Q4 2025 Sagicor Financial Co Ltd Earnings Call

March 12, 2026

Operator: Good morning. My name is Joelle, and I will be your conference operator today. At this time, I would like to welcome everyone to Sagicor Financial Company's Q4 and Full Year 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. 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 two. Thank you. Mr. George Sipsis, EVP, Corporate Development and Capital Markets, you may begin your conference.

Operator: Good morning. My name is Joelle, and I will be your conference operator today. At this time, I would lik e to welcome everyone to Sagicor Financial Company's Q4 and Full Year 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. 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 two. Thank you. Mr. George Sipsis, EVP, Corporate Development and Capital Markets, you may begin your conference.

Speaker #2: All lines have been placed on mute to prevent any background noise. After the speakers' 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.

Speaker #2: If you would like to withdraw your question, please press star two. Thank you. Mr. George Sipsis, EVP, Corporate Development and Capital Markets, you may begin your conference.

George Sipsis: Thank you, operator, and hello, everyone. Thank you for joining us today to discuss Sagicor's Q4 and full year 2025 results. As a reminder, our disclosures are available at our investor relations website at investors.sagicor.com, which includes the press release, financial statements, MD&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&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, including guidance and the use of non-IFRS financial measures and ratios, which may be mentioned as part of our remarks today.

Speaker #2: Thank you, operator. And hello, everyone. Thank you for joining us today to discuss Sagicor's fourth quarter and full year 2025 results. As a reminder, our disclosures are available at our investor relations website at investors.sagicor.com, which includes a press release, financial statements, MD&A, and the supplemental information package.

Speaker #2: 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&A period is reserved for financial research analysts.

Speaker #2: 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, including guidance, and the use of non-IFRS financial measures and ratios, which may be mentioned as part of our remarks today.

George Sipsis: I would also like to remind the audience that actual results regarding forward-looking information could differ materially. Please note that a detailed discussion of Sagicor's risk factors is provided in our MD&A, which is available on SEDAR+ 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 US dollars consistent with our reporting practice. Joining me today is our President and CEO, André Mousseau, our Chief Financial Officer, Kathy Jenkins, and Anthony Chandler, our Chief Controller. We'll begin with prepared remarks by André and Kathy, followed by a Q&A session. With that, I'll pass the call to our President and CEO, André Mousseau.

Speaker #2: 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 MDNA, which is available on Cedar Plus and on our website.

Speaker #2: A discussion of the assumptions underlying our expectations is provided in our previous filings and earning releases. Unless otherwise noted, all dollar amounts referenced will be in US dollars consistent with our reporting practice.

Speaker #2: Joining me today is our president and CEO, Andre Mousseau, 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&A session.

Speaker #2: With that, I'll pass the call to our President and CEO, Andre Mousseau.

André Mousseau: Thank you, George. Good morning, everybody, and thank you for joining us. We are pleased to report on the conclusion of an exceptional 2025 with another quarter of solid core results. Our full-year core earnings delivered record core earnings to shareholders of $142 million, 57% over last year and well above our guidance. Our core return on shareholders' equity for the year was 14.2%, and this was helped by an aggregate about $15 million of positive emergence from our short-term and long-term insurance portfolio. Absent this positive emergence, which we do welcome, of course, as a good sign of our overall reserving, we believe we're currently running at approximately $125 to 130 million core earnings to shareholder run rate.

Speaker #3: Thank you, George. Good morning, everybody, and thank you for joining us. We are pleased to report on the conclusion of an exceptional 2025 with another quarter of solid core results.

Speaker #3: Our full-year core earnings delivered record core earnings to shareholders of $142 million, a 57% over last year, and well above our guidance. Our core return on shareholders' equity for the year was 14.2%, and this was helped by, in aggregate, about $15 million of positive emergence from our short-term and long-term insurance portfolio.

Speaker #3: Absent this positive emergence, which we do welcome, of course, as a good sign of our overall reserving, we believe we're currently running at approximately a 125 to 130 million core earnings to shareholder run rate.

André Mousseau: What that means is we've hit our medium-term target that we issued back in 2024 of about a 13% ROE about a year ahead of schedule. This reflects all the work that we've done throughout our portfolio of operating companies to enhance our returns on equity there and how we've improved our debt cost of funding. 2025 was a banner year operationally too. Our US business continued its asset growth by nearly $1 billion to $6.8 billion as we continue to get to scale in that market. Our Canadian subsidiary completed a major milestone in its digital transformation, completing an industry-leading migration of all its admin data for its 750,000 in-force policies to a modern, cloud-based system that will allow quicker and more efficient product and service launches, better scalability and cost improvements, and cost certainty.

Speaker #3: What that means is we've hit our medium-term target that we issued back in 2024 of a 13% ROE, about a year ahead of schedule.

Speaker #3: And this reflects all the work that we've done throughout our portfolio of operating companies to enhance our returns on equity there, and how we've improved our debt cost of funding.

Speaker #3: 2025 was a banner year operationally too. Our US business continued its asset growth by nearly a billion dollars to 6.8 billion, as we continue to get to scale in that market.

Speaker #3: Our Canadian subsidiary completed a major milestone in its digital transformation, completing an industry-leading migration of all its admin data for its 750,000 enforced policies to a modern cloud-based system that will allow quicker and more efficient product and service launches, better scalability, and cost improvements, and cost certainty.

André Mousseau: We capped off the year with the announcement of a definitive agreement to merge our two Caribbean subsidiaries under a single publicly listed entity. This incredibly exciting development will allow us to launch a full AI-driven digital transformation initiative in our Caribbean operations at full scale, and ultimately create an exciting additional pillar of ROE growth for our shareholders. I'm going to come back to this and more on our forward outlook after Kathy gets through a more detailed financial review of 2025. Let's go to that. Kathy?

Speaker #3: And we capped off the year with the announcement of a definitive agreement to merge our two Caribbean subsidiaries under a single publicly listed entity.

Speaker #3: This incredibly exciting development will allow us to launch a full AI-driven digital transformation initiative in our Caribbean operations, at full scale, and ultimately create an exciting additional pillar of ROE growth for our shareholders.

Speaker #3: I'm going to come back to this and more on our forward outlook after Kathy gets through a more detailed financial review of 2025. So let's go to that.

Speaker #3: Kathy?

Kathy Jenkins: Great. Thank you, André, and good morning, everyone. As André mentioned, we are reporting a strong Q4 of 2025 to cap off another outstanding year. For Q4, core earnings to shareholders was up 13% from 2024 to $32 million. For full year 2025, Sagicor's core earnings to shareholders was $142 million, exceeding management's revised guidance of $120 to $130 million. In Q4, net loss to shareholders was $14 million, reflecting some continuing volatility from market movements and foreign exchange. For the full year, net income to shareholders was $67 million.

Speaker #4: Great. Thank you, Andre, and good morning, everyone. As Andre mentioned, we are reporting a strong fourth quarter of 2025 to cap off another outstanding year.

