ANNUAL REPORT — 2016 The curious thing about potential, is that talking about it isn’t enough. The power lies in action. That’s why at Sagicor, we make sure people achieve their full financial potential. We work with them to ensure they make prudent and informed financial decisions today, that will lead to a brighter, more prosperous tomorrow. OUR VISION To be a great company, committed to improving the lives of people in the communities in which we operate. CONTENTS 6 60 102 ABOUT SAGICOR OPERATING AND FINANCIAL INDEX TO THE FINANCIAL REVIEW STATEMENTS • Financial Statements & Notes 10 76 228 CHAIRMAN’S STATEMENT BOARD OF DIRECTORS SHAREHOLDER INFORMATION Financial Highlights • Advisors & Bankers • Offices 16 82 CORPORATE SOCIAL CORPORATE GOVERNANCE RESPONSIBILITY 50 96 HUMAN CAPITAL REPORT EXECUTIVE MANAGEMENT 2016 ANNUAL REPORT 3 ABOUT SAGICOR There’s no telling which direction your life will take, but by being thoughtful and rigorous now, you can ensure that your future will always be bright. When you place your trust in Sagicor, rest assured that we will be there for you every step of the way to help you reach your full potential. ABOUT SAGICOR Sagicor is a dynamic, indigenous Group which has been redefining Sagicor supports education at the primary, secondary and tertiary level, financial services in the Caribbean. Following a carefully crafted and sponsors a number of adult education and development activities. business strategy, the company transformed from a local single-line life insurance company to a financial services group with a solid regional As we move forward through these challenging times in the economic base, before expanding into the international financial services market. life of our region and the rest of the world, Sagicor’s core business strategies will continue to provide a wide range of financial products After the company demutualised in 2002, Sagicor Financial and services, while focused on our vision, “To be a great company, Corporation was formed as a publicly listed holding company. The word committed to improving the lives of people in the communities in Sagicor means “wise judgment”, and reflects the quality of the financial which we operate.” advice and services we offer. Sagicor now operates in 22 countries in the Caribbean, the USA and Latin America. For 176 years, Sagicor’s business has been based on long-term relationships with its customers, employees, and communities who entrust us with their financial well-being. Our name and reputation draw on the strength, stability and financial prudence that are our heritage, and this identity defines the flexibility that wise financial thinking can bring to our customers throughout their lives. Through local expertise and in partnership with world-class asset managers, reinsurers, together with sound risk management practices, Sagicor is able to provide wise financial advice, that meets the needs of its customers. For many decades, Sagicor provided financial support and voluntary assistance, primarily in the areas of health, education, youth development and sports, to a number of organisations and institutions. Sagicor continues to provide significant support for the prevention of non-communicable diseases by promoting healthy living, and improving access to and facilities for health-care in the region. 6 SAGICOR FINANCIAL CORPORATION LIMITED 2016 ANNUAL REPORT 7 CHAIRMAN’S STATEMENT Our guiding principle has always been to act wisely. By using the knowledge we have acquired over the years, we can do what is best to lead the way, and make everyone’s future as bright as possible. CHAIRMAN’S STATEMENT The economic circumstances of the markets Total revenue increased by 2.7% to US in which the Sagicor Group operated during $1,134.1 million, compared to the prior year 2016, showed little improvement over that of amount of US $1,104.2 million, an increase 2015. The US economy grew at a pace much of US $29.9 million. Net premium revenue lower than expected, while the situation in the closed at US $664.0 million, marginally Caribbean was very mixed. The performance under 2015’s net premium revenue of of the Jamaican economy continued to show US $673.9 million, and was impacted by signs of improvement, while the economy lower annuity business written in our USA of Trinidad & Tobago slipped deeper into segment, together with the impact of the recession. The economies of Barbados, and depreciation of the Jamaica Dollar to the US those of the Eastern Caribbean, enjoyed the dollar on translated premiums. Net investment Stephen McNamara, CBE early signs of a return to growth. However, the income closed the period at US $353.4 million, Chairman high debt to GDP ratios continue to constrain up from US $322.2 million in the prior year, the