Q2 2025 earnings call transcript

FINAL TRANSCRIPT

Sagicor Financial Company Ltd.

Second Quarter 2025 Earnings Conference Call

August 14, 2025 — 1:00 p.m. E.T.

CORPORATE PARTICIPANTS

Andre Mousseau

Sagicor Financial Company Ltd. — President & Chief Executive Officer

Kathy Jenkins

Sagicor Financial Company Ltd. — Chief Financial Officer

George Sipsis

Sagicor Financial Company Ltd. — Executive Vice President, Corporate Development & Capital Markets

CONFERENCE CALL PARTICIPANTS

Gabriel Dechaine

National Bank Financial — Analyst

Darko Mihelic

RBC Capital Markets — Analyst

Trevor Reynolds

Acumen Capital Partners — Analyst

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PRESENTATION

Operator

Good afternoon. My name is John and I will be your conference operator today. At this time, I would like to welcome everyone to Sagicor Financial Company’s Second Quarter 2025 Earnings

Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ 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, Corporate Development and Capital Markets, you may begin your conference.

George Sipsis — Executive Vice President, Corporate Development & Capital Markets, Sagicor Financial

Company Ltd.

Great. Thank you, operator, and hello, everyone. Thank you for joining us today to discuss Sagicor’s second quarter 2025 results. Our disclosures are available under the Investor Relations tab on our website at Sagicor.com, which includes a press release, financial statements, MD&A, and the 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.

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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 SEDAR+ 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 U.S. 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’ll pass the call on to our President and CEO, Andre Mousseau.

Andre Mousseau — President & Chief Executive Officer, Sagicor Financial Company Ltd.

Thank you, George. Good afternoon, everyone. Thank you for taking the time to join us today.

We’re very pleased to report an outstanding quarter for the period ended June 2025. All of our operating segments generated excellent insurance results, resulting in record core earnings to shareholders. All four of our operating segments generated positive core insurance experience gains, and new production was solid across each of our segments. Our U.S. subsidiary continues to grow and

4 surpassed $6 billion of total assets, our Canadian business continued to show strong profitability, and its contribution reflected the benefit of a recovery, somewhat, in the Canadian dollar, and both of our

Caribbean segments showed robust profitability, reflecting the progress our teams have made in our initiatives to enhance our returns on equity. We also continue to progress on our strategic initiatives to transform our businesses, which we expect to continue to bear fruit in 2026 and beyond.

Now I’m going to hand the call over to our CFO, Kathy Jenkins, to discuss our consolidated results and comment on the segment results in more detail. Kathy?

Kathy Jenkins — Chief Financial Officer, Sagicor Financial Company Ltd.

Thank you, Andre, and good afternoon, everyone.

As Andre mentioned, we are reporting an outstanding second quarter of 2025. Our core earnings to shareholders were up 82% from Q2 2024 to $46 million. Revenues were $736 million for the quarter compared to $606 million for the same quarter last year. New business CSM of $39 million for Q2 continues to reflect strong sales across all segments.

Now I will give you some more details on the segment financials.

Sagicor Canada’s sales production of $18 million of annualized new premium in Q2 was consistent with management expectations, resulting in new business CSM of $11 million for the quarter. Core earnings to shareholders of $25 million were strong and reflected strong investment earnings, a recovery in the Canadian dollar, and modest positive insurance experience. It decreased $1 million from Q2 2024 when we observed more significant positive insurance experience. Net income to shareholders of $4

5 million for the quarter was lower than core earnings to shareholders due to negative mark-to-market experience from higher interest rates in Canada. Net CSM was $581 million, an increase of 7% quarter over quarter.

Sagicor Life USA generated $283 million of new business production for the quarter, consistent with internal targets. That pushed the segment’s assets to over $6 billion. Core earnings to shareholders for the quarter was $16 million, including $5 million of core insurance experience gains. This was more than double the core earnings in the same quarter of the prior year, driven primarily by that positive insurance experience and higher expected net investment results. Net loss to shareholders of $1 million for the quarter was lower than core earnings to shareholders due to mark-to-market experience and $5 million of other one-time non-core adjustments to reserving methodologies, which subtracted from net income but increased CSM. Net income was $159 million, an increase of 3% quarter over quarter.

