to shareholders stated.
Revenues | Revenue of $15.24 billion was above prior year by 1 percent. With the effect of the NDX programme excluded, Revenue would have been up about 9 percent. Net Premium Income, in aggregate, was 4 percent more than that for 2012. The Individual lines of business earned premiums were up by 9 percent while Group Insurance and Annuity premiums were level with prior year. There was good new business across all lines. Investment income, before interest expense and capital gains was higher than in the prior year by 1 percent, reflecting lower coupons from March on some GOJ bonds management indicated to shareholders.
Administrative expenses of $3.73 billion were 10 percent more than in 2012 but the increase in the June quarter is 12.8 percent. The increase would have be only 6 percent if the $120 million legal claim is excluded. The increased expenses reflect mainly higher compensation costs, the $120 million legal claim paid in June 2013 and higher loan loss provisions in the Banking Group.
Stockholders’ Equity as at June 2013 was $33.21 billion, compared to $32.64 billion as at December 2012. Significant unrealized fair value losses were also recorded in June to Investments Reserves in Comprehensive Income, as bond prices fell with rising interest rates, especially USA corporate bonds. Total assets climbed to $185 billion from $175 in December last year as the group continues to grow moderately.
Insider call | At an annualised earnings of $1.68 per share generated in the latest quarter and with a stock price of just $8.20, the stock is undervalued and is accorded a Buy Rated rating.
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[…] Sagicor Life has cut dividends from the amount paid in 2012. The decline comes against the back drop of losses picked up from the government bond exchange (NDX) earlier this year, which resulted in realized capital losses of $1.2 billion and a 16 percent drop in net profit attributable to stockholders for the six months to June of $2.18 billion versus $2.60 billion in 2012. […]