Sagicor Financial Company Ltd. (SFC) Earnings Call Transcript & Summary

Hello, and welcome to the 2021 Annual and Special Meeting for Sagicor Financial Company Ltd. Please note that today's meeting is being recorded. During the meeting, we will have a question-and-answer session. [Operator Instructions] It is now my pleasure to turn today's meeting over to Althea Hazzard, Corporate Secretary Sagicor Financial. Ms. Hazzard, the floor is yours.

Good morning, everyone. My name is Althea Hazzard. I'm the Corporate Secretary for Sagicor Financial Company. Before the start of today's meeting, we would like to outline the agenda and various procedures and guidelines. Our agenda for this annual and special meeting of shareholders will begin before Chair, Timothy Hodgson, calling the meeting to order and addressing various preliminary matters. This will be followed by a brief address from our Group President and CEO, Dodridge Miller; and a review of the financial results of our Chief Financial Officer for the group, Andre Mousseau. The items of business to be voted on will then be moved, each to be followed by a formal discussion, if any. Voting will then close, and there will be general shareholder questions and answers. Following the question-and-answer session, the Chair will report the voting results. Registered shareholders and properly [ attending ] proxyholders of record are now able to submit comments or questions for formal discussion or for the general question-and-answer session. This can be done via the messaging platform on your screen. The electronic ballot for voting is also available on your screen, and you are encouraged to submit any questions or comments in advance of the general question-and-answer session. If you are a registered shareholder who has not provided voting instructions and you wish to vote your shares, you may do so at any time during the formal business of the meeting using the electronic ballot on your screen. Properly attending proxyholders may also vote at any time using the same method. The polls will remain open until just before the conclusion of the formal business of the meeting. If you have voted your shares prior to the start of the meeting, your vote has been received by the company's scrutineers, and there is no need to vote those shares during the meeting unless you wish to revoke or change your vote. Shortly following the meeting, we will post the final voting results on the Investor Relations page of our website. The results will also be filed on SEDAR. If you are a shareholder or a properly attending proxyholder, you may ask questions at any time during the meeting, do so via the messaging platform on your screen. During the formal business portion of the meeting, we will respond to the appropriate questions received on the applicable items of business. Appropriate questions that are not related to the item of business will be addressed in the question-and-answer session near the end of the meeting. This is subject to time constraints of 2 questions per person and 2 minutes per question. If there is not sufficient time to address any appropriate questions at the meeting, we will post them and the company's response on our website shortly following the meeting. During the formal discussion and question-and-answer portion of the meeting, comments or questions, including the legal name of the submitting shareholder or properly attending proxyholder maybe read aloud before being addressed. Comments or questions may not be addressed, which are: irrelevant to the business of the company or the business of the annual and special meeting; related to material and nonpublic information of the company; related to personal grievances; derogatory references to individuals and are otherwise in bad taste; repetitive statements already made by another shareholder; or out of order or not otherwise suitable for the conduct of the annual and special meeting as determined by the Chair or Corporate Secretary in their reasonable judgment. If we encounter any technical difficulties with the webcast during the course of the meeting, please remain logged on, and we will resume as soon as practicable. Finally, I would like to remind everyone that there may be forward-looking statements made and non-IFRS measures discussed during today's meeting. These forward-looking statements are, unless otherwise noted, given as of today's date and involve risks and uncertainties discussed in our filings before securities regulators. A number of factors and assumptions were played in the formulation of such statements, and actual results could differ materially. Non-IFRS measures are discussed in our management discussion analysis for the year ended December 31, 2020, and/or for the 3 months ended March 31, 2021. For additional information with respect to forward-looking statements, factors and assumptions and non-IFRS measures, we direct you to Sagicor's public filings. I now turn things over to our Chairman, Mr. Timothy Hodgson.

