Q1 2025 Sagicor Financial Co Ltd Earnings Call
Earnings Conference call.
Operator: first quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise.
Lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star, then the number two. Thank you.
We would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question. Please press Star then the number two thank you.
Mr York Sepsis EVP of corporate development and capital markets you May begin your conference.
George Sipsis: Mr. George Sipsis, EVP of Corporate Development and Capital Markets, you may begin your conference. Great. Thank you, operator. And hello, everyone. Thank you for joining us today to discuss Sagicor's first quarter 2025 results. Our disclosures are available under the Investor Relations tab on our website at Sagicor.com, which include a press release, financial statements, MD&A, and the unaudited supplemental information package containing core earnings, drivers of earnings, and additional disclosures. The link to our live webcast is also available on our website.
Speaker Change: Great. Thank you operator, and Hello, everyone. Thank you for joining us today to discuss <unk> first quarter 2025 results are.
Speaker Change: Disclosures are available under the Investor Relations tab on our website at <unk> Dot Com, which include our press release financial statements MD&A and the unaudited supplemental information package containing core earnings drivers of earnings and additional disclosures.
Speaker Change: Link to a live webcast is also available on our website.
Speaker Change: This conference call is open to the financial community investors the media and the public with a reminder, that the Q&A period is reserved for financial research analysts.
George Sipsis: This conference call is open to the financial community, investors, the media, and the public, with a reminder that the Q&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 Sagicor's risk factors is provided in our MD&A, which is available on CDAR Plus and on our website.
Speaker Change: I'll 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 <unk> financial measures and ratios, which may be mentioned as part of our remarks today.
Speaker Change: 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 such course risk factors is provided in our MD&A, which is available on SEDAR plus and on our website.
Speaker Change: A discussion of the assumptions underlying our expectations as provided in our previous filings and earnings releases.
George Sipsis: The discussion of the assumptions underlying our expectations is provided in our previous filings in our news release. Unless otherwise noted, all dollar amounts are referenced will be in U.S. dollars consistent with our reporting practice.
Speaker Change: Unless otherwise noted all dollar amounts referenced will be in U S dollars consistent with our reporting practice.
Speaker Change: Joining me today is our president and CEO Andre Musso, our Chief Financial Officer, Cathy Jenkins, and Anthony Chandler, our Chief controller will begin with.
George Sipsis: Joining me today is our President and CEO André Mousseau, our Chief Financial Officer Kathy Jenkins, and Anthony Chandler, our Chief Controller.
Speaker Change: With prepared remarks by Andre Kathy followed by a Q&A session with that I will pass the call to our president and CEO Andre Michel.
George Sipsis: We'll begin with prepared remarks by Andre and Kathy, followed by a Q&A session.
Andre Mousseau: With that, I'll pass the call to our President and CEO, Andre Musso. Thank you, George. And good morning, everyone. Thank you for taking the time to join us today. We're pleased to announce another solid quarter in Q1. Our quarterly core earnings to shareholders were our highest on record since our conversion to IFRS 17 in 2023. This reflects our operating segments firing on all cylinders and an improved corporate cost of funding. Both of our Caribbean segments showed significant progress, expanding margins, and growing core earnings to shareholders year over year. Our U.S. business continued its strong growth with over $400 million of new annuity production, and our Canadian segment showed robust profitability.
Speaker Change: Thank you George and good morning, everyone. Thank you for taking the time to join us today.
Speaker Change: Pleased to announce another solid quarter in Q1, our quarterly core earnings to shareholders, where our highest on record since our conversion to <unk> 17 in 2023.
Speaker Change: This reflects our operating segments firing on all cylinders and an improved corporate cost of funding.
Speaker Change: Both of our Caribbean segments showed significant progress expanding margins and growing core earnings to shareholders year over year.
Speaker Change: Our U S business continued its strong growth with over $400 million of new annuity production in our Canadian segment showed robust profitability all of our segments produced strong new business sales.
Andre Mousseau: All of our segments produced strong new business sales. This performance puts us in an excellent position to weather market volatility and achieve our targets for 2025.
Speaker Change: This performance puts us in an excellent position to weather market volatility and achieve our targets for 2025.
Speaker Change: We continue to advance our strategic initiatives.
Andre Mousseau: We continue to advance our strategic initiatives. including fostering greater collaboration across operating segments, modernizing our technology infrastructure, and enhancing both our access to and cost efficiency of capital, all with the objectives of lowering expenses, driving growth, and ultimately strengthening our returns on shareholders' equity.
Speaker Change: Including fostering greater collaboration across operating segments, modernizing our technology infrastructure and enhancing both our access to and cost efficiency of capital all with the objective of lowering expenses driving growth and ultimately strengthening our returns on shareholders' equity now.
Speaker Change: Now I'll hand, the call over to Kathy Jenkins to discuss our consolidated results and comment on the segments and details Kathy.
George Sipsis: Now I'll hand the call over to Kathy Jenkins to discuss our consolidated results and comment on the segments and details.
Kathy Jenkins: Thank you Andre and good morning, everyone.
Kathy Jenkins: Kathy? Thank you, Andre, and good morning, everyone. As Andre mentioned, we are reporting a strong first quarter to start off 2025. Q1, core earnings to shareholders were up over 100% from 2024 to $30 million and net income to shareholders was $7 million. Revenues were $648 million for the quarter compared to $639 million for the same quarter last year. New business CSM of $46 million per Q1 reflected strong sales across all.
