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Sagicor pushes back on downgrade impact

by Barbados Today
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Sagicor Financial Company is not expecting major sovereign debt downgrades in the region due to COVID-19.

The expression of confidence has come from president and chief executive officer Dodridge Miller as he and other top brass of Sagicor took questions from major corporate investors following the release this week of its second quarter results for the period ending June 30.

Responding to a question about a possible increase in the credit risk to Sagicor linked to its investment in Government debt in the region, particularly Trinidad & Tobago and Barbados, Miller said he doubted there would be “material movements” in the ratings.

“There have been two things happening in the economies of the Caribbean. The strain on the Caribbean economies is largely around foreign reserves and because the economies were closed and the tourism sector was not performing. We found that imports were also down.

“So foreign reserves were still quite buoyant across the region. In addition to that, the IMF [International Monetary Fund] provided most of the economies in the Caribbean with COVID-relief facilities to help them to keep their economies alive and that has kept them pretty stable even though, on an overall macro-economic environment, you have seen some weaknesses,” he told investors mainly from Canada-based corporates.

According to Miller: “As the economies are now coming out of COVID-19 and re-opening and we are seeing some tourism activity coming in, flights are coming in from Europe and Canada, we believe that while they will be constrained, the impact on Government debt will not be strong and therefore we don’t expect any material movement in their ratings.”

Responding to a query from a Scotiabank representative about plans by Sagicor to expand further in the United States market, Miller said much of that expansion was expected to come through mergers and acquisitions (M&A), but organic growth was also on the cards.

“We are looking at both. We are currently following a path of organic growth and since 2018, we have retained all of the business that we have been writing . . . but we also consider M&A as part of our strategy in the US that will help us to grow faster and improve our scale and returns.

“Our priority with M&A will be towards traditional life and annuities. We actually write a lot of annuity business but we are over-weighted, in our view, in terms of annuities against life [business] and we like a balanced portfolio,” Dodridge pointed out.

Also addressing the investor forum was Sagicor’s Chief Financial Officer Andre Ho Long who said there was a $14 million decline in revenue from the Sagicor Life operations in the Southern Caribbean.

According to Ho Long: “In our operations in the Southern Caribbean, revenue declined by US$14 million to US$97 million compared to [the second quarter] of 2019. Primarily impacted by lower new business sales and an increase in expected credit losses.

“While the Caribbean has enjoyed a robust medical and social response to the pandemic, resulting in controlled transmission rates to date, several jurisdictions such as Barbados and Trinidad had several weeks of severe lockdowns that severely impacted our ability to sell new policies.”

Sagicor Financial Company is incorporated in Bermuda and listed on the Toronto Stock Exchange. Trading of the company’s shares has been suspended in Barbados as the company is expected to delist from the Barbados Stock Exchange.

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