Sagicor Financial (TSE:SFC) reported higher third-quarter core earnings but a net loss as rising interest rates led to mark-to-market declines on fixed-income assets. Management also reaffirmed its return-on-equity targets and outlined plans to merge its Caribbean operations in the first half of 2027.
Core earnings attributable to shareholders rose 10% from a year earlier to $39 million, the company’s highest quarterly result so far in 2026. The insurer reported a $23 million net loss to shareholders, which Chief Financial Officer Kathy Jenkins attributed to mark-to-market experience on Canadian- and U.S.-dollar fixed-income assets, net of liability movements.
President and CEO Andre Mousseau said the assets contributing to net income volatility are primarily held to maturity. He said Sagicor remains focused on “fundamental long-term sustainable value creation.”
Canadian Assumption Changes Weigh on CSM
Sagicor Canada reported $25 million in core earnings, down 5% from a year earlier in U.S.-dollar terms, when the business benefited from particularly strong insurance experience gains. It posted a $15 million net loss as sharply higher Canadian interest rates affected the value of fixed-income assets.
The Canadian segment’s net CSM fell 12% from the prior quarter to $482 million. Jenkins said annual actuarial assumption updates and model refinements reduced CSM by $73 million, partly offset by new business CSM.
About 40% of the $73 million adjustment resulted from stronger lapse assumptions related to maturing term-life policies, Jenkins said. The remainder reflected assumption changes and modeling refinements related to future profitability of universal-life policies. Mousseau said the two components were unrelated and that the affected cohorts remained profitable.
Jenkins said the assumption review had positive effects in Sagicor’s other segments. In the U.S., the company found no basis for a significant change to assumptions for its legacy life book. Jenkins said Sagicor may take steps to de-risk that business, which is not core to its operations.
U.S. Annuity Margins Support Earnings
Sagicor Life USA generated $247 million in new business production, in line with management’s expectations. Core earnings rose 37% to $14 million, supported by higher expected insurance and investment earnings as the business grew. Net income was $3 million, held below core earnings by negative mark-to-market experience associated with higher U.S. interest rates.
Mousseau said the quarter’s annuity production was at the lower end of the company’s target range but carried strong margins. He expects product and distribution expansion to support growth in 2027, including potential access to bank channels after an upgrade of the U.S. operation’s AM Best rating to A from A-minus.
Asked whether annual production could rise from its approximately $1 billion run rate to $1.5 billion over three years, Mousseau said that was within the realm of possibility, while noting that planning was ongoing. He also cautioned against treating the U.S. segment’s third-quarter core earnings as its run rate, saying the second-quarter level was too low and the third-quarter result was probably somewhat high.
In the Caribbean, Sagicor’s share of Sagicor Jamaica’s core earnings fell 11% to $10 million as higher expenses offset stronger investment earnings and fee income. Sagicor Life’s core earnings rose 54% to $13 million, helped by positive mortality experience.
Caribbean Merger and ROE Targets
Sagicor received shareholder approval in October to combine its Caribbean operations under a single publicly listed company, Sagicor Group Caribbean. Mousseau said the transaction still requires final regulatory approval and a court process. The company expects to close in the first half of 2027 and may select the first day of a quarter to simplify accounting.
Jenkins said the company incurred approximately $8 million in integration expenses during the third quarter and expects further costs in coming quarters. Sagicor did not provide an overall cost estimate. Mousseau said combining systems and organizations could create near-term savings, with further opportunities from process and technology changes over the following one to two years.
Mousseau reaffirmed a 14% core ROE target for 2027 but said management wants that guidance to apply after the merger closes, beginning in the second or third quarter, because the treatment of closing costs remains uncertain. He also reaffirmed the 15% target for 2028 after an analyst asked about a change in the target’s wording to “medium-term.”
Sagicor’s group LICAT ratio was 133% at quarter-end, while its financial leverage ratio was 28.5%. Book value per share was $7.36, or CAD 10.44. The company announced a regular quarterly dividend of $0.075 per share.
About Sagicor Financial (TSE:SFC)
Sagicor Financial Company Ltd. (TSX: SFC) is a leading financial services provider with over 185 years of history in the Caribbean, over 90 years of history in Canada, and over 70 years of history in the United States. Sagicor offers a wide range of products and services, including life, health, and general insurance, banking, pensions, annuities, investment management, and real estate. Sagicor’s registered office is located at Clarendon House, 2 Church Street, Hamilton, HM 11, Bermuda, with its principal office located at Cecil F De Caires Building, Wildey, St. Michael, Barbados.