Kathy Jenkins: Ondrej mentioned, we are reporting a strong first quarter to start off 2025 for.
Kathy Jenkins: For Q1 core earnings to shareholders were up over 100% from 2000 $24 million to $30 million and net income to shareholders was $7 million.
Kathy Jenkins: Revenues were $648 million for the quarter compared to 639 million for the same quarter last year.
Kathy Jenkins: New business DSM at $46 million for Q1 reflected strong sales across all segments.
Kathy Jenkins: Now I will give you some more detail on the segments financial.
Kathy Jenkins: Now I will give you some more detail on the segment's finances. Sagicor Canada's sales production of $17 million in Q1 was consistent with management expectations. resulting in new business CSM of $12 million for the quarter. For earnings to shareholders of $25 million for the quarter, increased $8 million or 46% from the same quarter in the prior year, driven by higher core net investment results and insurance experience reverting towards expectation. Net income to shareholders of $11 million for the quarter was lower than core earnings to shareholders. Due to negative equity return.
Kathy Jenkins: <unk>, Canada sales production of $17 million in Q1, with consistent with management expectations, resulting in new business CSM of $12 million for the quarter.
Kathy Jenkins: Our earnings to shareholders of $25 million for the quarter increased $8 million or 46% from the same quarter in the prior year driven by higher core net investment result, and insurance experience regarding towards expectations.
Kathy Jenkins: Net income to shareholders of $11 million for the quarter was lower than core earnings to shareholders due to.
Kathy Jenkins: Two negative equity return, which affect the calculated future profitability of our universal life business.
Kathy Jenkins: and the Calculator's Future Profitability of Our Universal Life Insurance. Net CSM was $541 million, an increase of 1% quarter over quarter. Sagicor Life USA generated $411 million of new business production for the quarter, one of our highest quarters ever. We were able to drive higher than budgeted business due to competitive crediting rates and market momentum for multi-year guaranteed annuity products. Our earnings to shareholders for the quarter of $6 million was lower than our core net income because of unfavorable insurance experience on our legacy block of life. This was a combination of mild seasonality and mortality, which we observe in our U.S.
Kathy Jenkins: Net CSM with $541 million, an increase of 1% quarter over quarter.
Kathy Jenkins: That's a core life USA generated $411 million of new business production for the quarter, one of our highest quarters ever we were able to drive higher than budgeted business due to competitive crediting rates and market momentum from multiyear guaranteed annuity products.
Kathy Jenkins: Our earnings to shareholders for the quarter of $6 million was lower than our core net income because of unfavorable insurance experience on a legacy block of life insurance.
Kathy Jenkins: This was a combination of mild seasonality in mortality, which we observed in our U S segment, most first quarters.
Kathy Jenkins: Jim under accrued expenses carried over from Q4, and a minor positive correlation to equity due to how we reserve for our index business.
Kathy Jenkins: segment most first quarters. and the Mundo Recruit expenses carried over from Q4. And a minor positive correlation to equity due to how we reserved for our in-depth We note experience was right on target for our annuities business, where we are writing most of our premiums. We continue to see an accounting mismatch between asset prices. and the Calculation of our Liabilities, which appreciated more, generating an unfavorable market economy. leading to a marginal net loss to share.
Kathy Jenkins: We note experience was right on target for our annuity business, where we are writing most of our premium now.
Kathy Jenkins: We continued to see an accounting mismatch between asset prices, which appreciated in Q1, and the calculation of our liabilities, which appreciated more generating an unfavorable market impact leading to a marginal net loss to shareholders. We believe this market experience will reverse itself and come.
Kathy Jenkins: We believe this market experience will reverse itself in coming quarters as we have observed since the implementation of IFR 17. CSM was $153 million, a slight decrease of 1% quarter over Sagicor Jamaica had a strong net premium across all product lines as compared to Q1 2020. of $10 million for the quarter increased over the same quarter in the prior year due to improved margins and reserve release on the short-term business. and Higher Net Income from the Growing Loans Portfolio at its Sagicor's share of Sagicor, Jamaica's net income to shareholders of $13 million for the quarter was positively impacted by improved mark-to-mark Net CSM was $282 million, a decline of under 1%.
Kathy Jenkins: <unk> quarters as we have observed since the implementation of <unk> 17.
Kathy Jenkins: That CSM was 153 million, a slight decrease of 1% quarter over quarter.
Kathy Jenkins: That's a core Jamaica had a strong net premium across all product lines as compared to Q1 2024.
Kathy Jenkins: Core earnings to shareholders of $10 million for the quarter increased over the same quarter in the prior year due to improved margins and reserve release in the short term business and higher net income from the growing loans portfolio added bank.
Kathy Jenkins: <unk> share of side record, Jamaica, net income to shareholders of $13 million for the quarter was positively impacted by improved mark to market gains.
Kathy Jenkins: Net CSM was 282 million a decline of under 1% quarter over quarter.
Kathy Jenkins: Quarter over. Sagicor Life's short-term business benefited from repricing initiatives on renewals, while the long-term business had favorable insurance experience. Four earnings to shareholders of $11 million doubled the Q1 2024 result reflecting improved profitability in a short-term vision.
