Sagicor Financial Co (TSX:SFC) released first-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.

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The full earnings call is available at https://app.webinar.net/0RGKy0Aj5zJ

Summary

Sagicor Financial Company Ltd reported Q2 2026 core earnings of $34 million, up from $25 million in Q1 2026, primarily driven by improvements in core insurance experience and investment portfolio performance.

Net income to shareholders was $87 million, benefiting from favorable interest rate movements and strong equity markets impacting the company's universal life business in Canada.

Sagicor's growth strategy in the U.S. received a boost from an AM Best credit rating upgrade to 'A', which is expected to open further distribution opportunities.

The company is proceeding with its Caribbean Transformation Plan, expecting one-time charges and investments in upcoming quarters ahead of closing a significant transaction.

Management highlighted the potential for continued quarterly volatility in balance sheet results but expressed confidence in long-term ROE growth and total value creation for shareholders.

Book value per share increased to $7.65 USD, and the company announced its 27th consecutive quarterly dividend.

Full Transcript

Annes, Operator

Good morning. My name is Annes and I'll be your conference operator today. At this time, I'd like to welcome everyone to Sagicor Financial Company Ltd second quarter 2026 earnings call. 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'd like to ask a question during this time, simply press Star, then the number one on your telephone keypad. If you'd like to withdraw your question, please press Star, then the number two.

Thank you. Mr. George Ipsis, EVP Corporate Development and Capital Markets, you may begin your conference.

George Ipsis, EVP Corporate Development and Capital Markets

Great. Thank you, operator, and good morning, everyone. Thank you for joining us today to discuss Sagicor Financial Company Ltd's second quarter 2026 results. Before we begin, I'd like to remind everyone that our disclosures are available on our investor relations website at investors.sagicorps.com, which include a press release, financial statements, MD&A, and the supplemental information package which contains 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 the Q&A period being reserved for financial research analysts. I would like to refer 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 Financial Company Ltd'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 filings and earnings releases. Unless otherwise noted, all dollar amounts referenced will be in U.S. dollars consistent with our reporting practice. 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. With that, I'll pass the call to our President and CEO, Andre Mousseau.

Andre Mousseau, President and CEO

Thank you, George. Good morning, everybody. Thank you for joining us. We are pleased to report another solid quarter for Q2 2026. Our core earnings returned to our target levels as insurance experience was broadly in line with our expectations, and our net income was significantly higher than our core earnings as market volatility on asset prices has worked in our favor this quarter. We continue to make excellent progress on our strategic initiatives to drive ROE expansion and future growth, which I'll come back to after Kathy goes through a more detailed financial review of Q2.

Kathy Jenkins, Chief Financial Officer

Thank you, Andre, and good morning, everyone. Sagicor's Q2 2026 core earnings to shareholders were $34 million, compared to $25 million in Q1 2026. The stronger core earnings in Q2 were primarily driven by improvements in core insurance experience and investment portfolio performance. Net income to shareholders was $87 million, benefiting from favorable interest rate movements in Sagicor Canada and Sagicor Life, and strong equity markets impacting our universal life business in Sagicor Canada during the quarter.

Our operating segments generated steady new business production, leading to strong new business CSM of $44 million. Annualized core ROE for Q2 was in line with management's expectations at 13.6%. Now I will give you some more details on the segment financials. Sagicor Canada's new business production of $17 million for the quarter was consistent with management expectations, resulting in new business CSM of $11 million. Core earnings to shareholders of $27 million for the quarter increased 8% year over year, driven by higher expected investment earnings.

Net income to shareholders of $70 million for the quarter was higher than core earnings to shareholders due to favorable market-related impacts from lower interest rates and strong equity returns. Net CSM in U.S. dollars decreased 2% quarter over quarter to $548 million due to the devaluation of the Canadian dollar, whereas net CSM increased marginally on a constant currency basis. Sagicor Life USA's new business production of $284 million for Q2 was in line with management expectations.

