Fe­lix Pereira

As a mu­tu­al com­pa­ny for most of its his­to­ry, Bar­ba­dos Mu­tu­al Life As­sur­ance So­ci­ety (BM­LAS), the pre­cur­sor com­pa­ny to Sagi­cor, would have con­sis­tent­ly paid div­i­dends to its pol­i­cy­hold­ers. In ad­di­tion, they would have met the nor­mal ex­pec­ta­tions of pol­i­cy­hold­ers for prompt claims set­tle­ments and re­lat­ed ser­vices. Un­der that arrange­ment, pol­i­cy­hold­ers were in the unique po­si­tion of be­ing both val­ued cus­tomers and part own­ers of the en­ti­ty. In 2002, BM­LAS made the bold move to de­mu­tu­alise and be­came a share­hold­er-owned com­pa­ny, adopt­ing the name Sagi­cor Fi­nan­cial Cor­po­ra­tion. Ex­ist­ing pol­i­cy­hold­ers were is­sued 175 mil­lion new shares and an ini­tial pub­lic of­fer­ing (IPO) was made on both the Bar­ba­dos and T&T Stock Ex­changes for an ad­di­tion­al 85 mil­lion new shares. Share­hold­ers, with an ap­petite for both reg­u­lar div­i­dends and cap­i­tal ap­pre­ci­a­tion, now be­came a new con­stituent class with which the com­pa­ny had to con­tend.

Fol­low­ing the IPO price of $5.60 in De­cem­ber 2002, Sagi­cor's share price has risen to as high as $21.99, which was reached on June 25, 2008, and was re­cent­ly trad­ed at $7.50. Oth­er rel­e­vant sta­tis­tics are shown on the ta­ble. In a pri­vate place­ment in De­cem­ber 2009, the com­pa­ny is­sued 11.8 mil­lion new shares to Na­tion­al In­sur­ance Board of Bar­ba­dos at a price of US$1.663 per share. Fol­low­ing this, in 2011, an ad­di­tion­al US$135.7 mil­lion was raised via new pref­er­ence and com­mon shares to the In­ter­na­tion­al Fi­nance Cor­po­ra­tion and some re­gion­al and lo­cal in­vestors, which ac­counts for the big jump in share­hold­ers' eq­ui­ty in 2011 over the 2010 fig­ure. Over the nine-year pe­ri­od as a pub­lic en­ti­ty, the com­pa­ny's as­sets have grown al­most four-fold to reach US$5.36 bil­lion as at the end of 2011. Much of this growth was fu­elled by a com­bi­na­tion of ac­qui­si­tions and or­gan­ic growth. The de­cline in share­hold­ers' eq­ui­ty from $455.20 mil­lion in 2007 to $447.8 mil­lion in 2008 was due large­ly to the move­ment in re­serves from $21.7 mil­lion in 2007 to a neg­a­tive $85.2 mil­lion in 2008. This neg­a­tive change com­prised three main fig­ures: net loss­es on reval­u­a­tion of $55.3 mil­lion, gain trans­ferred to in­come on dis­pos­al of $14.6 mil­lion and re­trans­la­tion of for­eign op­er­a­tions of $42.1 mil­lion. As at the end of 2011, this item re­turned to a pos­i­tive fig­ure of $20.865 mil­lion. Af­ter climb­ing re­lent­less­ly from 2003-2008, earn­ings per share slipped dra­mat­i­cal­ly from 34.6 cents in 2008 to less than 24 cents in 2009, and fur­ther con­tract­ed to a mere 5.7 cents in 2010, the year de­scribed by its chair­man as the sev­enth worst year for the prop­er­ty and ca­su­al­ty in­dus­try since 1970.