Kathy Jenkins: Thank you cord life short term business benefited from repricing initiatives on renewals, while the long term business had favorable insurance experience.
Kathy Jenkins: Our earnings to shareholders of 11 million doubled the Q1, 2024 result, reflecting improved profitability in the short term business and favorable insurance experience in both the short term and long term business.
Kathy Jenkins: Thank you all for joining us today and I hope you have a very favorable insurance experience in both the short term and long term. Net income to shareholders of $8 million for the quarter was lower than core earnings to shareholders in the quarter, primarily due to rising interest rates impacting mark-to-market loss on our fixed income portfolio, partly offset by the gain on the valuation of assets. Net CSM was $249 million, a slight increase quarter over quarter. Returning to the consolidated picture, Sagicor remained well capitalized in Q1. was 137 percent, and our financial leverage ratio was 26 percent.
Kathy Jenkins: Net income to shareholders of $8 million for the quarter was lower than core earnings to shareholders in the quarter, primarily due to rising interest rates impacting mark to market loss on our fixed income portfolio, partly offset by the gain on the valuation of assets.
Kathy Jenkins: Net CSM was $249 million, a slight increase quarter over quarter.
Kathy Jenkins: Returning to the consolidated picture.
Kathy Jenkins: <unk> remained well capitalized in Q1.
Kathy Jenkins: Blackout ratio was 137% and our financial leverage ratio was 27, 2%.
Kathy Jenkins: Our book value per share finished the quarter at $7 <unk>.
Kathy Jenkins: Our book value per share finished the quarter at $7.05 U.S. or $10.14 Canadian. Our deployable capital or shareholders equity plus net CSM to shareholders was $2 billion or $15.01 per share US or $21.59 Canadian.
Kathy Jenkins: Yes.
Or $10.14 Canadian dollars.
Kathy Jenkins: Our deployable capital.
Kathy Jenkins: Our shareholders' equity plus net CSM to shareholders was $2 billion or $15.01 per share U S or $21 59 Canadian per share.
Kathy Jenkins: With that I will hand, it back to Andres.
Andre Mousseau: With that, I will hand it back to Andre. Thank you very much, Kathy. We are very pleased with the solid start to the year. I think our Q1 performance reflects continued progress on our key strategic priorities. We do continue to successfully grow the asset base of our U.S. business. You know, we were pleased to write over $400 million in the quarter, driving our assets above $6 billion. It puts us in excellent position to meet and exceed our target of over $1 billion of annuity sales for 2025. We remain focused on disciplined execution. I think you're seeing this coming through in the margins across our business.
Andres: Thank you very much Kathy.
Andres: We are very pleased with the solid start to the year I.
Andres: I think our Q1 performance reflects continued progress on our key strategic priorities.
Andres: We do continue to successfully grow the asset base of our U S business.
Andres: We were pleased to right over $400 million in the quarter driving our assets above $6 billion. It puts us in an excellent.
Position to meet and exceed our target of over $1 billion.
Andres: Annuity sales for 2025.
Andres: We remain focused on disciplined execution I think youre seeing this coming through in the margins across our business.
Andres: We are deepening our presence in our core markets, we're enhancing operational efficiency across all of our segments.
Andre Mousseau: We're deepening our presence in our core markets. We're enhancing operational efficiency across all of our segments, including where we have market shares and enabling us to grow efficiently in our larger markets.
Andres: <unk>, where we have large market shares.
Andres: And enabling us to grow efficiently and our larger markets.
Andres: To that end, we're pleased to have announced.
Andre Mousseau: To that end, we're pleased to have announced our latest 22nd consecutive quarterly dividend to shareholders since we've enlisted on the TSX. This is our second dividend since we raised the quarterly payout to $0.0675 U.S. per share, so annualized $0.27 U.S. per share, and we feel we're in a good spot. While macroeconomic uncertainty does persist, we're confident that our focused execution on these core strategic initiatives positions us well to deliver continued sustained growth in shareholder returns.
Andres: Our latest.
Andres: Eric.
Andres: The 20 <unk> consecutive quarterly dividend to shareholders. Since we've been listed on the PSX. This is our second dividend since we raised the quarterly payout to six and three quarter cents.
<unk> per share so annualized 27.
Andres: <unk> per share.
Andres: And we feel we're in a good spot.
Andres: While macroeconomic uncertainty does process, we're confident that our focused execution on these core strategic initiatives positions us well to delivered.
Andres: <unk> continued.
Andres: Continued sustained growth and shareholder returns.
Andres: Just before we close it up I would like to think.
Andre Mousseau: Just before we close it up, I would like to thank those shareholders who chose to join us yesterday at the beautiful Hilton Barbados and took the time to engage with us in person and ask questions, so thank you very much to that.
Those shareholders, who chose to join US yesterday at the beautiful Hilton Barbados.
Andres: And took the time to engage with us in person and ask questions. So thank you very much to that.
Andres: I would also like to think in this forum Steve.
Andre Mousseau: And I would also like to thank in this forum Stephen Facey, who it was announced is retiring from the board of Sagicor Financial, will continue to be a partner of ours and involved on the board on our Jamaican business, but we'd like to thank him very much for his friendship and partnership and stewardship on the SFC board.
