SAGICOR FINANCIAL COMPANY LTD. (formerly Sagicor Financial Corporation Limited) CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2019 AND DECEMBER 31, 2018 Information in this document may not be copied, reproduced, distributed, transmitted or in any way disseminated without the prior written consent of Sagicor Financial Corporation Limited. Any alteration, amendment, insertion or deletion is strictly prohibited. This information is intended only for persons to whom an electronic communication from authorised Sagicor personnel is addressed and is provided for lawful purposes only. Users should be aware that electronic communication could be forwarded, intercepted or altered by others. INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS Sagicor Financial Company Ltd. (formerly Sagicor Financial Corporation Limited) December 31, 2019 and December 31, 2018 Reports: Page Notes to the Financial Statements: Page Notes to the Financial Statements: Page Appointed Actuary’s Report 9 Financial Investments 63 31 Employee Retirement Benefits 85 Independent Auditor’s Report 10 Reinsurance Assets 65 32 Income Taxes 89 Consolidated Financial Statements: 11 Income Tax Assets 65 33 Deferred Income Taxes 90 Statement of Financial Position 4 12 Miscellaneous Assets and Receivables 65 34 Earnings per Common Share 92 Statement of Income 5 13 Actuarial Liabilities 66 35 Other Comprehensive Income (OCI) 93 Statement of Comprehensive Income 6 14 Other Insurance Liabilities 69 36 Cash Flows 94 Statement of Changes in Equity 7 15 Investment Contract Liabilities 70 37 Changes in Subsidiary and Associate Holdings 96 Statement of Cash Flows 9 16 Notes and Loans Payable 70 38 Discontinued Operation 100 17 Deposit and Security Liabilities 73 39 Contingent Liabilities 101 Notes to the Financial Statements: Page 18 Other Liabilities / Retirement Benefit Liabilities 73 40 Fair Value of Property 102 1 General Information 10 19 Income Tax Liabilities 73 41 Financial Risk 102 2 Accounting Policies 12 20 Accounts Payable and Accrued Liabilities 74 42 Insurance Risk - Property & Casualty Contracts 150 3 Critical Accounting Estimates and Judgements 38 21 Common Shares 75 43 Insurance Risk - Life, Annuity & Health Contracts 155 4 Segments 42 22 Reserves 76 44 Fiduciary Risk 160 5 Investment Property 53 23 Participating Accounts 78 45 Statutory Restrictions on Assets 160 6 Associates and Joint Ventures 54 24 Premium Revenue 78 46 Capital Management 161 7 Property, Plant and Equipment 59 25 Policy Benefits & Change in Actuarial Liabilities 78 47 Related Party Transactions 166 8 Intangible Assets 60 26 Net Investment Income 79 48 Breach of Insurance Regulations 166 – Related Party Balances 27 Fees and Other Revenue 80 49 Transition to IFRS 16 - Leases 167 28 Interest and Finance Costs 81 50 Reclassification of Comparative Figures 169 29 Employee Costs 81 51 Subsequent Events 169 30 Equity Compensation Benefits 82 1 Sagicor Financial Company Ltd. ACRONYMS Sagicor Financial Company Ltd. (formerly Sagicor Financial Corporation Limited) December 31, 2019 and December 31, 2018 Certain acronyms have been used throughout the financial statements and notes thereto to substitute phrases. The more frequent acronyms and associated phrases are set out below. Acronym Phrase AA Appointed Actuary EAD Exposure at Default ECL Expected Credit Losses FVOCI Fair Value through Other Comprehensive Income FVTPL Fair Value through Profit and Loss IAS International Accounting Standards IFRS International Financial Reporting Standards IFRS 9 International Financial Reporting Standard No.9 – Financial Instruments IFRS 16 International Financial Reporting Standard No.16 – Leases LGD Loss Given Default MCCSR Minimum Continuing Capital and Surplus Requirement OCI Other Comprehensive Income PD Probability of Default POCI Purchased or Originated Credit-Impaired SICR Significant Increase in Credit Risk SPPI Solely Payments of Principal and Interest 2 Sagicor Financial Company Ltd. SAGICOR FINANCIAL COMPANY LTD. APPOINTED ACTUARY’S 2018 & 2019 REPORT TO THE SHAREHOLDERS AND POLICYHOLDERS I have performed or reviewed the valuation of the consolidated policy liabilities of Sagicor Financial Company Ltd. (“Sagicor”) which includes the policy liabilities