Earnings call transcript: Sagicor Financial’s Q2 2025 growth shines

Sagicor Financial Company Ltd. reported a significant increase in core earnings for the second quarter of 2025, reflecting its strong performance across various segments. The company recorded core earnings of $46 million, marking an 82% increase compared to the same period last year. Revenues surged to $736 million from $6 million in the previous year, showcasing robust growth. The stock’s impressive performance year-to-date, with a 94.82% return according to InvestingPro data, reflects investor confidence in the company’s trajectory. Based on InvestingPro’s Fair Value analysis, the stock appears slightly overvalued at current levels.

Key Takeaways

• Core earnings rose by 82% to $46 million.
• Revenues reached $736 million, a substantial increase from last year.
• The company maintained a stable financial leverage ratio of 27.1%.
• Sagicor’s U.S. subsidiary assets surpassed $6 billion.
• Core earnings guidance for 2025 was increased to $120-130 million.

Company Performance

Sagicor Financial demonstrated significant improvement in its financial performance during Q2 2025. The company reported a notable increase in core earnings and revenues, driven by strong sales across all segments. With an EBITDA of $91.64 million and a healthy gross profit margin of 63.12% in the last twelve months, the company’s operational efficiency is evident. The Caribbean business showed robust performance, contributing to the overall growth. The company’s strategic initiatives and disciplined approach to new business production have been key drivers of its success. For deeper insights into Sagicor’s financial health and growth potential, InvestingPro subscribers can access comprehensive analysis and additional metrics in the Pro Research Report.

Financial Highlights

• Revenue: $736 million, up significantly from $6 million in the same quarter last year.
• Core earnings: $46 million, an 82% increase year-over-year.
• Book value per share rose to $7.29.
• Group LICAT ratio improved to 141%.
• Financial leverage ratio remained stable at 27.1%.

Outlook & Guidance

Sagicor Financial has revised its core earnings guidance for 2025 to $120-130 million, reflecting confidence in its ongoing performance. With EPS forecast for FY2025 at $0.44 and a favorable PEG ratio of 0.23, the company shows promising growth potential. The company also adjusted its new business CSM guidance to $155-175 million. Sagicor is targeting long-term core earnings growth of over 10% annually and aims to achieve a core return on equity of 13% or more in the medium term. InvestingPro data reveals the company maintains a solid Altman Z-Score of 4.3, indicating strong financial stability.

Executive Commentary

Andre Museau, President and CEO, expressed satisfaction with the company’s progress, stating, "We’re still comfortable that we are increasing the profitability of this company by more than 10% a year." He emphasized the company’s focus on maintaining profitability and strategic growth across its segments.

Risks and Challenges

• Market Volatility: Although market conditions have been relatively stable, any significant volatility could impact the company’s performance.
• Regulatory Changes: Potential changes in regulatory environments, particularly in the Caribbean and North American markets, could pose challenges.
• Economic Uncertainty: Broader economic uncertainties may affect consumer behavior and demand for financial products.
• Competitive Pressure: Sagicor faces competition in its key markets, which could impact its market share and profitability.

Sagicor Financial’s Q2 2025 results highlight its strong performance and strategic focus, setting a positive tone for the remainder of the year. The company’s revised guidance indicates confidence in its ability to sustain growth and profitability.

Full transcript - Sagicor Financial Company Ltd (SFC) Q2 2025:

John, Conference Operator: Afternoon. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to Sagicor Financial Company’s Second Quarter twenty twenty five Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session.

Thank you. Mr. George Sipsis, EVP, Corporate Development and Capital Markets, you may begin your conference.

George Sipsis, EVP, Corporate Development and Capital Markets, Sagicor Financial Company: Great. Thank you, operator, and hello, everyone. Thank you for joining us today to discuss Sagicor’s second quarter twenty twenty five results. Our disclosures are available under the Investor Relations tab on our website at sagicor.com, which includes a press release, financial statements, MD and A, and the supplemental information package containing core earnings, drivers of earnings, and additional disclosures. The link to our live webcast is also available on our website.