Andres: Stephen Facie, who it was announced is retiring from the board of <unk> financial will continue to be a partner of ours involved on the board on the Jamaica visit our Jamaican business.
Andres: But we'd like to thank him very much for his friendship and partnership.
Andres: Stewardship on the SFC Board.
Andres: With that I think we're ready for Q&A, if there is any so operator.
Andre Mousseau: With that, I think we're ready for Q&A, if there's any, so operator. Thank you.
Andres: Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the number one on your Touchtone phone, you'll hear a prompt that Johan has seen great should you wish to climb from the polling process. Please press the star followed by the number too.
Operator: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any key.
Speaker Change: If you are using a speaker phone please lift the handset before pressing any keys.
Speaker Change: One moment. Please for your first question.
Speaker Change: Your first question comes from Gabrielle Dee, Shane from National Bank of Toronto. Please go ahead.
Gabriel Dechaine: Your first question comes from Gabriel Dechaine from National Bank of Toronto. Please go ahead. Hi, good morning, good quarter. I just want to ask about the, you know, you brought the attention to the fixed annuities sale. But before I get into that, on the U.S. business overall, there was some negative policyholder experience or claims experience. Could you clarify what that was? And is it legacy lifeblocks? I don't think it's the same as the persistency issues in the fixed annuities business we saw a few times prior to today. Thanks, Gabe. I think you're reading that correct.
Gabrielle Dee: Hi, good morning, good quarter.
Just wanted to ask about the you brought to your attention to the <unk>.
Gabrielle Dee: Fixed annuity sale before I get into that on the U S business overall, there was some negative policyholder experience or claims experience.
Gabrielle Dee: Clarify what that was in the.
Gabrielle Dee: The legacy life block. So I don't think it's the same as the persistency issues in <unk>.
Gabrielle Dee: Fixed annuities business, we saw a few times prior to today.
Gabrielle Dee: Right. So thanks, Dave I think you are you are reading that correct.
Gabrielle Dee: Persistency with the.
Speaker Change: The annuities the multi year guaranteed annuities that were writing now is kind of right on the nose, where we thought it would be so this is related to <unk>.
Andre Mousseau: The persistency with the annuities, the multi-year guaranteed annuities that we're writing now was right on the nose where we thought it would be. This is related to two different blocks of business. It's a collection of a handful of sub $2 million issues for the quarter. With respect to our legacy term and universal life books, which collectively we refer to as the legacy life business, we usually do see some mild elevated mortality in Q1 because we don't budget for quarterly seasonality and mortality in winter and flu season. As we've been building out our drivers of earnings, this is the third Q1 in a row where we've observed that.
Gabrielle Dee: Two different blocks of business.
Speaker Change: It's kind of a collection of a handful of <unk>.
Speaker Change: Sub 2 million issues for the quarter so.
Speaker Change: With respect to our term are legacy term and universal life books, which collectively we refer to as the legacy life business.
Speaker Change: We usually do see.
Speaker Change: Some mild elevated mortality in Q1.
Speaker Change: Because we don't we.
Speaker Change: We don't budget for quarterly seasonality in mortality in the winter and flu season.
Speaker Change: So this is as we've been building out our drivers of earnings. This is the third Q1 in a row, where we have where we have observed that.
Kathy Jenkins: As Kathy mentioned, we carried over.
Andre Mousseau: As Kathy mentioned, we carried over some mild unaccrued expenses from Q4 around settling stuff up for year end. Then there's a little bit of an IFRS versus statutory accounting quirk on our legacy index business. These are fixed index annuities that we wrote five years ago or more where we're buying equity participations for our policy holders on a statutory basis. I think that's the right way to do it economically. But because IFRS says that your reserves are lower than what your statutory reserves say, it presents itself temporarily as a positive correlation to equity indices. Again, it's not a massive number, but each of these $1 and $2 million things just happen to add up negative in the quarter.
Some mild.
Kathy Jenkins: On accrued expenses from Q4 around settling stuff up.
Kathy Jenkins: For year end.
Kathy Jenkins: And then.
Kathy Jenkins: There is a little bit of an <unk> versus statutory accounting quirk.
Kathy Jenkins: On our.
Kathy Jenkins: Legacy Index business. So these are fixed indexed annuities that we wrote five years ago or more where we're buying equity participations for our policyholders.
Kathy Jenkins: On a statutory basis.
I think that's the right way to do it economically, but because <unk> that your reserves are lower than what your statutory reserves.
Kathy Jenkins: Presents itself temporarily as a.
Kathy Jenkins: Positive correlation.
Kathy Jenkins: Two two equity indices and so.
Kathy Jenkins: Again, it's not a massive number but each of these.
Kathy Jenkins: One and $2 million things just happened to add up.
Kathy Jenkins: Negative in the quarter.
Kathy Jenkins: Okay. So then.
Kathy Jenkins: The fixed annuity sales quickly is that.
Andre Mousseau: Got it. Okay. Then about the fixed annuity sales quickly, are you seeing some of that momentum carry over into Q2 because market conditions that would have supported the strong sales probably are still in effect today? Yeah, well, you know, going back to the commentary from March, you know, we're really picking our spots. So, you know, I wouldn't, I wouldn't expect to annualize that 400 million plus, you know, we had talked about being over a billion for the year. I think we're comfortable with that. So production, you know, won't necessarily drop in half, but I wouldn't expect 400, 400 million every quarter.
