Half-year Report
Sagicor Financial Corporation Limited
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Financial results for the six months ended June 30, 2019
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Chairman's Statement
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The Sagicor Group maintained a solid performance for the first six months to June 30, 2019. Group net income closed the period at US $58.4 million against a prior year result of US $39.4 million. Net income attributable to shareholders from continuing operations was US $26.2 million compared to the prior year result of US $21.5 million. Net income to shareholders from continuing operations in 2018 included the impact of a provision on the Government of Barbados Debt and was partially offset by certain one-time positive earnings releases.
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Total revenue for the Group amounted to US $992.8 million, against a prior year amount of US $633.3 million, an increase of US $359.5 million or 57%. Revenue growth was driven primarily by the USA business segment which generated premium growth, amplified by our strategic decision to cease reinsuring its premiums to third parties. Revenues continue to grow year over year in the Sagicor Jamaica and Sagicor Life business segments as well.
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Benefits including change in actuarial liabilities for future benefits were US $639.7 million, compared to US $298.4 million for the previous year and was consistent with the growth in premium income. Expenses including credit impairment losses were US $268.3 million, compared to US $286.9 million for the same period in the prior year, a decrease of 6%. Expenses in the prior year included credit impairment losses of US $57.8 million, largely related to the impairment of the Government of Barbados debt. Current year expenses included the impact of higher commissions related to sales growth in the USA segment.
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Group comprehensive income was US $102.0 million, compared to a loss of US $17.0 million for the prior year. Shareholder comprehensive income from continuing operations was US $57.5 million, compared to a loss of US $13.0 million for the prior year. The Group continues to benefit from significant net gains on investments measured at Fair Value through Other Comprehensive Income. Losses incurred on the retranslation of foreign currency operations reduced this year when compared to the previous year.
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In the statement of financial position as at June 30, 2019, assets amounted to US $7.9 billion, and liabilities amounted to US $6.6 billion. Group equity was US $1,224.7 million, compared to US $1,135.5 million at December 31, 2018. Shareholders' equity was US $658.6 million, compared to US $600.9 million at December 31, 2018. The Group's debt was US $473.9 million with a debt to capital ratio of 27.9%, compared to 30.2% at December 31, 2018.
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On June 4, our shareholders overwhelmingly approved the previously announced transaction with Alignvest Acquisition II Corporation ("AQY"), with 99.5% of shares voting in favour of the transaction. Our shareholders showed further support by electing to receive an aggregate of approximately US $20 million in cash consideration out of the maximum available US $205 million we offered to them. As a result, the vast majority of Sagicor's shareholders will continue to retain their investment in Sagicor post the transaction.
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Following completion of the Transaction, which is expected to close in the fourth quarter of 2019 subject to customary regulatory approvals, it is expected that Sagicor will retain over US $420 million of net cash from the transaction, leaving our company exceptionally well capitalized for future growth.
On behalf of the Board of Sagicor, I wish to thank our Shareholders and Customers for their continued support.