Speaker #4: For Q4, core earnings to shareholders was up 13% from 2024 to $32 million. For full year 2025, Sagicor's core earnings to shareholders was $142 million, exceeding management's revised guidance of $120 to $130 million.

Speaker #4: In Q4, net loss to shareholders was 14 million, reflecting some continuing volatility from market movements and foreign exchange. And for the full year, net income to shareholders was 67 million.

Kathy Jenkins: Total comprehensive income to shareholders, which in particular tells the full story of our foreign exchange position through both our net assets and liabilities, was between the reported and core earnings at $110 million, which allowed us to grow shareholders' equity by $77 million while returning over $40 million of capital to shareholders between our dividends and share buybacks. Revenues were $3 billion for the year compared to $3.1 billion for last year. New business CSM of $167 million was within the revised guidance of $155 million to $175 million net of reinsurance. Now, I will give you some more details on the segment financials.

Speaker #4: Total comprehensive income to shareholders, which in particular tells the full story of our foreign exchange position through both our net assets and liabilities, was between the reported and core earnings at 110 million which allowed us to grow shareholders' equity by 77 million while returning over 40 million of capital to shareholders between our dividends and share buybacks.

Speaker #4: Revenues were $3.0 billion for the year, compared to $3.1 billion for last year. New business CSM of $167 million was within the revised guidance of $155 million to $175 million, net of reinsurance.

Speaker #4: Now, I will give you some more details on the segment financial. Sagicor Canada's sales production of 17 million of annualized new premium for the quarter and 69 million for the year was consistent with management expectations.

Kathy Jenkins: Sagicor Canada's sales production of $17 million of annualized new premium for the quarter and $69 million for the year was consistent with management expectations, resulting in new business CSM of $12 million for the quarter and $44 million for the year. Core earnings to shareholders of $27 million for the quarter and $103 million for the year increased 12% and 19% year-over-year respectively, reflecting improved net investment results and insurance experience in line with expectations as compared to unfavorable insurance experience in Q4 2024. Net income to shareholders of $9 million for the quarter and $76 million for the year was lower than core earnings to shareholders due to unfavorable market-related impacts from lower asset prices due to higher Canadian interest rates.

Speaker #4: Resulting in new business CSM of 12 million for the quarter and 44 million for the year. Core earnings to shareholders of 27 million for the quarter and 103 million for the year increased 12% and 19% year over year, respectively.

Speaker #4: Reflecting improved net investment results and insurance experience in line with expectations, as compared to unfavorable insurance experience in Q4 2024. Net income to shareholders of 9 million for the quarter and 76 million for the year was lower than core earnings to shareholders due to unfavorable market-related impacts from lower asset prices due to higher Canadian interest rates.

Kathy Jenkins: Net CSM in aggregate increased 1% quarter-over-quarter to end the year at $566 million. Sagicor Life USA new business production was $268 million for the quarter, resulting in $1.3 billion of total production for 2025, which is our highest ever year of production and in line with our expectations. This resulted in AUM growth of over $900 million year-over-year. Core earnings to shareholders for the quarter of $8 million were slightly lower year-over-year, driven by increased operating expenses in support of business growth. Core earnings to shareholders of $41 million for the year increased 2% year-over-year as increased net investment results were offset by increased cost allocations.

Speaker #4: Net CSM in aggregate increased 1% quarter over quarter to end the year at 566 million. Sagicor Life USA new business production was 268 million for the quarter, resulting in 1.3 billion of total production for 2025, which is our highest ever year production and in line with our expectations.

Speaker #4: This resulted in AUM growth of over 900 million year over year. Core earnings to shareholders for the quarter of 8 million were slightly lower year over year driven by increased operating expenses in support of business growth.

Speaker #4: Core earnings to shareholders of 41 million for the year increased 2% year over year as increased net investment results were offset by increased cost allocation.

Kathy Jenkins: Net loss to shareholders of $12 million for the quarter was lower than core earnings to shareholders due to market experience losses of $18 million from interest rate movements impacting our liabilities more so than our assets, similar to what we saw in Canada. Net income to shareholders was $8 million for the year. Net CSM was $151 million flat quarter-over-quarter. Sagicor Jamaica recorded strong new business sales in both long-term and short-term insurance lines, and the commercial banking segment showed profitable expansion in its loan and credit card portfolios with higher net interest margin, and fee revenues year-over-year.

Speaker #4: Net loss to shareholders of 12 million for the quarter was lower than core earnings to shareholders due to market experience losses of 18 million from interest rate movements impacting our liabilities more so than our assets similar to what we saw in Canada.

Speaker #4: Net income to shareholders was $8 million for the year. Net CSM was $151 million, flat quarter over quarter. Sagicor Jamaica recorded strong new business sales in both long-term and short-term insurance lines, and the commercial banking segment showed profitable expansion in its loan and credit card portfolios, with higher net interest margin and fee revenues year over year.

Kathy Jenkins: Sagicor's share of Sagicor Jamaica's core earnings to shareholders of $12 million for the quarter and $48 million for the year both increased year-over-year, driven by better margins on short-term business, favorable insurance experience, and improved net interest margin and fee revenue in the commercial banking business. Sagicor's share of Sagicor Jamaica's net income to shareholders was $51 million for the year. Net CSM was $293 million flat quarter-over-quarter. Notably, this strong performance was inclusive of the net effect of Hurricane Melissa in Q4, which ended up per our previous guidance being barely material.

Speaker #4: Sagicor's share of Sagicor Jamaica's core earnings to shareholders of 12 million for the quarter and 48 million for the year both increased year over year driven by better margins on short-term business, favorable insurance experience, and improved net interest margin and fee revenue in the commercial banking business.

Speaker #4: Sagicor's share of Sagicor Jamaica's net income to shareholders was 51 million for the year. Net CSM was 293 million flat quarter over quarter. Notably, this strong performance was inclusive of the net effect of Hurricane Melissa in Q4, which ended up, per our previous guidance, being barely material.

Kathy Jenkins: Sagicor Life posted strong new business sales in the quarter and in 2025, reflecting higher single premium annuities and general growth in the portfolio as a result of repricing initiatives. Core earnings to shareholders of $7 million for the quarter and $42 million for the year increased 17% and 59% year-over-year, respectively, due to improved profitability in the short-term business from price adjustments and favorable insurance experience. Net income to shareholders of $16 million for the quarter and $57 million for the year were higher than core earnings to shareholders due to positive market experience. This showed the opposite effect of interest rate movements to our North American businesses, as our Caribbean segment has a modestly net short asset position compared to liabilities from a duration point of view, as opposed to our North American segments, which have long net asset positions relative to our liabilities.

Speaker #4: Sagicor Life posted strong new business sales in the quarter and in 2025, reflecting higher single premium annuities and general growth in the portfolio as a result of repricing initiatives.

Speaker #4: Core earnings to shareholders of 7 million for the quarter and 42 million for the year increased 17% and 59% year over year, respectively, due to improved profitability in the short-term business from price adjustments and favorable insurance experience.

Speaker #4: Net income to shareholders of 16 million for the quarter and 57 million for the year were higher than core earnings to shareholders due to positive market experience.