Core earnings to shareholders of $6 million for the quarter decreased year over year and were impacted by core insurance experience losses in the legacy life block compared to core insurance gains in Q2 2025. Net income to shareholders was also $6 million for the quarter, as market experience and other non-core net income were approximately neutral. Net CSM increased 1% quarter over quarter to $159 million. Sagicor Jamaica maintained strong insurance sales in the quarter supported by significant policy renewals and new business, resulting in net premium growth of 13% year over year.

Sagicor's share of Sagicor Jamaica's core earnings to shareholders of $10 million for the quarter was driven by higher expected investment earnings from higher interest margins and growth in the commercial banking and investment portfolios. Sagicor's share of Sagicor Jamaica's net income to shareholders was $9 million for the quarter, marginally lower than core earnings to shareholders. Net CSM increased 3% quarter over quarter to $308 million, driven by strong new business production contributing $14 million of new business CSM.

Sagicor Life generated $116 million of net premium during the quarter, having maintained strong insurance sales supported by growth in single-premium annuities. Core earnings to shareholders were strong at $14 million for the quarter, with favorable core insurance experience in both the short-term and long-term businesses. Net income to shareholders of $25 million for the quarter was higher than core earnings to shareholders, driven primarily by favorable interest-rate-related market movements.

Net CSM was $248 million, a decrease of 7% quarter over quarter, with organic growth offset by the impact of reinsurance, contract modification at our head office, other operating companies, and adjustments. Segment core costs to shareholders were $22 million for Q2, consistent with the prior quarter, and total reported costs to the shareholders were $23 million for Q2. With these results, Sagicor remained well capitalized in Q2. The group LICAT ratio was 134%, and our financial leverage ratio was 27.4%.

Our book value per share increased to $7.65 in U.S. dollars or $10.87 Canadian. We took advantage of some softness in our trading price later in Q2 to repurchase half a million shares for just under $3 million U.S. We are also pleased to announce our 27th consecutive quarterly dividend to shareholders since we've been listed on the Toronto exchange, and third dividend at the higher level of US$0.075 per quarter, or $0.30 annualized. On that note, I will hand back to Andre to close our prepared remarks.

Andre Mousseau, President and CEO

Thank you, Kathy. We are pleased to have seen some of the results revert after a slow first quarter, both in terms of insurance experience in aggregate, as well as seeing market volatility being favorable, which, as much as anything on the interest rate front, came from just a particular moment in time at the end of March in terms of mark-to-markets. Looking beyond our backwards-looking results, we continue to make excellent progress on our strategic initiatives.

Our growth strategy in the U.S. received another strong validation in our recent financial strength credit rating upgrade from AM Best to A in that market. Local credit ratings are very important in the U.S. market, and we believe that that upgrade will help open up further distribution opportunities for us as we look to accelerate the growth of that business next year and beyond. Under its new leadership, our Canadian business continues to generate excellent financial returns as we optimize our balance sheet there, and our Caribbean Transformation Plan, enabled by the pending combination of our segment Sagicor Life and Sagicor Jamaica, is well underway and tracking to add significant value in years to come. As we make progress towards combining those organizations, we do expect we'll start to see more one-time charges and investments in the third and fourth quarters of this year ahead of closing that transaction, and we believe that the investments that we're making this year in that really significant transformation will enable us to drive significant earnings growth in the Caribbean in the years to come.

As we've observed in the first couple of quarters of this year, and even in the first half of this third quarter, we should expect to see continued quarterly volatility around the balance sheet. That just seems to be the world we're in right now. But over the long term, we're very excited about the direction of our core ROE and ultimately book value creation and total value creation for our shareholders. So with that, George, I think we're ready to open the line for questions.

George Ipsis, EVP Corporate Development and Capital Markets

That's right. Operator, please open the line for questions.

Operator

Thank you, ladies and gentlemen. We will now begin the question-and-answer session. If you'd like to ask a question, please press Star, followed by the number one on your telephone keypad. If your question has been answered and you would like to withdraw from the queue, please press Star, followed by the number two. And if you're using a speakerphone, please lift your handset before pressing any keys. One moment, please, while we compile the roster.