growth, and expose these economies to the driven mainly by increased realised gains negative impact of external shocks. As a result, on our international investment portfolios, the environment, for the most part, reflected and exceeded the prior year amount by these economic realities, with businesses US $31.2 million, or 9.7%. Fees and other experiencing slow revenue growth, and having revenue amounted to US $116.8 million, to rely heavily on strategies which emphasised compared to US $109.1 million in 2015, an conservation and operating efficiencies. improvement of US $7.7 million, or 7.1%. Within this context, it is my pleasure to report Total benefits closed at US $560.4 million, and to you on the 2016 financial performance of marginally exceeded the prior year amount of the Sagicor Group, which experienced a solid US $552.9 million. performance, with net income for the year closing at US $109.3 million, compared to Expenses (including agents’ and US $76.8 million in the prior year. brokers’ commissions) closed the year at US $424.2 million, and were below the prior Net income attributable to shareholders year amount of US $427.7 million. Expenses was US $61.7 million, compared to reflected the lower commissions and related US $34.7 million in the prior year, an increase expenses, consistent with the lower premium of US $27.0 million. Earnings per common revenue. Premium and asset taxes were also share was US 20.0¢, and represented an lower when compared to the prior year, and annualised return on common shareholders’ resulted from a reduction in premium and equity of 12.6%, compared to 7.0% for the asset taxes in the Jamaica segment. prior year. 10 SAGICOR FINANCIAL CORPORATION LIMITED Total comprehensive income closed the year shares amounting to US $120.0 million business conservation, and process at US $96.7 million, compared to a loss during the year. improvement to positively impact our financial of US $0.6 million for the prior year. The performance and overall financial condition. main contributor to the improvement in The Board declared dividends of US 2.5 We recognise the challenges still facing our comprehensive income was an underlying cents per common share, payable on May 15, Caribbean Region, and we will continue to improvement in net gains on financial 2017, which is consistent with the dividends work with other private sector institutions assets of US $142.3 million. Included paid on November 15, 2016, and represents and governments to play our part in the in comprehensive income were net a 25% improvement on the dividend paid on revitalisation of the economies, for the long- gains for the year on financial assets of May 17, 2016. term benefit of our customers, shareholders US $39.2 million, resulting from mark-to- and the communities in which we operate. market gains on financial assets associated On June 8, 2016, Shareholders approved with our international portfolios. The Group the redomiciliation of Sagicor Financial On behalf of the Board of Sagicor, I wish to experienced net declines of US $103.2 million Corporation to Bermuda. This was achieved thank our Shareholders and Customers for for the 2015 financial year. Retranslation losses on July 20, 2016, when the Company was their continued support. amounted to US $28.5 million, compared continued under Bermuda Law as Sagicor to US $15.7 million reported in 2015, and Financial Corporation Limited. This is resulted from declines in the Jamaica dollar the first phase of a three-part process to of US $21.0 million and the Trinidad dollar, immunise the Sagicor Group from non- US $7.5 million, when compared to the United investment grade domiciles, and to protect Stephen McNamara States dollar. the credit rating of the Group. The second Chairman phase is the incorporation of a reinsurance March 31, 2017 In the statement of financial position as company in Bermuda, while the third is the at December 31, 2016, assets amounted re-organisation of the corporate structure to US $6.5 billion, compared to to re-organise the main operating entities US $6.4 billion in the prior year. Liabilities as direct subsidiaries of Sagicor Financial closed at US $5.7 billion, the same Corporation Limited. level as in 2015. Sagicor’s Group equity totalled US $795.4 million, an increase of On December 23, 2016, S&P Global Ratings US $56.2 million, or 7.6% over the 2015 re-affirmed the credit rating of Sagicor financial year. Finance (2015) Limited at “BB-“ with stable outlook. Sagicor Finance (2015) Limited is the The Group’s debt was US $395.2 million. The Sagicor subsidiary through which the Sagicor debt to capital ratio was 33.2%, down from international corporate bond was issued. 39.2% for the prior year, and was impacted by the fact that the Company redeemed all its