Speaker #4: This showed the opposite effect of interest rate movements to our North American businesses, as our Caribbean segment has a modestly net short asset position compared to liabilities from a duration point of view.

Speaker #4: As opposed to our North American segments, which have long net asset positions relative to our liabilities. Net CSM was 262 million and increased of 3% quarter over quarter.

Kathy Jenkins: Net CSM was $262 million, an increase of 3% quarter-over-quarter. At our head office, other operating companies, and adjustments segment core cost to shareholders was $23 million for Q4, consistent with the prior quarter. For 2025, it was $92 million, a 2% improvement from the prior year. Net cost to shareholders was $37 million for Q4 and $126 million for 2025. With these results, Sagicor remained well capitalized in Q4. The group LICAT ratio was 136%, and our financial leverage ratio was 26.9%. Our book value per share significantly increased during the year to $7.65 USD in US dollars or CAD 10.49 Canadian.

Speaker #4: At our head office, other operating companies and adjustments segment core cost to shareholders was 23 million for Q4 consistent with the prior quarter. For 2025, it was 92 million a 2% improvement from the prior year.

Speaker #4: Net cost to shareholders was 37 million for Q4 and 126 million for 2025. With these results, Sagicor remained well capitalized in Q4. The group LICAT ratio was 136% and our financial leverage ratio was 26.9%.

Speaker #4: Our book value per share significantly increased during the year to $7.65 in US dollars or $10.49 Canadian. Our deployable capital or shareholders' equity plus net CSM to shareholders was 2.2 billion or $15.95 US per share or $21.87 Canadian per share.

Kathy Jenkins: Our deployable capital or shareholders equity plus net CSM to shareholders was $2.2 billion or $15.95 per share or CAD 21.87 per share. We are also pleased to announce another increase to our dividend, making this the third hike in a row. Our new payout will be $0.075 per share or $0.30 annualized, about an 11% increase over last year. Even with this payout, we anticipate we will be towards the bottom of our 30% to 40% core earnings target payout ratio, which reflects our belief that we can continue to generate strong risk-adjusted returns by reinvesting the majority of our earnings in growing our future earnings going forward. We will be in a good position to keep delivering a growing dividend as we grow our earnings going forward.

Speaker #4: We are also pleased to announce another increase to our dividend, making this the third March in a row. Our new payout will be US$0.075 per share, or $0.30 annualized, about an 11% increase over last year.

Speaker #4: Even with this payout, we anticipate we will be towards the bottom of our 30 to 40 percent core earnings target payout ratio which reflects our belief that we can continue to generate strong risk-adjusted returns by reinvesting the majority of our earnings in growing our future earnings going forward.

Speaker #4: And we will be in a good position to keep delivering a growing dividend as we grow our earnings going forward. On that note, I will hand back to Andre to talk about that forward outlook.

Kathy Jenkins: On that note, I will hand back to André to talk about that forward outlook.

André Mousseau: Thank you, Kathy. This really is an exciting time for Sagicor, not just because we believe we've more than executed on the original vision that we set out in 2022 and 2023 when we were putting this asset portfolio together. I remember back in 2023, when we originally closed the acquisition of ivari and had it form a cornerstone of our combined business, we had guided in our year-end earnings release to about $90 to 105 million of core earnings, and we said that we believed we could eventually get the business to a 13% core return on equity or beyond. We used medium-term target as a euphemism for 2027. Here we are a couple years later, and we've exceeded that.

Speaker #1: Thank you, Kathy. This really is an exciting time for Sagicor, and not just because we believe we've more than executed on the original vision that we set out in '22 and '23, when we were putting this asset portfolio together.

Speaker #1: I remember back in 2023 when we originally closed the acquisition of Avari and had it form a cornerstone of our combined business, we had guided in our year-end earnings release to about 90 to 105 million of core earnings, and we said that we believed we could eventually get the business to 13% core return on equity or beyond.

Speaker #1: And we used medium-term target as a euphemism for 2027. Here we are a couple of years later and we've exceeded that. Even without the help of the positive insurance emergence in 2025, we are running at a solid 13% ROE today and we have very meaningful upside beyond that.

André Mousseau: Even without the help of the positive insurance emergence in 2025, we are running at a solid 13% ROE today, and we have very meaningful upside beyond that. I'm gonna take some time here to go through some of the details on ROE expansion that we see from here. We believe that we have three robust avenues for growth, all within our control, which can drive ROE expansion going forward, well beyond our old guidance. These three things are the continued growth in our US annuities business, which we have talked about over the last couple of years, margin expansion in our Canadian business, and a huge digital transformation opportunity in our newly combined Caribbean segments. First of all, I'd like to talk about our US business, which we continue to believe will drive our asset growth going forward.

Speaker #1: So I'm going to take some time here to go through some of the details on ROE expansion that we see from here. We believe that we have three robust avenues for growth, all within our control which can drive ROE expansion going forward.

Speaker #1: Well beyond our old guidance. And these three things are the continued growth in our US annuities business which we have talked about over the last couple of years, margin expansion in our Canadian business, and a huge digital transformation opportunity in our newly combined Caribbean segments.

Speaker #1: So, first of all, I'd like to talk about our US business, which we continue to believe will drive our asset growth going forward. So, we challenged ourselves to deliver over $1 billion of new annuities in 2025, and we surpassed that while maintaining a laser focus on spread discipline—not compromising on asset quality to do it.

André Mousseau: We challenged ourselves to deliver over $1 billion of new annuities in 2025, and we surpassed that while maintaining a laser focus on spread discipline, not compromising on asset quality to do it, all of this in a competitive environment. We grew our assets in that segment to nearly $7 billion, and we have a clear path over a 3-year planning cycle to get that near $10 billion, where we believe we'll see some meaningful margin expansion. In this past year, we made some additions to its expense base through new systems and executive hires, which has set us up to grow earnings more than proportional to that asset growth going forward. That's number one. Number two, we have the Canadian business. Now, this one is more mature than our US business. I think I mentioned it before.

Speaker #1: All of this in a competitive environment. So we grew our assets in that segment to nearly $7 billion, and we have a clear path over a three-year planning cycle to get that near $10 billion, where we believe we'll see some meaningful margin expansion.

Speaker #1: In this past year, we made some additions to expense to its expense base through new systems and executive hires which has set us up to grow earnings more than proportional to that asset growth going forward.

Speaker #1: That's number one. Number two, we have the Canadian business. Now, this one is more mature than our US business. I think I mentioned it before.

André Mousseau: There are about 750,000 policies, and with our niche distribution, we have relatively modest new business generation relative to the size of the back book. The financial margins in this segment are strong, and they have outperformed our expectations going back to 2023. In 2025, you really saw that come through the asset growth of the universal life policies, and ultimately through the drivers of earnings and the strong investment earnings performance. We believe that there is more asset margin growth possible by applying some of the lessons that we've learned on our posture on our US balance sheet and porting them to the Canadian balance sheet, which still has a very conservative posture with a lot of low-yielding provincial assets, and other low-yielding fixed income instruments.