Good morning, ladies and gentlemen. As Althea said, my name is Tim Hodgson. I am Director and Chair of the Board of Sagicor Financial Company Ltd. It gives me great pleasure to welcome you to the company's 2021 Annual Special Meeting of Shareholders. Thank you, Althea, for outlining today's agenda, procedures and guidelines. As COVID-19 concerns continue to impact all of us, Sagicor made the decision to also hold the 2021 meeting in a virtual format to help ensure the health and safety of our shareholders, employees and the communities in which they live and work. It also affords all of our shareholders an even greater ability to participate in the shareholders' meeting regardless of their physical location. At this time, I wish to acknowledge the passing of Mr. John Shettle Jr. since our last shareholders' meeting. Mr. Shettle was a Director of Sagicor Financial Corporation from 2008, and became a Director of this company on December 5, 2019. He served as Chair of our Audit Committee from December 2019 until his passing. Mr. Shettle also served as a Director of our subsidiary, Sagicor USA, since 2006. His significant contribution to the Sagicor Group is very much appreciated. This meeting will now come to order. In accordance with Sagicor Financial Company Ltd.'s bylaws, I will act as Chair of the meeting. In attendance with me this morning are Dodridge Miller, our Group President and CEO; Andre Mousseau, our Group Chief Financial Officer; Althea Hazzard, our Corporate Secretary. And joining us today on camera are directors, Dr. Archibald Campbell and Stephen McNamara. In the event, I'm disconnected from the meeting as a result of a technical issue, Mr. Miller will assume the role of Chair of the meeting. Fellow directors who are also joining us virtually today, but not on camera, are: Sir Hilary Beckles; Peter Clarke; Keith Duncan; Monish Dutt; Stephen Facey; Jonathan Finkelstein; Mahmood Khimji; Gilbert Palter; Reza Satchu; and Aviva Shneider. We are also joined today by a new nominee, Dennis Harris. As noted by Althea, we will begin with remarks made by our Group President and CEO, Dodridge Miller, and a presentation by our Group CFO, Andre Mousseau. Following this, we will turn to the formal business of the meeting, after which there will be time for general shareholder questions. Althea Hazzard, the Corporate Secretary of the company will serve as secretary and record the proceedings of the meeting. Steven Nguyen and Christopher de Lima of the TSX Trust Company will act as scrutineers today. To facilitate the formal business of the meeting, I will propose each item, and I have been advised by Bart Catmull, that he is prepared to second each of the formal motions I so move. Accordingly, unless there are objections, I will take such motions as seconded with no further action needed. We will now proceed with the meeting. This year, Sagicor used notice and access to deliver its annual financial statements and meeting materials, and as a result, the Notice of Meeting and the management information circular are accessible on Sagicor's website and under Sagicor's profile on the SEDAR website. They are also available at the meeting and materials link on the bottom left-hand side of your screen today. The form of proxy or voting instructions form were mailed to all shareholders of record as of the close of business on April 15, 2021. We have received an affidavit from the TSX Trust Company as to the proper sending of the notice of this meeting and the form of proxy to shareholders. We do note that due to Canada post restrictions, Sagicor arranged through the Trinidad and Tobago Postal Corporation or the proxy-related documents to be picked up by DSL -- sorry, DHL International, on May 4, 2021, to be inducted into the local postal service for shareholders in Trinidad and Tobago. Sagicor also arranged with FedEx Corporation for the proxy-related documents to be couriered to Barbados and St. Lucia for induction to the local postal services there. I have been informed by the scrutineers that we have sufficient number of shareholders present or present by proxy that hold a sufficient number of shares to constitute a quorum. As a quorum is present and proper Notice of the Meeting has been given, this meeting is now duly and properly constituted for the transaction of business. I direct that the scrutineers report be incorporated into the minutes of this meeting. I will now turn to Dodridge Miller, Group President and CEO, who will provide his remarks.

