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Operator: Good morning, ladies and gentlemen, and welcome to the Sagicor Financial Company's Third Quarter 2025 Earnings Call. [Operator Instructions] This call is being recorded on Friday, November 14, 2025. I would now like to turn the conference over to George Sipsis. Please go ahead.
George Sipsis: Thank you, operator, and hello, everyone. Thank you for joining us today to discuss Sagicor's Third Quarter 2025 Results. I'd like to point out that our disclosures are available under the Investor Relations tab on our website at sagicor.com or at investors.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. 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 to our President and CEO, Andre Mousseau.
Andre Mousseau: Thank you, George. Good morning, everybody. Thank you for joining us. I'm very pleased for us to announce another outstanding quarterly performance. On a core basis, our results reflect broad-based strength. Our Canadian business continues to show outstanding profitability. Our U.S. business grew its assets by about $250 million from the prior quarter and continues to generate strong spreads. And both of our Caribbean operating segments showed strong core profitability, reflecting progress on initiatives that we've been working on for years. Our net income to shareholders was $81 million reflecting those strong core numbers plus a reversal of some of the income volatility that have gone the other way earlier in the year and seems endemic under the IFRS 17 standard. With these strong results, coupled with some opportunistic share buybacks, we're at a record book value per share, whether you follow in Canadian or U.S. dollars. Before handing off to Kathy, I would like to acknowledge the absolutely outstanding job our team in Jamaica has done in the leadership -- in the lead up to and the aftermath of Hurricane Melissa. Our business continuity plans were flawlessly executed, and we were out there serving clients across the island within hours of the storm passing. We have rallied our troops and are leading the recovery effort. While this may cause a temporary setback in the Jamaican economy, we're confident in the country and our company there, and we will build back stronger than ever. Now I'll hand over to Kathy to result -- to discuss the results of the quarter in a bit more depth.
Kathy Jenkins: Thank you, Andre, and good afternoon, everyone. As Andre mentioned, we're reporting an outstanding third quarter of 2025. Our core earnings to shareholders were up 45% from Q3 2024 to $35 million. Revenues were $974 million for the quarter compared to $1.1 billion for the same quarter last year. New business CSM up $41 million for Q3 continues to reflect strong sales across all segments. You will recall that the third quarter is when we perform our annual actuarial review of nonfinancial insurance assumptions like mortality and policyholder experience. As we adjust our assumptions, some of the impact comes through the income statement and is captured in noncore within our drivers of earnings, while other adjustments affect our CSM. This time around, the effect was positive as we recognized net income but negative to CSM. In Q3, the impact on our earnings of the actuarial assumption changes was $5 million of after-tax noncore net income. CSM decreased in aggregate this quarter driven by the adjustment of assumed mix on Universal Life products in Canada and lapse assumptions in the U.S. as we take a more conservative CSM posture on our annuity products. Now I'll give you some more details on the segment financials. Sagicor Canada's sales production of $16 million of analyzed -- annualized new premium for the quarter was consistent with management expectations, resulting in new business CSM of $10 million for the quarter. Core earnings to shareholders of $27 million increased $7 million compared to the same quarter in the prior year, reflecting strong insurance experience gains from favorable mortality experience. Net income to shareholders of $53 million for the quarter was higher than core earnings to shareholders due to favorable market-related impacts from lower interest rates and higher-than-expected equity market returns. Net CSM was $559 million, a decrease of 2% quarter-over-quarter on a Canadian dollar basis. Sagicor Life USA's new business production of $335 million for the quarter grew 16% over the same period in the prior year. Core earnings to shareholders for the quarter of $10 million were lower than Q3 2024 due to favorable insurance experience in the prior year, while in line with expectations this quarter. The impact from higher MYGA mortality claims from the quarter were offset by positive experience from other business lines. Net income to shareholders of $21 million for the quarter was higher than core earnings to shareholders due to favorable market experience from interest rate movements. Net CSM was $151 million, a decrease of 5% quarter-over-quarter. As I noted in my remarks last quarter, we expected the negative market experience that rose in the first half of the year in both North