Speaker #1: There are about 750,000 policies and with our niche distribution, we have relatively modest new business generation relative to the size of the back book.

Speaker #1: But the financial margins in this segment are strong, and they have outperformed our expectations going back to 2023. And in 2025, you really saw that come through, through the asset growth of the universal life policies and ultimately through the drivers of earnings and the strong investment earnings performance.

Speaker #1: We believe that there is more asset margin growth possible by applying some of the lessons that we've learned on our posture and our US balance sheet and porting them to the Canadian balance sheet which is still has a very, very conservative posture with a lot of low-yielding provincial assets and other low-yielding fixed income instruments.

André Mousseau: Third, we have an enormous opportunity to deliver value through the combination of our Caribbean subsidiaries into one entity called Sagicor Group Caribbean. Prior to this combination, which we believe will close in Q4 2026 or thereabout, our Jamaican subsidiary was constrained from full cooperation with the rest of Sagicor by the dynamic of having a differing shareholder base. Now, with this combination, we are working hand in hand with our partners in the Caribbean to drive not just a combination with traditional synergies, but to use the combination as a catalyst to run a full digital-enabled transformation of the entire way that we do business in the Caribbean.

Speaker #1: Third, we have an enormous opportunity to deliver value through the combination of our Caribbean subsidiaries into one entity called Sagicor Group Caribbean. Prior to this combination which we believe will close in the fourth quarter of 2026 or thereabouts, our Jamaican subsidiary was constrained from full cooperation with the rest of Sagicor by the dynamic of having a differing shareholder base.

Speaker #1: Now, with this combination, we are working hand in hand with our partners in the Caribbean to drive not just a combination with traditional synergies but to use the combination as a catalyst to run a full digital-enabled transformation of the entire way that we do business in the Caribbean.

André Mousseau: Whether good or lucky, we're doing it at a fabulous time because the emergence of AI powerful enough to tackle the data transformation challenges involved will make this a faster and more comprehensive transition than what we could have embarked on even 12 months ago. This project is gonna require a robust investment of time and resources, but we have conviction that we will look up at this business in two or three years and find it a truly transformed champion relative to solidify and build upon our market-leading position in the English-speaking Caribbean and beyond. I've talked about 3 initiatives here. We believe that each of these initiatives fully realized has the opportunity to contribute between 1% and 2% return on equity growth to our overall financial results over the next 3 to 5 years.

Speaker #1: And whether good or lucky, we are doing it at a fabulous time because the emergence of AI, powerful enough to tackle the data transformation challenges involved, will make this a faster and more comprehensive transition than what we could have embarked on even 12 months ago.

Speaker #1: This project is going to require robust investment of time and resources, but we have conviction that we will look up at this business in two or three years and find it a truly transformed champion, relative to solidify and build upon our market-leading position in the English-speaking Caribbean and beyond.

Speaker #1: So I've talked about three initiatives here. We believe that each of these initiatives, fully realized, has the opportunity to contribute between one and two percent return on equity growth to our overall financial results.

Speaker #1: Over the next three to five years. So with full follow-through on these initiatives, we're looking at a vision of a company that would be delivering ROEs that would beyond be beyond kind of the midpoint of mid-teens and would be delivering significantly more net income than we are today.

André Mousseau: With full follow-through on these initiatives, we're looking at a vision of a company that would be delivering ROEs that would be beyond, you know, again, the midpoint of mid-teens and would be delivering significantly more net income than we are today, you know, again, over a 3 to 5-year planning period. Let me tie this back to the near term. We delivered $142 million of core earnings to shareholders in 2025. Unaffected by the positive results that we got from our insurance book, we see a run rate today of between $125 and $130 million that would, you know, carry into 2026 and have some growth based on compounding of capital absent these strategic initiatives.

Speaker #1: Again, over a three to five-year planning period. So let me tie this back to the near term. We delivered 142 million of core earnings to shareholders in 2025.

Speaker #1: Unaffected by the positive results that we got off our insurance books, we'd see a run rate today of between 125 and 130 million that would carry into 2026 and have some growth based on compounding of capital absent these strategic initiatives.

André Mousseau: Now, we see 2023 as an investment year, and so we're not putting out specific core earnings target or ROE target, and, you know, there are a number of reasons behind this. First, when our Caribbean subsidiaries merge at some point this year, the geography and proportions of the earnings, and the drivers of earnings or how the financials come together are gonna change. This might happen in Q3 or Q4 or potentially even in early parts of next year. Mechanically, the proportion of earnings are gonna change as, you know, our proportion of SLI in the Southern Caribbean goes down from 100 to about 55%. Our ownership of Jamaica will go the other way from 49 to about 55.

Speaker #1: Now, we see 2023 as an investment year, and so we're not putting out specific core earnings targets or ROE targets, and there are a number of reasons behind this.

Speaker #1: First, when our Caribbean subsidiaries merge, at some point this year, the geography and proportions of the earnings in the drivers of earnings or how the financials come together are going to change.

Speaker #1: And this might happen in the third quarter or the fourth quarter or potentially even in early parts of next year. But mechanically, the proportion of earnings are going to change as our proportion of SLI in the Southern Caribbean goes down from 100 to about 55 percent.

Speaker #1: Our ownership of Jamaica will go the other way from 49 to about 55. And then our internal financing costs pro forma will improve by about 20 million dollars or so as we restructure and retire intercompany debt.

André Mousseau: Then our internal financing costs pro forma will improve by about $20 million or so as we restructure and retire intercompany debt. In addition to this, there's gonna be direct and indirect, you know, first around the closing of the transaction itself, and then around staffing and executing the transformation. We'll continue to make investments in people and systems so that we know that we're in a proper position to manage growth. You know, a lot of these costs may run through the non-core line, but not necessarily all. In aggregate, since converting to IFRS 17, we've actually had higher reported net income than core to shareholders.

Speaker #1: So, in addition to this, there are going to be direct and indirect costs, first around the closing of the transaction itself, and then around staffing and executing the transformation.

Speaker #1: And we'll continue to make investments in people and systems so that we know that we're in a proper position to manage growth. So a lot of these costs may run through the non-core line but not necessarily all.

Speaker #1: In aggregate, since converting to IFRS 17, we've actually had higher reported net income than core to shareholders. But in 2026, we would not plan it that way, as we believe that we're going to have some of these closing costs and transformation costs around the Caribbean transaction, which we believe are extraordinarily high IRR investments and forward earnings.

André Mousseau: In 2026, we would not plan it that way as we believe that we're gonna have some of these closing costs and transformation costs around the Caribbean transaction, which we believe as extraordinarily high IRR investments in forward earnings. Looking out to 2027 and 2028, once these transaction costs, you know, have gone away, there we have conviction from at the early wins on each of these three initiatives. The guidance we're giving is core return on equity. There's equity, you know, taking no view on either positive or negative emergence from the insurance portfolios of approximately 14%, next year in 2027 and approximately 15% in 2028. At those levels, we would see plenty of upside potential beyond that, in the years to come.

