RATING DRIVERS
Supporting Factors
- Leading market position in the Caribbean with continued growing market share in international markets
- Financial performance negatively impacted by COVID-19 pandemic with a slight rebound in the 1st quarter of 2021
- Good capitalization levels and adequate short-term liquidity metrics
- Strong and effective Enterprise Risk Management (ERM) framework
Constraining Factors
- Global economic uncertainty along with exposure to weak economic conditions in countries which SFC’s subsidiaries operate present significant downside risks to the profitability of SFC
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 USA
- An improvement in the creditworthiness of Jamaica where SFC derives more than 30% of its revenue
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
- A reduction in the creditworthiness of Jamaica where SFC derives more than 30% of its revenue
- Substantial deterioration in consolidated financial performance, with a greater than 35% fall in premium income.
- Decrease in Interest Coverage to <1.5X
- Increase in Debt to Equity ratio to >75%
COMPANY BACKGROUND
Sagicor Financial Corporation Limited (SFCL) was formed with the demutualization of Barbados Mutual Life Assurance Society through an initial public offering on the Barbados Stock Exchange in 2002. The Group was redomiciled in Bermuda in 2016, and then, on December 5, 2019, Alignvest Acquisition II Corporation (Alignvest)[1] acquired all the shares of SFCL. SFCL was renamed Sagicor Financial Company Ltd (SFC) and is now listed and traded solely on the Toronto Stock Exchange. This sale transaction resulted in approximately US $450 million in new capital being raised for the Group.
The Group operates now in 20 countries across the Caribbean, USA, and Latin America, offering through its subsidiaries, individual life, health and annuity products, group life and benefits administration, banking and investment management services, and property and casualty insurance, amongst other financial services. In 2020, its total revenue was derived from the United States of America (36%), Jamaica (31%), Trinidad and Tobago (14%), Barbados (10%), with other Caribbean territories (9%).
In September 2019, the Group issued a bond in two tranches, Tranche A – J $ 5.7 billion and Tranche B – US $31.8 million, carrying annual interest rates of 6.25% and 5.1% respectively. Both tranches had an original tenor of 13 months with fixed interest rates and a bullet repayment of principal upon maturity[2]. Upon maturity on October 27th, 2020, the bondholders consented to an extension request made by SFC to extend the maturity date by 18 months to April 2022. The repayment structure of the bond remains the same as originally issued with fixed interest rates and a bullet repayment of principal upon maturity in April 2022[3]. Notably, the interest rate on Tranche A (J $) remained unchanged while the interest rate for Tranche B (US $) was revised to upward to 5.5%.
[1] A Toronto-based Special Purpose Acquisition Corporation (SPAC).
[2] The bond facilities were fully underwritten by Sagicor Investments Jamaica Limited, a fully owned subsidiary of Sagicor Group Jamaica and the Lead Arranger and Broker for the bonds.
[3] The bond matures on April 26th 2022 with an option of further extension.
Analytical Contacts:
Nadia Sanchez
Tel: 1-868-627-8879 Ext. 229
E-mail: nsanchez@caricris.com
Anelia Oudit
Tel: 1-868-627-8879 Ext. 226
Mobile: 1-868-487-8364
E-mail: aoudit@caricris.com
Website: www.caricris.com
Email: info@caricris.com
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