For both of our North American segments, we expect this quarter’s negative market experience to reverse over time. We have observed that pattern since implementing the current accounting standard in

2023.

Sagicor Jamaica had strong net premium growth across most business lines and improved margins from repricing of short-term products. Sagicor’s share of Sagicor Jamaica’s core earnings and net income to shareholders of $15 million for the quarter increased over the same quarter in the prior year due to policy enhancement initiatives performed in Q2, favourable claims experience, and increased revenue from policy repricing. Our share of the results included about $3 million of core insurance experience gains. Net CSM was $277 million, a decline of under 2% quarter over quarter.

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Sagicor Life’s short-term business continued to benefit from price adjustments while the long-term business had improved insurance experience, leading to the segment’s best quarter under IFRS 17. Core earnings to shareholders of $16 million increased 89% from the same quarter in the previous year, reflecting improved profitability in short-term business and favourable insurance experience in long-term business. Net income to shareholders of $21 million for the quarter was higher than core earnings to shareholders in the quarter primarily due to positive market experience. This was our one segment with positive market experience gains as asset prices in those markets follow different interest rate movements. Net CSM was $259 million, an increase of 4% quarter over quarter.

At our head office, other operating companies, and adjustments segment, currency volatility generated some net income and comprehensive income movement. You will recall that we had C$510 million, or approximately US$374 million, of debt denominated in Canadian dollars as at Q2, which is an excellent natural hedge for our positive net asset position in Canadian dollars. This debt liability gets marked-to-market every quarter through the income statement; however, our larger US$859 million, or roughly C$1.2 billion, net asset position in our Canadian subsidiary gets marked-to-market through other comprehensive income. So, there is a strong positive correlation between the valuation of the Canadian dollar to our other comprehensive income and an opposite effect about half the size through our income statement. This quarter, that resulted in an $18 million non-core income statement charge with a $45 million gain through OCI. This contributed to both the difference between our core earnings to shareholders and reported net income to shareholders and also explains why our total comprehensive income to shareholders was so much higher than our reported net income.

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So, having said all that, Sagicor remained well capitalized in Q2. The group LICAT ratio was 141%, which was an improvement of four percentage points over the prior quarter, Q1 2025, and our financial leverage ratio was 27.1%. Our book value per share increased in U.S. dollars to $7.29, or C$9.94. Our deployable capital, or shareholders’ equity plus net CSM to shareholders, was $2 billion, or US$15.63 per share, or C$21.32 per share. With this strong capital position, we are announcing our 23rd consecutive quarterly dividend to shareholders since we’ve been listed on the Toronto Exchange and the third dividend at the higher level of US$0.675 per quarter or annualized US$0.27 per year.

We are also updating our previous guidance on select key measures for 2025. Given the strong performance through the first half of the year, we are now increasing our guidance on core earnings to shareholders for 2025 to be between $120 million and $130 million. At the same time, we are adjusting our guidance on new business CSM slightly lower to $155 million to $175 million for the year. We’ve made this adjustment as we have seen higher than anticipated profitability for our U.S. new business reflected in investment income rather than CSM amortization, compared to our previous forecasts. We expect that we will continue to refine our forecasting and reserving methodologies going forward as we continue to learn under the new IFRS 17 accounting standard.

With that, I will hand it back to Andre.

Andre Mousseau — President & Chief Executive Officer, Sagicor Financial Company Ltd.

Thank you very much, Kathy.

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We really are pleased with another solid quarter. It does reflect our continued progress on our strategic priorities. We do remain on track with our North American growth initiatives. It’s particularly gratifying to see the strong insurance performance coming out of our Caribbean operating segments.

Many of the initiatives there that have contributed to this turnaround have long cycle times around the analysis, product redesign, repricing, often regulatory approval, and so it can take a long time, and a lot of what we’re observing here in 2025 reflects the hard work that was done in 2023 and 2024.

As we look ahead, we remain committed to building on this momentum to generate positive and disciplined growth for our shareholders. We’re confident in our continued focus on driving increased returns on equity through our strategic initiatives across all our segments that is going to position us for continued success well into the future.