Speaker #1: So looking out to 2027 and 2028, once these transaction costs have gone away, there we have conviction from the early wins on each of these three initiatives.

Speaker #1: And so the guidance we're giving is core return on shareholders' equity taking no view on either positive or negative emergence from the insurance portfolios of approximately 14 percent next year in 2027 and approximately 15 percent in 2028.

Speaker #1: And at those levels, we would see plenty of upside potential beyond that in the years to come. And we're putting guidance out here that is based on these initiatives that we view as within our control.

André Mousseau: We're putting guidance out here that is based on these initiatives that we view as within our control. There's a lot there to digest. We are very, you know, happy to be here putting some meat on the bone of some of the things that we have right in front of us to accomplish. We're really proud of what we've accomplished over the last three or four years, and we're very excited to build on it and go and do it again. As this goes forward, we intend to continue to put details around this in our public disclosure, to engage with analysts, to engage directly with our investors, and we're very excited about that.

Speaker #1: So there’s a lot there to digest. We are very happy— we're happy to be here, putting some meat on the bone of some of the things that we have right in front of us to accomplish.

Speaker #1: We're really proud of what we've accomplished over the last three or four years, and we're very excited to build on it and go and do it again.

Speaker #1: So as this goes forward, we intend to continue to put details around this in our public disclosure, to engage with analysts, to engage directly with our investors, and we're very excited about that.

Speaker #1: And in the meantime, if there are any immediate questions, George, I think we'd be happy to take them.

André Mousseau: In the meantime, if there are any immediate questions, George, I think we'd be happy to take.

George Sipsis: Thank you, André. With that said, operator, we can begin the Q&A.

Speaker #2: Thank you, Andre. With that said, operator, you can begin the Q&A.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by the 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 star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Pranav Turian with National Bank Capital Markets. Your line is now open.

Speaker #3: Thank you, ladies and gentlemen. We will now begin the question and answer session. Did you have a question? Please press star, followed by the one on your touch-tone phone.

Speaker #3: You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star, followed by the two.

Speaker #3: If you are using a speakerphone, please lift the hands up before pressing any keys. One moment, please, for your first question. Your first question comes from Pranar Kurian with National Bank Capital Markets.

Speaker #3: Your line is now open.

Pranav Turian: Hi. Thanks for taking my question. I just had a question on expenses. Could you give us some color on the year-on-year increase in Canadian and the US segment expenses? I think you cited business growth as a reason for the increase in the US.

Speaker #4: Hi. Thanks for taking my question. I just had a question on expenses. Could you give us some color on the earlier increase in Canadian and the US segments expenses?

Speaker #4: I think you cited business growth as a reason. For the increase in the US.

André Mousseau: Yeah. From a big picture point of view, there are two things that are happening at the same time. The first one is, you know, as I made in the commentary and the prepared remarks, as we're growing the business, we're making sure that we're developing the people and the systems to be able to be responsible stewards of, call it that gross margin growth. If you look at the gross margin growth in the North American segments, in aggregate, you know, kind of compare 2023 to 2025, you say, okay, it makes sense that you're putting more expenses in there for that.

Speaker #5: Yeah. From a big picture point of view, there are two things that are happening at the same time. The first one is, as I made the commentary in the prepared remarks, as we're growing the business, we're making sure that we're developing the people and the systems to be able to be responsible stewards of, call it that, that gross margin growth.

Speaker #5: And if you look at the if you look at the gross margin growth in the North American segments, in aggregate, kind of compare 2023 to 2025, you say, "Okay.

Speaker #5: That makes sense that you're putting more expenses in there for that. Now, there was a second piece in Q4, which is for a matter of tax planning—we're being more structured about allocating expenses down into the operating segment.

André Mousseau: Now, there is a second piece in Q4, which is, for a matter of tax planning, we're being more structured about allocating expenses down into the operating segments. Segments where, you know, where costs appropriately can be offset against taxable net income. We have executives at sort of a non-taxable holding company. Even, you know me, I'm the Chief Executive of SFC, but I'm also the Chief Executive of our North American subsidiaries. To manage down our overall tax rate, we're allocating a bit of costs down appropriately into the operating subsidiaries. There's kind of a one-time step change of expenses in Q4.

Speaker #5: So segments where costs appropriately can be offset against taxable net income. So there are we have executives at kind of a non-taxable holding company even me, I'm the chief executive of SFC, but I'm also the chief executive of our North American subsidiaries.

Speaker #5: And so, to manage down our overall tax rate, we're allocating a bit of costs down appropriately into the operating subsidiaries. And so, there's kind of a one-time debt change of expenses in Q4.

Pranav Turian: Assumption review, the impact on CSM, I think, $12 million impact, major drivers expenses in Canada and Jamaica.

Speaker #4: I should review the impact and CSM. I think $12 million impact, major driver was expenses in Canada and Jamaica.

André Mousseau: We couldn't quite hear it. Could you repeat the question?

Speaker #5: We couldn't quite hear it. Could you repeat the question?

Pranav Turian: You know, the impact on the assumption review impact. The CSM, there was a negative impact of around $12 million.

Speaker #4: The impact and the assumption review, impact. So the CSM, there was a negative impact of around $12 million.

André Mousseau: Yeah. That's, you know, kind of a knock-on effect. Kathy, you could expand on this, but it's kind of a knock-on effect of some of those of the expense run rate. You know, CSM is just one way for earnings to emerge. You know, if you have a $12 million reduction in CSM, you know, maybe that's $1 million or so less of CSM emergence out of the operating subsidiary on an annual basis. You know, it's offset by less expenses up at the head office. It's, you know, just kind of CSM math, but it ends up being a bit of a wash. It, you know, by definition, that ends up being a wash. Kathy, is there anything else you'd say to that?

Speaker #5: Yeah. So that's kind of a knock-on effect of and Kathy, you could expand on this, but it's kind of a knock-on effect of some of those of the expense run rate.

Speaker #5: CSM is just one way for earnings to emerge, but if you have a $12 million reduction in CSM, maybe that's a million dollars or so less of CSM emergence out of the operating subsidiary on an annual basis.

Speaker #5: But then it's offset by less expenses up at the head office. So it's just kind of CSM math, but it ends up being a bit of a what?

Speaker #5: By definition, that ends up being a wash. Kathy, is there anything else you'd say to that?

Kathy Jenkins: Yeah. I would mention that, if you recall, in Q4 is when we do our annual assessment of our expenses. We do our expense studies. As a result of that, we identified, you know, through inflation, through that sort of thing, as we're growing the business, there are additional expenses, and some of that would be what you call maintenance expenses that would then be part of the actuarial assumptions. To the extent that the portfolio has CSM, increases in the maintenance expenses would reduce CSM, to the extent that there is an existing CSM, then it runs through the P&L. This is part of our annual assumption review.

Speaker #3: Yeah. I would mention that it's if you were calling Q4 is when we do our annual assessment of our expenses. We do our expense studies.

