By Al Edwards, Business Co-ordinatorLIFE INSURANCE giant Life of Jamaica (LoJ), a subsidiary of the Sagicor Group, has posted record profits of $1.2 billion for the year ended December 31, 2003.
After tax, net profits ($1.2 billion) increased by 41 per cent or $350 million over 2002's results. With the adoption of International Financial Reporting Standards (IFRS), the 2002 net profits were restated from $830 million to $858 million.
Last year at a Mayberry Investor's forum, Maxine MacLure, then president and CEO of LoJ, was forecasting profits of $1 billion for the year ended, December 2003. So what contributed to this outstanding performance?
Individual Life new sales for 2003 reached record levels. Settled annualised premium income (API) went up as high as $621 million, up from $341 million in 2002. New API in the employee benefits area was also strong at $385 million for 2003.
Other key performance drivers include:
Portfolio growth from the acquisition of Island Life Insurance Company effective 31 March 2003
Very positive performance of the investments portfolios
Improved economies in the Employee Benefits area by co-ordinating the administration of the LoJ and first Life Insurance Company employee benefits business.
Realisation of administration synergies from the merged operations of LoJ and Island Life.
They also benefited from recognising gains previously deferred on disposal of its interest in Global Bahamas Holdings Limited and unrealised foreign exchange gains.
Basic earnings per share calculated at $0.53 compared to the 2002 figure of $0.52. On a fully diluted basis the figures were $0.52 for 2003 and $0.47 for 2002.
While the 2003 profits were strong, the ordinary shares in issue increased from 1,656,248,000 to 2,520,897,000 during the year.
At December 31, 2003, the LoJ share price was $3.90, an increase of $1.20 during the year, and the market capitalisation was $9.8 billion.
Its asset base, including the Segregated Funds which are managed on behalf of policyholders, grew by 50 per cent from $10.9 billion at the end of 2002 to $16.3 billion by the end of 2003. Stockholders' equity increased to $3.8 billion, up from $1.4 billion at the end of 2002. There was a 13 per cent return on total assets, an 18 per cent return on invested assets and a 47 per cent return on equity.
This growth in LoJ's balance sheet resulted from its acquisition of Island Life at the end of March 2003 and the impressive profits generated for the year.
Total assets under management, including the LoJ Pooled Investments Funds and the Diversified Investment Funds, at the end of year were $36.4 billion, up from $25.0 billion at December 2002.
Last year, LoJ was able to distribute surpluses to its shareholders with the emergence of positive retained earnings in 2003. The board of directors adopted a dividend payout ratio of 40 per cent of normal earnings. By the end of October it paid an interim dividend of $0.10 per share. Before the year end, the board approved a second interim dividend of $0.06 per share. This payment was made at the end of January 2004. The total distribution to shareholders was about $403.3 million.
OTHER PERFORMANCE
HIGHLIGHTS
Total revenues of $5.6 billion, an increase on 2002's $4 billion. Cash flows from operating activities, $3.4 billion almost double 2002's $1.6 billion. Benefits and expenses also increased, with the company posting figures of 4.3 billion, commissions and expenses accounting for most of this sum. Provision for policyholders' liabilities also rose to $3.4 billion, an increase on 2002's $2.5 billion. Pension funds also registered an increase of $1.4 billion, a significant increase on 2002's $546 million.
FANTASTIC PERFORMANCE
Commenting on this impressive performance, LoJ's President and CEO, Richard Byles, told the Financial Gleaner: "Much of the credit for this fantastic performance must go to Maxine MacLure. At this point in time I am still familiarising myself with the company. As we look to the future we need to build our financial services group. We no longer can rely solely on insurance products because it will not sustain us. Guardian has sought to add other related services and so must we. We are faced with the challenge of facing falling interest rates as equities are now beginning to show a better return than Government Paper. We must be conscious of our cost and stay within the limits set by actuaries and we must be sensitive to our customers' needs, a big premium must be placed on customer service as we look to diversification."