of its life insurance subsidiaries: A — Sagicor Life Inc. (Barbados) (“SLI”), B — Capital Life Insurance Company Bahamas Limited (Bahamas) (“CLIC”), C — Sagicor Life Aruba NV (Aruba), D — Sagicor Panamá SA (Panama), E — Nationwide Insurance Company Limited (Trinidad & Tobago), F — Sagicor Life (Eastern Caribbean) Inc. (“SLECI”), G — Sagicor Life Jamaica Limited (Jamaica) *, H — Sagicor Life of the Cayman Islands Limited (Cayman Islands) *, and I — Sagicor Life Insurance Company (USA) *, for the balance sheets, at 31st December 2018 and at 31st December 2019, and their change in the respective consolidated statement of operations, for the years then ended, for each organization and on a consolidated basis in accordance with accepted actuarial practice, including selection of appropriate assumptions and methods. The valuation of Sagicor and its Life Insurance Subsidiaries was conducted by myself, or other actuaries (indicated by a “*” above), using either the Policy Premium Method (“PPM”) or the Canadian Asset Liability Method (“CALM”) where appropriate, assuming best-estimate assumptions together with margins for adverse deviations in accordance with the Standards of Practice (Life) of the Canadian Institute of Actuaries. For those where other actuaries completed the valuation, I have reviewed and accepted their valuation and have relied on their work in order to issue this certificate. In my opinion, the amount of policy liabilities makes appropriate provision for all policyholder obligations and the financial statements fairly represent the results of the valuation. Sylvain Goulet, FCIA, FSA, MAAA Affiliate Member of the Institute and Faculty of Actuaries Member of the Caribbean Actuarial Association Appointed Actuary for Sagicor Financial Company Ltd., and the above Life Subsidiaries A to F 26th March 2020 Independent auditor’s report To the Shareholders of Sagicor Financial Company Ltd. Our opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Sagicor Financial Company Ltd. (the Company) and its subsidiaries (together ‘the Group’) as of December 31, 2019 and December 31, 2018, and their consolidated financial performance and their consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS). What we have audited Sagicor Financial Company Ltd.’s consolidated financial statements comprise: • the consolidated statements of financial position as of December 31, 2019 and December 31, 2018; • the consolidated statements of income for the years then ended; • the consolidated statements of comprehensive income for the years then ended; • the consolidated statements of changes in equity for the years then ended; • the consolidated statements of cash flows for the years then ended; and • the notes to the consolidated financial statements, which include significant accounting policies. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2019. The key audit matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. PricewaterhouseCoopers SRL, The Financial Services Centre, Bishop’s Court Hill, P.O. Box 111, St. Michael, BB14004, Barbados, West Indies T: +246-626-6700, F:+246-436-1275, www.pwc.com/bb Key audit matter How our audit addressed the key audit matter Actuarial methodologies and assumptions Our approach to addressing the matter involved used in the valuation of actuarial the following procedures, amongst others: liabilities ● updated our understanding for any changes Refer to Note 3 Critical accounting estimates and impacting the assumptions, specifically, judgements, and Note 13 Actuarial liabilities, to the investment returns, associated discount rates consolidated financial statements. and borrowing rates, policy expenses and operating assumptions such as mortality, The Group’s total actuarial liabilities was $3.6 morbidity and persistency. billion as at December 31, 2019 and is the most significant liability on the Group’s statement of ● assessed the competence and capability of financial position. management’s actuarial expert. We focused on this area as it involves significant ● evaluated the methodologies and assumptions judgement over uncertain future outcomes, mainly utilized by management’s actuaries, considering the ultimate total settlement value of long-term published