Speaker #3: And as a result of that, we identified, through inflation and through that sort of thing, as we're growing the business, there are additional expenses. And some of that would be what you call maintenance expenses, that would then be part of the actuarial assumptions.

Speaker #3: So to the extent that the portfolio has CSM, it'll go it will increases in the maintenance expenses would reduce CSM. To the extent that there is that there isn't existing CSM, then it runs through the P&L.

Speaker #3: So this is due to our—it's part of our annual assumption review.

Pranav Turian: Right. I just had a second question on private credit. There's been some scrutiny on these asset managers with in-house insurance arms, and some of these players are quite active in the fixed annuity sales space. You've mentioned competitive spread environments in the past. I was just wondering, maybe over the medium term, could we see some indirect impacts if there's some negative impacts on private credit, could we see maybe a lower competitive environment in fixed annuities, maybe utility or spreads?

Speaker #4: All right. Right. And I just had a second question on private credit. So there's been some scrutiny on these asset managers with in-house insurance arms.

Speaker #4: And some of these players are quite active in the fixed annuity sales space. And you've mentioned competitive spread environments in the past. I was just wondering, maybe over the medium term, could we see some indirect impacts?

Speaker #4: If there's some negative impacts on private credit, could we see maybe a lower competitive environment in fixed annuities? Maybe with healthier spreads?

André Mousseau: You know, what I'd say is, you know, our production in 2025 reflects production in a competitive environment, right? Because in 2025, for the majority of the year, there was not this noise around private credit. In that competitive environment includes players that were tied to kind of the most aggressive of the private credit houses, which would include, you know, reinsurers that managed to keep their names out of the headlines. You know, would include the larger entities where, you know, there's headline risk. You know, those are the names that you're reading about in the New York Times or The Wall Street Journal every day.

Speaker #5: So what I'd say is our production in 2025 reflects production in a competitive environment, right? Because in 2025, for the majority of the year, there was not this noise around private credit.

Speaker #5: And so that competitive environment includes players that were tied to kind of the most aggressive of the private credit houses, which would include reinsurers that managed to keep their names out of the headlines, but would include the larger entities where there's headline risk.

Speaker #5: Those are the names that you're reading about in the New York Times or the Wall Street Journal every day. They're all tied. And they were all part of the competitive environment.

André Mousseau: You know, they're all tied, and they were all part of the competitive environment. You know, we have inched our way into kind of some of the asset class, but we've never. Like, it's a very small proportion, and we haven't been in any of the adventurous sets. You know, as the last few weeks have happened, we've gone and done a full portfolio review and, you know, because of our conservative posture, we're underweight, you know, the sectors where there's the particular anxiety around, you know, software and other technology, you know, technology sectors where, you know, there's either the risk of disruption for AI or the risk that there's a building bubble. All of those we are very underweight relative to, in particular, the more aggressive players.

Speaker #5: We have inched our way into some of the asset classes, but it's a very small proportion. And we haven't been in any of the adventurous assets as the last few weeks have happened.

Speaker #5: We've gone and done a full portfolio review and because of our conservative posture, we're underweight the sectors where there's the where there's the particular anxiety around software and other technology technology sectors where there's either the risk of disruption for AI or the risk that there's a building bubble.

Speaker #5: All of those, we are very underweight. And relative to in particular, the more aggressive players. And so look, I want to be cautious about this, but all things being equal, if the most aggressive private equity or private credit-backed players need to become less aggressive, that improves the competitive dynamic.

André Mousseau: Look, I wanna be cautious about this, but all things being equal, if the most aggressive private equity or private credit players need to become less aggressive, that improves the competitive dynamic. You know, setting aside this whole shift in asset allocation, there continues to be a huge demographic shift as the boomer bulge goes through retirement into these new products. I can tell you anecdotally that you know, global volatility, which we don't like in aggregate, is, as a life insurer, we are long economic growth and stability at a fundamental level. I can tell you our US plain vanilla annuity sales had their best week ever last week.

Speaker #5: Standing aside from this whole shift in asset allocation, there is a there is a continues to be a huge demographic shift as the boomer bulge goes through retirement into these new products.

Speaker #5: And I can tell you, anecdotally, that global volatility which we don't like in aggregate is as a life insurer, we are long economic growth and stability at a fundamental level.

Speaker #5: But I can tell you our US plain vanilla annuity sales had their best week ever last week. And we didn't raise rates, but it's just when volatility happens and people remember that there can be volatility in the equity markets, the portion of their retirement savings that can go into these plain vanilla annuities I think people have woken up over the last couple of weeks and remembered why these are an important piece of the piece of the portfolio.

André Mousseau: We didn't raise rates, but it's just, you know, when volatility happens and people remember that there can be volatility in the equity markets, the portion of their retirement savings that can go into these plain vanilla annuities, you know, I think people have woken up over the last couple weeks and remembered why these are an important piece of the portfolio. I don't wanna jump up and down and say that this is good for the competitive environment, but you could, you know, sketch out that case.

Speaker #5: So I don't want to jump up and down and say that this is good for the competitive environment, but you could you could sketch out that case.

Pranav Turian: All right. Thanks. That's it for me.

Speaker #4: All right. Thanks. That's it for me.

Operator: Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one. Your next question comes from Mike Rizvanovic with Scotiabank. Your line is now open.

Speaker #3: Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one. Your next question comes from Mike Ruzanovich, Wisconsin Bank.

Speaker #3: Your line is now open.

Mike Rizvanovic: Good morning. André, I wanted to go back to the ROE guidance for 2027, just so that I understand this. It sounds like this year is more of an investment year. Can you talk a bit about the trajectory? When you mention the 14%, that's not exiting 2027, not like you're getting there at the very end of the year. That's for the full year, correct?

Speaker #5: Okay, good morning. Andre, I wanted to go back to the ROE guidance for 2027 just so that I understand this. So it sounds like next—or, sorry, this year is more of an investment year.

Speaker #5: Can you talk a bit about the trajectory? And when you mentioned the 14%, that's not exiting 2027—it's not like you're getting there at the very end of the year.

Speaker #5: That's for the full year, correct? Correct. Okay. And then the trajectory, so you're not offering anything for 2026, but you are going to be investing?

André Mousseau: Correct.

Rachel Smith: Okay. Then the trajectory, so you're not offering anything for 2026, but you are going to be investing. What sort of impact do you see on the ROE? I'm just wondering if there's a bit of a retraction here before you start to see the trajectory going up.

Mike Rizvanovic: Okay. Then the trajectory, so you're not offering anything for 2026, but you are going to be investing. What sort of impact do you see on the ROE? I'm just wondering if there's a bit of a retraction here before you start to see the trajectory going up.

Speaker #5: What sort of impact do you see on the ROE? I'm just wondering if there's a bit of a retraction here before you start to see the trajectory going up.

André Mousseau: Right. So, you know, we ran at 14.2, I think, for the full year last year, or 2025, the year that we're talking about. You know, that includes, because the core emergence doesn't let you. The core earnings includes how your insurance portfolio does relative to your reserves. In some years that's negative, and if you're properly reserved, some years it's positive. It was positive for us in aggregate in 2025, you know, enough to poke ROE up by just over a point.