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Stephen McNamara
Chairman
August 9, 2019
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FINANCIAL HIGHLIGHTS | Six months ended JUNE 30 Ā | |
(in US Currency except percentages) | 2019 | 2018 |
Total revenue | $992.8m | $633.3m |
Overall Group net income | $58.4m | $39.4m |
Overall shareholders' net income | $26.7m | $24.9m |
Net income allocated to non-controlling interests | $31.0m | $22.8m |
Total equity | $1,224.7m | $889.0m |
Book Value per share | $2.15 | $1.95 |
Ratio of Debt to Capital | 27.9% | 31.7% |
Earnings per common share from continuing operations | 8.5Ā¢ | 7.0Ā¢ |
Annualised return to common shareholders' equity | 8.5% | 7.2% |
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ĀĀ
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION | |||||||
Amounts expressed in US $000 | Ā | Ā | Ā | June 30 | June 30 | December 31 | |
Ā | Ā | Ā | Ā | Ā | 2019 | 2018 | 2018 |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Ā | Ā | Ā | Ā | Ā | Ā (unaudited) | Ā (unaudited) | Ā (audited) |
ASSETS | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Financial investments | Ā | Ā | Ā | Ā | 5,870,127 | 5,037,795 | 5,347,663 |
Other investments and assets | Ā | Ā | Ā | 1,991,584 | 1,891,654 | 1,960,522 | |
Assets of discontinued operation | Ā | Ā | Ā | - | 13,467 | 17,239 | |
Total assets | Ā | Ā | Ā | Ā | 7,861,711 | 6,942,916 | 7,325,424 |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
LIABILITIES | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Policy liabilities | Ā | Ā | Ā | Ā | 4,106,477 | 3,566,394 | 3,662,438 |
Other liabilities | Ā | Ā | Ā | Ā | 2,530,557 | 2,487,515 | 2,527,525 |
Total liabilities | Ā | Ā | Ā | Ā | 6,637,034 | 6,053,909 | 6,189,963 |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
EQUITY | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Shareholders' equity | Ā | Ā | Ā | Ā | 658,605 | 596,748 | 600,869 |
Participating accounts | Ā | Ā | Ā | Ā | 3,605 | (11,230) | 4,078 |
Non-controlling interests | Ā | Ā | Ā | 562,467 | 303,489 | 530,514 | |
Total equity | Ā | Ā | Ā | Ā | 1,224,677 | 889,007 | 1,135,461 |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Total liabilities and equity | Ā | Ā | Ā | 7,861,711 | 6,942,916 | 7,325,424 | |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
These financial statements have been approved for issue by the Board of Directors on August 9, 2019. |
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CONSOLIDATED STATEMENT OF INCOME | |||||||
Amounts expressed in US $000 | Ā | Ā | ---- Six months to ---- | ---- Three months to ---- | |||
Ā | Ā | Ā | Ā | ----- June 30 ----- | ----- June 30 ----- | ||
Ā | Ā | Ā | Ā | 2019 | 2018 | 2019 | 2018 |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Ā | Ā | Ā | Ā | Ā (unaudited) | Ā (unaudited) | Ā (unaudited) | Ā (unaudited) |
REVENUE | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Net premium revenue | Ā | Ā | Ā | 677,770 | 410,030 | 312,711 | 222,728 |
Net investment and other income | Ā | Ā | 315,053 | 223,249 | 156,593 | 119,271 | |
Total revenue | Ā | Ā | Ā | 992,823 | 633,279 | 469,304 | 341,999 |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
BENEFITS AND EXPENSES | Ā | Ā | Ā | Ā | Ā | Ā | |
Benefits | Ā | Ā | Ā | 639,700 | 298,416 | 291,865 | 166,324 |
Expenses | Ā | Ā | Ā | 268,320 | 286,918 | 137,356 | 169,301 |
Total benefits and expenses | Ā | Ā | 908,020 | 585,334 | 429,221 | 335,625 | |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
OTHER | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
(Loss) / gain arising on business combinations, acquisitions and divestitures | (347) | 5,280 | (347) | - | |||
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
INCOME BEFORE TAXES | Ā | Ā | 84,456 | 53,225 | 39,736 | 6,374 | |
Income taxes | Ā | Ā | Ā | (26,574) | (17,195) | (14,204) | (8,814) |
NET INCOME / (LOSS) FROM CONTINUING OPERATIONS | 57,882 | 36,030 | 25,532 | (2,440) | |||
Net income from discontinued operation | Ā | Ā | 517 | 3,357 | -Ā | 2,965 | |
NET INCOME FOR THE PERIOD | Ā | Ā | 58,399 | 39,387 | 25,532 | 525 | |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