This conference call is open to the financial community, investors, the media and the public, with a reminder that the Q and A period is reserved for financial research analysts. I will begin by referring you to the cautionary language and disclaimers in our materials and public filings regarding the use of forward looking statements and the use of non IFRS financial measures and ratios, which may be mentioned as part of our remarks today. I would also like to remind the audience that actual results regarding forward looking information could differ materially, and please note that a detailed discussion of SAGICRO’s risk factors is provided in our MD and A, which is available on SEDAR plus and on our website. A discussion of the assumptions underlying our expectations is provided in our previous filings and earnings releases. Unless otherwise noted, all dollar amounts referenced will be in U.

S. Dollars, consistent with our reporting practice. Joining me today is our President and CEO, Andre Museau our Chief Financial Officer, Kathy Jenkins and Anthony Chandler, our Chief Controller. We’ll begin with prepared remarks by Andre and Kathy, followed by a Q and A session. With that, I’ll pass the call to our President and CEO, Andre Mussopp.

Andre Museau, President and CEO, Sagicor Financial Company: Thank you, George. Good afternoon, everyone. Thank you for taking the time to join us today. We’re very pleased to report an outstanding quarter for the period ended June 2025. All of our operating segments generated excellent insurance results resulting in record core earning to shareholders.

All four of our operating segments generated positive core insurance experience gains and new production was solid across each of our segments. Our U. S. Subsidiary continues to grow and surpass $6,000,000,000 of total assets. Our Canadian business continued to show strong profitability and its contribution reflected the benefit of a recovery somewhat in the Canadian dollar.

And both of our Caribbean segments showed robust profitability reflecting the progress our teams have made in our initiatives to enhance our returns on equity. We also continue to progress on our strategic initiatives to transform our businesses, which we expect will continue to bear fruit in 2026 and beyond. Now I’m going to hand the call over to our CFO, Kathy Jenkins to discuss our consolidated results and comment on the segment results in more detail. Kathy?

Kathy Jenkins, Chief Financial Officer, Sagicor Financial Company: Thank you, Andre, and good afternoon everyone. As Andre mentioned, we are reporting an outstanding 2025. Our core earnings to shareholders were up 82% from Q2 twenty twenty four to $46,000,000 Revenues were $736,000,000 for the quarter compared to $6.00 $6,000,000 for the same quarter last year. New business CSM of $39,000,000 for Q2 continues to reflect strong sales across all segments. Now I will give you some more details on the segment financials.

Succor Canada’s sales production of $18,000,000 of annualized new premium in Q2 was consistent with management expectations, resulting in new business CSM of $11,000,000 for the quarter. Core earnings to shareholders of $25,000,000 were strong and reflected strong investment earnings, a recovery in the Canadian dollar, and modest positive insurance experience. It decreased $1,000,000 from Q2 twenty twenty four when we observed more significant positive insurance experience. Net income to shareholders of $4,000,000 for the quarter was lower than core earnings to shareholders due to negative mark to market experience from higher interest rates in Canada. Net CSM was $581,000,000 an increase of 7% quarter over quarter.

Sagicor Life USA generated $283,000,000 of new business production for the quarter, consistent with internal targets. That pushed the segment’s assets to over $6,000,000,000 Core earnings to shareholders for the quarter was $16,000,000 including $5,000,000 of core insurance experience gains. This was more than double the core earnings in the same quarter of the prior year, driven primarily by that positive insurance experience and higher expected net investment results. Net loss to shareholders of $1,000,000 for the quarter was lower than core earnings to shareholders due to mark to market experience and $5,000,000 of other one time non core adjustments to reserving methodologies, which subtracted from net income but increased CSM. Net income was $159,000,000 an increase of 3% quarter over quarter.

For both of our North American segments, we expect this quarter’s negative market experience to reverse over time. We have observed that pattern since implementing the current accounting standard in 2023. Sagicor Jamaica had strong net premium growth across most business lines and improved margins from repricing of short term products. Sagicor’s share of Sagicor Jamaica’s core earnings and net income to shareholders of $15,000,000 for the quarter increased over the same quarter in the prior year due to policy enhancement initiatives performed in Q2, favorable claims experience, and increased revenue from policy repricing. Our share of the results include about $3,000,000 of core insurance experience gains.