Speaker #5: Right. So we ran at a 14.2, I think, for the full year last year. Or 2025, the year that we're talking about. And that includes because the core emergence doesn't let you the core earnings include how does your insurance portfolio do to where do relative to your reserves?

Speaker #5: In some years, that's negative. And if you're properly reserved, some years it's positive. It was positive for us in aggregate. In 2025, enough to poke ROE up by just over a point.

André Mousseau: You know, I sit here today and say, okay, absent these initiatives, you'd say, okay, you know, your best guidance would be a 13% unaffected ROE, and maybe you'll continue to have good emergence out of your insurance portfolio or maybe not. We, you know, reserve not to have a view on that, which would mean that kinda mechanically, as we compound our capital, you would have earnings growth, but you would not have ROE expansion. You know, what I do know is, you know, we intend to invest in closing and transaction costs in the Caribbean merger and then make a robust investment in a transformation project.

Speaker #5: So I sit here today and say, "Okay, absent these initiatives," you'd say, "Okay, your best guidance would be a 13% unaffected ROE." And maybe you'll continue to have good emergence out of your insurance portfolio or maybe not.

Speaker #5: And we reserve not to have a view on that, which would mean that, kind of mechanically, as we compound our capital, you would have earnings growth.

Speaker #5: But you would not have ROE expansion. What I do know is we intend to invest in closing and transaction costs in the Caribbean, in the Caribbean merger, and then make a robust investment in a transformation project.

André Mousseau: I can sit here not being encumbered by being an accountant and say, I think those are gonna be non-core costs. You know, you have to be able to see where that's gonna come through in, you know, when you get together and do your reviews, what's core and what's non-core. We'd rather not put a number on the table for 2026. We'll tell you know, throughout every quarter in 2026 where we think we would be running kinda absent one-time costs, whether that's core or not. It's a lot easier to get conviction around the 2027 and 2028 numbers because we know where we're running at now.

Speaker #5: I can sit here not being encumbered by being an accountant and say, "I think those are going to be non-core costs." But you have to be able to see where that's going to come through in when you get together and do your reviews, what's core and what's non-core.

Speaker #5: So we'd rather not put a number on the table for 2026. We'll tell you throughout every quarter in 2026 where we think we would be running kind of absent one-time costs, whether that's core or not.

Speaker #5: But it's a lot easier to get conviction around the 2027 and 2028 numbers because we know where we're running at now. We see some of these quick wins where we have high enough conviction to stand behind meeting or exceeding it.

André Mousseau: You know, we see some of these quick wins, where we have high enough conviction to stand behind meeting or exceeding it. That's why we're putting a finer point on 27 and 28. Look, the implication kind of getting at your first question around timing is that by the end of next year, we'll be through a 14.0% ROE because we see it as accelerating.

Speaker #5: And so that's why we're putting a finer point on 2027 and 2028. And look, the implication kind of getting at your first question around timing is that by the end of next year, we'll be through a 14.0% ROE because we see it as accelerating.

Rachel Smith: Got it. Okay. Thank you for that color. In terms of the three initiatives that you've outlined, is this relatively equally weighted? Just ballpark. It sounds like you've got three very distinct strategies or strategic initiatives here. Is there any one that's a lot more meaningful in terms of getting that ROE up, or are they all sort of playing a similar role?

Mike Rizvanovic: Got it. Okay. Thank you for that color. In terms of the three initiatives that you've outlined, is this relatively equally weighted? Just ballpark. It sounds like you've got three very distinct strategies or strategic initiatives here. Is there any one that's a lot more meaningful in terms of getting that ROE up, or are they all sort of playing a similar role?

Speaker #5: Got it. Okay. Thank you for that color. And in terms of the three initiatives that you've outlined, is this relatively equally weighted? Just ballpark, it sounds like you've got three very distinct strategies or strategic initiatives here.

Speaker #5: Which one is is there any one that's a lot more meaningful in terms of getting that ROE up, or are they all sort of playing a similar role?

André Mousseau: They're more similar than they are different. You know, I would sit here and on each of the three and say, mechanically, I'd be disappointed if we didn't get 1% of ROE expansion off each of them over a 3-year cycle. Now some of them have more headroom than others. I think the case for growth in the Caribbean could have the opportunity to really be transformative to the way that we do business in 3 and 5 years. You know, I think the cap on that is higher, and it would be, you know, pretty meaningful. Whereas, you know, with the Canadian investment expansion, you know, fundamentally, we're a public company and we're not gonna get hyper aggressive.

Speaker #5: They're more similar than they are different. I would sit here on each of the three and say mechanically I'd be disappointed if we didn't get a full percent of ROE expansion off each of them over a three-year cycle.

Speaker #5: Now, some of them have more headroom than others. I think the case for growth in the Caribbean could have the opportunity to really be transformative to the way that we do business in three and five years.

Speaker #5: So, I think the cap on that is higher, and it would be pretty meaningful. Whereas with the Canadian investment expansion, fundamentally we're a public company and we're not going to get hyper-aggressive. And so with that one, if I was to range from kind of the smallest of the opportunities, that would cap out at still a meaningful number, but maybe a 2% move in our overall ROE.

André Mousseau: With that one, if I was to range around kind of the smallest of the opportunities, you know, that would cap out at still a meaningful number, but, you know, maybe a 2% move in our overall ROE.

Rachel Smith: Okay. Thanks for that. Just sneak one last quick one and just a quick numbers question, maybe for Kathy. Just the tax rate in the quarter. Effective tax rate did come in a bit low. I'm not sure if it's geographic mix of your earnings this quarter, but anything on the tax line that's temporary? Does it sort of revert to recent quarters?

Mike Rizvanovic: Okay. Thanks for that. Just sneak one last quick one and just a quick numbers question, maybe for Kathy. Just the tax rate in the quarter. Effective tax rate did come in a bit low. I'm not sure if it's geographic mix of your earnings this quarter, but anything on the tax line that's temporary? Does it sort of revert to recent quarters?

Speaker #5: Okay, thanks for that. And just to sneak in one last quick one. Just a quick numbers question, maybe for Kathy, but just—the tax rate in the quarter, expected tax rate, did come in a bit low.

Speaker #5: I'm not sure if it's geographic mix of your earnings this quarter, but anything on the tax line that's temporary, does it sort of revert to recent quarters?

André Mousseau: Yeah. Kathy, that's definitely for you.

Speaker #2: Yeah, Kathy, that's definitely for you.

Kathy Jenkins: Yeah. Sorry. I was trying to take it off mute. Yes. I think it's a mix. We did see some in Jamaica. There was some. It really is the mix of earnings. That and some work we've been doing to plan.

Speaker #3: Yep. Yeah. Sorry, I was trying to take it off mute. Yes. I think it's a mix. We did see some in Jamaica, there was some—it really is the mix of earnings.

Speaker #3: So that and some work we've been doing to plan.

