Richard Byles, president and CEO of Life of Jamaica and chairman of
Pan Caribbean
THE LOJ Group produced net profits after taxes, attributable to stockholders, of $373 million for the quarter ended March 31, 2005. This was 20 per cent better than the $311 million recorded for the same period in 2004.
In January 2005, LoJ, which already owned eight per cent of the shares of Pan Caribbean Financial Services Ltd (PCFS), gained control of that company by acquiring a further 43 per cent interest. The results of LoJ for this quarter, therefore, include the consolidation of PCFS revenues, expenses, assets and liabilities and 51 per cent of that company's profits for the period. The directors said in their quarterly report that they are optimistic about the future performance of the enlarged LoJ Group, and expect the remainder of the year to fulfil its earnings expectation.
IMPACTED BY LOWER INTEREST RATES
The quarterly profits were generated on revenues of $2.3 billion (2004; $1.6 billion) and were impacted by lower interest rates, a decline in the stock market, a retreat in the prices of GoJ Global bonds and financing costs of $25 million associated with the acquisition of PCFS shares, the company reported.
Compared to the same period last year, the reported tax expenses for LoJ is also $48 million higher and reflects the doubling of the Life Insurance industry's tax rate announced in April 2004. LoJ's basic earnings per stock unit for the quarter was $0.15 (2004; $0.12) and $0.14 on a fully diluted basis (2004; $0.11). Ordinary shares in issue grew from 2,540,890,130 at December 2004 to 2,560,890,130 at the end of March 2005, as a result of the staff share purchase plan.
Sales of new business in the Individual Life division were good, exceeding the record quarter they had last year. Lower investment income and a disproportionate amount of annual costs in the first quarter restrained the contribution to profits of this division. The Employee Benefits division met their new business target for most products and experienced a high contract renewal rate, producing a strong contribution to profits for the quarter. Similarly, PCFS's performance for the quarter was excellent though they did incur $25 million of financing costs associated with the purchase of the 43 per cent share.
The balance sheet shows total assets of $59 billion (2004: $20 billion), a dramatic increase as a result of the acquisition of PCFS. At the same time shareholders' equity attributable to stockholders fell slightly to $5.8 billion (2004: $6.2 billion). The reduction is attributed to approximately $900 million of unrealised gains on PCFS shares being removed from investment reserves on the change in accounting treatment from a portfolio investment to a subsidiary.
LOANS FROM SAGICOR
The net profits of $373 million represent an annualised return on average equity of 25 per cent. The balance sheet also shows borrowings of $2.5 billion, which represents a loan taken by LoJ from the ultimate parent, Sagicor Financial Corporation, to purchase the 43 per cent interest in PCFS and which will be extinguished in the second quarter of 2005.
On March 15, 2005, a first interim dividend of $0.10 per share was declared, payable on April 21, 2005 to stockholders on record as at March 24, 2005.
The Vesting Order for the transfer of First Life's Insurance assets and liabilities to LoJ was received on March 31, 2005. This means that as of April 1, 2005, LoJ doubled its interest in the group life, health and pension management businesses. In exchange, LoJ was to issue approximately 1.16 billion shares to First Life in consideration for that business, and its 37 per cent interest in PCFS being transferred to Sagicor Financial Corporation in retirement of the debt of $2.5 billion.