Thank you, Chairman, and good morning, and welcome to this, our second Annual General Meeting, since our listing on the Toronto Stock Exchange. Today, I will touch on the following topics: a brief introduction, our financial performance, the operating environment and our outlook for the future. Later, our CFO, Andre Mousseau, will provide additional details on our financial performance for the year. The year 2020 was a challenging one for the world as it was for Sagicor. By the middle of the first quarter, the world was forced to confront one of the greatest health challenges of the century, the coronavirus pandemic. Overnight, we were plunged into an environment of increasing cases of infection and, unfortunately, deaths associated with those cases. In an attempt to stem the spread of the virus, countries responded, not entirely in a coordinated manner, but with some of the strictest restrictions on citizens not experienced by many of us before in our lifetime. These severe but necessary protocols had a negative impact on the global economy as the business grown to a halt for most of the first 3 quarters of the year. Sagicor entered the year well capitalized and with a strong liquidity position. We are a resilient company with over 180 years of experience to guide us. In addition, having just completed our significant transaction in December of 2019, we were well positioned to cope with the economic and financial follow from the pandemic. Through this transaction, we started 2020 with capital of USD 2.3 billion and liquidity of around $500 million. This strong financial position would add to our resilience and stability during the year. Turning to our financial performance. Despite the challenging environment, Sagicor delivered a strong performance for financial year 2020. Net income to shareholders was a small loss of $4 million driven mainly by record low interest rates in the United States, asset market volatility particularly in the early year, and lower new business sales as many of our countries remain closed for the majority of the year. Total revenue reached 2019 levels of $1.9 billion, buoyed by a very strong fourth quarter, which not only saw strong sales, but also a return to normal profit patterns. Net investment income also improved quarter after quarter to reach $331 million for the year. Total assets increased by over $500 million to reach $9.3 billion by the end of the year. Our CFO will provide additional details on our financial performance in a few minutes. In response to the restricted business environment, Sagicor pivoted very quickly to a work-from-home operating model. We accelerated many of the process improvement initiatives already underway and which allowed us to effectively support a digital response to the new environment. These initiatives became very necessary as we sought to safeguard our staff, our customers and our communities, while maintaining a high level of service to all of our stakeholders. We are pleased with the relative ease with which our management and staff adjusted to the work-from-home environment, and we are grateful to our customers for their patience and understanding as we sought to engage with them in a safe and contact-free manner. In addition, Sagicor also played an active role in the response to the pandemic by providing financial forbearance to our customers and financial and logistical support country efforts across many geographies. Through 2020, we continue to pay dividends to our shareholders on a quarterly basis. And while we have made a successful shift to our more digital operating environment, we are aware of some issues being experienced by some of our shareholders particularly in the Caribbean, around the receipt and encashment of dividend checks. We appreciate the inconvenience this has caused, and we're working with the TSX Trust, our transfer and dividend-paying agents, and selected Caribbean financial institutions to resolve these issues. We fully expect to do so before the end of the current year. As mentioned earlier by our Chairman, in September 2020, it was with immense sadness that we said farewell to our director John Shettle Jr. John passed away after a long illness. John carried his illness with great courage and dignity and continue to make vital contributions to our Board to the very end. John was an excellent director, a tremendous human being and a good friend. We also welcome Monish Dutt back to the Board. Monish first joined the Board with the IFC strategic partnership in 2011 and separating -- on closing of the Alignvest transaction. We're happy to be able to again benefit from Monish's wide knowledge and considerable experience. At the end of the year, Mr. Ravi Rambarran, President and CEO of Sagicor Life, retired from the Sagicor Group. Ravi joined Sagicor of the acquisition of Life of Jamaica in 2001 and has been an important part of our growth and development for more than 2 decades. Mr. Robert Trestrail was appointed President and CEO of Sagicor Life Caribbean, succeeding Mr. Rambarran. Robert has been with Sagicor in various leadership roles since 2007, and most recently as the Head of our Trinidad and Tobago operation. Robert has the knowledge and experience to lead Sagicor Life through the next phase of its development. Turning to the outlook. While we're not yet through the global crises, there are positive signs that we're nearing the end. The aggressive rollout of the vaccine program across the globe, including many Caribbean islands, appears to be reducing the number of new cases. This is a welcome and positive sign not only for our people, but for the economies in which we operate. For Sagicor, our company is financially strong, and our operating results continue to improve quarter-over-quarter. We delivered strong net income in quarter 4 of 2020, and this has continued into the first quarter of 2021. We, therefore, have a sense of optimism as we move through 2021 and continue to progress our strategic initiatives. I would like to express my gratitude to our staff and advisers, our customers, our shareholders and business partners for their support this past year. I especially offer my appreciation to our Board and Directors for their support and guidance as we navigated the year 2020. Thank you very much. And with that, I will turn the presentation over to our CFO, Andre Mousseau.

