The SAGICOR Debate
US based Barbadian Actuary Walter Blackman shares his views on the decision by Sagicor to redomiciled from Barbados. Sagicor, formerly The Mutual Society, always evokes emotion in Barbados given its coloured past. There is the intervention by Minister of Housing Dennis Kellman which provoked a caustic response by Sagicor Group Head Dowridge Miller. The decision by the Sagicor board for strategic reasons to sever its tie to Barbados as its domicile questions our capacity as a sovereign country to sustain successful indigenous companies. How will Barbados challenge the hegemony of Trinidad and Jamaica as they cherrypick our best companies? Should it mater? How will our national pride suffer because of it.
Walter Blackman’s comment:
The difference between Sagicor and CLICO is as wide as the difference between night and day. You would have observed that Sagicor’s recent growth was achieved through the acquisition of companies, rather than through organic growth. From where I sit, it appears to me that Dodridge Miller’s focus was on the growth-through-acquisition process. Whilst he was “out” pursuing that objective, someone had to stay at home and manage the company’s operations. That responsibility seems to have fallen on the shoulders of Mrs. Pat Downes-Grant.
Pursuing a strategy of growth through acquisition can have a serious effect on a company’s income statement, balance sheet, and internal operations. Companies don’t naturally merge seamlessly so tremendous effort has to be made to rationalize computer systems, reallocate corporate talent, streamline operations, manage risks, and eradicate duplication and wastage. I believe Sagicor is still wrestling with some of these challenges today. Sagico Life USA has presented its fair share of problems. At one point, the outlook for the company was negative, but it was recently upgraded to stable after the statutory operating results of the company showed improvement. Acquiring Sagico Life Jamaica (SLJ) represented a bold but worrisome investment in the Jamaican economy. However, Sagicor has reaped sustained favourable results from its SLJ operations, and the overall financial situation in Jamaica seems to be improving. I believe the company has divested itself of its UK business.
Despite its challenges, Sagicor has a lot going for it as a company. It is adequately capitalized, has strong brand recognition, enjoys a strong competitive market position within the Caribbean, and seems destined to receive a stream of consistent earnings from diverse sources for years to come.
Not surprisingly, the last A.M. Best rating I saw gave Sagicor a Financial Strength Rating (FSR) of A- (Excellent), and an Issuer Credit Rating (ISR) of a-.
Sagicor’s history cannot escape the tale of colour and class that defines the history of Barbados. From the moment black persons assumed some positions of power and authority within Sagicor, predictions of the company’s imminent collapse became audible and frequent. The mere fact that Sagicor is still standing today, with an excellent Financial Strength Rating from A.M. Best, is enough for us to offer this Caribbean company some words of congratulations and encouragement.
Barbados Underground 
No one takes Dennis Kellman seriously except the people of St. Lucy who votes for a doofus just because he is a DEM. That man is out of his depth in every subject.
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Someone in the DLP should muzzle Dennis Kellman. I listened to this idiot on VOB yesterday and I was aghast that one man could be so ignorant. I said…….oh no, you did not just say that.
Kellman knew he was lying but as a know it all about everything except anything to do with his portfolio, he continued even when David Ellis tried to bail it out. Talk about an idiot.
Boy was I glad when Mr Miller called. But that note, Mr Miller, will do no good…………the PM needs Kellman to stay as PM!
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I don’t know any of the commenters nor do I wish to get into a debate with anyone on the financial future of Barbados…! However, I will say this, if Barbados does not pull its head out the sand as a matter of urgency the Island WILL be ruin financially! I have the solution and will act on it in due course…! Here’s a clue, look to the East…!!!
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Fumble,
Time for the reshuffle.
Oh no, he is not going to do it now because we are asking for it. What a man!
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David,
Did you understand Kellman to say yesterday that Sagicor should have challenged Standard and Poors over the rating?
But he did imply that they should. Did he want Sagicor to bury their heads in the sand just like all the morons like him, Inniss, the governor, Stinkliar and Fumble rubbished Standard and Poors! To their own peril!
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Out of his depth; a doofus; ignorant. I love them all. All perfect descriptions for this clown who must put his head on his pillow each night and wonder if he is in a parallel universe to be a member of anybody’s Cabinet. How could any right thinking PM assign a Ministry to this man. There is nothing ministerial about him and he doesn’t even know when to shut up. Stuart has got to feel some measure of embarrassment at some of his Cabinet colleagues; but Kellman isn’t the only one. Quite a few of the fellows are out of their depths. Just listen to them struggle to get their thoughts across. He ought to remember where he was when David Thompson was alive.