Net CSM was $277,000,000 a decline of under 2% quarter over quarter. Sagicor Life’s short term business continued to benefit from price adjustments, while the long term business had improved insurance experience leading to the segment’s best quarter under IFRS 17. Core earnings to shareholders of $16,000,000 increased 89% from the same quarter in the previous year, reflecting improved profitability in the short term business and favorable insurance experience in long term business. Net income to shareholders of $21,000,000 for the quarter was higher than core earnings to shareholders in the quarter, primarily due to positive market experience. This was our one segment with positive market experience gains as asset prices in those markets follow different interest rate movements.

Net CSM was two fifty nine million dollars an increase of 4% quarter over quarter. At our head office, Other Operating Companies and Adjustments segment, currency volatility generated some net income and comprehensive income movements. You will recall that we had $510,000,000 Canadian or approximately $374,000,000 U. S. Of debt denominated in Canadian dollars as at Q2, which is an excellent natural hedge for our positive net asset position in Canadian dollars.

This debt liability gets mark to market every quarter through the income statement. However, our larger US859 million dollars or roughly $1,200,000,000 Canadian net asset position in our Canadian subsidiary, gets mark to market through other comprehensive income. So there is a strong positive correlation between the valuation of the Canadian dollar to our other comprehensive income and an opposite effect, about half the size, through our income statement. This quarter that resulted in an $18,000,000 non core income statement charge, but a $45,000,000 gain through OCI. This contributed to both the difference between our core earnings to shareholders and reported net income to shareholders, and also explains why our total comprehensive income to shareholders was so much higher than our reported net income.

So having said all that, Sagicor remained well capitalized in Q2. The group LICAT ratio was 141%, which was an improvement of four percentage points over the prior quarter Q1 twenty twenty five and our financial leverage ratio was 27.1%. Our book value per share increased in US dollars to $7.29 or CAD9.94. Our deployable capital, or shareholders’ equity plus net CSM to shareholders, was $2,000,000,000 or $15.63 U. S.

Per share or 21.32 per share. With this strong capital position we are announcing our twenty third consecutive quarterly dividend to shareholders since we’ve been listed on the Toronto Exchange and the third dividend at the higher level of 6.75¢ per quarter or annualized $0.27 U. S. Per year. We are also updating our previous guidance on select key measures for 2025.

Given strong performance through the first half of the year, we are now increasing our guidance on core earnings to shareholders for 2025 to be between $120,000,000 and $130,000,000 At the same time we are adjusting our guidance on new business CSMs slightly lower to $155,000,000 to $175,000,000 for the year. We have made this adjustment as we have seen higher than anticipated profitability for our U. S. New business reflected in investment income rather than CSM amortization compared to our previous forecasts. We expect that we will continue to refine our forecasting and reserving methodologies going forward as we continue to learn under the new IFRS 17 accounting standard.

With that, I will hand it back to Andre.

Andre Museau, President and CEO, Sagicor Financial Company: Thank you very much, Kathy. We really are pleased with another solid quarter. It does reflect our continued progress on our strategic priorities. We do remain on track with our North American growth initiatives. It’s particularly gratifying to see the strong insurance performance coming out of our Caribbean operating segments.

Many of the initiatives there that have contributed to this turnaround have long cycle times around the analysis product redesign, repricing often regulatory approval. And so, it can take a long time and a lot of what we’re observing here in 2025 reflects the work that was done, the hard work that was done in 2023 and 2024. As we look ahead, we remain committed to building on this momentum to generate positive and disciplined growth for our shareholders. We’re confident in our continued focus on driving increased returns on equity through our strategic initiatives across all our segments that is going to position us for continued success well into the future. With that, we’d be pleased to start the Q and A period.

John, Conference Operator: Operator? Thank If you have a question, please press star then the number one on your telephone keypad. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed with the number 2. Your first question comes from the line of Gabriel Dechon from National Bank.

Your line is now open.

Gabriel Dechon, Analyst, National Bank: Hey. Good afternoon. Just there were a lot of experience gains this quarter, all segments. That’s that’s great. I just wanna get a sense.

Maybe not Canadian, doesn’t sound like it was too material, but maybe bit dumbed down explanation of of what happened in The Caribbean and and The US. Is is US mostly mortality? Or

Andre Museau, President and CEO, Sagicor Financial Company: Kathy, you want to take this?

Kathy Jenkins, Chief Financial Officer, Sagicor Financial Company: Sure. So, in The US we had a $5,000,000 gain and that was a reversal of the $7,500,000 loss we had in Q1 and this was primarily due to a reversal of the experience on our legacy block of business.

Gabriel Dechon, Analyst, National Bank: Okay.

Kathy Jenkins, Chief Financial Officer, Sagicor Financial Company: You’ll recall last quarter we spoke about the difference between statutory and IFRS accounting on our hedging of equity exposure on the FIA. We do that on a stat basis, but it provides a bit more volatility on an IFRS basis. So it’s primarily due to that, not really much in terms of policyholder behavior, that sort of thing. That was to expectations. Jamaica, we had a $5,000,000 gain and that was a reversal of the $2,400,000 loss in Q1.

And we’re really seeing the impact of policy repricing that we spoke about earlier. And similarly, we’re seeing an SLI, the $3,000,000 gain, we’re continuing to see the positive impact from our product repricing initiatives that we spoke about.

Gabriel Dechon, Analyst, National Bank: So Caribbean is all repricing? Yes. Okay. And then as far as the guidance goes, maybe you can correct me if I’m wrong, but my interpretation of the guidance increase for this year is because this quarter was so strong, we should look at that increases pretty much what happened this quarter and in the second half you’re not really changing what you expected previously or is that misinterpreting your message?

Andre Museau, President and CEO, Sagicor Financial Company: I think that’s closer to right than not. I do think that we’re ahead of plan in terms of many of our strategic initiatives to increase the margins across the business. That said, this quarter benefited from three out of four positive emergence out of insurance experience and one that was neutral to mildly positive. So we do budget for those numbers to be flat over time. And so we don’t want you look at a core earnings to shareholders of 45,000,000 or 46,000,000, we don’t want to just multiply that by four.

If you look through and you take out the insurance experience and adjust for the minority interest and stuff, the last couple of quarters excluding minority interest have been running at about 35,000,000, kind of unadjusted core net earnings, which is a good number. It’s a little earlier in the business plan than we thought we would hit those numbers. I mean, we have aspirations of getting there and further in our two to three year planning cycle, call it. But even that unadjusted core number of 35 for two quarters in a row includes some better than expected emergence in the short term business that we’re gonna wait to see whether it’s repeatable or not. So, we adjust our guidance way, way up just to stub our toe and miss that.

We’re putting something in place that we think we can meet or exceed. But at the same time, I think we’d be more comfortable today saying that with nil insurance experience, we’re probably at that run rate in the low 30s, which would come out to run rate core earnings in somewhere in the 120s.

Gabriel Dechon, Analyst, National Bank: Got it. That’s fair enough. And then I guess something we saw in Q4, you had given guidance on 2026 that you’d be up 10% versus your expected 2025 range. And now that range is higher, that guidance range is higher, is that still applicable or should we be adjusting our expectations that 10% is not really maybe less than 10% now or not? Well,

Andre Museau, President and CEO, Sagicor Financial Company: we’re still comfortable with a long term core earnings generation growth run rate of well into the double digits for this business between just the compounding of retained earnings and the initiatives that we have to expand ROE. When you look through any quarterly noise, we’re still comfortable that we are increasing the profitability of this company by more than 10% a year. Now, depending on insurance experience in the last couple of quarters of this year, it’s possible that our core earnings come in higher than our guidance. If our core earnings come in higher than our guidance, we will have to go back and really study where that’s coming from before seeing whether we chin up to a short term target of 10% plus. Because right now, because of the net positive experience, our reported core net income is a little bit ahead of where we see the core profitability.

Gabriel Dechon, Analyst, National Bank: That’s fair. And then last question, the sales, I mean, we’re down versus Q1, the fixed annuity sales I’m talking about, but still a good number. Is there any reason why we shouldn’t expect you to exceed your sales target for the year based on what you’ve achieved in the first half? And maybe touch upon some of the market conditions that inform that perspective?

Andre Museau, President and CEO, Sagicor Financial Company: Sure. So I think the market conditions right now are pretty good, you know, not notwithstanding the monthly, weekly, daily news cycle. Yeah. Yeah. Been it’s been hourly.

It’s been a relatively gentle period of volatility in the markets where we’re investing. And so both ourselves and our competitors, we’ve seen relative stability in the crediting rates in the marketplace. And we seem to be in a good spot of not too hot, not too cold on production. We could produce more than kind of $100,000,000 a month that we’re running at right now. What we’re conscious of is making sure that we’re able to get the risk adjusted and capital adjusted spreads on that business.

So I’d rather write 1,300,000,000.0 this year in The US at great spreads than to stretch out to a billion and a half and accept a lower return on equity because we can hold our capital and deploy it in future periods. So right now, I would look at Q2 production as great production, still growing the balance sheet and look to be in that 1.3 zip code for total annual production for The US.

Gabriel Dechon, Analyst, National Bank: Okay, great. Enjoy the rest of your summer.

Andre Museau, President and CEO, Sagicor Financial Company: Thank you.

John, Conference Operator: Your next question comes from the line of Darko Mihelic from RBC Capital Markets. Just

Darko Mihelic, Analyst, RBC Capital Markets: a couple of really quick follow ups. I just think the first question for me is just to sort of solidify the difference between core earnings and reported. I think in your prepared remarks you talked about $18,000,000 difference, but there’s still still leaves like a $34,000,000 difference that’s unaccounted for me. So can you just describe what the other big driver was of the difference between core and reported earnings?

Andre Museau, President and CEO, Sagicor Financial Company: The big thing is market experience. And so in the North American in both North American segments, we saw a bit of mark to market experience losses. So no actual credit losses, but just rising rates in Canada and shifting curve in The US.

Darko Mihelic, Analyst, RBC Capital Markets: Okay, great. And just a couple of other smaller follow ups as well. The first one is, so we’ve seen in some of the segments, a little bit of what I would call like a flip flop of experience, so to speak, one quarter being down, the other quarter being up. And so the question is, many of the other life insurers are coming up to this sort of assumption reviews. And can you just remind me of the timing of your assumption review and if there’s anything here that’s building towards a trend of some sort?

Andre Museau, President and CEO, Sagicor Financial Company: So we split our assumption reviews between Q3 and Q4. We try and do the big ones in Q3, like the mortality and lapse in persistency Q3 and then sometimes we get to expense and others in Q4. So it is coming up. I would agree with you that we’ve seen it flip flop down at the operating segment level, which you don’t love volatility, but you like to see it going both ways. We had had a concern going back in 2023 and 2024 with a number of quarters in a row of negative experience and SLI, for example, we did end up strengthening reserves last year and the combination of that and the initiatives that Kathy talked about have pushed them forward in this year.

So we don’t see anything on the horizon that would be material. I think if we did, we’d be signaling now. If you look rolling on a last four quarters basis, our core insurance experience is just about flat, which would give you an indication that in aggregate all in all, we’re closer rather than far.

Darko Mihelic, Analyst, RBC Capital Markets: Okay, thank you. And I just wanted to revisit the one segment that I want to better understand because you’ve done some work and we’ve seen an improvement in results. And so I’m just trying to understand where it can go in terms of the repricing initiatives that we’re seeing in Sagicor Life. And I guess ultimately if the repricing is sort of working, should we see some shifting in the way that it comes through? Like should we see maybe a reserve, a change in reserves and have it flow in differently or, and so ultimately what I’m looking for is some sort of guidance on the net insurance service result and what should I focus on and where can it ultimately go here?

Because my sense is it’s not done. And I don’t want to overestimate it, but I want to understand if there how much more room is left in this and where should I see it showing up?

Andre Museau, President and CEO, Sagicor Financial Company: Yeah, it’s a great question and you look at SLI, on the one hand, I agree with you, the initiatives broadly to improve ROE are not finished And so we do think it has room to run. On the other hand, some of the core insurance gains and losses and even a little further up on the drivers of earnings in the short term business, the short term business in effect includes experience in that line. And we have a small P and C business, so it’s never gonna get to overall materiality, but to the extent you’re gonna take losses in a P and C business operating in Barbados and Trinidad, we would expect that to come in Q3 and Q4 with weather. And so there could be a couple of million dollars a quarter there of seasonality that would favor the first half and not favor the second half. So it’s all a way of saying, I wouldn’t want to take that 15,000,000 and of core earnings from SLI and multiply that by four either.

But we feel more and more confident that if you take out those core insurance gains and look at profitability that way. It’s significantly above, it’s a much better picture than we would have talked about because I’m just looking at the drivers of earnings I have in front of me where we had four negative, it was never huge, but we had four or we had seven quarters in a row of negative insurance experience gains. So one of our goals for 2026 is to provide more detailed segment guidance as well as opposed to doing it in aggregate.

Darko Mihelic, Analyst, RBC Capital Markets: Okay. Great. That’s very helpful. Thank you.

John, Conference Operator: Your next question comes from the line of Trevor Reynolds from Acumen Capital. Your line is now open.

Trevor Reynolds, Analyst, Acumen Capital: Yeah. Good morning, or afternoon, I guess. But just curious, you guys revised two of your guidance metrics. The other metrics that you guys had out there previously from Q4, are those all intact from where they were at or just kind

Darko Mihelic, Analyst, RBC Capital Markets: of wondering how we should look at that?

Andre Museau, President and CEO, Sagicor Financial Company: So I think we had the 13 plus percent as a medium term target. We’re definitely not backing off of that. If you like what we achieved this quarter, it gives us more confidence that that is on the table and more. I’m being cautious in my comments in terms of near term guidance, but we still definitely have conviction around getting to 13% plus core core return on equity over the next couple of years. And we will so we’re not revisiting that, reconfirming it, I guess, and we’ll revisit whether it should still be that number when we report the full year results.

Terms of sorry, remind me what was the other one that we didn’t talk about? It was the 10% earnings growth, right? So that one, I think we wanna see where I kind of refer you to the comments to the earlier question where we want to see where the full year settles out because if we end up with if we do multiply this first half by two and end up at a number that is through $130,000,000 of core net income. There may be some one time stuff in there, in which case we might back off next year’s earnings guidance. That one we need to see.

Trevor Reynolds, Analyst, Acumen Capital: Okay, and then I think most of my other questions have been answered. Guess just maybe on the repricing initiatives, in are line with your expectations or have

Darko Mihelic, Analyst, RBC Capital Markets: they

Trevor Reynolds, Analyst, Acumen Capital: occurred quicker than anticipated? Just kind of want to get a sense of your thoughts on those.

Andre Museau, President and CEO, Sagicor Financial Company: The real answer is the difference between public guidance and internal expectations. We’re pleased with the progress, I’ll put it that way.

Trevor Reynolds, Analyst, Acumen Capital: Got it. Thanks, guys.

John, Conference Operator: If you have any questions or any follow-up, please press 1. There are no further questions at this time. I will now turn the call back to George Sipsis. Please continue.

George Sipsis, EVP, Corporate Development and Capital Markets, Sagicor Financial Company: Great. Thank you, operator, and thank you everyone for joining the call today. A replay of this call will be available for one month on our website, and a transcript will be posted as soon as available. If you have any additional questions, please do not hesitate to reach out to any one of us. With that, thanks again for your participation and interest today.

Have a great day, everyone.

John, Conference Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.

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