Thank you, Dodridge. In reviewing our 2020 performance, we're pleased with our resilience through the first year of the pandemic and excited by our prospects as our economies recover. Recall that we came into 2020 with strong momentum from 2019. We had robust operating performance that year, and we were very well capitalized, having closed the transaction in December 2019 to bring in USD 450 million net [ U.S. ] of new equity, which in retrospect, looks very prudently timed. And we had a solid first 2 months of 2020 right up until March. From there, it was really a tale of several distinct parts of the year. In those last weeks of the first quarter, asset prices declined globally as markets repriced risk during the uncertain early days of COVID. During that first quarter, we took a loss through net income of just about USD 30 million. The second and third quarters were quite different. Asset prices gradually recovered, but our operations were restricted in our ability to sell new business and interest rates fell even closer to 0 in the United States compressing our margins. This led to modest losses in the second and third quarter. However, in the fourth quarter and into the first quarter of this year as well, we've seen a recovery back towards our targeted level of profitability. So while in aggregate, we had a $4 million loss to shareholders in 2020 as a whole. We have delivered $60 million of combined net income over the last 6 months between Q4 of 2020 and Q1 of this year. We also remain, as Dodridge said, very well capitalized off the back of, not only having raised that equity in 2019, but having refinanced our international bond just last month at a significant interest savings. Between this level of capitalization and our operating momentum, we're confident in our position today. And this concludes my remarks.

Thank you, Dodridge and Andre. The next matter on the agenda is the proposed amendment to bylaw 36.6(a) of the company, which is the item of special business. As set out in the management information circular for the meeting, approval is being sought to amend this bylaw to increase the director age limit from 70 years to 72 years of age, and it is proposed to adopt and thus amend bylaws of the company to be the bylaws of the company and substitution for and to the exclusion of all of the existing bylaws thereof. Sagicor believes that the proposed amendment will provide more flexibility to allow directors who add value and remain strong contributors to continue to serve the Board and to allow the company to continue to benefit from their service. The proposed amendment is available to all shareholders as Appendix A to the management information circular. The management information circular is available through the Investor Relations page of our website, on the website of SEDAR, and the management information circular is also available at the meeting materials link on the left-hand side of your screen. I move that bylaw 36.6(a) of the bylaws of the company be amended to increase the director age limit from 70 years of age to 72 years of age, in the manner described in Appendix A of the management information circular dated April 19, 2021, in respect of this meeting, and to adopt and thus amend bylaws of the company in substitution for and to the exclusion of all the existing bylaws thereof. As advised earlier, I take such motion as seconded. Madam Secretary, have we received any questions relating to this item of business?

No, Mr. Chairman, we have not.

As a reminder, the polls for all applicable items of business will remain open until just before the conclusion of the formal business of the meeting. To vote on this item of business, use the electronic ballot on the left-hand side of your screen. If you have not already voted, you may vote for or against in respect of this motion. The results of the voting will be shared later in the meeting. The second item of business is for the shareholders to receive the company's audited financial -- consolidated financial statements for the year ended December 31, 2020 together with the auditor's report thereof, both of which can be found in our annual report. The 2020 annual report is available to all shareholders through the Investor Relations page of our website and on the SEDAR website. The annual report is also available in the meeting materials link on the left-hand side of your screen. Madam Secretary, have we received any questions relating to this item of business?

No, Mr. Chairman, we have not.

Then in accordance with the Bermuda Companies Act and the company's bylaws, the statements are presented to this meeting, but no other action is required with respect to them. The third item of business is the election of Directors of the company. The management information circular for the meeting lists the 15 director nominees. There is 1 new director proposed for election. He is Mr. Dennis Harris, and his biographical information is included in the management information circular previously referred to. In recommending Mr. Harris, the Corporate Governance and Ethics Committee and the Board considered his role at JMMB as a Director, the company's largest shareholder, as well as his management experience and experience as a Corporate Director, more generally. Confirmation of Mr. Harris' appointment will be subject to receipt of certain approvals from regulators of certain regulated subsidiaries. The nominees identified in the 2021 management information circular for election as Directors are: Dodridge Miller; Sir Hilary Beckles; Dr. Archibald Campbell; Peter Clarke; Keith Duncan; Stephen Facey; Mahmood Khimji; Stephen McNamara; Reza Satchu; Aviva Shneider; Gil Palter; Jonathan Finkelstein; Dennis Harris; and myself, Tim Hodgson. I move to formally nominate as a Director each of the proposed director nominees named in the management information circular for this meeting for election as a Director of Sagicor Financial Company Ltd. to serve until the next Annual Meeting of Shareholders or until a respective successor is elected or appointed. As no notice of additional Director nominees was received in accordance with the company's bylaws, I declare nominations closed. I also move to elect each of the 15 named individuals. I'm sorry, I believe I forgot to mention, Mr. Dutt is also up for nomination. Thank you, Althea, for getting that. I also move to elect that each of the 15 named Directors of the company. As advised earlier, I will take such motions as seconded. Madam Secretary, have we received any questions relating to an item of business?

