Sagicor Financial raised its earnings guidance Wednesday, outlining a strategy to push return on equity to 15% by 2028 through three strategic initiatives across its insurance operations.
Speaking at Scotiabank’s 27th Annual Financials Summit, Chief Executive Officer Andre Mousseau said the company currently generates approximately 13% ROE, up from roughly 10% three years ago. Management guided for 14% ROE next year, with an internal target range of 16% to 19% once all three levers are fully deployed.
The first lever centers on Sagicor’s Canadian life-insurance business, ivari, which holds a balance sheet of about $10 billion and carries more than 90 years of operating history. Historically a slow-growth operation focused on mid-market universal-life products, ivari is expected to contribute 100 to 200 basis points of additional ROE — roughly $10 million to $20 million — over the next two to three years through improved asset allocation and portfolio yield. Mousseau noted the company has recruited a new senior vice president of investments from a major Canadian insurer to help drive the effort.
The second lever is expansion of Sagicor’s U.S. annuity book, which has grown from about $2 billion five years ago to nearly $7 billion today. Quarterly production recently reached approximately $1 billion, and the company says it is still addressing less than a quarter of the addressable market. Mousseau emphasized a disciplined approach to deployment, stating the company would rather commit $1 billion of assets at a 15% to 16% marginal ROE than double that volume at 10% to 12%.
A recent upgrade of the U.S. operating company’s financial-strength rating from A-minus to A also opened additional distribution channels, particularly bank-affiliated sales routes that typically require an A rating. A new U.S. president was hired around May or June from National Life, a mutual company roughly ten times larger.
The third lever involves integrating Sagicor’s Caribbean operations, which span approximately 20 countries across assets accumulated over roughly 185 years. The company announced plans in December to merge about 20 separate entities into a single operating structure, with financial close expected late 2024 or early 2025. Integration work has already begun ahead of legal close, and Mousseau said expected annual synergies of $10 million to $20 million — translating to another 100 to 200 basis points of ROE improvement — should start appearing in results by the fourth quarter.
On capital allocation, Sagicor has reduced its share count by roughly 10% over the past seven years through net buybacks and has a normal course issuer bid authorized for 9.2 million shares, representing about 7% of outstanding shares. Mousseau said the stock trades at approximately a 70% discount to peer valuations and remains underfollowed. He pointed to more than $1 billion in contractual service margin — representing future profits embedded in actuarial assumptions — as a value element he believes the public market is pricing at zero.
“We have put hard in guidance that we see 100 basis points to 200 basis points, which round numbers means an extra $10 million to $20 million of ROE out of that lever, over the next two or three years,” Mousseau said. “We stick by that.”
Sagicor’s historical total return over the past year stood at 13.37%.