With that, we’d be pleased to start the Q&A period. Operator?

Q & A

Operator

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. If you have a question, please press star then the number one on your telephone keypad. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys.

The first question comes from the line of Gabriel Dechaine from National Bank. Your line is open.

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Gabriel Dechaine — Analyst, National Bank Financial

Good afternoon. There were a lot of experience gains this quarter in all segments. That’s great. I just want to get a sense, maybe not the Canadian segment, it doesn’t sound like it was too material, but maybe a dumbed down explanation of what happened in the Caribbean and the U.S. Is U.S. mostly mortality or…?

Andre Mousseau — President & Chief Executive Officer, Sagicor Financial Company Ltd.

Kathy, do you want to take this?

Kathy Jenkins — Chief Financial Officer, Sagicor Financial Company Ltd.

Sure. So, in the U.S., we had a $5 million gain, and that was a reversal of the $7.5 million loss we had in Q1. This was primarily due to a reversal of the experience on our legacy block of business.

Gabriel Dechaine — Analyst, National Bank Financial

Okay.

Kathy Jenkins — Chief Financial Officer, Sagicor Financial Company Ltd.

You’ll recall last quarter we spoke about the difference between statutory and IFRS accounting on our hedging of equity exposure on the FIA. We do that on a stat basis, but it provides a bit more volatility on an IFRS basis. So it’s primarily due to that, not much in terms of policyholder behaviour, that sort of thing - that was to expectations.

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In Jamaica, we had a $5 million gain, and that was a reversal of the $2.4 million loss in Q1, and we’re really seeing the impact of policy repricing that we spoke about earlier. And similarly, we’re seeing, in SLI, the $3 million gain. We’re continuing to see the positive impact from our product repricing initiatives that we spoke about.

Gabriel Dechaine — Analyst, National Bank Financial

For Caribbean, it was all repricing?

Kathy Jenkins — Chief Financial Officer, Sagicor Financial Company Ltd.

Yes.

Gabriel Dechaine — Analyst, National Bank Financial

Okay. And then, as far as the guidance goes, maybe you can correct me if I’m wrong, but my interpretation of the guidance increase for this year is, because this quarter was so strong, we should look at that increase as pretty much what happened this quarter. In the second half, you’re not really changing what you expected previously? Or is that misinterpreting your message?

Andre Mousseau — President & Chief Executive Officer, Sagicor Financial Company Ltd.

I think that’s closer to right than not. I do think that we’re ahead of plan in terms of many of our strategic initiatives to increase the margins across the business. That said, this quarter benefited from three out of four positive emergence out of insurance experience and one that was neutral to mildly

11 positive. We do budget for those numbers to be flat over time and so, you look at our core earnings to shareholders of $45 million or $46 million, we don’t want to just multiply that by four.

If you look through and you take out the insurance experience and adjust for the minority interest, the last couple of quarters, excluding minority interest, have been running at about $35 million unadjusted core net earnings, which is a good number. It’s a little earlier in the business plan than we thought we would hit those numbers. We have aspirations of getting there and further in our two- to three-year planning cycle, call it, but even that unadjusted core number of $35 million for two quarters in a row includes some better than expected emergence in the short-term business that we’re going to wait to see whether it’s repeatable or not. We don’t want to adjust our guidance way, way up just to stub our toe and miss it, so we’re putting something in place that we think we can meet or exceed. But at the same time, I think we’d be more comfortable today saying that, with nil insurance experience, we’re probably at that run rate in the low 30s, which would come out to run rate core earnings somewhere in the 120s.

Gabriel Dechaine — Analyst, National Bank Financial

Got it. Fair enough. And then I guess something we saw in Q4, you had given guidance on 2026 that you’d be up 10% versus your expected 2025 range, and now that range or the guidance range is higher, is that still applicable or should we be adjusting our expectations that it may be less than 10% now or not?

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Andre Mousseau — President & Chief Executive Officer, Sagicor Financial Company Ltd.

Well, we’re still comfortable with a long-term core earnings generation run rate, growth run rate of well into the double digits for this business between just the compounding of retained earnings and the initiatives that we have to expand ROE. When you look through any quarterly noise, we’re still comfortable that we are increasing the profitability of this company by more than 10% a year.