American segments to reverse over time. Accordingly, as Andre noted, this quarter, the favorable market experience in both segments reversed much of the previous period's negative market experience. Sagicor Jamaica recorded strong insurance sales, evidenced by ongoing growth in insurance revenues and net premium income from last year. Our share of Sagicor Jamaica's core earnings to shareholders of $12 million for the quarter increased over the same quarter in the prior year due to price repricing in the short-term business, sales growth in the long-term business, and improved net interest margin and fee revenue in the Commercial Banking business. Our share of Sagicor Jamaica's net income to shareholders of $14 million for the quarter was higher than core earnings to shareholders due to positive experience adjustments from changes to lapse assumptions. Net CSM was $293 million and net CSF to shareholders was $144 million, both of which increased 6% quarter-over-quarter. Sagicor Life's business fundamentals remain strong with improving margins on short-term businesses and insurance experience aligning to expectations for long-term businesses. Core earnings to shareholders of $9 million increased 23% from the same quarter in the prior year, driven by repricing initiatives on renewal and adjustments on product offerings on short-term business. Net income to shareholders of $13 million for the quarter was higher than core earnings to shareholders, primarily due to positive market experience from lower interest rates in the U.S. and higher interest rates in the Trinidad and Tobago market. Net CSM was $255 million, a decrease 2% quarter-over-quarter. At our head office, other operating companies and adjustment segment, core loss to shareholders was $22 million for Q3, an improvement of $1 million year-over-year, reflecting lower interest costs from favorable debt refinancing that was completed in 2024. Net loss to shareholders was $20 million. As mentioned by Andre, our colleagues in Jamaica have done an extraordinary job supporting colleagues, clients and communities impacted by Hurricane Melissa. With respect to the economic impact on our business, our preliminary estimate is that the impact in Q4 will be either immaterial or just marginally material to Sagicor at a group level. So today, we would say a potential net income hit of $5 million to $10 million to SFC. Our small P&C business in Jamaica is heavily reinsured and could only generate losses of less than $3 million. It will take more time to assess the impact on our lending portfolio through our bank in Jamaica. But again, our major clients are insured with other companies, and so we are talking primarily about the knock-on effects to small borrowers. We are assessing forbearance for a number of smaller customers doing the right thing for customers in affected areas as they sort themselves out, not ultimately economic losses necessarily, but we'll see how those run through our ECL. And we have also given well over $1 million so far directly to relief efforts that we and other private sector leaders are championing and we will expense those. Once you factor in the fact that we own 49% of the Jamaican operations, our view today is that SFC's net exposure will be below $10 million. Prior to this event, Jamaican businesses -- our Jamaican business was really hitting on all cylinders. So we believe our Jamaican business will come back strong in 2026 and beyond as rebuilding efforts may stimulate the economy there. So having said all that, Sagicor remains well capitalized in Q3. The group's LICAT ratio was 141%. Our financial leverage ratio was 26.6%. Our book value per share significantly increased to USD 7.74 or CAD 10.78. As we saw the effect of the reversal of market experience increase our retained earnings. Our deployable capital for shareholders' equity plus net CSM to shareholders was $2.2 billion or USD 15.93 per share or CAD 22.18 per share. Subsequent to quarter end, on October 21, Global Credit rating agency Fitch Ratings upgraded Sagicor's long-term issuer default rating to BBB from BBB-, and also upgraded Sagicor's senior unsecured debt to BBB- from BB+. This upgrade provides a unanimous view from our credit rating agencies that Sagicor senior unsecured debt is investment grade. This is further validation of Sagicor's strong capitalization as we pursue stable and profitable growth. This upgrade will provide Sagicor with enhanced access to capital as we execute on our strategy, and we will examine our refinancing options as we move into 2026. With the continuing strong capital position, we are announcing our 24th consecutive quarterly dividend to shareholders since we've been listed on the Toronto Exchange and the third dividend at the higher level of USD 0.0675 per quarter or annualized USD 0.27 per year. We do intend to reassess the dividend payout following the release of our Q4 results as we are tracking dividend payments so far in 2025, below our targeted payout range of 30% to 40% and due to our core net income gain so much higher than our original guidance. With that, I will hand it back to Andre.
