Financial services giant Sagicor says it sees brighter days ahead for the economy.
As Sagicor Financial Corporation gears up to make a significant investment in the nation’s heartland, officials say they expect to see a turnaround in the country’s fortunes owing to Government’s austerity and retrenchment policies.
While reporting very little impact on the company from Government’s debt restructuring, Sagicor Financial’s Group Chief Operating Officer Ravi Rambarran said the firm made “full provision” for it.
Based on financial results for the nine-month period ended September 30, Sagicor’s net income was near $120 million, compared to about $171.6 million year on year.
The Sagicor Group holds about $674 million in Government debt, of which $556 million is domestic Barbados-dollar denominated debt.
The company had determined the net impact of the credit events on Government of Barbados debt to shareholders at approximately $86 million.
“The principal source of that reduction in net income related to our full provision for the government of Barbados debt restructuring, that was US$43 million. Despite that full provision our capital ratios remain very healthy,” said Rambarran.
Likening the process of Barbados’ restructuring to that of the Jamaican experience minus devaluation, Rambarran said he was confident Barbados would once again see brighter days.
“We are pleased with the results and we are certainly pleased that the impact of the Government of Barbados’ debt restructuring is behind us and so now we can focus on what we view as the positive economic benefits to emerge from such a restructuring, because we have observed the same phenomenon in Jamaica when Jamaica exited the IMF (International Monetary Fund) programme,” said Rambarran.
“I think it is fair to say that Jamaica is now viewed as the poster child of IMF programmes and economic recovery. So we expect a similar experience in Barbados because the play book followed is very similar in terms of restructuring the economy, in terms of having governance oversight and we are also pleased by the confidence reposed in one of Sagicor’s own executives in being a co-chairman of that oversight committee,” the Sagicor chief said, in an apparent reference to the general manager of Barbados operations, Edward Clarke.
Rambarran said the mere fact that the company was about to embark on a $400 million investment in a retirement village and medical complex, was a reflection of its confidence in the restructured economy.
“I don’t think you can find a better mark of confidence in the restructuring of the economy than Sagicor committing US$200 million to projects. That I think should speak a lot louder,” he said.
President and Chief Executive Officer of Sagicor Financial Corporation Dodridge Miller stressed that shareholders would not feel an impact from the debt restructuring, pointing out that “shareholder value may have been impacted but not impaired”.
Further commenting on the overall Barbados Economic Recovery and Transformation (BERT) programme, Miller said “our experience across several geographies suggested that if the macroeconomic environment continues to improve based on restructuring programmes in place, we expect an outcome that will be positive to Sagicor, shareholders and its policyholders”.
“We have seen the Government taking steps that are in line with what is expected to restructure the economy, and will stop the hemorrhaging of the excess debt overload and we remain confident that the outcome would be positive for the country, for Sagicor, policyholders and shareholders,” he insisted.
He said the most challenging period for the insurance and investments firm this year was going through the debt exchange “and making sure it was done effectively and to the benefit of the entire country”.
He said the debt restructuring did not come as a surprise, since before the announcement was made financial institutions had already started to meet to prepare themselves for such an event.
He said the debt restructuring would not deter the company from investing in Government paper in the future.
“We have seen this happen throughout the region and we understand the dynamics of the macro-economic environment,” said Miller.
Pointing out that a lot of the investment in the private sector had to do with confidence in the economy, Clarke said that confidence had certainly been returning in the last few months.
He added that with the recent announcement of the change in corporate tax rates from 30 per cent to between one per cent and 5.5 per cent, he expected Barbados to attract new investment.
“So I think it will attract new investment, for Sagicor certainly it opens the avenues for future possible investment because if we can invest and be taxed at two per cent it makes it more attractive to do business in Barbados,” said Clarke.
Sagicor Financial Corporation, the financial services firm’s holding company moved to Bermuda in July 2016, ending a 170-year history as a Barbadian company.
Sagicor made the move after it was affected by a downgrading of Barbados’ sovereign credit rating to B from BB+ in 2015 by ratings agency Standard & Poor’s.