Mr. Chairman, I was checking, and no we have not.

Thank you very much. As a reminder to shareholders and proxyholders voting at the meeting, if you've not already voted, to vote on the items of business, use the electronic ballot on the left-hand side of your screen, and under item #2, you will find listed the names of the 15 nominees for election to the Board of Directors listed in the 2021 management information circular. For each nominee, if you've not already voted, you may vote for or withhold voting. As previously noted, the results of the voting will be shared later in the meeting. The next item of business is the appointment of the company's external auditors for the next year and authorizing the Board of Directors to fix their remuneration. I move that PricewaterhouseCoopers SRL be appointed as the company's external auditors until the next Annual Meeting of Shareholders or until a successor is appointed and the Board of Directors be authorized to fix the auditor's remuneration. As previously advised, I take such motion as seconded. Madam Secretary, have we received any questions relating to this item of business?

Mr. Chairman, we have not.

Again, to vote on this item, use -- if you've not already voted, use the electronic ballot on the right-hand side of your screen and under item 3, you may vote for or against in respect of the motion. This is the final formal item of business. As such, discussions of the items of business is now closed, and voting will close in 15 seconds. Please ensure you register your vote now if you've not already done so. [Voting]

5 seconds left. Voting is now closed. Okay. The polls are now closed with respect to voting on all of the motions. Voting results are being tabulated by the scrutineers and will be provided later in the meeting or shortly thereafter. The report on voting results will be incorporated into the minutes of the meeting. The final voting results will be posted on the Investor Relations page of Sagicor's website and filed on SEDAR. Hold on 1 second. I'm advised by the secretary that there are no other matters of business to properly come before the meeting at this time. Is that correct, Althea?

Sure, we have 2 questions only. And I think we should take those questions now.

Okay.

The first question is from [ Dennis Jagasar ], I hope I have that correctly, and [ Cheryl Rosemary Supal ], and they want to know why are agents' compensation expenses in the U.S. market different from other markets in which Sagicor operate and does this impact significantly on the company's bottom line?

I'll direct that question to Mr. Miller.

Thank you, Chairman. The model of distribution we apply in the U.S. is a broker independent distribution model. The compensation is structured along similar lines to a captive agency model, except it's done through a broker. It has no different impact on our operations than with a normal captive agents in most of the markets in which we operate in.

The next question, please.

The next question, please provide an update on the share buyback program.

Thank you. I'll direct that to the group CFO, Andre Mousseau.

Thank you, Chair, and thanks for the question. Our share buyback program, which is done pursuant to the rules of the Toronto Stock Exchange remains in effect. We put it in place in June of last year and it lasts for 1 year. We disclose every quarter how much we purchase through the plan. I believe the amount that we had applied for was 8 million shares out of our total shares outstanding. We've used, to date, approximately half of that amount. As I said, the -- such a program lasts for 12 months and is subject for renewal. And if the Board seeks to renew such, it would be done later this month or later, and that would be publicly disclosed at that point.

Thank you. Madam Secretary, are there any other questions?

Mr. Chairman, we have no other questions.

If anyone has a question, now would be the time to put it in. Hearing that there are no other questions, we will conclude the question period now. Okay. The scrutineers have reported to me regarding the matters voted on today, and I will now announce the results. With respect to the resolution to amend the bylaws of the company, I declare this resolution duly carried. With respect to the resolution regarding election of each of the individuals nominated as Directors, I declare that each of the 15 nominees is elected as a Director of the company. With respect to the resolution to appoint, PricewaterhouseCoopers SRL as the auditor of the company for the ensuing year and to authorize directors to fix their remuneration, I declare this resolution duly carried. This completes the business of the meeting. And on behalf of the entire Board and management team of Sagicor Financial Company Ltd., we thank you for your ownership interest and your attendance at our Annual Special Shareholders Meeting today.

This concludes the meeting. Thank you for participating. You may now disconnect.