Andre Mousseau: Thank you, Kathy. This quarter provides us with further validation of our current operating strategy to focus on return on equity, improving initiatives and delivering shareholder value. Our annualized core ROE was nearly 14%, well ahead of our original time line to achieve mid-teens core ROE and net income and book value growth followed significantly. We continue to see opportunities to further increase our ROE, whether through growth in our U.S. annuities business at high marginal returns on capital, active balance sheet management with our improved ratings and technology-driven improvements to our operating models across all of our subsidiaries. We look forward to presenting revised strategic plans for future periods when we deliver our year-end results in March of next year. Until then, we're very pleased to take your questions if there are any.
Operator: [Operator Instructions] Your first question comes from the line of Gabriel Dechaine from National Bank.
Gabriel Dechaine: A quick one on the fixed annuity sales. You had another good quarter and it looks like you're well on track to exceed the $1.3 billion number you floated on the last call. Just wondering if there's any expectation that would lead to a different outcome or maybe even a better outcome?
Andre Mousseau: Thanks, Gabe. It could be better. We deliberately originally set out a target that was a little short of what we were trying to do internally. We still do see strong return on capital. We're seeing some of the strongest returns on capital in some time for the new business that we're putting on the books this quarter. That said, the production can ebb and flow. So I don't want to be too specific about any individual quarter, but it's fair to say that our target for 2026 will be to build on wherever we end up for 2025 and exceed it.
Gabriel Dechaine: Okay. I would get back to fixed annuities in a minute, but just on the -- the couple of numbers thrown around there, on the Jamaica situation, which, of course, is unfortunate, very unfortunate. But you said USD 5 million to USD 10 million that's the potential hit to your P&C business profits, correct? And then there was another $10 million reference that just...
Andre Mousseau: No. No. So $5 million to $10 million is the aggregate ZIP code of net income exposure to SFC in total. As Kathy said, the P&C business -- there is building blocks to get up to it. The P&C business is about -- is heavily reinsured. And so in aggregate, the loss there is going to be less than $3 million. We've spent, call it, $2 million on relief efforts with kind of with the multilaterals and the things that we're doing internally. And then there's a bit of an unknown for as we give forbearance through the bank, how much that's going to be. And so if you say that, that number would be -- work its way as a $5 million ECL, that would be a $10 million total net income hit in Q4. And then we own half of that. So if you look at that stack, which, if I had to give a best estimate, it would be in and around that. It would say, okay, we're in the ZIP code of $10 million. We own half of that. It's $5 million off of our -- off of SFCs to Q4 P&L. Don't know how much of that is core versus noncore. I haven't really thought about that. It's not about the accounting today. But that's kind of the ZIP code. And what Kathy was talking about is we want to give ourselves some room in the guidance in case it turns out there's a little bit more. But because we're focused in Jamaica on the long game. And if it's the right thing to do for our customers, maybe we extend more forbearance. And so this is all on a week-to-week basis. But the point here is that it's just scratching the edge really of materiality for us.
Gabriel Dechaine: Got it. Now getting back to the fixed annuities business, I know there's a lot of components to this year's actuarial review, but the one that stuck out for me was the $30 million or whatever strengthening of reserves for multiyear guaranteed annuities. I believe -- and related to lapse, I believe this is the third year in a row that's been requirement or an outcome rather. Can you remind me what's going on there? I believe it's that you assume there's a certain persistency, I guess, retention or renewal of these policies as they mature, but that renewal rate was lower, so you're having to pay more renewal commissions or something -- what sort of behavior are you witnessing? And if I'm correct in my numbers there that this is maybe the third year that this has happened. What's the confidence level that we've cleared that this issue has put the rest, so to speak? And then what have you done on new product sales to adjust for this issue in your back book?