Kathy Jenkins: Are you seeing some of that momentum carry over into Q2 because market conditions.
Kathy Jenkins: Ported the strong sales probably are still in <unk> and.
Kathy Jenkins: In effect today.
Kathy Jenkins: Yes.
Kathy Jenkins: Going back to the commentary for March.
Kathy Jenkins: Really picking our spots so.
Kathy Jenkins: I wouldn't I wouldn't expect to annualize that 400 million plus we had talked about being over $1 billion for the year.
Kathy Jenkins: I think we're comfortable with that so.
Kathy Jenkins: So production.
Kathy Jenkins: It won't necessarily drop in half, but I wouldn't expect 400 $400 million.
Kathy Jenkins: Every quarter the market conditions are still good.
Andre Mousseau: The market conditions are still good. You know, we had a little pocket where we had got ahead of the market and raised rates. And then we saw everyone catch up to us a number of weeks later and eventually, eventually pass us. And so, you know, we let our weekly production come down. So, you know, I wouldn't expect. I wouldn't expect to see $400 million again in Q2, but it would be kind of consistent with our guidance of annualized $1 billion for the year. Got it. And then just from a scale standpoint, I mean, I look at the AUM number for the U.S.
Kathy Jenkins: We had a little pocket, where we had got ahead of the market and raise rates and then we saw everyone catch up to US a number of weeks later and eventually eventually pass us and so we let our weekly production come down so I wouldn't expect I wouldn't expect to see.
Kathy Jenkins: $400 million again in Q2, but it would be kind of consistent with our guidance of annualized $1 billion.
Kathy Jenkins: For the year got.
Kathy Jenkins: Got it and then.
Just.
Kathy Jenkins: From.
Kathy Jenkins: Scale standpoint.
Kathy Jenkins: The AUM number for the U S and I think it's just.
Kathy Jenkins: Shy of $6 billion.
Andre Mousseau: and I think it's just shy of $6 billion, and I'm wondering if you can put some perspective of every billion, and I equate the increase in AUM to multiple factors, but namely the fixed annuities block growth. Every billion, or if there's another benchmark, please share that. What does that add to your consolidated ROE? Because I saw your, I mean, for a different reason, but the 12% mark was exceeded this year for ROE. Um, I'm just trying to get a sense for progression thereof. It's a very interesting question connecting that, you know, the way we would look at it is to say, you know, okay, a billion dollars of new annuity would generate, you know, net of commissions, et cetera, about, you know, order of magnitude, $15 million of gross margin to the business.
And I'm trying to.
Kathy Jenkins: I'm wondering if you can put some perspective every billion I quit the increase in AUM.
Multiple factors, namely the.
Kathy Jenkins: Fixed annuities block growth.
Kathy Jenkins: Every billion or if theres. Another benchmark, please share that where does that add to your consolidated Roe.
Kathy Jenkins: Because I saw your I mean for different reasons.
Kathy Jenkins: 12% Merck was exceeded this year for <unk>.
Kathy Jenkins: I'm, just trying to get a sense for progression thereof.
Kathy Jenkins: Oh.
Kathy Jenkins: It's a very interesting question connecting that the way the way we would look at it is to say.
Kathy Jenkins: Okay $1 billion of new annuity.
Kathy Jenkins: Would generate.
Kathy Jenkins: Net of.
Kathy Jenkins: Net of commissions et cetera.
Kathy Jenkins: About.
Kathy Jenkins: Order of magnitude $15 million of.
Kathy Jenkins: Gross margin.
Kathy Jenkins: The business and then.
Kathy Jenkins: We would have to carry some excess capital on that.
Andre Mousseau: And then we would have to carry some excess capital on that, but on the margin we would view that as, you know, high team's return on equity business. And so, I think you could extrapolate from there, you know, once we get, once we add a couple billion dollars more of AUM, it really does start to move the needle in our baseline ROE. And just for definitional purposes, the $15 million of gross margin that's... Pre-tax or what? Fully structured, that would be net of tax. Okay. All right then.
Kathy Jenkins: But.
Kathy Jenkins: On the margin, we would view that as.
Kathy Jenkins: Hi.
Kathy Jenkins: High teens return on equity business and so.
Kathy Jenkins: I think you could extrapolate from there.
Kathy Jenkins: Once we get.
Kathy Jenkins: Once we add a couple of billion dollars more of AUM. It.
Kathy Jenkins: It really does start to move the needle in our baseline Roe.
Kathy Jenkins: Got it and just for definitional purposes of $15 million of gross margin.
Kathy Jenkins: Pre tax or <unk>.
Kathy Jenkins: Fully structured that that would be that would be net of tax okay.
Kathy Jenkins: Right.
Kathy Jenkins: Yes.
Kathy Jenkins: Enjoy the rest of your week.
Gabriel Dechaine: Thanks and enjoy the rest of your week. All right, thank you, Gabe.
Kathy Jenkins: Alright, Thank you again.
Kathy Jenkins: Thank you.
Speaker Change: Ladies and gentlemen, as a reminder show would you have a question. Please press star one.