NET INCOME / (LOSS) ATTRIBUTABLE TO: | Ā | Ā | Ā | Ā | Ā | ||
Common Shareholders | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
From continuing operations | Ā | Ā | 26,194 | 21,543 | 11,095 | 2,046 | |
From discontinued operation | Ā | Ā | 517 | 3,357 | - | 2,965 | |
Ā | Ā | Ā | Ā | 26,711 | 24,900 | 11,095 | 5,011 |
Participating policyholders | Ā | Ā | 705 | (8,310) | 457 | (16,497) | |
Non-controlling interests | Ā | Ā | 30,983 | 22,797 | 13,980 | 12,011 | |
Ā | Ā | Ā | Ā | 58,399 | 39,387 | 25,532 | 525 |
Basic earnings per common share: | Ā | Ā | Ā | Ā | Ā | Ā | |
From continuing operations | Ā | Ā | 8.5 cents | 7.0 cents | 3.6 cents | 0.7 cents | |
From discontinued operation | Ā | Ā | 0.2 cents | 1.1 cents | 0.0 cents | 1.0 cents | |
Ā | Ā | Ā | Ā | 8.7 cents | 8.1 cents | 3.6 cents | 1.7 cents |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Fully diluted earnings per common share: | Ā | Ā | Ā | Ā | Ā | ||
From continuing operations | Ā | Ā | 8.4 cents | 6.9 cents | 3.5 cents | 0.7 cents | |
From discontinued operation | Ā | Ā | 0.2 cents | 1.1 cents | 0.0 cents | 0.9 cents | |
Ā | Ā | Ā | Ā | 8.6 cents | 8.0 cents | 3.5 cents | 1.6 cents |
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | |||||||
Amounts expressed in US $000 | Ā | Ā | ---- Six months to ---- | ---- Three months to ---- | |||
Ā | Ā | Ā | Ā | ----- June 30 ----- | ----- June 30 ----- | ||
Ā | Ā | Ā | Ā | 2019 | 2018 | 2019 | 2018 |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Ā | Ā | Ā | Ā | Ā (unaudited) | Ā (unaudited) | Ā (unaudited) | Ā (unaudited) |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
NET INCOME FOR THE PERIOD | Ā | Ā | 58,399 | 39,387 | 25,532 | 525 | |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Items net of tax that may be reclassified subsequently to income: | Ā | Ā | Ā | Ā | |||
Financial assets measured at fair value through other comprehensive income (FVOCI): | Ā | Ā | Ā | Ā | |||
Gains / (Losses) on revaluation | 76,149 | (65,113) | 10,214 | (36,722) | |||
Losses / (Gains) transferred to income | 42,197 | (1,749) | 41,768 | 1,888 | |||
Net change in actuarial liabilities | Ā | Ā | (64,106) | 29,874 | (29,956) | 16,711 | |
Retranslation of foreign currency operations | Ā | (7,653) | (17,782) | (12,113) | (14,741) | ||
Other items | Ā | Ā | Ā | - | - | - | 1 |
Ā | Ā | Ā | Ā | 46,587 | (54,770) | 9,913 | (32,863) |
Items net of tax that will not be reclassified subsequently to income: | Ā | Ā | Ā | Ā | |||
Unrealised (losses) / gains arising on revaluation of owner occupied property | (2,964) | 832 | 59 | 832 | |||
Net gains on equity securities designated at fair value through through other comprehensive income | 18 | 27 | 1 | 13 | |||
Losses on defined benefit plans | - | (2,500) | - | (2,500) | |||
OTHER COMPREHENSIVE INCOME / (LOSS) FROM CONTINUING OPERATIONS | 43,641 | (56,411) | 9,973 | (34,518) | |||
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
TOTAL COMPREHENSIVE INCOME / (LOSS) FOR THE PERIOD | 102,040 | (17,024) | 35,505 | (33,993) | |||
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
TOTAL COMPREHENSIVE INCOME / (LOSS) ATTRIBUTABLE TO: | Ā | Ā | Ā | Ā | |||
Common Shareholders | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
From continuing operations | Ā | Ā | 57,453 | Ā (12,976) | 19,205 | Ā (18,357) | |
From discontinued operation | Ā | Ā | 517 | 3,357 | - | 2,965 | |
Ā | Ā | Ā | Ā | 57,970 | (9,619) | 19,205 | (15,392) |
Participating policyholders | Ā | Ā | 1,325 | (9,061) | 681 | (17,221) | |
Non-controlling interests | Ā | Ā | 42,745 | 1,656 | 15,619 | (1,380) | |
Ā | Ā | Ā | Ā | 102,040 | (17,024) | 35,505 | (33,993) |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | |||||||
Amounts expressed in US $000 | Share | Share | Ā | Retained | Participating | Non-controlling | Ā |
Ā (unaudited) Ā | Capital | Premium | Reserves | Earnings | Accounts | Interest | Total |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Ā Six months toĀ June 30, 2019: | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Balance, beginning of period | 3,061 | 300,665 | (76,995) | 374,138 | 4,078 | 530,514 | 1,135,461 |
