Sagicor is raising millions of dollars from investors as it accumulates funding to repay debt.
The financial services group which operates in the Caribbean, United States and Canada on Friday announced the closure of a Canadian private placement offering of CAN$350 million 5.503 per cent Series 20261 Senior Unsecured Notes which will be due for payment on September 25, 2031.
With the outcome of the offer to be announced, Sagicor said it “intends to use the net proceeds of the Offering for debt repayment purposes and related transaction costs”.
The instruments were “offered on a private placement basis through a syndicate of agents co-led by National Bank Financial Inc. and RBC Dominion Securities Inc., supported by BMO Nesbitt Burns Inc., Scotia Capital Inc., Citigroup Capital Markets Canada Inc., J.P. Morgan Securities Canada Inc., and Acumen Capital Finance Partners Limited”.
Sagicor Financial Company Ltd’s most recent management discussion and analysis report, shows that at June 30, 2026, the group had US$1.02 billion in notes and loans payable compared to US$998.6 million as of December 31, 2025.
This included US$545.9 million in 5.30 per cent senior notes due in 2028, and US$174.7 million in 6.359 per cent unsecured senior notes due in 2029. Notes are similar to bonds but typically have a shorter period of maturity.
The new CAN$350 million 5.503 per cent Series 2026-1 Senior Unsecured Notes notes received credit ratings of ‘BBB’ from S&P Global Ratings, ‘BBB’ from Morningstar DBRS, and ‘BBB-’ from Fitch.
S&P Global Ratings, in confirming its rate for the notes, stated: “We expect the company to use the proceeds from this issuance to repay existing debt, resulting in a neutral impact on our financial leverage expectations.
“We also expect the company to maintain financial leverage at 40 per cent to 45 per cent on a reported equity basis under [International Financial Reporting Standard] 17, and below 35 per cent when considering contractual service margin and risk adjustment.”
S&P Global Ratings defined financial leverage as a general measurement of “the amount of debt or debtlike funding that is used by an insurer to meet its general capital needs”.
In a separate report confirming its rating, Fitch said that Sagicor’s existing ratings “are not affected by this rating action”.
“The rating for the new issue is equivalent to the ratings of Sagicor’s existing senior debt. Sagicor intends to use the net proceeds for debt repayment purposes, therefore financial leverage is expected to remain unchanged,” the firm stated.
Deterioration
Fitch said the rating for the new notes could be downgraded for a number of reasons in the future including for financial leverage exceeding 35 per cent; deterioration in key financial metrics; and significant deterioration in the operating environments and sovereigns of Jamaica, Trinidad and Barbados, which could lead to a material decline in operating performance or the credit profile of Sagicor’s investment portfolio.
Fitch also said that “an upgrade is considered unlikely over the near to intermediate term without a significant strengthening of the business profile and operating scale”.
Factors influencing an upgrade in the longer term included a significant improvement in the business profile, supported by a larger operating scale and strong market position in Canada and the US, demonstrated by consistent, less volatile earnings and revenue contributions; a sustained consolidated return on equity above 12 per cent and consistent earnings and net income from the business segments; no material deterioration in the operating environments and sovereigns of Jamaica, Trinidad and Tobago, and Barbados; and maintenance of very strong capitalisation metrics, including a consolidated life insurance capital adequacy test (LICAT) ratio above 120 per cent.
The LICAT ratio measures the financial health and safety of life insurance companies in Canada by dividing their available capital by their required capital.
Sagicor’s most recent financial report for the second quarter ended June 30 stated that Sagicor had total capital of US$3.7 billion comprised of shareholders’ equity (US$1 billion), notes and loans payable (US$1 billion), noncontrolling interests (US$407 million) and net contractual service margin (CSM) (US$1.3 billion).
As Fitch noted, CSM is a component of an insurer’s liabilities that represents the future unearned profit expected to be earned over the duration of an insurance contract.
Sagicor’s recent financials said the group had a financial leverage ratio of 27.4 per cent, an indication of the proportion of debt the company uses to finance its operations as compared with its capital.
Sagicor’s financial report at the end of June said the group had cash flows of US$786.8 million at the end of that period.
“Liquidity sources immediately available to Sagicor include: existing cash and cash equivalents; the company’s portfolio of highly rated, highly liquid investments; cash flow from operating activities which include net premiums receipts, fee income and investment income; and borrowing facilities,” the company said.
“Sagicor expects to have sufficient liquidity to fund its operations and to meet its current business plans. However, should the need arise, additional liquidity sources include further bank loans and new issuances of debt or shares in the private or public markets.”
The group has a revolving credit facility of US$225 million to meet potential liquidity requirements. By the end of June US$91.9 million was drawn down from the facility. (SC)