Kellman prefers to whittle away precious taxpayers hours/dollars on call in programmes with unenlightening gibberish. I have heard better arguments in rum shops and I say free him up and let him go wherever he truly belongs. He is a serious pretender with no viable solutions to getting this economy up and running again nor enlightening the masses. A few others need to go along with him too because all they do is run a red herring trail or perhaps I should say a blue peter shark tail.
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The difference between Sagicor and CLICO is as wide as the difference between night and day?
Bull, both crooks , dealing in land fraud , Jeniffer King and the other lawyer are now stuck , No more land to get , They are also part of a slavery , 175 years ago looks so to us, ,, Now we can clean up Barbados with out them all over the place, God never made it that we needed either on of them to live in the Sun , Bye and dont come back,
No more free land , We will be coming for it soon,
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Think what Kellman is saying is that this Sagicor has been around through downgrades, why now, why not resist like the other times.
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what i belive is this was a story well worth exploring and the opportunity presented it self but the low rated media bunch could not help but to drop the ball in preference to kick kellman a,ss bunch uh fools.
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@John Hanson
Tell me bout the Sagicor Land Fraud nuh. Details please!
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A concise but good article.
Unfortunately, Sagicor may just be one of many that will relocate. The issue lies in what a couple of people have pointed out, that a company’s credit rating is DEPENDENT upon the credit rating of its domicile, according to rating policy followed for many years by S&P.
This rating is critical for a company to enter into agreements and also, to source financing.
Thus, it is imperative that the rating be kept as high as possible. And a low rating will surely impact negatively on a company’s ability to garner business.
Which is why
And yes, Kellman was talking a load of utter rubbish, but that is par for the course for him.
It is high time that people need to understand that the Government spokesperson’s ‘playing to the gallery’ has little real merit, but can come with devastating consequences.
Notice that the Don is not speaking as much, is he trying to distance himself for personal image protection, realizing what is coming?
If anyone in that Cabinet realizes what this rating scenario means, he surely does.
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What was Elombe attempting to say today on the afternoon show? Besides the history lesson what was the relevance given the decision made by Sagicor to redomicile.
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Seems to me he wanted to take credit for getting Sagicor into Jamaica. 😉
Other than that??? Dunno….
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Maybe we got the wrong Mottley that want to be PM….
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Picture this, in 2018:
President George Clooney
Prime Minister Elombe Mottley
Yuh like dat?
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Can we have all the quotes from the MoF,the Governor of the CB and the Prime Minister in respect of their comment on each downgrade Barbados got.The one that I find very idiotic coming from a Prime Minister is his comment
in June 2014,likening S & P to garbage.What an irresponsible statement coming from a Prime Minister of Barbados.And the foolish point Worrell made to the MD of the IMF Madame Christine Madeleine Odette LaGarde eliciting her guarded response that she was a simple lawyer and not an economist.
Allyuh have square peg in roung hole oui!
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@David the blogmaster “Sagicor, formerly The Mutual Society, always evokes emotion in Barbados given its coloured past.”
Don’t you mean its white past?
LOL!!!
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Dipper Barrow once referred to his namesake, as not having done an honest days work in his life. One wonders what he would have said of Elombe.
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how to wreck the economy in 7 years? this is how you do it, blame the recession, curse the opposition and then accuse them of not providing proper alternatives, spend spend spend, lets not care what you spend money on. constituency councils, stupid housing projects, free bus fares u name. lets spend because you know, if shit happens then maybe one winter season of suppose increased in arrivals will bail us out. oh no maybe not, we hae a back up credit card called the nis, lets get money from there. oh shooot things looking brown, lets start beggin internationally even tho the loan sharks will poke out our eyes because ya know we r broke and our credit rating is awful. btw lets curse the rating agencies because they r all wrong, we are ok we dont need your assessments. what do we do now? we done tax de livin daylight outta everybody, leh me see.. we betta continue beggin and see wa happen
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Caswell Franklyn January 13, 2015 at 4:55 PM #
No one takes Dennis Kellman seriously except the people of St. Lucy who votes for a doofus just because he is a DEM. That man is out of his depth in every subject.
……………………………………………………………………………………………………………
Kellman reminds of one of the three dogs in Castle Grant plantation yard. Two big ugly english bull dogs, and a common breed mongrel. You make a short cut through the yard and the two lazy english bull dogs ,under the great house verandah, would keep lying down, while following you with their eyes. Not so when the little mogrel sighted you. He would make the world of noise, while chasing you down the yard, and dead set on drawing blood.
The only difference is that the big bull ugly dogs would half heartedly join the chase,and attempt to reign in the mongrel ,as he was trying to show them up.
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”The only difference is that the big bull ugly dogs would half heartedly join the chase,and attempt to reign in the mongrel ,as he was trying to show them up.”
That if funny.
And of course, being an ’eminient person’ Kellie surely can show the others up…
Well, a smart move if not other, making a short yardstick to be compared against, one looks better, yes?
Like if one is a construction worker and you get a new foreman, he asks who is your fastest worker, tell him (name chosen at random), Collie.
That way, all you have to do is a little bit better than Collie. Of course, he may not know that Collie is slow and has not pushed more than three wheelbarrow loads in his life…
😉
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David
We were surprised at the Walter Blackman estimate for Sagicor. It seems not unlike the kinds of statements the company itself would make. In our business we call these part of a dog and pony show.
We guess it’s better to avoid critical analysis by blaming the government or resting on a short stint with the company or by being a member of some actuarial association/society. With Bajans it’s always about being able to add or subtract or regurgitate better that the boy on the other desk.
Blackman has avoided our central point of analysis – share price. There can be no better indicator of a firm’s performance than share price. And share price was at its highest around the time of demutualization. Since then it has steadily declined, in spite of over 50 acquisitions.
This tells us that the company was merely acquiring for acquiring sake. Not to add value to shareholders. This represents the most egregious managerial malpractice known to man or mammon.
You can talk all you want about an acquisition strategy, If that strategy does not add value to the shareholders it represents a colossal management failure. Mangers like these would last no more than 2 quarters in a real public company environment, not 15 years.
More centrally, Blackman fails to estimate the current global environment and the implications for Sagicor. That he would mouth the rhetoric of the company is, in these circumstances, at least troubling, and in the worst case …………
We will get back to this issue in the future, when the next shoe drops, for it would take the future to reveal itself before the average Bajan mind is able to capture it ahead of time.
The managers of Sagicor are as much failures as are the managers of our government. Let’s come to the realization that this a a culturally bound phenomenon. For it is only by acceptance that an alcoholic can start to give up drink.
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@Pacha
The share price of any company listed on the BSE can be manipulated by insignificant transactions pu through at close of trading day.
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@ Pacha
Strong arguments.
Would LOVE to hear Walter’s rebuttal.
Supporting your logic has been the recent case of BL&P. Until sold, it was considered to have been among the better managed companies in the region.
Careful analysis of its share prices however would show a continuing undervaluation and very poor returns to shareholders.
Eventually EMERA came along and got themselves a steal – buying the company for about 30% of its real worth.
In the few years since, this company has generated more profits for its new owners than it did for previous shareholders in the last 20 years …while it’s quality of service has declined.
It is rumored that the reserves alone that were retained by BL&P and eventually passed on to EMERA, were enough to pay for the purchase. This is money that should have rightfully been passed on to shareholders …which would have raised share value and made takeover more unlikely….or at least attract a true value for the company.
Well…”some” shareholders did make a killing….
Sagicor is more of the BL&P mold than that of the Barbados Government. The problem with the Government is incompetence and bribery…rather than super conservative attitudes (or hidden agendas)
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@ Pachamama January 14, 2015 at 7:24 AM
Pacha, a very incisive analysis of this Sagicor debate.
There is much more in the Sagicor mortar than a pestle of its falling share price.
Have Sagicor’s profits been increasing or declining over the last 4 years?
Can it really carry such large and growing administration costs without affecting the long-term bottom line resulting in the lowering of shareholder value?
What have been Sagicor cash flow positions for the last 5 years.
The life insurance business is the ‘food basket’ for savings to fund long-term investments like mortgages and commercial loans.
After the recent financial meltdown and the CLICO debacle is the life insurance and pensions markets really growing in the Caribbean especially among the young, many of them unemployed with little or no long-term prospects of reliable sources of income to even think about saving?
Is Sagicor, like many National Insurance schemes, about to face a massive spike in demand for settlement of pension plans and matured insurance contracts taken out by the hardworking savers and baby boomers of the 50’s and 60’s?
If we can get some answers to those question we might be in a better position to informatively assess the ‘genuineness’ of Walter’s claim to Sagicor’s upbeat outlook and long-term expectation of sound financial health in an overall depressed Caribbean market that many international players in the ‘financial services’ industry have exited.
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Nobody in barbados wants to know the truth.Sagicor has the advantage over barbados and the “Truth”if it be told would decimate with a rippling effect
worst than Clico.The rating agency quoted in the article also gave Barbados a top rating at the same time as Sagicor.
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Well seriously doah!Caswell calling Kellman a dooffas is like calling the kettle black and talking about Kellman voters wuh dam caswell membership is like a drop in the bucket when compared to kellman voters.
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David
Yes, but Sagicor is supposed to be a global, public, company. The activities on one rigged market are never sufficient, and by themselves enough, to guide activities everywhere else.
Keep your eyes on the ball and see the deeper structures which make the operations in the local market and they relationships with other markets on which the share trades as part a contrived circumstance.
Meaning Miller et al, should be in jail!
@ Bushie
We are always amazed at your propensity to grab the meanings of events. Not only the understanding of the history and present, but with an eye on future.
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@Pacha
Understood.
The read so far is that we are seeing Trinidad and Jamaica marking territory and seeking to control the financial gateway in the Caribbean. The shakeout from it is the diminished role Barbados continues to play in the region.
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@ David
Agreed.
However, TNT and Jamaica are unlikely to be any less bad in the short run. Their longer term history has been worst, much worst.
Again, our judgement is that the Trinidadians are using these circumstances to operationalize a long held geo-strategy.
There shall be no winners in this.
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It will not be surprising to us if Miami, the current domicile of Miller and America the place for one of the larger acquisitions. An acquisition in which Miller stakes the future of the company, emerges as the compromise HQ.
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Reports are that Kellman has been reprimanded for his idiotic comments on Sagicor but in true Kellman style, he claims that he is right and that Sagicor should be punished for leaving Barbados.
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Bajans hate truth.only their version
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@ Bushie
”It is rumored that the reserves alone that were retained by BL&P and eventually passed on to EMERA, were enough to pay for the purchase. This is money that should have rightfully been passed on to shareholders …which would have raised share value and made takeover more unlikely….or at least attract a true value for the company.”
Bushie again you are right.
If one has ever bought a company one would know that getting one’s hand on the cookie jar, such as described by Bushie, is essential.
When it comes to financial companies, insurance companies, the quantum of assets which must be transferred to the acquirer will oftentimes make the notion of a sale or a takeover counter-intuitive.
Bushie! Yuh got good instincts. Unlike most.
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@Pacha and Bushie
Do you think Chairman Tony Marshall and his Deputy along with the managers of the NIS knew about those reserves?
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@ David
If they did not know they should have known. When a company is being prepared for sale, part of the valuation involves a ‘re-doing’ of the books.
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@Pacha
Are you suggesting that there are NOT always 2-3 sets of books?
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@Pacha
If we assume they knew then there is the issue of motive.
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@ Money
There are legitimate issues to be considered in the valuation – how depreciation has been accounted for, the present value of assets, receivables, payables etc. Many others of course
Money, we were amused that there were audited financials and that the auditors were not less than professional. LOL
@ David
Motive is a valid issue. Most times though it is a lack of courage to ask the right questions, to do the right things.
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Well, well Caswell Franklin you cannot even get 2 wild cats to join your union and you are washing your putrid mouth on Kellie. You only left the BLP because they chose another candidate over you in St Thomas. Kellie is very successful at the polls and you cannot even get on the ballot. You are a loud mouth, rabble rousing nuisance who does not seem to have good command of noun and verb agreement. It is’ people do vote’ instead of ‘people does vote ‘. The folk in St . Lucy are free to vote as they please. What would you say about St Thomas? Are those good people stupid to vote B always too? NO, it is you who have stupid pig headed ideas. All of sudden Caswell Franklin is some erudite guru who has a monopoly on sense, information, education and intelligence in Bim. To sensible debates, you are as a nagging barnacle on a fishing vessel dragging it back
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CBC TV is currently running an advisory about the port.In it we are treated to a glimpse of an area of old Bridgetown of 1955.It certainly looks a more vibrant,busy Bridgetown compared to today.Lots of traffic,pedestrian, motor and maritime.
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lighthouse January 14, 2015 at 3:37 PM #
. You are a loud mouth, rabble rousing nuisance who does not seem to have good command of noun and verb agreement. It is’ people do vote’ instead of ‘people does vote ‘.
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You forgot to tell him which of the brand name schools you have attended.
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LOL @ Lighthouse
….and if we wanted to get technical should it not be “…You are a loud mouth, rabble rousing nuisance who DO not seem to have good command of noun and verb agreement”?
you …DO not seem to have…
rather than …
you …DOES not seem to have….
“You” being treated as plural…as in “you ARE as a nagging barnacle on a fishing vessel….”
….which is why we generally ignore such shiite here on BU….
As far as Bushie is concerned we could ‘do’ or ‘does’ …
…de whacker going whack…. 🙂
@ Caswell
Keep up the good work boss.
You gotta be doing some shiite right to attract this kind of attack, and if the worse they have on your ass is that “you ain’t no damn scholar…”
BIG DEAL….
….wuh “Pilly” told you so fifty years ago…
LOL ha ha ha
whaloss!!
muh belly!!!
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@ David
Do you think Chairman Tony Marshall and his Deputy along with the managers of the NIS knew about those reserves?
++++++++++++++++++++++++++++++++++
Marshall was probably not at home when the schoolchildren passed by his gate talking about that….
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It doesn’t matter Bushie, from all reports Marshall will be off to the UN shortly to perform his ambassadorial duties.
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lighthouse January 14, 2015 at 3:37 PM #
@caswell
this is well worth repeating
Well, well Caswell Franklin you cannot even get 2 wild cats to join your union and you are washing your putrid mouth on Kellie., you are as a nagging barnacle on a fishing vessel dragging it back
HA! HA! muh belly HA! HA!
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Interesting how the focus has become Sagicor and its strength or viability, when the issue is why it is relocating, which is fairly obvious as explaned and as others will likely follow.
Smoke and mirrors.
And if Sagicor has issues, as the strongest insurance group here, the others must be really be bad. Maybe that is why some of the others are very reticent to pay claims.
Nope Sireee, the issue is Barbados rating. That is where the focus should be.
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The private sector is pushing ahead with integration while the governments, assisted by the people, drag their feet. Yuh either in all the way or out altogether.
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@ Crusoe
What is Barbados?
It is no more than the collection of people, companies, other organizations etc. It is the relative strengths or weaknesses of the constituent parts which makes a national rating make sense.
We could also speak about the citizens and their relative less well off positions. Or you!
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@ Enuff
The private sector is pushing ahead with integration while the governments, assisted by the people, drag their feet. Yuh either in all the way or out altogether.
++++++++++++++++++++++++++
Sir….. you still with this shiite?!?
What the private sector is doing is called “conquest”.
They are all about maximizing profit- and to do so, they need minions… …consumers… .victims.. ..brass bowls…
Do you GET the difference between integration and SUBJUGATION Enuff?
Integration is about an all-encompassing ONENESS…. (Won’t happen in this selfish world of ours)
Subjugation is about an all-encompassing MASSY… (which is what YOU keep promoting for unsuspecting Bajans…)
@ David
Man Skippa, if Enuff don’t stop this treason talk……Bushie may have to employ some strong language …which was picked up from Onions’ sea-cat woman… (which she likely got from Onions…) 🙂
That man Enuff ain’t going to rest till we are sold out lock, stock, and barrel to outsiders…. he DESERVES a few choice words don’t you think boss…?
Shiite man, Enuff must be Owen’s son (if he had one….) ha ha ha
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@Bushie
Enuff may just be a Sir Cave protégée.
On Wednesday, 14 January 2015, Barbados Underground wrote:
>
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Pachamama January 14, 2015 at 2:07 PM
“If they did not know they should have known. When a company is being prepared for sale, part of the valuation involves a ‘re-doing’ of the books.”
Not in my universe it doesn’t. There may be one or two cases where companies up for acquisition have tried to bend the figures and have got away with it but it is not difficult to do a proper due diligence and find out what is real.
Have you come across different sets of accounts during a company acquisition Pachamama? I haven’t.
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Sagicor is a Barbados based business that reports their financial statements in US$. The Barbados dollar is fixed to the US$. If the fixed relationship of the Barbados dollar to the US$ changes with a downward revaluation, the financial consequences for Sagicors reporting could be quite serious. They are mitigating that risk.
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Like the CEO stated 85% of Sagicor’s business is done extra regional.
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And following closely, Massy has withdrawn trading its shares on the Barbados Stock Exchange.
Who is next ? Where are the life jackets and bilge pumps Captain Prime Minister?
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@Colonel Buggy
Barbados is now the ant between the two elephants.
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David
Because Miller may make that comment and even that it may be right, what is to become of the nearly 200 years of development given by Barbados and this region. This distortion has not been always so. The purchase of the American subsidiary alone would have had a lot to do with that, but this is a less than 10 year reality.
Before then, Trinidad, singularly, and other regional countries, collectively, were doing far more business than Barbados.
Moreover, there are other relatively small countries that have some companies, raw materials, processes, etc which allow them to be bigger internationally than locally. One time Barbados was the largest sugar producer in the world.
Are we not to have any of dominance at all, in anything? Are circumstances to be always in the reverse?
Miller is talking shit! Trying to justify an act of treason.
Sagicor could certainly off-shore its HQ, in say the Isle of Man, as a functional matter, and let business as usual continue in Barbados, no pun intended. Certainly, that would achieve its stated aims. The problem is that there is more in the mortar than the pestle.
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Stupse, and more will follow, particularly financial entities that rely on the ratings to do business internationally.
And yet, Poochie and Magoo (can someone do a cartoon with that title, I waive copyright), can get up and talk chalk about the rating not mattering.
Stupse, guh an run a sno-cone cart Poochie.
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@Pacha
What has changed with the decision to redomiciled?
Consider Sagicor an entity with interest and considerations an individual would also consider. Don’t individuals immigrate all the time?
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But hasn’t the Barbados Light and Power Holdings ,redomiciled to Canada? The profits certainly are.
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@ David
Well you could re-domicile in at least two ways. One, as a tactical maneuver or secondly, as a strategic act.
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David, remember we are dealing with the second oldest life insurer in the western hemisphere. If that has no value we wonder what will.
We were against selling out or moving companies like Agostura, Mount Gay and others.
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@Pacha
What matters is dollars and cents, Sagicor domiciled in a country with junk credit rating places any international finance company at a disadvantage if it has to enter the capital market. Why can’t it just be about business? The fact Barbados cannot manage it’s affairs to maintain a competitive credit rating is our business and not Sagicor.
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http://www.captiveinsurancetimes.com/countryfocus/country.php?country_id=54#.VLmI4UfF-JY
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Well David, if the perceived problem is what you say it is, what Sagicor says it is, then we have presented a solution which serves that interest and also would not be seen as trowing Barbados overboard by one of its aged corporations. It leading aged corporation.
That obvious solution would mean off-shoring Sagicor, as a tactical response, that’s all. Unless there are other forces, like we know there are, with other interests.
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Pachamama (plural) January 14, 2015 at 7:24 AM #
“Blackman has avoided our central point of analysis – share price. There can be no better indicator of a firm’s performance than share price. And share price was at its highest around the time of demutualization. Since then it has steadily declined, in spite of over 50 acquisitions.
This tells us that the company was merely acquiring for acquiring sake. Not to add value to shareholders. This represents the most egregious managerial malpractice known to man or mammon.”
Pachamamum (singular),
I sincerely hope that you are not involved in offering financial advice to any business or company.
My ‘article’ above subtly hints at the need to pay attention to a company’s fundamentals (performance & health). A company that is fundamentally healthy will demonstrate an ability to sustain its current satisfactory performance and a vision aimed at building a profitable business platform for the future.
Sagicor, like any company, has its challenges. No one knows for sure if it will overcome all of them, but everyone can see that it is making attempts to adapt to a changing world and changing global market conditions. For that, it deserves credit.
Any successful student of accounting will tell you that the cash flow of any company, and thus its real worth, will be generated from two sources:
1, Long-term growth in earnings and profits
2. Returns on invested capital minus the cost of acquiring capital (borrowing costs)
Here, we can see clearly that if Sagicor continues to be domiciled in Barbados, its relatively high borrowing costs resulting from the “junk” status of Barbados’ credit rating will drag down its net return on invested capital, and cash flow. Eventually, its market value will suffer.
When forced to choose one single measure of a company’s performance, accountants generally opt for Return On Equity (ROE). When dealing with an insurance company, I prefer to use Return On Assets. In those assets, I would make sure that I include the depth of talent of the management team.
The difference between the talent of the management team of Sagicor compared to the management team of CLICO is as wide as the difference between night and day. This difference alone explains why almost 1/2 billion dollars in policyholders’ premiums have been ‘spirited’ away from a poorly and unethically managed CLICO. Sagicor is still alive and kicking. CLICO, to all intents and purposes, is dead.
You consider share price to be a central point of the analysis. l don’t. Admittedly, every CEO and investor of a company love to see rising share prices. However, the share price, by definition, doesn’ t always indicate whether or not the fundamentals of a company are in a healthy state.
The accounting literature is replete with stories about companies whose share prices were continuously falling whilst, at the same time, these companies were creating unprecedented levels of value by increasing their ROE. On the other hand, the share price of a blacksmith shop could have been going through the roof in 1960. By 1965, the whole industry was virtually dead.
Finally, I think I should warn you that share prices can be manipulated to serve vested interests and hidden agenda. In fact, in a rather curious way, Bush Tea has already warned you, via his remarks on the BL&P:
Bush Tea January 14, 2015 at 8:29 AM #
@ Pacha
“Supporting your logic has been the recent case of BL&P. Until sold, it was considered to have been among the better managed companies in the region.
Careful analysis of its share prices however would show a continuing undervaluation and very poor returns to shareholders.
Eventually EMERA came along and got themselves a steal – buying the company for about 30% of its real worth.
In the few years since, this company has generated more profits for its new owners than it did for previous shareholders in the last 20 years …while it’s quality of service has declined.”
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@ Walter Blackman
We see you have relied almost exclusively on the theories and practices of accounting. This shows your limitations. The space in which we operate Accountants are hidden in the back office and only allowed to exit once we have taken care of more substantial matters.
We are creators of value you are merely a numbers cruncher. A bookkeeper!
This is the primary criticism of Dodridge Miller and the people at Sagicor that you now seem so anxious to lionize. More precisely your new found ‘good managers’ are not entrepreneurs. Especially Miller and that limited mind of the accountant avoid progress.
Blackman! You are still at the infantile point where you assume that some academic qualification make good managers. We say no. Most times we would suggest the reverse is you. Compare Arthur Lok Jack to Miller and anybody on his team, for example.
You have a company which has made over 50 acquisitions with share price remaining, in real terms, about the same or lower for 15 years and you as an actuary cum accountant could come here to justify this.
We will continue this after soccer!
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Pachamama December 5, 2013 at 4:26 PM #
“We believe this writer also neglected to calculate ‘interest’ for the period 2013 to 2018. We would expect better from one of our leading ‘numbers men’.”
Pachamama December 6, 2013 at 7:22 AM #
@ Walter Blackman
” Unlike most we have little regard for the likes of you. You boys who went to some backward school somewhere and have been indoctrinated with foolishness to receive some irrelevant credential, ignorantly continue to brag about an eleven plus exam or a misplaced record of academic achievement but still can do no better than work for White people, can never help Barbados by transforming an industry or the world with this backward ‘brightness’. Blackman, we are not afraid of you or your ilk. We are guided that you are a fucking idiot and will never recognize that there is anybody in this world who has a better brain than anybody else. So the fundamental basis of your existence is irrelevant to this writer.”
Pachamama January 14, 2015 at 7:24 AM #
“We were surprised at the Walter Blackman estimate for Sagicor. It seems not unlike the kinds of statements the company itself would make. In our business we call these part of a dog and pony show.
We guess it’s better to avoid critical analysis by blaming the government or resting on a short stint with the company or by being a member of some actuarial association/society. With Bajans it’s always about being able to add or subtract or regurgitate better that the boy on the other desk.”
Pachamamum(singular),
Any adequate response to the above comments which you have written about me would require the expertise of a very experienced professional who holds a “relevant credential” in both psychoanalysis and psychotherapy.
What business are you in?
What is your nationality?
Which forward school did you attend?
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We remember you well as always an arrogant cunt hole. Who pretends to know something, but you know too little about too much
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Gents
The reality is that the Stock market involved sets the price of said Stock. In Bdos and the Cbean we do NOT have a LIQUID market, we do NOT have up to date Qtly EPS and other critical info. This is the crux of the share pricing for Sagicor and any other Stock in illiquid markets.
Psychology in Liquid markets is FAR MORE important than most appreciate. It is proven that ridiculous optimism leads to falling prices and vice versa for pessimism. US EPS can be easily 82% out of kilter with reality (and has been at least 25% over inflated on average for the last 40yrs+). We have the US Govt and Corps trying to CON investors in order that the public will spend $$$ and believe that everything is fine economically.
Today’s price for a Stock or the Mkt Index is very seldom reflective of a reasonable valuation multiple of Earnings, Assets, Revenue or any other measure. This is why some investors like Warren Buffet are very rich and others lose $$$, simply appreciating when there are quality bargains and when Corps are way overvalued and should be sold to GREATER FOOLS!
Having a PhD does not help when investing in Stocks or other markets. Common sense, knowledge of MarketS history, knowledge that the majority are very probably wrong at key turning points and the guts NOT to follow the crowd is what counts.
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Pachamama January 17, 2015 at 12:13 PM #
We remember you well as always an arrogant cunt hole.
Pachamamum,
Maybe I came across one of those in my lifetime and didn’t recognize it. What are the distinguishing features? How deep is it? If anything goes in, can it climb back out?
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millertheanunnaki January 14, 2015 at 8:32 AM #
@ Pachamama January 14, 2015 at 7:24 AM
“There is much more in the Sagicor mortar than a pestle of its falling share price.
Have Sagicor’s profits been increasing or declining over the last 4 years?
Can it really carry such large and growing administration costs without affecting the long-term bottom line resulting in the lowering of shareholder value?
What have been Sagicor cash flow positions for the last 5 years.”
millertheanunnaki,
Your interest in Sagicor’s profits and cash flow position is a good place to start if you want to get an idea of the company’s financial health. You can get the answers to your questions by researching the company’s annual financial statements. However, that exercise will give you an insight into the nature of the company’s historical growth or lack thereof.
To get an idea of the company’s future performance and viability, someone would have to make assumptions and projections related to its future operations and then discount the expected future cash flows back to the present. An untrained mind might contemptuously view the process as “numbers crunching” and “bookkeeping” but accountants and financial analysts make part of their living by doing this routinely. This stuff can become quite esoteric and BU has a general audience, so I have left issues like debt leveraging and its problems completely out of the discussion.
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millertheanunnaki January 14, 2015 at 8:32 AM #
@ Pachamama January 14, 2015 at 7:24 AM
“The life insurance business is the ‘food basket’ for savings to fund long-term investments like mortgages and commercial loans.
After the recent financial meltdown and the CLICO debacle is the life insurance and pensions markets really growing in the Caribbean especially among the young, many of them unemployed with little or no long-term prospects of reliable sources of income to even think about saving?”
millertheanunnaki,
Excellent observation and question. Insurance is all about trust and confidence.
Sagicor and Guardian Life would have lost thousands of potential Caribbean policyholders to CLICO Barbados. Those policyholders who were ‘burnt’ would have passed on an insurance horror story to their children, family, friends, and neighbours. Given a reduced, contaminated, wary life insurance market in the Caribbean which is riddled with ineffective regulation, one can easily understand why Sagicor would be seeking entry into markets further afield (e,g, USA). Success is not guaranteed, but we can understand what they are trying to do and should give them credit for making the effort.
Maybe down the road, Sagicor might be interested in seeking out qualified bi-lingual (English/Spanish) employees with a view to setting up operations in Latin America, the Dominican Republic, and Cuba.
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millertheanunnaki January 14, 2015 at 8:32 AM #
@ Pachamama January 14, 2015 at 7:24 AM
“Is Sagicor, like many National Insurance schemes, about to face a massive spike in demand for settlement of pension plans and matured insurance contracts taken out by the hardworking savers and baby boomers of the 50’s and 60’s?”
millertheanunnaki,
Sagicor administers pension plans which have been sponsored by private sector employers. Traditionally, when a participant reaches normal retirement age (usually age 65), the plan sponsor would purchase an annuity from an insurance company.
For example, let us assume that you worked for ABC company and your pension benefit amounted to $4,000 per month. Let us also assume that Sagicor charges $560,000 for a $4,000 monthly life annuity payable from age 65. ABC’s pension trust would pay Sagicor $560,000 and you would no longer be a participant of ABC’s pension plan. You would now become an annuitant of Sagicor and your future monthly pension receipts would now be tied up with the fortunes of Sagicor. If Sagicor goes bust, your retirement income goes down the drain. (That is precisely what happened to CLICO annuitants. Can you pause for a moment and imagine the agony and mental anguish of these CLICO annuitants who worked a lifetime only to be robbed of their pensions by management and government officials?)
Under this traditional approach, Sagicor would continue to collect admin fees from the pension plan (there would still be active ABC workers in the pension plan who haven’t reached age 65) and its annuity business would grow each time a plan participant retires.
Given the CLICO debacle, I would recommend to Barbadian employers who are really interested in their workers’ post-retirement welfare that they now use a cheaper option to safeguard their workers’ pension: pay the retired workers’ monthly pensions directly out of the pension trust and keep the insurance company out of the pension payment picture.
In your case, you would now receive a $4,000 monthly cheque straight from the ABC pension trust. There would be no need to take out $560,000 to pay Sagicor. Under this scenario, Sagicor’s annuity business would suffer. All whoever is responsible for investing the pension funds would benefit because the $560,000 would practically remain invested. The pension trust would also benefit because the $560,000 that stayed in the trust would earn investment income for the trust.
Matured insurance contracts are a different matter. Technically speaking, there are only 3 types of matured insurance contracts that I can think of: Endowment policies, whole life policies under which the insured person reaches age 100, and term insurance policies which have a ‘return of premium’ feature. With these policies, if death does not intervene, there is a known precise date in the future that Sagicor must pay out a benefit. For other insurance policies, the precise time of death is unknown so Sagicor would not know when a death benefit is to be paid. This problem is handled by setting aside statutory reserves, and by using the services of professionals trained in asset/liability matching.
The ages of the Barbadian Baby Boomers now range between 49 and 67. Within the next 35 years, about 90% of this group will be dead. Hopefully, the investment portfolio of Sagicor is structured to reflect this fact.
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