Operator: Ladies and gentlemen, as a reminder, should you have a question, please press star 1.
Your next question comes from <unk> <unk> from Scotia Bank. Please go ahead.
Meny Grauman: Your next question comes from Meny Grauman from Scotiabank. Please go ahead. Hi, good morning. A few questions.
Speaker Change: Hi, Good morning, a few questions one starting in Jamaica. It looks like you benefited from a reserve release, and just wanted to get a little bit better understanding.
Andre Mousseau: One, starting in Jamaica, looks like you benefited from a reserve release and just wanted to get a little bit better understanding of that. We had a small reserve release on one of our on our PNC business so it's a one-time but it is quite small. with the amount that was released as we evaluated, we took a look at our business and how it was evolving, the determination that. It was a group creditor policy where we got some improved pricing and just the way it's shorter term business which is why it's lumped in with the PNC but we did get a reserve release right away reflecting the increased profitability for the next few quarters.
Speaker Change: Got that.
Speaker Change: We had a small.
Speaker Change: Our reserve release on one of our on our P&C.
Speaker Change: Business so.
Speaker Change: A one time.
Speaker Change: It is quite small in terms of the amount that was released.
Speaker Change: As we are.
Speaker Change: Evaluated.
Speaker Change: We took a look at our business and how it is evolving.
Speaker Change: They make the determination that could release.
Awesome.
Speaker Change: Yes, it was.
Speaker Change: It was a group group creditor policy, where.
Speaker Change: We got some improved pricing.
Speaker Change: Just the way, it's shorter term business, which is why it's lumped in with the P&C, but we did get a reserve release right away, reflecting the increased profitability for the next few quarters.
Speaker Change: <unk> not repeatable necessarily but it is reflective of what we're trying to do in Jamaica as well as in surgical or life of getting these group business is reverting back to the mean in terms of profitability.
Andre Mousseau: Not repeatable necessarily but it is reflective of what we're trying to do in Jamaica as well as in Sagicor life of getting these group businesses reverting back to the mean in terms of profitability.
Speaker Change: So.
It's not something you would take us.
Andre Mousseau: It's not something you take as a repeatable but it's a good thing.
Speaker Change: As a repeatable, but but it's a good sign.
Okay, and then just thinking ahead in terms of Jamaica, There's a banking business. There. So just wanted to ask about.
Andre Mousseau: And just thinking ahead in terms of Jamaica, there's a banking business there, so I just wanted to ask about what you're seeing on the credit front and expectations going forward, obviously tariff-related. Stresses are something top of mind for any banking business around the globe, so just wondering what your thoughts were there for the Jamaica business. I don't think we've seen anything present itself yet. There are kind of two competing forces with respect to the Jamaican economy. I think that the consensus view is cautious around just global macroeconomic slowdown and that's not good for anyone, and I don't think that's disproportionate on our Jamaican business, but lower dollars means lower remittances, means lower everything, deposits, premiums for that matter.
Speaker Change: What youre seeing on the credit front and expectations going forward.
Speaker Change: Obviously.
Speaker Change: Tariff related.
Speaker Change: Stresses are something top of mind for any banking business, let's say around the globe. So just wondering what's your.
Speaker Change: Your thoughts were there.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: I don't think we've seen anything presents itself yet.
Speaker Change: They're kind of two competing forces with respect to the Jamaican economy I think to that.
Speaker Change: The consensus view is cautious.
Speaker Change: Around just global.
Speaker Change: <unk> economic slowdown and that's not good for anyone and I don't think Thats disproportionate.
Speaker Change: On our Jamaican business, but lower dollars means lower maintenance as this means lower everything deposits premiums for that matter.
Speaker Change: So I wouldnt see that that disproportionate to us, but it is yes.
Andre Mousseau: So I wouldn't see that disproportionate to us, but that's the general tone. The flip side in Jamaica is that there's continued improvement in the fiscal situation and you're starting to see the, well, continuing to see the ratings agencies reflect that, and there is also the hope that the U.S. Department of State will lighten up on some of its travel warning to Jamaica that it's had in place for some period of time, which has disproportionately affected tourist travel to Jamaica, and so Jamaica hasn't seen quite the recovery that other fly-in tourist markets have in and around the Caribbean, and if that gets lifted, that would be kind of a unique positive dynamic for economic activity into Jamaica, and we're hopeful that that's actually imminent.
Speaker Change: That's the general tone.
Speaker Change: The flip side in Jamaica is that there is continued improvement in the fiscal situation and you are starting to see the the.
Speaker Change: Well continuing to see the ratings agencies.
Speaker Change: Reflect that.
Speaker Change: And there is also the hope that.
Speaker Change: The debt.
Speaker Change: The U S Department of state will lighten up on some of its travel on its travel warning.
Speaker Change: Two Jamaica that it has had in place for.
Speaker Change: For some period of time, which which has disproportionately.
Speaker Change: Affected tourist travel to Jamaica, So Jamaica, hasnt seen quite the recovery that other.
Speaker Change: Fly in tourist markets have.
Speaker Change: And then around the Caribbean.
Speaker Change: And if that gets lifted that would be kind of a unique positive dynamic for.
<unk>.
Speaker Change: For economic activity into into.
Speaker Change: Into Jamaica, and we're hopeful that that's actually imminent.
