Wednesday, April 24, 2024

Sagicor addresses downgrade

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The following is the full text of Sagicor Financial Corporation’s response to the downgrade of the group and several of its subsidiaries announced by international rating agency A.M. Best on Thursday.AS WE STATED in our chairman’s report on our half-year results for 2009, Sagicor, as an insurance company operating in the Caribbean, is required by law to invest substantially in the bonds and other instruments issued by the governments of countries in which we operate. This is not unexpected, as the funds available for investment are seen as part of the national savings which should be available to fund the economic development of the country.  However, this naturally exposes our group to the vagaries of the economic performances of these countries. We continue to address this business risk through expansion and geographic diversification.
On the heels of the latest A.M. Best ratings of Sagicor Financial Corporation (SFC) and its Caribbean Life Insurance subsidiaries – Sagicor Life Inc. (SLI), Sagicor Capital Life Insurance Company Limited (Sagicor Capital), and Sagicor Life Jamaica (SLJ) – the Sagicor Group reaffirms its support to our Jamaican operations and the recovering Jamaican economy.  A.M. Best recently downgraded the financial strength ratings of Sagicor Life Inc. and Sagicor Capital from A (Excellent) to A- (Excellent) and SLJ from A (Excellent) to B++ (Good).A.M. Best also downgraded the issuer credit rating of the US$150 million, 7.5 per cent 2016 senior unsecured notes issued by Sagicor Financial Corporation to “bbb-” from “bbb” and debt rating to “bbb” from “bbb+”. The rating agency cited “continued significant revenue, asset and earnings exposure to the Jamaican economy” as the reasons for these rating changes.
In its release, A.M. Best acknowledged the continued positive performance by SFC in terms of consolidated earnings, risk-adjusted capitalisation, name recognition and access to additional capital sources. It noted, however, “Despite the recently implemented debt exchange programme by the Jamaican government to defuse the potential default risk underlying the government bonds, A.M. Best believes that the risk of Jamaican exposure will continue to linger going forward and may stress SFC’s financial results and risk-adjusted capitalisation.”“This assessment does not seem to reflect the recent improvements in the economy following the debt exchange programme,” said Richard Byles, president and chief executive of Sagicor Life of Jamaica.
Byles pointed to the recent IMF test, which Jamaica passed with what the IMF described as relative ease.  He noted, “There are positive signs all around that give us the confidence to support the current fiscal policies. We recognise that the government has taken some tough decisions, for example, the recent divestment of Air Jamaica and privatisation of the sugar industry. These are part of the critical actions that are required to move the economy forward.” Positive expectationsByles also noted that despite the dramatic adjustments that have taken place in the country, SLJ has continued to perform well. “The company recorded strong first-quarter results and I expect to report on a good second quarter in the next week or two,” he added.  This year Sagicor Financial, the Barbados-based regional financial institution, commemorates its 170-year heritage of service to the Caribbean region. Dodridge Miller, group president and CEO, echoed Byles’ sentiments. “There is no doubt that Jamaica faces challenges. We’ve seen the economy tested in recent months, and the resilience of the Jamaican people. However, we believe that the correct remedies are being pursued, and from all indicators, Jamaica is on the right track. Interest rates are trending down, the Jamaican dollar is holding firm, and multilateral agencies have endorsed the fiscal policies.”
He underscored the group’s support for Jamaica, the largest of the CARICOM islands, and expressed the view that in due course, the rating agency will adjust its perspective of the Jamaican economy as the recent economic and social shocks are absorbed.  We at Sagicor expect the region to have challenges from time to time, especially when impacted by world economic conditions.  However we remain committed to the development of the communities in which we operate, while delivering competitive returns to our stakeholders.  We are also committed to the orderly development of our international operations, particularly in the United States and the United Kingdom, and we believe that this strategy will be to the long-term benefit of all of our stakeholders.
 
DODRIDGE MILLER (inset),  president and chief executive officer of Sagicor Financial Corporation, says the company expects the region to have challenges from time to time. (FP)

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