Total comprehensive income from continuing operations | - | - | 31,259 | 26,194 | 1,325 | 42,745 | 101,523 |
Total comprehensive income from discontinuedĀ operation | - | - | - | 517 | - | - | 517 |
Transactions with holders of equity instruments: | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Movements in treasury shares | 1 | (30) | - | - | - | - | (29) |
Changes in reserve for equity compensation benefits | - | - | 6,296 | - | - | - | 6,296 |
Dividends declared | - | - | - | (7,658) | - | (12,036) | (19,694) |
Transfers and other movements | - | - | 683 | 474 | (1,798) | 1,244 | 603 |
Balance, end of period | 3,062 | 300,635 | (38,757) | 393,665 | 3,605 | 562,467 | 1,224,677 |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Ā Six months toĀ June 30, 2018: | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Balance, beginning of period | 3,059 | 300,470 | (47,482) | 367,327 | 865 | 308,089 | 932,328 |
Prior period adjustment | - | - | 94 | 1,124 | - | 3,677 | 4,895 |
January 1, 2018 adjustment-changeĀ onĀ initialĀ applicationĀ of IFRSĀ 9 | - | - | (217) | (10,442) | (2,930) | (2,352) | (15,941) |
Balance as restated | 3,059 | 300,470 | (47,605) | 358,009 | (2,065) | 309,414 | 921,282 |
Total comprehensive income from continuing operations | - | - | (32,019) | 19,043 | (9,061) | 1,656 | (20,381) |
Total comprehensive income from discontinuedĀ operation | - | - | - | 3,357 | - | - | 3,357 |
Transactions with holders of equity instruments: | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Movements in treasury shares | - | 16 | - | - | - | - | 16 |
Changes in reserve for equity compensation benefits | - | - | (1,686) | - | - | - | (1,686) |
Dividends declared | - | - | - | (7,648) | - | (10,449) | (18,097) |
Transfers and other movements | - | - | (204) | 1,956 | (104) | 2,868 | 4,516 |
Balance, end of period | 3,059 | 300,486 | (81,514) | 374,717 | (11,230) | 303,489 | 889,007 |
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Ā
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CONSOLIDATED STATEMENT OF CASH FLOWS | |||||||
Amounts expressed in US $000 | Ā | Ā | Ā | Ā | Ā | ---- Six months to ---- | |
Ā | Ā | Ā | Ā | Ā | Ā | ----- June 30 ----- | |
Ā | Ā | Ā | Ā | Ā | Ā | 2019 | 2018 |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Restated |
Ā | Ā | Ā | Ā | Ā | Ā | (unaudited) | (unaudited) |
CASH FLOWS | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Operating activities: | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Cash from income, interest and taxation | Ā | Ā | Ā | 321,026 | 78,282 | ||
Net increase in investments and operating assets | Ā | Ā | Ā | (323,927) | (253,129) | ||
Net change in operating liabilities | Ā | Ā | Ā | Ā | 43,384 | 225,265 | |
Ā | Ā | Ā | Ā | Ā | Ā | 40,483 | 50,418 |
Investing activities | Ā | Ā | Ā | Ā | Ā | (4,761) | (6,930) |
Financing activities | Ā | Ā | Ā | Ā | Ā | (33,271) | (17,007) |
Effects of exchange rate changes | Ā | Ā | Ā | Ā | (2,730) | (5,800) | |
Net change in cash and cash equivalents - continuing operations | (279) | 20,681 | |||||
Net change in cash and cash equivalents - discontinued operation | Ā | 17,756 | - | ||||
Cash and cash equivalents, beginning of period | Ā | Ā | Ā | 321,561 | 338,349 | ||
Cash and cash equivalents, end of period | Ā | Ā | Ā | 339,038 | 359,030 |
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STATEMENT OF INCOME BY SEGMENT | |||||||
Amounts expressed in US $000 | Ā | Ā Six months to June 30, 2019 | |||||
Ā (unaudited) | Ā | Sagicor Life | Sagicor Jamaica | Sagicor Life USA | Head Office and other | Inter-segment eliminations | Total |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Total revenue | Ā | 246,532 | 353,663 | 372,499 | 51,016 | (30,887) | 992,823 |
Total benefits and expenses | Ā | 219,282 | 280,780 | 356,179 | 46,627 | 5,152 | 908,020 |
Loss arising on business combinations, acquisitions and divestitures | Ā | (347) | - | - | - | - | (347) |
INCOME BEFORE TAXES | Ā | 26,903 | 72,883 | 16,320 | 4,389 | (36,039) | 84,456 |
