SJ reports 88% decline in six months net profits

Market News

August 10, 2020

August 7, 2020

Sagicor Group Jamaica Limited (SJ), for the six months ended June 30, 2020, reported that Total Revenues decreased by 9% to $38.85 billion from $42.59 billion in 2019, while for the second quarter, Total Revenues declined 2% to total $22.04 billion compared to $22.47 billion in 2019. Total revenue year to date was broken down as follows.

- Net premium revenue increased by 20% to a total of $25.36 billion compared to $21.07 billion last year.
- Net Investment Income increased to $9.05 billion from $8.10 billion in 2019, a 12% increase.
- Realised and Unrealised capital (losses)/gains closed the period at a loss of $2.39 billion versus a gain of $3.91 billion in 2019.
- Credit losses on loans and investment securities amounted to $$1.63 billion relative to $106.21 million in 2019.
- Fees and other revenue went up 2% to $6.97 billion from $6.81 billion in 2019.
- Hotel revenue closed the period at $1.49 billion relative to $2.80 billion in 2019.

The Company mentioned that, “net premium income of $25.36 billion increased 20% over 2019, an increase of 16% when normalized for premiums from Advantage General Insurance Company (AGIC) which was acquired in September 2019. The Group has recorded substantial Expected Credit Losses (ECL) on its portfolios of loans and domestic and international investment securities.” Moreover, “COVID-19 and the resulting travel restrictions have adversely impacted our investments in hotel operations. The Group recognized that 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,” as per Management.

Benefits and Expenses totaled $31.04 billion for the period, decreasing by 9% from $34.20 billion, while for the second quarter Benefits and Expenses were up 2% to close at $18.12 billion relative to $17.75 billion in 2019. Of this Benefits and Expenses:

- Net insurance benefits incurred increased by 22% to close at $16.01 billion (2019: $13.13 billion).
- Changes in insurance and annuity liabilities amounted to a gain of $2.21 billion relative to a loss of $5.04 billion in 2019.
- Administration Expenses increased from $9.82 billion in 2019 to $11.35 billion in 2019.
- Commission and related expenses grew by 12% to $3.21 billion from $2.87 billion in 2019.
- Amortization of intangible assets and Asset tax both advanced to $445.13 million (2019: $376.78 million) and $746.74 million (2019: $641.61 million) respectively.
- Amortization of lease liabilities totaled $295.73 million versus $260.82 million in 2019.

Share of profit from joint venture amounted to $148.51 million relative to a loss of $12.09 million a year prior. Share of loss from associate for the period totaled $1.93 billion compared to a profit of $909.81 million last year. Impairment of investment in associate amounted to $1.79 billion (2019: nil), Impairment of goodwill totaled $853.50 million (2019: nil) and Share of loss from disposal of associate amounted to $380.75 million (2019: nil). As such, Profit before Taxation amounted to $3.02 billion, a 68% decrease when compared to the $9.29 billion booked in 2019.

Investment and corporation taxes of $2.17 billion (2019: $2.16 billion) was reported for the period, an increase of 1% which translated into an 88% decline in net profit to $846.71 million (2019: $7.13 billion) for the six months period. In addition, loss for the quarter amounted to $295.33 million relative to $3.63 billion in 2019. Net profit attributable to shareholders for the period amounted to $4.36 billion relative to $6.39 billion for the corresponding period in 2019. Total comprehensive income amounted to $2.08 billion (2019: $12.76 billion) for the six months ended June 30, 2020. For the second quarter, total comprehensive income amounted to $6.56 billion (2019: $7.50 billion).
Earnings per share (EPS) for the quarter amounted to $0.63 (2019: $0.95), while EPS for the period totaled $1.12 relative $1.64 in 2019. The twelve-month trailing EPS amounted to $3.49. The number of shares used in our calculations amounted to 3,905,634,918 units. SJ’s stock last traded on August 7, 2020 at $41.97.

Balance Sheet at a glance:

Total Assets increased by 11% or $47.15 billion to close at $472.13 billion as at June 30, 2020 from $424.98 billion the year prior. This increase was mainly driven by ‘Loans & leases, after allowance for credit losses’ which went up to $88.60 billion (2019: $72.94 billion). Also, ‘Pledged assets’ increased 21% to end the period at $87.55 billion (2019: $72.35 billion).

Equity attributable to stockholders of the company as at June 30, 2020 stood at $93.73 billion (2019: $82.80 billion) resulting in book value per share of $24 (2019: $28.54).

Analyst Certification -The views expressed in this research report accurately reflect the personal views of Mayberry Investments Limited Research Department about those issuer(s) or securities as at the date of this report. Each research analyst (s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendation(s) or view(s) expressed by that research analyst in this research report.

Company Disclosure -The information contained herein has been obtained from sources believed to be reliable, however its accuracy and completeness cannot be guaranteed. You are hereby notified that any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be unlawful. Mayberry may effect transactions or have positions in securities mentioned herein. In addition, employees of Mayberry may have positions and effect transactions in the securities mentioned herein.