Speaker Change: Got it.
Speaker Change: And then I just wanted to ask about.
Speaker Change: Reported earnings.
Andre Mousseau: And then I just wanted to ask about... reported earnings. talked about the market impact, but there was another item there, tax item and other, it looked quite sizable. I'm just wondering what that was. I think there's an annual asset tax in Jamaica that runs through the numbers in Q1, and on a core basis what we do is we spread that over the four quarters of the year, and so that's part of it.
Speaker Change: You talked about the market impact.
Speaker Change: But.
Speaker Change: There was another item there tax item in the other.
Speaker Change: Look quite favorable so just wondering what Scott.
Speaker Change: I think there is there is an annual asset tax in Jamaica.
Speaker Change: It runs through the numbers in Q1 and on a core basis, what we do is we spread that over over the four quarters of the year and so that's that's part of it.
Speaker Change: Kathy and we also that's where we put the.
Kathy Jenkins: Kathy? And we also, that's where we put the NCI goes through there as well, so we'd have the full impact of the market experience on the market experience line, and then the portion that's attributable, that isn't attributable, gets eliminated. And then finally for me, it looks like the tax rate came in quite a bit lower than what we've seen last quarter and the year-ago quarter. I'm just wondering what drove that and is that something unusual or is that something sustainable? I think it's a more normalized rate that we have, it was in terms of some of our The tax rates, it's not like an income tax rate like you'd have in, in.
Speaker Change: The D.
Speaker Change: NCI goes through there as well so we would have the full impact of market experience on the market experience line and then the portion Thats attributable.
Speaker Change: That isn't necessarily the life.
Speaker Change: Eliminated through there.
Speaker Change: Understood and then finally from me.
Speaker Change: It looks like the timeframe.
Speaker Change: Right a bit lower than what.
Speaker Change: What we've seen.
Speaker Change: Last quarter on the Euro.
Speaker Change: <unk> quarter.
Speaker Change: Just wondering.
Speaker Change: What drove that.
Speaker Change: Unusual or alright.
Speaker Change: <unk>.
Speaker Change: Sure.
Speaker Change: Thank you to the more normalized rate that we have it was in terms of some of our.
Speaker Change: Sure.
Speaker Change: The tax rate, it's not like an income tax rate like you'd have in in.
Speaker Change: In Canada, and the U S. So some of the Caribbean countries, how the tax rates are a little different so it was how.
Kathy Jenkins: In Canada and the U.S. and some of the Caribbean countries, how the tax rates are a little different. So it was how some of the... It's how it was calculated for. It's related to the Caribbean and it's more normal. It's hard to make sense of our tax rate on an aggregated basis because we're taxed so simply in Canada and the U.S. and idiosyncratically in our other markets, and kind of going back to the comment that I had a minute ago about trying to normalize some of that out. But, you know, we continue to believe that managing that is a potential kind of medium to long-term source of ROE expansion.
Speaker Change: Some of the.
Speaker Change: Yeah.
Speaker Change: How it was calculated for.
Speaker Change: It's related to the Caribbean and a more normalized I think.
Speaker Change: It's hard to make sense of our tax rate on a on an aggregated basis because were tax so simply in Canada, and the U S and idiosyncratic Lee.
Speaker Change: In our other markets.
Speaker Change: Kind of going back to the comment that I had a minute ago about trying to normalize some of that.
Speaker Change: Some of that out.
Speaker Change: But we continue to believe that.
Speaker Change: Managing that.
Speaker Change: As a potential kind of medium to long term.
Speaker Change: Source of ROE.
Speaker Change: ROE expansion.
Speaker Change: Just one last thing before you're off the line many I'd like to say thank you very much for your engagement.
Andre Mousseau: Just one last thing, but before you're off the line, Meny, I'd like to say thank you very much for your engagement and support over the years. Thanks. I appreciate that.
Speaker Change: And support over the years.
Speaker Change: Thanks, Dan I appreciate that.
Speaker Change: That's all from me.
Meny Grauman: That's all for me. Thank you.
Speaker Change: Thank you.
Speaker Change: Your next question comes from Trevor <unk> from a human capital. Please go ahead.
Trevor Reynolds: Your next question comes from Trevor Reynolds from Acumen Capital. Please go ahead. Morning, guys. Canada, the results there seem to come in a little stronger than discussed, than the expectations that were discussed after last quarter. Maybe, can you just touch on some of the gives and takes there? I think that's accurate and it comes down to part of the reason that we put forward consolidated guidance and not segment-specific guidance. Everyone is still learning to see how earnings emerge through IFRS 17 and what the different component parts are telling us. So you know we're not surprised that Canada had a good quarter operationally because it is.
Speaker Change: Good morning, guys.
Speaker Change: Canada the results there seem to come in a little stronger then discuss.
Speaker Change: The expectations that we discussed last quarter and maybe can you just touch on some of the gives and takes there.
Speaker Change: I think thats accurate.
Speaker Change: It comes down to.
Speaker Change: Part of the reason that we've put forward consolidated guidance and not segment specific guidance.
Speaker Change: Everyone is still.
Learning to see how earnings emerge through <unk> 17, and what the different component parts are telling us so.
Speaker Change: We're not surprised that.