Now, depending on insurance experience in the last couple of quarters of this year, it’s possible that our core earnings come in higher than our guidance. If our core earnings come in higher than our guidance, we will have to go back and really study where that’s coming from before seeing whether we chin up to a short-term target of 10%-plus, because right now, because of the net positive experience, our reported core net income is a little bit ahead of where we see the core profitability.

Gabriel Dechaine — Analyst, National Bank Financial

That’s fair. And then last question, the sales, I mean we’re down versus Q1, the fixed annuity sales

I’m talking about, but still a good number. Is there any reason why we shouldn’t expect you to exceed your sales target for the year based on what you’ve achieved in the first half? And maybe touch upon some of the market conditions that inform that perspective.

Andre Mousseau — President & Chief Executive Officer, Sagicor Financial Company Ltd.

Sure. So I think the market conditions right now are pretty good, you know, notwithstanding the monthly, weekly, daily news cycle. It’s been a relatively gentle period of volatility in the markets where we’re investing and so, both ourselves and our competitors, we’ve seen relative stability in the crediting

13 rates in the marketplace and we seem to be in a good spot of not too hot, not too cold, on production.

We could produce more than the around $100 million a month that we’re running at right now. What we’re conscious of is making sure that we’re able to get the risk-adjusted and capital-adjusted spreads on that business. So, I’d rather us write $1.3 billion this year in the U.S. at great spreads than to stretch out to $1.5 billion and accept a lower return on equity, because we can hold our capital and deploy it in future periods. So right now, I would look at Q2 production as great production, still growing the balance sheet, and look to be in that $1.3 billion ZIP code for a total annual production for the U.S.

Gabriel Dechaine — Analyst, National Bank Financial

Okay, great. Enjoy the rest of your summer.

Andre Mousseau — President & Chief Executive Officer, Sagicor Financial Company Ltd.

Thank you.

Operator

As a reminder, if you have any questions, please press star one on your telephone keypad. Your next question comes from the line of Darko Mihelic from RBC Capital Markets. Your line is now open.

Darko Mihelic — Analyst, RBC Capital Markets

Hi. Thank you. Just a couple of really quick follow ups. I think the first question for me is to sort of solidify the difference between core earnings and reported. I think in your prepared remarks you talked about $18 million of difference, but that still leaves a $34 million difference that’s unaccounted for, for

14 me. So can you describe what the other big driver was of the difference between core and reported earning?

Andre Mousseau — President & Chief Executive Officer, Sagicor Financial Company Ltd.

The big thing is market experience, and so in both North American segments we saw a bit of mark- to-market experience losses, so no actual credit losses but just rising rates in Canada and shifting curve in the U.S.

Darko Mihelic — Analyst, RBC Capital Markets

Okay. Great. And a couple of other smaller follow ups as well. The first one is, so we’ve seen, in some of the segments, a little bit of what I would call a flip flop of experience, so to speak, one quarter being down, the other quarter being up, and so the question is, many of the other life insurers are coming up to their sort of assumption reviews. Can you remind me of the timing of your assumption review and if there’s anything here that’s building towards a trend of some sort?

Andre Mousseau — President & Chief Executive Officer, Sagicor Financial Company Ltd.

We split our assumption reviews between Q3 and Q4. We try to do the big ones in Q3, like the mortality and lapse and persistency in Q3, and then sometimes we get to expense and others in Q4. So, it is coming up.

I would agree with you that we have seen it flip flop down at the operating segment level, which, you know, you don’t love volatility, but you like to see it going both ways. We had a concern going back in

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2023 and 2024 with a number of quarters in a row of negative experience in SLI, for example. We did end up strengthening reserves last year and the combination of that and the initiatives that Kathy talked about have pushed them forward in this year. So, we don’t see anything on the horizon that would be material.

I think if we did, we’d be signaling it now. If you look rolling on a last four-quarters basis, our core insurance experience is just about flat, which would give you an indication that, in aggregate, all in all, we’re closer rather than further.

Darko Mihelic — Analyst, RBC Capital Markets

Okay. Thank you. And I just wanted to revisit the one segment that I want to better understand, because you’ve done some work and we’ve seen an improvement in results, so I’m just trying to understand where it can go in terms of the repricing initiatives that we’re seeing in Sagicor Life. And I guess ultimately, if the repricing is sort of working, should we see some shifting in the way that it comes through? Should we see maybe a change in reserves, and have it flow in differently? So ultimately what

I’m looking for is some sort of guidance on the net insurance service result and what should I focus on and where can it ultimately go here, because my sense is it’s not done, and I don’t want to overestimate it but

I want to understand how much more room is left in this and where should I see it showing up?

Andre Mousseau — President & Chief Executive Officer, Sagicor Financial Company Ltd.

It’s a great question. And you look at SLI, on the one hand, I agree with you, the initiatives broadly to improve ROE are not finished and so we do think it has room to run. On the other hand, some of the core insurance gains and losses, and even a little further up on the drivers of earnings and in the short- term business, the short-term business in effect includes experience in that line. We have a small P&C

16 business, so it’s never going to get to overall materiality, but to the extent you’re going to take losses in a

P&C business operating in Barbados and Trinidad, we would expect that to come in Q3 and Q4 with weather. And so there could be a couple of million dollars a quarter there of seasonality that would favour the first half and not favour the second half.

So, it’s all a way of saying I wouldn’t want to take that $15 million of core earnings from SLI and multiply that by four either, but we feel more and more confident that, if you take out those core insurance gains and look at profitability that way, it’s significantly above. It’s a much better picture than we would’ve talked about, because I’m just looking at the drivers of earnings I have in front of me where we had seven negative, it was never huge, but we had seven quarters in a row of negative insurance experience gains. So, one of our goals for 2026 is to provide more detailed segment guidance as well as opposed to doing it in aggregate.

Darko Mihelic — Analyst, RBC Capital Markets

Okay, great. That’s very helpful. Thank you.

Operator

If you have any questions, please press star one. Your next question comes from the line of Trevor

Reynolds from Acumen Capital. Your line is now open.

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Trevor Reynolds — Analyst, Acumen Capital Partners

Good morning, guys. Or afternoon, I guess. Just curious, you guys revised two of your guidance metrics. The other metrics that you guys had out there previously from Q4, are those all intact from where they were at? Just kind of wondering how we should look at that.

Andre Mousseau — President & Chief Executive Officer, Sagicor Financial Company Ltd.

I think we had the 13%-plus as a medium-term target. We’re definitely not backing off of that. If you look at what we achieved this quarter, it gives us more confidence that that is on the table and more.

I’m being cautious in my comments in terms of near-term guidance, but we still definitely have conviction around getting to 13% plus core return on equity over the next couple of years. So, we’re not revisiting that, reconfirming it I guess, and we’ll revisit whether it should still be that number when we report the full-year results.

Sorry, remind me what was the other one that we didn’t talk about? It was the 10% earnings growth, right? So that one, I’d refer you to the comments to the earlier question where we want to see where the full year settles out, because if we do multiply this first half by two and end up at a number that is through

$130 million of core net income, there may be some one-time stuff in there, in which case we might back off next year’s earnings guidance. So that one we need to see.

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Trevor Reynolds — Analyst, Acumen Capital Partners

Okay. And then I think most of my other questions have been answered. I guess just maybe on the repricing initiatives, are those in line with your expectations or have they occurred quicker than anticipated? Just kind of want to get a sense of your thoughts on those.

Andre Mousseau — President & Chief Executive Officer, Sagicor Financial Company Ltd.

The real answer is the difference between public guidance and internal expectations. We’re pleased with the progress, put it that way.

Trevor Reynolds — Analyst, Acumen Capital Partners

Got it. Thanks.

Operator

If you have any questions or any follow up, please press star one.

There are no further questions at this time. I will now turn the call back to George Sipsis. Please continue.

George Sipsis — Executive Vice President, Corporate Development & Capital Markets, Sagicor Financial

Company Ltd.

Great. Thank you, operator, and thank you, everyone, for joining the call today. 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

19 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.

Operator

Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation.

You may now disconnect.

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