A successful acquisition of Canadian insurance company, Ivari, by Sagicor Financial Company (SFC) is expected to have a lucrative impact on SFC’s bottom line, investments and shareholders.

Sagicor Financial Company, which is the parent company of Sagicor Group Jamaica, offers services including banking and investment management, pension administration, life and health insurance, and annuities. 

SFC recently announced that it has entered into an agreement to acquire Canada-based insurer, Ivari. Ivari has been in operation for over 80 years.  It provides individual life and critical illness insurance to the Canadian middle class. 

The acquisition will cost SFC about CA$325 million (US$250 million or JM$38 billion). 

The deal is expected to close in the next six to twelve months, pending regulatory approvals. 

Lucrative impact

Speaking on Taking Stock with Kalilah Reynolds, business journalist at the Jamaica Observer, David Rose, said despite the hefty price tag, the deal will be very lucrative for SFC.

He said that the acquisition would double SFC’s asset base from US$10 billion to US$20 billion.

“After the acquisition, SFC’s earnings per share would increase 25%, and based on how they plan to structure the deal, their portfolio would shift from about 63% investment-grade investments to 83%,” he added.

Investment grade refers to the quality of a company’s credit. According to Investopedia, to be considered investment grade, the company must be rated at ‘BBB’ or higher by Standard and Poor’s or Moody’s.

“SFC is currently rated BB+, so, they still have a couple of rungs to go up before they become investment grade,” Rose noted. 

He explained that a higher investment grade would allow SFC to reduce their financing costs when seeking debt. 

SFC is funding 80% of the acquisition through a five-year secured term loan and 20% with cash on hand at the company level.

JMMB to benefit

Meanwhile, Rose also noted that this would be beneficial for JMMB Group as SFC’s success will reflect on its results. 

“JMMB Group is the single largest shareholder in SFC as they have 23.33%, and SFC was actually the largest boost to JMMB’s profit growth in the last quarter,” he noted. 

He added that SFC’s 6-month profits were up 86% compared to last year’s profits and the company is well on the way to meeting its full-year profit target.