Sagicor pulled into losses by associate
The tourism holdings of Sagicor Group Jamaica Limited weighed on the company in the June quarter, resulting in a rare net loss.
The financial conglomerate maintained profitability, however, when the non-controlling stake in a loss-making subsidiary is stripped out.
Sagicor Group, operator of Jamaica’s top insurance company and fourth-largest commercial bank, spun from a profit of $3.6 billion in the 2019 quarter to a net loss of $295 million for the April-June 2020 period due to hotel impairments.
Profit attributable to shareholders amounted to $2.47 billion this period, down from $3.69 billion in the comparative quarter in 2019. The earnings in the June quarter were offset by non-controlling losses of $2.77 billion.
Earnings per share in the quarter totalled $0.63 compared to $0.95 a year earlier. Over half year, the earnings per share totalled $1.12 compared to $1.64 at half-year 2019.
Sagicor Group President and CEO Christopher Zacca took issue with the characterisation that the group reported a loss, focusing instead on the $2.47 billion of profit attributable to shareholders.
“The real number is the profit attributable to shareholders. It is unfair to the shareholders of Sagicor to refer to that other figure,” said Zacca in an online investor briefing on Tuesday.
“When you speak about a net loss, the first in 20 years, it is totally irrelevant and, frankly, quite damaging. When we get on the X Fund call, then we can speak about that because it is a separate company,” he said.
The conglomerate operates profitable banking and insurance business. But tourism investments by subsidiary Sagicor Real Estate X Fund – particularly its holdings in Playa Hotels & Resorts – have weighed on the group’s performance.
Tourism earnings for Sagicor X Fund and the hospitality market writ large have been pummelled by the coronavirus due to restrictions placed on travel.
“COVID-19 and the resulting travel restrictions have adversely impacted our investments in hotel operations,” said Sagicor in its June quarter earnings report The group recognised a significant share of loss and impairment charge from its investment in associate, Playa, and an impairment charge relating to the goodwill that arose on the acquisition of the X Fund Group in 2018,” it said.
The impairment losses totalled $1.3 billion.
Sagicor Group Jamaica Limited holds 21 per cent of Sagicor X Fund directly but controls the company through various entities.
Sagicor Group acquired holdings in Playa Hotels through X Fund and other entities in 2018.
“If we had known that COVID-19 would have completely destroyed tourism across the world, then maybe we wouldn’t have done it. Apart from that, we still feel it was the right thing to do,” Zacca said on Tuesday.
Sagicor Group’s total assets were estimated at $472 billion in June, up from $425 billion a year earlier. Shareholder equity totalled $121 billion, up from $111.5 billion.
For the June quarter, the conglomerate earned total revenue of $22 billion, which dipped slightly year on year from $22.5 billion, but under the circumstances, Sagicor performed well, Zacca said, referencing the pandemic and the economic fallout that has come with it.
The company’s results have also been impacted by unrealised capital losses driven by the broad decline in bond and equity prices.
“In spite of the difficult environment, the group’s insurance businesses have continued to show strong performance, most notably with net premium income being 20 per cent higher than prior year,” stated Sagicor in statements accompanying the financials.
“We have seen healthy new business sales and portfolio growth, which continues to drive core results. The key metrics of our commercial and investment banking businesses have also remained strong and are expected to improve as the economy begins to show greater activity,” the company said.