Andre Mousseau: So what you're seeing here is two different things. There's the insurance behavior piece of it. But there's also the -- there is also continuing refinement and improvement of how you reserve for these products under IFRS 17. And so there's -- some of what you're seeing is related to lapse behavior and the mitigants that we have to take care of it. More of it is around us refining our views with our advisers of how much CSM should be in these products when you reserve for them. And how much of the profitability should come out through other parts of the drivers of earnings. We're in a bit of a unique situation because we're an IFRS reporter in the U.S. market. Most of the folks in the U.S. market aren't dealing with this issue. So it does feel as we work with our actuarial advisers and with our auditors that we're plowing new snow, so to speak. And so if we could go back in time and take, even with -- even without any effect of policyholder behavior, we would have had lower CSM in retrospect 2 years ago when we did the transition to IFRS 17 because we're seeing more of the profitability come out through the investment earnings and other pieces of the drivers of earnings. So that's a really big part of it. You're right. This is a couple of years in a row. It's more about wanting to really take a conservative position and not have to deal with this again. The unit economics of the business that we're selling are very strong. We're able to add the assets at the pace that we feel good about. And the aggregate return on equity on the portfolio, if you look at the profitability, plus the other $10 million or so a year that we're taking out of our U.S. business and profits through internal financing on our surplus notes, tell you that the business is strong and it's really, really running well. So this is really about resetting for the new way that we're looking at the accounting. In terms of what we have done, we did put in place a more robust renewal commission program in place as we -- and that helps retain more business. It's a really interesting question on a statutory basis about whether you -- whether you're better off retaining all the business versus writing new business, if you -- in today's environment, the way you ask statutory accounting works, you have to stick with your old assumptions from when you wrote the business when you renew it. And what that means is for Vintage 2020 and 2021 and 2022 policies when they were written in lower interest rate environment, it's actually more punitive to hold the renewing policy than it is to write a new one, which means we're trying to be -- we're trying to take a relatively sharp pencil and decide on a week-to-week basis, are we better off retaining versus are we better off just selling more, and it's a hard concept to get through in a 5-minute answer to an earnings call. But big picture, we can observe the gross margin on our book getting bigger every quarter, and we think it's marked properly now.
Operator: Your next question is from the line of Mike Rizvanovic from Scotiabank.
Mehmed Rizvanovic: A couple of quick ones for me. I wanted to start with the natural disaster in Jamaica, obviously very sad to see. But just in terms of how you sort of put the parameters on that tail risk and your reinsurance approach. I'm just wondering, should we think about this as irrespective of the type of natural disasters we may see in the future. It is an area that's prone to these that you're basically covered off and you are, in fact, hedging through reinsurance, the majority of that tail risk?
Andre Mousseau: Yes. That is the lesson you should take. It is -- the region is prone to this. That said, Melissa was the worst to hit the region and Jamaica, in particular, in a generation. This is not -- it's hard to tell the future in today's world, but this is not Florida at the moment, which is getting the one in 100-year storms seemingly every year. But I agree with your fundamental point that this kind of puts a bow around -- this is as bad as we've seen a storm in our region, and we -- this proves that our reinsurance works and it's less than a $10 million hit today.
Mehmed Rizvanovic: Okay. That's very helpful. And then a quick one on the ROE. Obviously, you had an outsized quarter in Q2, well above your 13-plus target. This quarter, you're a little bit above your target? And just thinking about some of the momentum you have in some of your business lines here. And when you have that 13-plus target, like what does that target represent? Do you have any updated thoughts? I'm not sure to think about it as more of a 3- to 5-year target, like we hear with some of your -- some other financials. They tend to have that longer view. But like you're already there, and I'm wondering if we shouldn't be maybe starting to think about getting to a better number in, say, 2 to 3 years?