The first question comes from Gabrielle Deschaine with National Bank Equity. Please go ahead.

Gabrielle Deschaine, Analyst at National Bank Equity

Hey, good morning. I have a few questions here. One on the insurance experience. Sorry. There was some improvements overall sequentially after what we saw in Q1, but the U.S. has, you know, had a few quarters now of negative mortality, I believe. Can you just give a high-level overview of what you're observing in that block? Is it legacy life, annuities, or what?

Andre Mousseau, President and CEO

Yeah, thanks, Gabe. If you look at this quarter versus last quarter, Q1 was a little bit of, if you flip four coins in a row, one in 16 times they're always going to come up tails. You can kind of compare that to Q2 of last year, where they all came up heads, or in the positive. In aggregate, we were about flat. But you're right, we had negative in the U.S. segment. Again, the significant majority of that experience in that U.S. segment is around the legacy life block of business that we don't write anymore, and it's kind of a combination of kind of vintage 2016 through 2020 term business, as well as some significantly older blocks.

And so you really have to get in and parse it on a block-by-block basis, and we're taking a really deep dive into that. And so, you know, as we've talked about on our other calls, we're always looking at our actuarial assumptions. We're taking a very hard look at mortality across the board, including for our U.S. business, for Q3. And it may be that we end up strengthening reserves on that block so that we don't have to be distracted and talking about it every quarter.

In aggregate, the annuities business, the book that we put on the book in the last five years or so as we've shifted to this strategy, is more or less in line with the economics and the expectations that we had. And so, you know, you really have to get in and look at it on a business line-by-business line basis.

Gabrielle Deschaine, Analyst at National Bank Equity

And reserve adjustment would be CSM reduction, perhaps. Would that be how it would come through?

Andre Mousseau, President and CEO

It's either through CSM or through equity. And, you know, the way it works is you have to get in on a cohort-by-cohort basis. And so, you know, if we knew what the answer was, we'd have put it out in Q2. And, you know, we're doing the work for the deep dive for Q3. And, you know, we're taking a look at that, we're taking a look at the balance sheet in aggregate. We're taking a hard look at the Canadian business, and with the combination of the Caribbean businesses, we're going to get a chance, whether it's in Q4 of this year or Q1 of next year, to completely reset that as a new combined balance sheet.

And we're going to take a look at those as well.

UNKNOWN Analyst

Conversely, the annuities persistency seems to have been quieter of late. So it looks like that's, you know, last year and I believe the year prior there was some noise around lapses, but that seems to have been settled out. Is that a fair statement?

Andre Mousseau, President and CEO

Yeah. So, you know, if you look at what we did last year, we said, okay, you know, here's what's happening as the early stages of the cohorts come up for renewal and, you know, you would start to see patterns of behavior with a little bit of negative correlation between how they roll over and the size of the policy. And so we went in and tweaked those assumptions and now what we're seeing on that is emergence that is more in line on what we had there.

And we're tactically, I think, doing a good job of managing that business where obviously you want to encourage rollovers, but, you know, there are certain times where at some point it becomes diminishing marginal returns, where you're actually better off with a new policy because of the way U.S. statutory works and as the interest rate environment has moved.

UNKNOWN Analyst

Yeah. And, you know, the annuities sales volumes, is there any connection there that we're, you know, about 15% or so below last year's first-half production, or is it just the rate volatility or market conditions that are causing you to step back a little bit relative to last year?

Andre Mousseau, President and CEO

It's a little bit of all of the above. We're taking a disciplined long-term approach around, okay, what are the IRRs? What's the ultimate ROE of the marginal dollar that we're building to? The environment has gotten more and more competitive and for the time being we've stuck and we said we're going to put rate in the right place where we're offering good value to policyholders and we're happy with the returns that we're getting rather than stretching with rate and accepting lower returns as we build the balance sheet there.