Share­hold­ers' in­come erod­ed

In 2011, the loss­es of US$33.4 mil­lion in­curred by Sagi­cor at Lloyds erod­ed share­hold­ers' in­come by a mas­sive 97 per cent. This left share­hold­ers with a nom­i­nal US$1 mil­lion or 0.2 cents per share. Over this pe­ri­od, the com­pa­ny has had three dif­fer­ent chair­men, Col­in God­dard, a Bar­ba­di­an, Ter­rence A Mar­tins from Trinidad, and cur­rent­ly, Stephen Mc Na­ma­ra, a St Lu­cian/Irish na­tion­al. These in­di­vid­u­als re­flect the Caribbean char­ac­ter of the or­gan­i­sa­tion. It is in­ter­est­ing to note that al­though Sagi­cor is reg­is­tered in Bar­ba­dos, the ma­jor­i­ty of its share­hold­ers are Trinida­di­ans or Trinidad-based en­ti­ties. As at the end of 2010, such en­ti­ties held shares amount­ing to 47.53 per cent of the 291,341,344 out­stand­ing shares in the com­pa­ny, while Bar­ba­dos-based in­di­vid­u­als and en­ti­ties held 35.40 per cent of the out­stand­ing shares. New in­vest­ments in 2011 by the Unit­ed States-based In­ter­na­tion­al Fi­nance Cor­po­ra­tion could per­haps fur­ther weak­en the Bar­ba­dos po­si­tion.Amidst the com­pa­ny's re­lent­less growth in its as­set base, how have in­vestors fared? We can per­haps look at three dif­fer­ent hy­po­thet­i­cal groups of in­vestors:

(1) orig­i­nal BM­LAS pol­i­cy­hold­ers

(2) orig­i­nal IPO in­vestors, who have nev­er sold or bought any more shares, and

(3) fi­nal­ly, late­com­ers, who have bought shares at vary­ing prices over this nine-year pe­ri­od

Share price ap­pre­ci­a­tion

The first group of orig­i­nal pol­i­cy­hold­ers would have re­ceived shares based on a for­mu­la us­ing the size of their poli­cies and the num­ber of years which it was in force, among oth­er fac­tors. Be­cause these share­hold­ers did not make any di­rect out­lay of funds to ac­quire these shares, many have a ten­den­cy to re­gard these shares as be­ing "free." De­pend­ing on their age, these share­hold­ers would have a pre­dis­po­si­tion to sell some of their hold­ings when­ev­er a need for cash aris­es. A few would have been for­tu­nate to sell some of their shares at the rel­a­tive­ly high prices pre­vail­ing in mid-June 2008. The rel­a­tive in­dif­fer­ence of this group to get­ting a good price at a par­tic­u­lar time helps make this share more volatile than it oth­er­wise might be un­der nor­mal trad­ing con­di­tions. For the IPO group, who ba­si­cal­ly bought some shares and con­tin­ue to hold them up to the present time, they have seen a 34 per cent ap­pre­ci­a­tion (or $1.90) in the share price from the orig­i­nal $5.60 to the cur­rent $7.50. At the same time, they would have re­ceived to­tal div­i­dends of $2.74 per share over their hold­ing pe­ri­od (in­clu­sive of the div­i­dend that is be­ing paid in May 2012). Us­ing the cur­rent price of $7.50 and div­i­dend pay­ment of $0.25, the share gives new in­vestors a yield of 3.33 per cent; this is gen­er­al­ly much high­er than what many in­come funds cur­rent­ly pay to in­vestors.

Late­com­ers who have bought shares at vary­ing prices over this pe­ri­od may, in fact, have a rel­a­tive­ly high av­er­age cost, some even in ex­cess of $12.00 per share. In the cur­rent en­vi­ron­ment and pend­ing the re­lease of Sagi­cor's first quar­ter re­sults, they may con­sid­er that the ex­ist­ing price of $7.50 rep­re­sents an op­por­tu­ni­ty for them to buy ad­di­tion­al shares and so help low­er their av­er­age cost. Of course, this as­sumes that the in­vestor is con­fi­dent about the com­pa­ny's fu­ture prospects and that the set­backs of the last three years are not like­ly to be re­peat­ed in the near fu­ture. In ad­di­tion to its strong as­set base and its stur­dy eq­ui­ty po­si­tion, Sagi­cor is one of the few com­pa­nies, if not the on­ly com­pa­ny, that lists the skills and ex­pe­ri­ences of its di­rec­tors in its an­nu­al re­port. If we be­lieve that it has learnt valu­able lessons from the sig­nif­i­cant events of the past few years, then it now seems like­ly that the com­pa­ny is well poised to re­sume its up­ward path in prof­itabil­i­ty, div­i­dend in­creas­es and pos­i­tive price move­ments-all of which would al­so be ben­e­fi­cial to its pol­i­cy­hold­ers.