Rachel Smith: a lower tax rate versus, say, the last few quarters as a run rate?

Mike Rizvanovic: a lower tax rate versus, say, the last few quarters as a run rate?

Speaker #5: So a lower tax rate versus, say, the last few quarters as a run rate?

Kathy Jenkins: It was mixed. I would say, yeah, you know, probably a little premature for that. I would say, you know, it would be more conservative. We are continuing to work on our effective tax rate.

Speaker #3: It was mixed. I probably I would say, yeah, it probably a little premature for that. So I would say it would be more conservative, but it is we are continuing to take our to work on our effective tax rate.

Rachel Smith: Okay. Thanks for the time.

Trevor Reynolds: Okay. Thanks for the time.

Speaker #5: Okay. Thanks for the time.

André Mousseau: Thank you.

Speaker #2: Thank you.

Operator: Your next question comes from Trevor Reynolds with Acumen. Your line is now open.

Speaker #1: Your next question comes from Trevor Reynolds with Acumen. Your line is now open.

Trevor Reynolds: Yeah. Hey, guys. Just curious on the Hurricane Melissa, is that fully baked into the numbers now?

Speaker #4: Yeah. Hey, guys. Just curious on the hurricane, Melissa. Is that fully baked into the numbers now?

André Mousseau: Kathy?

Speaker #2: Yeah. Kathy?

Kathy Jenkins: Yes. Yes. I would say most of it is in there. We have our, like, net of reinsurance rather. It's in our core in terms of the claims, and we were well reinsured. It was, you know, in there. In our non-core, that's where we have a little bit in terms of, you know, additional rebuilding of infrastructure, like our infrastructure that was impacted. In order of magnitude, it was, you know, around $2.1 million at net in our core and maybe $3 million in the non-core, and it was less, and then we only take a portion of that. In terms of next year, there'll probably a little bit more in terms of non-core, and maybe a little bit.

Speaker #3: Yes. Yes. So I would say most of it is in there. We have our net of insurance of reinsurance, rather. It's in our core in terms of the claims, and we're well reinsured.

Speaker #3: So it was it was in there. And then in our non-core, that's where we have a little bit in terms of additional rebuilding of infrastructure, like our infrastructure that was impacted.

Speaker #3: But in order of magnitude, it was around 2 million, 100 net in our core and maybe 3 million in the non-core. And it was less.

Speaker #3: And then we only take a portion of that. In terms of next year, there'll probably be a little bit more in terms of non-core and maybe a little bit.

Kathy Jenkins: Again, the numbers are very small and, you know, we're well reinsured in terms of the core.

Speaker #3: But again, the numbers are very small, and we're well reinsured in terms of the core.

André Mousseau: Right. Kathy, I think you mean to say a little bit more, a little bit incremental to this as opposed to more than what we saw in Q4.

Speaker #2: Right. And Kathy, I think you mean to say a little bit more a little bit incremental to this as opposed to more than what we saw in Q4?

Kathy Jenkins: Oh, sorry. Yes. Oh, yes. Sorry. Yes. Thank you for clarifying that. Yes.

Speaker #3: Oh, sorry. Yes. Oh, yes. Sorry. Yes. Thank you for clarifying that. Yes. Just a—

André Mousseau: So, you know, I, I think-

Kathy Jenkins: Little bit incremental.

Speaker #2: No, I think the point here was that barely scratched materiality for Q4. And in terms of non-core stuff, we're being good citizens and making donations to community initiatives and all that sort of stuff.

André Mousseau: The point here was, it barely scratched materiality for Q4. You know, in terms of non-core stuff, we're being good citizens and making donations to community initiatives and all that sort of stuff. You know, we're talking the $1 and $2 millions of dollars. It's the right thing to do.

Speaker #2: But we're talking the ones and two millions of dollars. It's the right thing to do. But I think the thing that we should take away from this—and we wanted to allude to this in Q4 without being too hasty—is that we, both from an operational planning point of view and from a financial exposure point of view, are responsible.

André Mousseau: you know, I think the thing that we should take away from this, and we wanted to allude to this in Q4, without, you know, without being too hasty, is that, you know, we both from an operational planning point of view and from a financial exposure point of view, we're responsible and our anticipated exposures even to catastrophic events, and this was a once in generations weather event, just barely scratches materiality because of the safeguards that we have in place.

Speaker #2: And our anticipated exposures even to catastrophic events. And this was a once-in-generations weather event. Just barely scratches materiality because of the safeguards that we have in place.

Trevor Reynolds: Great. Thanks for the update there. Just on the Caribbean transformation. You kinda provided some guidance in terms of when we might see that take place on, in terms of your reporting. Like what is the timeline on an actual digital transformation? Do you expect that to, you know. Just some updates on kind of the timeline of that actually occurring. Would that all be done when you start reporting as under the new segment? Just curious on that.

Speaker #4: Great. Thanks for the update there. Just on the Caribbean transformation. So you kind of provided some guidance in terms of when we might see that take place on in terms of your reporting.

Speaker #4: What is the timeline on an actual digital transformation? Is that do you expect that to just maybe just some updates on kind of the timeline of that actually occurring?

Speaker #4: Would that all be done when you start reporting as under the new segment? Just curious on that.

André Mousseau: I mean, we are embarking on a full transformation effort, being guided by outside parties who have done this before for, you know, similar large organizations globally. We're deliberately doing that so that we can get best practices. I think if you know, talk to some of the other companies that you cover around really robust transformations, you know, they are two and a half year projects. We're not waiting till close, but, you know, this is stuff we're gonna be working on in 2027 and 2028, as well. You know, when we're putting forward guidance in 2027, it's incorporating any quick wins from that sort of project.

Speaker #2: No. I mean, we are embarking on a full transformation effort being guided by outside parties who have done this before for similar large organizations globally.

Speaker #2: And we're deliberately doing that so that we can get best practices I think if you talk to some of the other companies that you cover around really robust transformations, they are two, two and a half year projects and we're not waiting till close but this is stuff we're going to be working on in 27 and 28 as well.

Speaker #2: And so when we're putting forward guidance in 2027, it's incorporating kind of quick wins from that sort of project. But we're going to continue to work on it and it's one of the big sources of margin expansion looking out into 28 and beyond.

André Mousseau: We're gonna continue to work on it and, you know, it's one of the big sources of margin expansion looking out into 2028 and beyond.

Trevor Reynolds: Great. That's helpful. Thanks.

Speaker #4: Great. That's helpful. Thanks.

Operator: There are no further questions at this time. I will now turn the call over to George Sipsis for closing remarks.

Speaker #1: There are no further questions at this time. I will now turn the call over to George Sipsis for closing remarks.

George Sipsis: 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, everyone. Have a great day.

Speaker #4: Great. Thank you, operator. And thank you, everyone, for joining the call today. This call will be available for one month on our website, and a transcript will be posted as soon as available.

Speaker #4: 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, everyone.

Speaker #4: Have a great day.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and now say please disconnect your lines.

Q4 2025 Sagicor Financial Co Ltd Earnings Call

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