And so what we're focused on is getting the pricing on what we're doing now right, and then expanding our product and distribution and setting higher targets for next year. You know, you see the run rate, we should still be well through that billion-dollar production this year if you look at where we've been for the first six months. But, you know, we have a comprehensive plan that has come with upgrading the balance sheet there. You saw that with the announcement with Ambassador a few weeks ago and, you know, running with the new leadership of that organization to drive that growth next year and beyond because we still see a really significant opportunity to deploy our capital well there.

UNKNOWN Analyst

Okay, and then last one for me, just the CSM reconciliation, there was a pretty big decline there tied to some reinsurance contract modification. Can you shed some light on that, please?

Andre Mousseau, President and CEO

Yeah, you know, I put this under the category of balance sheet cleanup of the Caribbean businesses as— As we move them towards the combination. And so, you know, these get down into individual matters with individual reinsurers and we're kind of making decisions that are the right long-term decisions for the ROE looking forward.

UNKNOWN Analyst

Thank you.

Operator

Thank you, ladies and gentlemen. As a reminder, if you have any questions, please press star one. Your next question comes from Darko Mihailik with RBC Capital Markets. Please go ahead.

Darko Mihailik, Analyst at RBC Capital Markets

Hi. Thank you. Good morning. So we could be looking at potentially some, let's call it noise, in the next couple of quarters with respect to investments in the Caribbean, maybe some reserve changes and so on. So maybe you can talk a little bit about what—or maybe it's too early to talk about expectations going into 2020. So my question then is we have witnessed a lot of volatility in investment results. And, you know, it's not just Sagicor Financial Company Ltd, we've seen it across the board, but it does tend to be a bit more volatile for you.

So my question is, Andre, have you considered at some point maybe altering the investment strategy a little bit? Maybe some curbs or some hedges in place to reduce the volatility? Is that something that's crossed your mind at all with respect to how you operate, especially considering the inordinate impact it's had on your company versus some of the others that I cover? I'm not saying I've heard this from other insurers, but I'm curious if this is a thought and it's not necessarily just to remove the volatility.

Maybe it's just even to remove some of the tails. So I'm very curious on your thought process with respect to your investment program.

Andre Mousseau, President and CEO

Well, thank you, Darko. And it's a really important question. It's a great question. And the answer, has it occurred to us, is a resounding yes. This is something that we discuss as an executive team and it comes up at the board level, you know, particularly where at the board level we have representatives from our big shareholders who take this volatility themselves. And so I think your observation is correct with respect to IFRS 17, or at least I'd agree with it, that with IFRS 17 there's volatility for all life insurers.

And as we have benchmarked ourselves against the bigger public peers here, our volatility is more pronounced. Now that is volatility, based on our analysis, in the statistical use of the word, and not a euphemism for bad results. Because if you look at the aggregate of these, you know, whatever we're up to now, 14 quarters, I guess, under IFRS 17, our actual return versus reported core is at least as good, if not in some cases better than the returns on that ratio to other public life insurance companies.

And so, you know, we have a couple hypotheses on why it's the case that we are more volatile. And, you know, it's probably a combination of things, but we are more heavily tuned proportionally to old-fashioned balance sheet life insurance businesses than the big four Canadians who have, you know, as you know when you spend lots of time with them, evolved to have more of their business in capital-light EBITDA-type businesses, and, you know, that's what's enabling them to push up ROEs into the 20% range.

And so some combination of that and just simply the economies of scale, the relative size of head office relative to the operating entities. But, you know, it's not definitive, and we can observe it that we can say, okay, our reported net income tracks over a long period of time to core in a pretty satisfactory way, but we're seeing a lot of volatility. And so, you know, the question becomes what could you do to mitigate that? And, you know, you talk about tails and, you know, potentially tactically you could talk about tails, but fundamentally, you know, what you can do is shorten up on your assets backing capital and, you know, make your assets backing capital that are not going to move more or less in line with your liabilities if you're getting ALM right. You know, shorten it up, get less volatility on that, and become more indifferent or less correlated on a quarterly basis. And, you know, what that basically means is taking away risk and taking away the tenor premium on your capital and ultimately reducing your net income over a long period of time, whether it's your core net income or the aggregate of the actuals that fall out.