Income taxes | Ā | (5,205) | (16,829) | (3,427) | (1,119) | 6 | (26,574) |
NET INCOME / (LOSS) FROM CONTINUING OPERATIONS | Ā | 21,698 | 56,054 | 12,893 | 3,270 | (36,033) | 57,882 |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Net income / (loss) attributable to shareholders from continuing operations | Ā | 20,993 | 24,737 | 12,893 | (13,335) | (19,094) | 26,194 |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Total Comprehensive income / (loss) attributable to shareholders from continuing operations | Ā | 27,547 | 36,580 | 25,210 | (12,920) | (18,964) | 57,453 |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Ā | Ā | Ā | |||||
Ā | Ā | Six months to June 30, 2018 | |||||
Ā | Ā | Sagicor Life | Sagicor Jamaica | Sagicor Life USA | Head Office and other | Inter-segment eliminations | Total |
NET INCOME / (LOSS) FROM CONTINUING OPERATIONS | Ā | 24,729 | 45,242 | (413) | 20,835 | (54,363) | 36,030 |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Net income / (loss) attributable to shareholders from continuing operations | Ā | 33,039 | 22,217 | (413) | 4,262 | (37,562) | 21,543 |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Total Comprehensive income / (loss) attributable to shareholders from continuing operations | Ā | 30,557 | 1,511 | (9,552) | 3,476 | (38,968) | (12,976) |
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STATEMENT OF FINANCIAL POSITION BY SEGMENT | |||||||
Amounts expressed in US $000 | Ā | June 30, 2019 | |||||
Ā (unaudited) | Ā | Sagicor Life | Sagicor Jamaica | Sagicor Life USA | Head Office and other | Inter-segment eliminations | Total |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Total assets | Ā | 2,032,515 | 3,265,859 | 2,688,952 | 406,415 | (532,030) | 7,861,711 |
Total liabilities | Ā | 1,521,999 | 2,390,479 | 2,416,664 | 839,922 | (532,030) | 6,637,034 |
Net assets | Ā | 510,516 | 875,380 | 272,288 | (433,507) | - | 1,224,677 |
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Ā | Ā | Ā | |||||
Ā | Ā | June 30, 2018 | |||||
Ā | Ā | Sagicor Life | Sagicor Jamaica | Sagicor Life USA | Head Office and other | Inter-segment eliminations | Total |
Net assets | Ā | 524,404 | 548,699 | 231,560 | (415,656) | - | 889,007 |
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Ā
PRODUCTS AND SERVICES | |||
Ā | Ā | Ā | Ā |
Total external revenues relating to the Group's products and services are summarised as follows: | |||
Ā | Ā | Ā | Ā |
Amounts expressed in US $000 | Ā | ---- Six months to ---- | |
Ā | Ā | ----- June 30 ----- | |
Ā | Ā | 2019 | 2018 |
Ā | Ā | Ā (unaudited) | Ā (unaudited) |
Ā | Ā | Ā | Ā |
Life, health and annuity insurance contracts issued to individuals | Ā | 677,936 | 369,847 |
Life, health and annuity insurance and pension administration contracts issued to groups | Ā | 147,810 | 139,563 |
Property and casualty insurance | Ā | 26,622 | 23,495 |
Banking, investment management and other financial services | Ā | 90,743 | 85,329 |
Other revenuesĀ | Ā | 49,712 | 15,045 |
Ā | Ā | 992,823 | 633,279 |
Ā | Ā | Ā | Ā |
Ā
NOTES TO THE FINANCIAL STATEMENTS | ||||||||
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
1.Ā BASIS OF PREPARATION | Ā | Ā | Ā | Ā | Ā | Ā | ||
These condensed interim financial statements have been prepared in accordance with the accounting policies set out in note 2 of the December 31, 2018 audited financial statements, except for the adoption of IFRS 16 - Leases'.Ā This standard became effective from January 1, 2019. IFRS 16 removes the distinction between operating and finance leases and requires recognition of an asset (the right to use the leased item) and a financial liability to pay rentals, for virtually all lease contracts. | ||||||||
Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
In accordance with the transition provisions in IFRS 16, the standard has been implemented using the modified retrospective method with no restatement of comparative information. In applying IFRS 16 for the first time, the group has used the practical expedients permitted by the standard. |
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