A.M. Best Affirms Ratings of Sagicor Financial Corporation and Its Subsidiaries
December 8, 2015 by Best's News Service
Oldwick – A.M. Best has affirmed the financial strength rating (FSR) of A- (Excellent) and the issuer credit ratings (ICR) of “a-” of Sagicor Life Inc. (St. Michael, Barbados). A.M. Best has also affirmed the FSR of A- (Excellent) and the ICR of “a-” of Sagicor General Insurance Inc. (Sagicor General) (Bridgetown, Barbados), Sagicor Life Insurance Company (Sagicor Life USA) (Austin, TX), and the FSR of B+ (Good) and the ICR of “bbb-” of Sagicor Life Jamaica Limited (SLJ) (Kingston, Jamaica). The outlook for all ratings is stable.
Concurrently, A.M. Best affirmed the ICR of “bbb-” of the ultimate parent, Sagicor Financial Corporation (SFC) (Barbados) and assigned an issue rating of “bbb+” to the USD 320 million, 8.875% senior unsecured notes that mature in 2022, noting Sagicor Life Inc.’s guarantee. The outlook for these ratings is stable. SFC is publicly traded on the Barbados, Trinidad and London stock exchanges. Due to its redemption, A.M. Best has withdrawn the “bbb” issue rating for the USD 150 million, 7.5% senior unsecured notes that were scheduled to mature in 2016. Despite the net increase in financial leverage, SFC’s overall leverage position remains within A.M. Best’s expectations for its current rating level. In addition, diversified sources of cash and profitable operations provide adequate debt service coverage.
The rating affirmations reflect the organization’s adequate capitalization, consistent earnings in its core business lines and strong brand recognition in the Caribbean market. Through its operating subsidiaries, SFC has a long operating history, very strong brand recognition and diversified geographical reach, all of which contributes to a favorable competitive market position throughout the Caribbean region. Supported by profitable operations, SFC’s consolidated risk-adjusted capital position remains adequate, including its business risk exposures in its Jamaica operations.
Offsetting rating factors include SFC’s significant business and financial exposure to Jamaica’s economy through its controlling interest in Sagicor Group Jamaica (a recently created holding company of SLJ) and emerging country risks in Barbados. While A.M. Best believes such exposures are partially mitigated by the sustained favorable performance of SFC’s Jamaica operations, the somewhat stabilized financial condition in Jamaica and geographic diversification in the Caribbean region, further deterioration in the Jamaica’s or Barbados’ financial condition could potentially stress SFC’s overall operating results. Additionally, SFC faces ongoing challenges to sustain earnings and premium growth in its core mature Caribbean life/health insurance marketplace.
Although annuity growth has pressured historical earnings, Sagicor Life USA entered into a reinsurance agreement and managed production in order to manage the capital strain associated with its annuity business growth. In addition, the company continues to maintain an adequate level of risk-adjusted capital, mainly from parental support rather than organic growth in surplus. However, historical support was mainly in the form of internal surplus notes, which constitute more than half of its capital and surplus position.
Sagicor General is among the largest property/casualty insurers in Barbados and has a significant presence in Trinidad and Tobago and other Caribbean territories. Despite challenging market conditions, Sagicor General has continued to produce positive overall operating results, which are derived from its sound underwriting performance in conjunction with a steady stream of investment income. The company also benefits from the synergies derived as a subsidiary of SFC.
This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.
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