CariCRIS upgrades its regional issue ratings for the debt issue of up to US$76 million or Jamaican Dollar equivalent of Sagicor Financial Company Ltd

CariAA+ (Regional Scale Foreign Currency)

CariAA+ (Regional Scale Local Currency)

jmAAA (National Scale Foreign and Local Currency)

?

?Caribbean Information and Credit Rating Services Limited (CariCRIS) has upgraded by one-notch the assigned issue ratings to CariAA+ (Foreign and Local Currency Ratings) on its regional scale and reaffirmed the Jamaica national scale ratings of jmAAA (Foreign and Local Currency Ratings), to the debt issue of up to US $76 million or J$ equivalent of Sagicor Financial Company Limited (SFC or the Company).? The regional scale ratings indicate that the level of creditworthiness of this debt obligation, adjudged in relation to other debt obligations in the Caribbean is high.? The Jamaica national scale ratings indicate that the level of creditworthiness of this debt obligation compared to other debt obligations in Jamaica is the highest.?

Our one-notch uplift of SFC’s regional scale ratings stemmed from the Company successfully meeting 1 of 2 upgrade criteria specified in our last report (June 2023). The report outlined that a condition/outcome that could lead to an improvement in the Company’s ratings is:?

1. Successful acquisitions and/or regional expansion over the next 12 to 15 months with a concomitant material improvement in any of its main segments’ market share and SFC’s overall financial performance - Actual achieved by SFC following the successful acquisition of ivari[1].? The acquisition has improved the Company’s geographical diversity in business lines and operating territories to include the Canadian market with approximately 26% of the Universal Life[2] market share as at December 2023[3].? This has resulted in the expansion of the Company’s revenue generation capacity and asset base which has bolstered SFC’s capitalisation and economic resilience given its strengthened balance sheet. Additionally, the associated positive impact to SFC’s capital strength bodes well for further expansion and overall financial flexibility. SFC’s overall financial performance in 2023 more than exceeded CariCRIS’ one year growth expectations[4].?

CariCRIS has also assigned a stable outlook on the ratings. The stable outlook is based on CariCRIS’ expectation of continued improvement in the Company’s financial performance over the next 12- 15 months, buttressed by its recent acquisition of ivari, consistent growth in SFC’s United States of America (USA) operations and continued technological advancements aimed at improving operating efficiency. These factors collectively could serve to increase its profitability and expand its market presence in existing and new markets. Further, CariCRIS expects SFC to comfortably meet all its debt obligations as they come due and maintain good capitalisation buffers.

SFC’s ratings continue to reflect its leading market position in the Caribbean, as well as a growing market share in international markets. This international market presence is further enhanced by the Company’s entrance into Canada following its recent acquisition. This acquisition contributed to the Company reporting a rebound in the financial performance, good capitalization levels and short-term liquidity metrics. Moreover, SFC’s strong and effective Enterprise Risk Management framework continues to bolster the ratings. These rating strengths are tempered by the global economic uncertainty which continues to present downside risks to countries in which SFC’s subsidiaries operate, thus potentially challenging profitability levels.

Rating Sensitivity Factors

Factors that could, individually or collectively, lead to an improvement in the ratings and/or Outlook include:

• ?Substantial improvement in the market position and financial performance and profitability of Sagicor Canada and Sagicor Jamaica.
• Successful acquisitions and/or regional expansion over the next 12 to 15 months with a concomitant material improvement in any of its main segments’ market share and SFC’s overall financial performance.

Factors that could, individually or collectively, lead to a lowering of the ratings and/or Outlook include:

• A significant change in capitalization, especially on account of future acquisitions resulting in the MCCSR falling to 175% or lower.
• Substantial deterioration in consolidated financial performance, with a greater than 40% fall in total income.?
• Decrease in Interest Coverage to <1.5X.
• A reduction in the creditworthiness of Jamaica where SFC derives more than 30% of its net insurance and investment result.

For more information on the ratings of SFC, please visit www.caricris.com or contact:

Dr. Kathryn Budhooram

Head, Rating Operations

Cell: 1-868-706-6510

E-mail: [email protected]

OR

Ms. Anelia Oudit

Manager, Ratings

Cell: 1-868-487-8364

E-mail: [email protected]

Note

This rating release is transmitted to you for the sole purpose of dissemination through your agency/newspaper/magazine. You may use this rating release in full or in part without changing the meaning or context thereof, but with due credit to CariCRIS. CariCRIS has the sole right of distribution of its rating releases, for consideration or otherwise, through any media, including websites, portals, etc.

Visit our website and subscribe to read the full Rating Release and Rationale.