Speaker Change: Canada had a good quarter operationally because.
Speaker Change: It is.
Speaker Change: Having a good quarter operationally in terms of the cost structure.
Andre Mousseau: Having a good quarter operationally in terms of the cost structure, new business sales in C dollars are up which is good and you know it's a big book of business and so some quarters we see positive emergence, some negative and some quarters like this it's kind of right on the nose. Profitability is a million or two higher on a quarterly basis than what we would have guided to and we'll see, it's good to see, we'll see whether that persists for the year.
Speaker Change: New business sales in C dollars are up.
Speaker Change: Which is good and.
Speaker Change: It's a big book of business and so some quarters, we see positive emergence some negative in some quarters like this it's kind of right on the nose.
Speaker Change: Profitability is.
Speaker Change: $1 million or two higher on a quarterly basis than what we would have guided to.
Speaker Change: And we will see.
Speaker Change: It's good to see we'll see whether that whether that persists for the year.
Speaker Change: Okay.
Speaker Change: And then just on.
Andre Mousseau: Okay. And then just on, you discussed the mortality generally being higher in Q1. Are you guys adjusting the way you model that out moving forward? in the U.S. No plans to right now. I think the actuaries have enough on their plate. I think that a good step for us as we're managing the business is to look at the drivers of earnings and understand what happens. And so I think we observed some meaningfully good experience in the American book in the back half of last year. And so you take a look every year and see whether in aggregate it's working and use the drivers of earnings to understand what happened every quarter.
Speaker Change: You discussed the mortality.
Speaker Change: Generally being higher in Q1.
Speaker Change: Are you guys adjusting the way you.
Speaker Change: You model that out moving forward.
Speaker Change: In the U S.
Speaker Change: No no plans to right now I think.
Speaker Change: Ed.
Speaker Change: The actuaries have enough on.
Speaker Change: I think that.
Speaker Change: A good step for us as we are managing the business is to look at the drivers of earnings and then understand what happens and so.
Speaker Change: We will I think we observed.
Speaker Change: Meaningfully good experience in the Canadian book or in the American book Excuse me.
Speaker Change: In the back half of last year, and so you take a look every year.
Speaker Change: See whether in aggregate it's working.
Speaker Change: And use.
Speaker Change: Use the drivers of earnings to understand what happened every quarter.
Speaker Change: Got it.
Speaker Change: On the on your corporate or your.
Andre Mousseau: Got it.
Andre Mousseau: And on the, on your corporate area, yeah, your head office expenses, maybe just where you sit there, if there's kind of where you're kind of targeting those over the coming quarters and years. I think on a year-over-year basis, we're observing some improvement on the cost of funding side that runs through head office. And so for the time being, that'll be stable from Q1 going forward because we had a couple of different refinancing events that happened in 2024. We do have some moving pieces on the mark-to-markets of assets and some other one-time items in head office.
Speaker Change: Head office expenses, maybe just where you sit there.
Speaker Change: Got it.
Speaker Change: Where are you kind of targeting those.
Speaker Change: Over the coming quarters and years.
Speaker Change: I think on a year over year basis were observing.
Speaker Change: Some improvement on the.
Speaker Change: On the cost of funding side that that runs through head office.
Speaker Change: And so.
Speaker Change: For the time being that'll be stable from.
Speaker Change: From Q1 going forward, because we had a couple of different refinancing events.
Speaker Change: That happened in 2024.
Speaker Change: Four we do have some movie.
Speaker Change: The moving pieces on the Mark to markets.
Speaker Change: Of assets.
Speaker Change: And some other onetime items.
Speaker Change: And head office and so we kind of encourage you to to look to look at the core which is.
Andre Mousseau: And so we kind of encourage you to look at the core, which sees through the noise. And I think we're kind of budgeting on that basis.
Speaker Change: Which sees through the noise and I think we're kind of budgeting on that basis.
Speaker Change: Great and then last question just.
Andre Mousseau: Great. And then last question, just your core EPS targets, I think the high end at $0.80 a share, maybe do you think there's upsides to that target given kind of your performance in Q1? Well, if you annualize Q1, it would tell you so. I think we're going to wait until we see the second quarter before before updating before updating guidance. So, you know, Q1 puts us in a good spot. But I think we're going to wait and see one more before before changing.
Speaker Change: Your core EPS targets I think the high end at.
Speaker Change: 80.
Speaker Change: Sure.
Speaker Change: Do you think there is upside to that target given kind of your performance in Q1.
Speaker Change: If you annualize Q1, it would tell you so.
Speaker Change: I think we're going to wait until we see the second quarter before before updating before updating guidance. So Q1 puts us in a good spot.
Speaker Change: But I think we're going to wait and see one more before before changing it.
Speaker Change: Great. That's all my questions. Thank you.
Trevor Reynolds: Great. That's all my questions. Thank you.
Speaker Change: Thank you.
Speaker Change: There are no further questions at this time you May proceed.
Operator: There are no further questions at this time. You may proceed. Thank you, Operator, and thank you, everyone, for joining today's call. 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.
Speaker Change: Thank you operator, and thank you everyone for joining today's call a replay of this call will be available for one month on our website and a transcript will be posted as soon as available.
Speaker Change: 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.
Speaker Change: Yeah.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation you may now disconnect.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect.