Good day, my name is Sergio, and I will be your conference operator today. At this time, I would like to welcome everyone to Sagicor Financial Company Ltd's first quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press Star, then the number one on your telephone keypad. If you would like to withdraw your question, please press Star, then the number two. Thank you. Mr. George Sipsis, EVP of Corporate Development and Capital Markets, you may begin your conference.
Great, thank you, Operator. Hello, everyone. Thank you for joining us today to discuss Sagicor's first quarter 2025 results. Our disclosures are available under the Investor Relations tab on our website at sagicor.com, which include a press release, financial statements, MD&A, and the unaudited supplemental information package containing core earnings, drivers of earnings, and additional disclosures. The link to our live webcast is also available on our website. This conference call is open to the financial community, investors, the media, and the public, with a reminder that the Q&A period is reserved for financial research analysts. I will begin by referring you to the cautionary language and disclaimers in our materials and public filings regarding the use of forward-looking statements and the use of non-IFRS financial measures and ratios, which may be mentioned as part of our remarks today.
I would also like to remind the audience that actual results regarding forward-looking information could differ materially, and please note that a detailed discussion of Sagicor's risk factors is provided in our MD&A, which is available on CDAR Plus and on our website. A discussion of the assumptions underlying our expectations is provided in our previous filings and earnings releases. Unless otherwise noted, all dollar amounts referenced will be in US dollars, consistent with our reporting practice. Joining me today is our President and CEO, Andre Mousseau, our Chief Financial Officer, Kathy Jenkins, and Anthony Chandler, our Chief Controller. We'll begin with prepared remarks by Andre and Kathy, followed by a Q&A session. With that, I will pass the call to our President and CEO, Andre Mousseau.
Thank you, George, and good morning, everyone. Thank you for taking the time to join us today. We're pleased to announce another solid quarter in Q1. Our quarterly core earnings to shareholders were our highest on record since our conversion to IFRS 17 in 2023. This reflects our operating segments firing on all cylinders and an improved corporate cost of funding. Both of our Caribbean segments showed significant progress, expanding margins, and growing core earnings to shareholders year over year. Our US business continued its strong growth with over $400 million of new annuity production, and our Canadian segment showed robust profitability. All of our segments produced strong new business sales. This performance puts us in an excellent position to weather market volatility and achieve our targets for 2025.
We continue to advance our strategic initiatives, including fostering greater collaboration across operating segments, modernizing our technology infrastructure, and enhancing both our access to and cost efficiency of capital, all with the objectives of lowering expenses, driving growth, and ultimately strengthening our returns on shareholders' equity. Now I'll hand the call over to Kathy Jenkins to discuss our consolidated results and comment on the segments and details. Kathy?
Thank you, Andre, and good morning, everyone. As Andre mentioned, we are reporting a strong first quarter to start off 2025. For Q1, core earnings to shareholders were up over 100% from 2024 to $30 million, and net income to shareholders was $7 million. Revenues were $648 million for the quarter, compared to $639 million for the same quarter last year. New business CSM of $46 million for Q1 reflected strong sales across all segments. Now I will give you some more detail on the segment's financials. Sagicor Canada's sales production of $17 million in Q1 was consistent with management expectations, resulting in new business CSM of $12 million for the quarter. Core earnings to shareholders of $25 million for the quarter increased $8 million, or 46% from the same quarter in the prior year, driven by higher core net investment result and insurance experience reverting towards expectations.
Net income to shareholders of $11 million for the quarter was lower than core earnings to shareholders due to negative equity returns, which affect the calculated future profitability of our universal life business. Net CSM was $541 million, an increase of 1% quarter over quarter. Sagicor Life USA generated $411 million of new business production for the quarter, one of our highest quarters ever. We were able to drive higher than budgeted business due to competitive crediting rates and market momentum for multi-year guaranteed annuity products. Core earnings to shareholders for the quarter of $6 million was lower than our core net income because of unfavorable insurance experience on our legacy block of life insurance.
This was a combination of mild seasonality in mortality, which we observed in our US segment's most first quarters, demand-to-recruit expenses carried over from Q4, and a minor positive correlation to equity due to how we reserved for our indexed business. We note experience was right on target for our annuities business, where we are writing most of our premium now. We continue to see an accounting mismatch between asset prices, which appreciated in Q1, and the calculation of our liabilities, which appreciated more, generating an unfavorable market impact, leading to a marginal net loss to shareholders. We believe this market experience will reverse itself in coming quarters, as we have observed since the implementation of IFRS 17. Net CSM was $153 million, a slight decrease of 1% quarter over quarter. Sagicor Jamaica had a strong net premium across all product lines as compared to Q1 2024.
Core earnings to shareholders of $10 million for the quarter increased over the same quarter in the prior year due to improved margins and reserve release on the short-term business and higher net income from the growing loans portfolio at its bank. Sagicor's share of Sagicor Jamaica's net income to shareholders of $13 million for the quarter was positively impacted by improved mark-to-market gains. Net CSM was $282 million, a decline of under 1% quarter over quarter. Sagicor Life's short-term business benefited from repricing initiatives on renewals, while the long-term business had favorable insurance experience. Core earnings to shareholders of $11 million doubled the Q1 2024 result, reflecting improved profitability in the short-term business and favorable insurance experience in both the short-term and long-term business.
Net income to shareholders of $8 million for the quarter was lower than core earnings to shareholders in the quarter, primarily due to rising interest rates impacting mark-to-market loss on our fixed income portfolio, partly offset by the gain on the valuation of assets. Net CSM was $249 million, a slight increase quarter over quarter. Returning to the consolidated picture, Sagicor remained well capitalized in Q1. Group LICAT ratio was 137%, and our financial leverage ratio was 27.2%. Our book value per share finished the quarter at $7.05 US, or CAD 10.14. Our deployable capital, or shareholders' equity plus net CSM to shareholders, was $2 billion, or $15.01 per share US, or CAD 21.59 per share. With that, I will hand it back to Andre.
Thank you very much, Kathy. We are very pleased with the solid start to the year. I think our Q1 performance reflects continued progress on our key strategic priorities. We do continue to successfully grow the asset base of our US business. We were pleased to write over $400 million in the quarter, driving our assets above $6 billion. It puts us in an excellent position to meet and exceed our target of over $1 billion of annuity sales for 2025. We remain focused on disciplined execution. I think you're seeing this coming through in the margins across our business. We're deepening our presence in our core markets. We're enhancing operational efficiency across all of our segments, including where we have large market shares, and enabling us to grow efficiently in our larger markets.
To that end, we're pleased to have announced our latest 22nd consecutive quarterly dividend to shareholders since we've been listed on the TSX. This is our second dividend since we raised the quarterly payout to $0.0675 per share, so annualized $0.27 per share. We feel we're in a good spot. While macroeconomic uncertainty does persist, we're confident that our focused execution on these core strategic initiatives positions us well to deliver continued sustained growth in shareholder returns. Just before we close it up, I would like to thank those shareholders who chose to join us yesterday at the beautiful Hilton Barbados and took the time to engage with us in person and ask questions. Thank you very much for that. I would also like to thank in this forum, Stephen Facey, who it was announced is retiring from the board of Sagicor Financial.
Will continue to be a partner of ours and involved on the board on the Jamaican visit, our Jamaican business. We would like to thank him very much for his friendship and partnership and stewardship on the Sagicor Financial Company Ltd board. With that, I think we are ready for Q&A if there is any. Operator?
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touchstone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Gabriel Deshane from National Bank of Toronto. Please go ahead.
Hi, good morning. Good quarter. Just want to ask about the, you know, you brought the attention to the fixed annuity sale. Before I get into that, on the US business overall, there was some negative policyholder experience or claims experience. Could you clarify what that was and its legacy life blocks? I do not think it is the same as the persistency issues in the fixed annuities business we saw a few times prior to today.
Right. Thanks, Gabe. I think you're reading that correct. The persistency with the annuities, you know, the multi-year guaranteed annuities that we're writing now was kind of right on the nose where we thought it would be. This is related to two different blocks of business, and it's kind of a collection of a handful of sub-$2 million issues for the quarter. You know, with respect to our term, our legacy term and universal life books, which collectively we refer to as the legacy life business, we usually do see some mild elevated mortality in Q1 because we don't budget for quarterly seasonality in mortality and not just, you know, winter and flu season. This is, you know, as we've been building out our drivers of earnings, the third Q1 in a row where we've observed that.
As Kathy mentioned, we carried over some mild unaccrued expenses from Q4 around settling stuff up for year-end. There is a little bit of an IFRS versus statutory accounting quirk on our legacy index business. These are fixed indexed annuities that we wrote, you know, five years ago or more, where we're buying equity participations for our policyholders on a statutory basis. I think that that's the right way to do it economically. Because IFRS says that your reserves are lower than what your statutory reserves say, it presents itself temporarily as a positive correlation to equity indices. You know, again, it's not a massive number, but each of these, you know, one and two million dollar things just happened to add up negative in the quarter.
Got it. Okay. So then about the fixed annuity sales quickly, is that you're seeing some of that momentum carry over into Q2 because, you know, market conditions that would have supported the strong sales probably are still in effect today?
Yeah. You know, going back to the commentary from March, you know, we're really picking our spots. You know, I wouldn't expect to annualize that $400 million plus. We had talked about being over $1 billion for the year. I think we're comfortable with that. Production, you know, won't necessarily drop in half, but I wouldn't expect $400 million every quarter. The market conditions are still good. You know, we had a little pocket where we had got ahead of the market and raised rates, and then we saw everyone catch up to us a number of weeks later and eventually pass us. You know, we let our weekly production come down. You know, I wouldn't expect to see $400 million again in Q2, but it would be kind of consistent with our guidance of annualized $1 billion for the year.
Got it. And then just from a, you know, scale standpoint, I mean, I look at the AUM number for the US, and I think it's just shy of $6 billion. And I'm trying to, I wonder if you can put some perspective. Every billion, and I equate the increase in AUM to multiple factors, but namely the fixed annuities block growth, every billion, or if there's another benchmark, please share that. What does that add to your consolidated ROE? Because I saw your, I mean, for different reasons, but the 12% mark was exceeded this year for ROE. I'm just trying to get a sense for progression thereof.
Oh, it's a very interesting question connecting that. You know, the way we would look at it is to say, you know, okay, a billion dollars of new annuity would generate, you know, net of commissions, et cetera, about, you know, order of magnitude $15 million of gross margin to the business. And then we would have to carry some excess capital on that. But on the margin, we would view that as, you know, a high teens return on equity business. I think you could extrapolate from there, you know, once we add a couple of billion dollars more of AUM, it really does start to move the needle in our baseline ROE.
Got it. And just for definitional purposes, the $15 million of gross margin, that's pre-tax or what?
Fully structured, that would be net of tax.
Oh, okay. All right, then. Thanks. Yeah, enjoy the rest of your week.
All right. Thank you, Gabe.
Thank you. Ladies and gentlemen, as a reminder, should you have a question, please press star one. Your next question comes from Manny Grauman from Scotiabank. Please go ahead.
Hi, good morning. A few questions. One starting in Jamaica. Looks like you benefited from a reserve release and just wanted to get a little bit better understanding of that.
We had a small reserve release on one of our P&C businesses. It is a one-time, but it is quite small in terms of the amount that was released. As we evaluated, we took a look at our business and how it was evolving. They made the determination they could release some round.
Yeah. It was a group creditor policy where, you know, we got some improved pricing and just the way it's shorter-term business, which is why it's lumped in with the P&C, but we did get a reserve release right away reflecting the increased profitability for the next few quarters. Not repeatable necessarily, but it is reflective of what we're trying to do in Jamaica as well as in Sagicor Life of getting these group businesses reverting back to the mean in terms of profitability. You know, it's not something you take as repeatable, but it's a good sign.
Okay. And then just thinking ahead in terms of, you know, Jamaica, there is a banking business there. So just wanted to ask about, you know, what you are seeing on the credit front and expectations going forward. Obviously, tariff-related stresses are something top of mind for any banking business around the globe. So just wondering what your thoughts were there for the Jamaica business.
I do not think we have seen anything present itself yet. There are kind of two competing forces with respect to the Jamaican economy. I think that, you know, the consensus view is cautious around just global macroeconomic slowdown, and that is not good for anyone. I do not think that is disproportionate on our Jamaican business. You know, lower dollars means lower remittances, means lower everything, deposits, premiums for that matter. I would not see that disproportionate to us, but it is, you know, that is the general tone. The flip side in Jamaica is that there is continued improvement in the fiscal situation, and you are starting to see the, well, continuing to see the ratings agencies reflect that.
There is also the hope that the U.S. Department of State will lighten up on some of its travel warning to Jamaica that it's had in place for some period of time, which has disproportionately affected tourist travel to Jamaica. Jamaica hasn't seen quite the recovery that other fly-in tourist markets have in and around the Caribbean. If that gets lifted, that would be kind of a unique positive dynamic for economic activity into Jamaica. We're hopeful that that's actually imminent.
Got it. I just wanted to ask about, you know, reported earnings. You talked about the market impact, but there was another item there, tax item and other. It looked quite sizable. I'm just wondering what that was.
I think there's an annual asset tax in Jamaica that runs through the numbers in Q1. On a core basis, what we do is we spread that over the four quarters of the year. That's part of it. Kathy?
We also, that's where we put the NCI goes through there as well. We'd have the full impact of the market experience on the market experience line. The portion that's attributable that isn't attributable to life gets eliminated through there.
Understood. Finally for me, just it looks like the tax rate came in quite a bit lower than what we've seen last quarter and the year-ago quarter. I'm just wondering what drove that, and is that something unusual or is that something sustainable?
I think it's a more normalized rate that we have. It was in terms of some of our tax rates, it's not like an income tax rate like you'd have in Canada and the U.S. Some of the Caribbean countries, how the tax rates are a little different. It was how it was calculated for, it's related to the Caribbean, and it's more normalized, I think.
Yeah. It's hard to make sense of our tax rate on an aggregated basis because, you know, we're taxed so simply in Canada and the US and idiosyncratically in our other markets. Kind of going back to the comment that I had a minute ago about trying to normalize some of that, some of that out. You know, we continue to believe that managing that is a potential kind of medium to long-term source of ROE expansion. Just one last thing before you're off the line, Manny, I'd like to say thank you very much for your engagement and support over the years.
Thanks, Sam. I appreciate that. That's all for me.
Thank you. Your next question comes from Trevor Reynolds from Acumen Capital. Please go ahead.
Morning, guys. Canada, the results there seem to come in a little stronger than expectations that were discussed after last quarter. Maybe can you just touch on some of the gives and takes there?
I think that's accurate. You know, it comes down to, you know, part of the reason that we've put forward consolidated guidance and not segment-specific guidance. You know, everyone is still learning to see how earnings emerge through IFRS 17 and what the different component parts are telling us. You know, we're not surprised that Canada had a good quarter operationally because it is having a good quarter operationally in terms of the cost structure. New business sales in C dollars are up, which is good. You know, it's a big book of business. Some quarters we see positive emergence, some negative, and some quarters like this, it's kind of right on the nose. Profitability is, you know, a million or two higher on a quarterly basis than what we would have guided to. You know, we'll see. It's good to see.
We'll see whether that persists for the year.
Okay. And then just on you discussed the mortality generally being higher in Q1. Are you guys adjusting the way you model that out moving forward in the US?
No plans to right now. I think, you know, the actuaries have enough on their plates. I think that, you know, a good step for us as we're managing the business is to look at the drivers of earnings and understand what happens. You know, we will, I think we observed some meaningfully good experience in the Canadian book or in the American book, excuse me, in the back half of last year. You know, you take a look every year and see whether in aggregate it's working and, you know, use the drivers of earnings to understand what happened every quarter.
Got it. On your corporate or your, yeah, your head office expenses, maybe just where you sit there, if there's kind of where are you kind of targeting those over the coming quarters and years?
I think, you know, on a year-over-year basis, we're observing some improvement on the cost of funding side that runs through head office. You know, for the time being, that'll be stable from Q1 going forward because, you know, we had the couple of different refinancing events that happened in 2024. You know, we do have some moving pieces on the mark-to-markets of assets and some other one-time items in head office. We kind of encourage you to look at the core, which sees through the noise. I think we're kind of budgeting on that basis.
Great. Last question, just your core EPS targets, I think the high end at $0.80 a share. Maybe do you think there's upside to that target given kind of your performance in Q1?
If you annualize Q1, it would tell you so. I think we're going to wait until we see the second quarter before updating guidance. You know, Q1 puts us in a good spot. I think we're going to wait and see one more before changing it.
Great. That's all my questions. Thank you.
Thank you. There are no further questions at this time. You may proceed.
Thank you, operator. Thank you, everyone, for joining today's call. A replay of this call will be available for one month on our website, and a transcript will be posted as soon as available. If you have any additional questions, please do not hesitate to reach out to any one of us. With that, thanks again for your participation and interest today. Have a great day, everyone.
Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect.