Sagicor, the international insurance and finance company with its roots in Barbados, is feeling the effects of its failure to sell a failed British subsidiary.
Credit rating agency Standard & Poor’s has placed both Sagicor Life and Sagicor Finance Limited under negative credit watch because it has not yet sold Sagicor at Lloyd’s, the property and casualty business based in the United Kingdom on which the Sagicor group lost millions of dollars.
Two months ago Chairman Stephen McNamara said the company’s board and management “made the determination that the Sagicor Europe operations, comprising our Sagicor at Lloyd’s insurance business, would be divested and the group would realise its value through a sale of the business”.
There was a US$43.2 million loss on the Lloyd’s business in 2011 followed by a US$15.6 million operating loss last year. But while the intention to sell was announced recently, S&P thinks Sagicor is taking too long to sell its UK business, something which was hurting the outlook for its overall business.
“Our ratings incorporate our expectations that Sagicor will be able to significantly reduce its property and casualty business. So far, the company failed to sell Sagicor at Lloyd’s, which specialises in P&C, but the company is still pursuing the sale,” S&P said recently.
“We would downgrade the company if the sale doesn’t materialise over the next three months. Based on our analysis, if the sale is not completed within that period, our capital adequacy calculations will erode and the company’s bottom-line results will continue to suffer losses in this business.
“If the sale is completed, our capital calculations and operating performance should remain in line with our expectations, and we could affirm the rating. However, due to the company’s large exposure to Jamaica, which recently restructured its debt amid a stalled economy, the outlook will most likely remain negative.
“We expect to resolve the CreditWatch on Sagicor within the next three months. We could downgrade the company if it fails to formalise the sale during this timeframe. On the other hand, if this transaction is completed we could affirm the ratings,” it added.
This initial statement from the credit rating agency was followed by another indicating that Sagicor Finance Limited senior unsecured debt rating had been lower from BB to BB-. (SC)