Richard Byles, president of LOJ, says if the fat is trimmed from the insurance company's earnings in 2005, his profits would be 27 per cent. With the fat, net profits grew only 5.0 per cent. - File

Keith Collister, Business Writer

Life of Jamaica (LoJ's) net profit attributable to shareholders was up only five per cent to $2.57 billion for calendar year 2006, but that's before you trim the fat from the 2005 earnings, says president and CEO Richard Byles.

"The most striking thing about the results is that if you adjust for the one time gain of $430 million in 2005, profits would have been up 27 per cent," Byles told Wednesday Business.

On Tuesday, LoJ stock traded up 20 cents at $8.09. Excluding this one-time gain from the sale of 197 million shares in Pan Caribbean to LoJ's ultimate parent Sagicor reduces LoJ's core 2005 profits to $2.02 billion.

LoJ's 2006 performance, measured against the adjusted earnings, is a 27.2 per cent improvement on 2005, and represents annualised return of 22 per cent on shareholders equity.

Share dilution

While basic earnings per share also fell marginally from 71 cents to 69 cents (59 before the unusual gain) for the previous year, this is due to the share dilution when LoJ acquired the financial services business of First Jamaica Investments Limited, formerly First Life Insurance Company.

LoJ issued 1.156 billion LoJ shares in the second quarter of 2005. But according to Byles, due to accounting conventions, only a quarter of the dilution was taken into account per quarter, with the result that the impact of the dilution only ended in March 2006.

The weighted average number of shares in issue for calendar 2006 increased a further 9.0 per cent above those outstanding during 2005, indicating further dilution of shareholder value in the review year.

"LoJ's core business is very healthy," said Byles, supported by strong revenue growth, up 22 per cent to $14.77 billion over the year prior's $12.12 billion, the latter figure including the unusual gain of $430 million.

According to Byles, LoJ retained its leading position in its key Individual Life segment both in terms of new business generated and actual earned premiums, growing revenues 19 per cent to $4.27 billion, while growth in earned premiums for the Employee Benefits division was even stronger, up 35 per cent over 2005.

Byles argues that further evidence of LoJ's strong core business is that all LoJ's key performance ratios, such as those which measure expenses, commissions, conservation, benefit payments and return on invested assets are operating within expectations.

Net investment income also performed well, rising by 17 per cent to $3.59 billion, helped by the sale of all the apartments of their Winchester Estate project.

Construction at the Winchester Business Centre is also making satisfactory progress and is slated for completion in the second quarter of 2007.

Book value also increased in 2006 to $14.41 billion from $11.65 billion, and total group assets increased to $79.06 billion compared to $70.91 billion in 2005.

Financial strength

LoJ's financial strength also continued to improve. Its Minimum Continuing Capital and Surplus Requirement (MCCSR) at185.8 per cent was way ahead of the required 120 per cent.

LoJ also joined its parent Sagicor in attaining a financial strength rating of "A" (excellent) from the A.M. Best, the leading rating agency for insurance companies worldwide.

The company's investment banking subsidiary, Pan Caribbean Financial Services Limited, also recorded its sixth consecutive year of record profits, with net income for 2006 up 8.0 per cent to $1.11 billion.

Byles, in his outlook for LoJ, said he would look to "the same places" for future growth - product expansion and continued improvements in cost efficiency.

keithcollister@cwjamaica.com

Life of Jamaica

Revenues $14.8 billion

Net inv. income $3.7 billion

Net profits $2.6 billion

EPS $0.69

Group assets $79.1 billion

Book value $14.4 billion

Market cap $30.2 billion

Issued shares $3.73 billion

Market price $8.09

MCCSR185.8%

Rating (AM Best)'A' (excellent)