So, you know, we are playing with a North Star here of generating strong long-term return on equity. And so, you know, we've made the strategic decision for the time being that we're going to optimize the economics for how much book value generation we can get over the next two, three, four years and beyond, rather than shortening up and feeling a little bit more comfortable. And so, you know, you're accepting that if you get a tougher mark like you did in the fourth or fifth week of March, you know, your book value dips down to $10 a share and then market normalizes and you come back up to 11.

But really what we're trying to do is say, okay, as we draw that book value generation out over a long period of time, how do we optimize value for long-term shareholders?

Darko Mihailik, Analyst at RBC Capital Markets

Okay, thank you for the thoughtful response. And it's an interesting one, one that I have to think about as well, because we do see, even amongst just the five Canadian lifecos, let's say, we definitely see a difference in positioning and in returns, right, and volatility. So it's all connected. I appreciate the response very much. Thank you.

Operator

Thank you. Your next question comes from Trevor Reynolds with Acumen Capital. Please go ahead.

Trevor Reynolds, Analyst at Acumen Capital

Morning, guys. I think most of my questions have been answered, but just is there any update on when you expect the Caribbean transaction to be completed, and maybe just anything you can share on kind of the magnitude of noise that you expect over the coming quarters here and how you guys will kind of guide us to what to expect here over the coming quarters?

Andre Mousseau, President and CEO

Yeah, thanks, Trevor. You know, we're still pushing to get it closed in Q4 if we can, but it may end up going into the first half of next year. You know, because this is fundamentally an internal transaction, we can be nice to ourselves, so to speak, and close it on the first day of a quarter, which really, really simplifies things from an accounting point of view. And so if we're not ready to go Sept. 30, it moves the transaction into next year.

And so with that, it's hard for us to give specific guidance around the noise and when it shows up, because if a lot of the transaction costs and investments that we're making happen in the same quarter that we close, then it kind of all goes into the wash of the closing of the transaction, and, you know, we're going to have all sorts of significant noise to look through. Whereas, you know, we are marching full speed ahead with this transformation, kind of irrespective of when it's going to close.

And so if it moves into next year, you might start seeing some of these charges that show up in Q3 and Q4, which are good investments, but I wouldn't want to give guidance on how much because we don't even know yet which ones they'd be. So I think we're sticking to the story that we told the last couple calls where we've said, you know, 2027, once the transaction closes, we see a path to the value creation. We see the path to being in a kind of 14% ROE target next year and then going to 15% in 2028 as these strategic initiatives really, really kick in.

And so, you know, we're not modifying that and feel comfortable with it given, you know, even this quarter where we're closer to 14 than we are to 13. And so really trying to keep our eye on the ball for the results next year.

Trevor Reynolds, Analyst at Acumen Capital

Great. And then in terms of realizing the synergies on that transaction, do you expect to realize that—maybe just kind of the timing of how you see that playing out?

Andre Mousseau, President and CEO

I think it's going to be a process that builds over a couple of years. Some of the stuff would be—some of the stuff would even start showing up as soon as this year. It'll be tough to parse through because you're spending money on the investments to get them. But we have some quick wins, quick wins already, and more will come through in, in '27. And then a lot of the things that are more around, you know, process reengineering and, and consolidating on more modern technology is, you know, realistically goes into 2028.

And so, you know, that's all, that's all built into, you know, pretty—are pretty meaningful ROE growth guidance from '27 to '28. Great.

Trevor Reynolds, Analyst at Acumen Capital

Thanks for taking my questions.

Andre Mousseau, President and CEO

Yep. Thank you.

Operator

Thank you, Trevor. There are no further questions on the phone line. I will turn the call back to Mr. Ipsis with some closing remarks.

George Ipsis, EVP Corporate Development and Capital Markets

Thank you, operator, and thank you everyone for joining the call today. As usual, 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. Have a great day, everyone.

Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.