Andre Mousseau: You sound like a board member. The original -- when we put the 13-plus guidance, that was a medium-term guidance, and that was supposed to be code for year-end '26 going into 2027. Kind of to your point, that was supposed to be towards the end of the 3-year planning cycle. And so that's where we were going with -- in my commentary, where I've said we have hit it early. We are pleased with it. It's a couple of quarters in a row that we're running through 13%. We will update our forward guidance as we get through strategic planning, and that will come in the next call. What I would say is that the last 2 quarters, validates a certain base, and you can call that 13%, 14%. And we have a lot of options on the table to continue to enhance our ROE. Kathy talked about the final re-rating up to full investment grade. So we have the opportunity to improve our cost of capital throughout the system. Every dollar we put into the U.S. on a marginal basis is improving our ROE. There's a lot of opportunity to achieve efficiencies in our business and better serve customers using technology. These are things that will be observable over a couple of years, but will allow us to get targets for return on equity well through the 13% or 14% as we look forward. And every time you can also buy a share back at a 30% discount to book, you're only jacking it even more. So we do see the opportunity over the medium term to get to a higher return on equity. And our intention is to be a bit more granular about that next year as we put forward our revised medium-term guidance.
Operator: Your next question comes from the line of Trevor Reynolds from Acumen Capital.
Trevor Reynolds: I think just following up on kind of the guidance, there is no real update with the quarter. In terms of kind of where you sit about $110 million of core earnings year-to-date and the previous guidance of $120 million to $130 million. It looks like that's more than achievable. I just want to kind of get a sense of where that -- where your kind of outlook that's here in the near term on that.
Andre Mousseau: Yes. I think more than achievable is a good term. We want to -- we'll see how Q4 turns out. Sitting here, I think we have an idea that Q4 will be a little lighter than Q3, just given the inflow that we have on Jamaica. But we haven't put a lot of thought yet into how much of that is core versus noncore. And even with the big daily volatility, there hasn't been a lot of aggregate volatility in either rates or equities. So we were managing -- we're trying to manage on a longer-term basis, but we feel good that we're not going to embarrass ourselves on the guidance.
Trevor Reynolds: Okay. And then maybe just on the CSM as well, like you had about $125 million year-to-date, like looks more like the range is kind of the target there?
Andre Mousseau: Yes. If you take the commentary that I talked about to one of the earlier questions on CSM, we've come to this revised view working with our advisers -- our outside actuarial health that we should just be putting less CSM into these annuities products than we thought before. And so our sales -- the volatility in the CSM for new business is really -- versus guidance is really out of the U.S. because Canada and the Caribbean has been pretty consistent with how we build up to the guidance. So it's really about less CSM coming through in the U.S., even though we're hitting our sales targets and on a statutory or economic basis, the business that we're writing is right on budget or better, and our numbers have been ahead of guidance. So it's really all part and parcel with that.
Trevor Reynolds: Okay. And then last one is just, I guess, around your free cash flow priorities, I guess. You hinted that there's maybe some room for upside on the dividend. How do you weigh that against the share buyback given your discount to book today?
Andre Mousseau: Yes. You saw in our public disclosure that we did buy back some shares in Q3. I'd expect us to continue to do that in Q4. If you look at our shares today in the $8 range, to us, if you look through to the core earnings generation, they're as cheap today at $8 as they were a couple of years ago at $6. And you could observe that when it was below $6, we were buying as much as we could. So you look at our leverage ratio or our LICAT or however you want to look at it, we're very well capitalized today which, to me, I think there's room for us to continue to grow and at the same time, return capital to shareholders. So I would expect we would continue to buy back shares. We've been pretty open that we're going to look at our dividend every year in March as well. And so we intend to do so.
Operator: Your last question comes from the line of Darko Mihelic from RBC Capital Markets.
Darko Mihelic: I just wanted to return to the tragic events in Jamaica, and I really appreciate the color, it's very helpful for Q4. But I'm thinking beyond Q4. I just wanted to think about how you view the situation with respect to earnings power beyond Q4 and momentum that may be lost as a result of this event and thinking about the economy, currency, top line impacts. What's your early read on how we should think about your segment for '26?
Andre Mousseau: Yes. So that's a great question, Darko. And I think it's really the one that's topical. And the reason that we don't have a firm view on this is that there's a lot of pushes and pulls on this, just from a macro point of view. And when you're as big as we are, there is a pretty robust correlation between economic activity and the performance of our business. I mean, our Jamaican business has been an incredible performer since -- over the last generation kind of 12, 15 years since Jamaica got its fiscal house in order and has had strong growth. So there is certainly a significant near-term hit to GDP and a near-term first order hit to foreign currency remittances and that a lot of the worst affected areas were farming areas. And so Jamaica in the near term, well, these are cash crops that turn over a couple of times a year. But in the near term, there will be more importation of food. They're still taking stock of Montego Bay, which was relatively harder hit and a meaningful percentage of the hotel stock in Montego Bay may end up missing the Christmas season, that's bad first order for foreign currency as well. Now, on the other side, we're seeing positive remittances from friends and families that send foreign currency directly to the country. The country did avail itself of some catastrophe bonds that will now be in the money. And so there's hundreds of millions of dollars of hard currency that flows in through that way. And as infrastructure and housing and commercial pieces are rebuilt, you have funds that are coming in from international reinsurance that carry the catastrophe losses for businesses that are owned under multinationals, which is a lot of the big, big stock. And there is a stimulative effect to an economy of going out and rebuilding roads and building. So it's very difficult to really establish what is this going to do for economic activity and for new business sales next year and for our loss ratios on our group businesses. And at this point, we don't have a view as to -- is it not a big step back from a budgeting point of view as the Jamaica business was really growing or is this net neutral. And that's really the challenging part of the budgeting exercise for next year that we -- it's hard to speculate on until we take stock a little bit more.
Darko Mihelic: Okay. I appreciate that. That's a good fulsome answer and giving me more to think about, too. And so just my last question then would be with respect to Sagicor Life. Maybe you can speak to sort of where you are with the repricing initiatives. And also there, what I'm interested in understanding is the potential benefit into '26. I'm not so interested in Q4. What I'm really looking for is sort of how you see that developing into '26?
Andre Mousseau: SLI, the repricing initiatives do continue to be helpful on an economic basis. I think we saw a little bit of onetime help in Q2 compared to what we had in Q3 as sometimes -- when you change your assumptions sometimes stuff comes through all at once. Big picture, when you step back from the quarterly noise, we would continue to -- all things being equal to continue to see margin expansion in SLI in 2026 and 2027.
Darko Mihelic: Okay. And then just lastly, back to the U.S. business. If this is essentially a shift in the accounting less CSM, more investment sort of income, what is it that you're doing there? Is it just a higher risk adjustment? Or is it something else to fulfillment cash flows? Can you just give you a general rough idea? Because I do think from a geography point of view, I want to understand better how to model this business into '26 and '27?
Andre Mousseau: It's prevalent throughout the drivers of earnings. We've gone through and we had a project to go and -- to go and really retool the way in which we reserve for it. And part of it is around conservatism and wanting to make sure that we get away from negative quarterly noise, but part of it was also an effort to minimize the actual reported earnings volatility a little bit. And so there was a change throughout. I think that we should get together with the folks in the research community and find a forum to educate on the way to model it going forward, and take the time to do it properly. It's hard to wrap it all in a bow on a call like this.
Operator: There are no further questions at this time. I would like to turn the call back to George Sipsis for closing comments. Please go ahead, sir.
George Sipsis: Thank you, operator, and thank you, everyone, for joining the call today. A reminder that 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.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.