Sagicor Financial Co Stock

Good morning. My name is Annis, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Sagicor Financial Company's Second Quarter 2026 Earnings Call. [Operator Instructions]

Mr. George Sipsis, EVP, Corporate Development and Capital Markets, you may begin your conference.

Great. Thank you, operator, and good morning, everyone. Thank you for joining us today to discuss Sagicor's Second quarter 2026 results.

Before we begin, I'd like to remind everyone that our disclosures are available on our Investor Relations website at investors.sagicor.com, which include a press release, financial statements, MD&A and the supplemental information package, which contains 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 Q&A period being reserved for financial research analysts.

I would like to refer 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 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 will pass the call to our President and CEO, Andre Mousseau.

Thank you, George. Good morning, everybody. Thank you for joining us.

We are pleased to report another solid quarter for Q2 2026. Our core earnings returned to our target levels as insurance experience was broadly in line with our expectations, and our net income was significantly higher than our core earnings as market volatility on asset prices worked in our favor this quarter. We continue to make excellent progress on our strategic initiatives to drive ROE expansion and future growth, which I'll come back to after Kathy goes through a more detailed financial review of Q2.

Kathy?

Thank you, Andre, and good morning, everyone.

Sagicor's Q2 2026 core earnings to shareholders were $34 million compared to $25 million in Q1 2026. The stronger core earnings in Q2 were primarily driven by improvements in core insurance experience and investment portfolio performance. Net income to shareholders was $87 million, benefiting from favorable interest rate movements in Sagicor Canada and Sagicor Life and strong equity markets impacting our universal life business in Sagicor Canada. During the quarter, our operating segments generated steady new business production, leading to strong new business CSM of $44 million. Annualized core ROE for Q2 was in line with management's expectations at 13.6%.

Now I will give you some more details on the segment financials. Sagicor Canada's new business production of $17 million for the quarter was consistent with management expectations, resulting in new business CSM of $11 million. Core earnings to shareholders of $27 million for the quarter increased 8% year-over-year by higher expected investment earnings. Net income to shareholders of $70 million for the quarter was higher than core earnings to shareholders due to favorable market-related impacts from lower interest rates and strong equity returns. Net CSM in U.S. dollars decreased 2% quarter-over-quarter to $548 million due to the devaluation of the Canadian dollar, whereas net CSM increased marginally on a constant currency basis.

Sagicor Life USA's new business production of $284 million for Q2 was in line with management expectations. Core earnings to shareholders of $6 million for the quarter decreased year-over-year and were impacted by core insurance experience losses in the legacy life block compared to core insurance gains in Q2 2025. Net income to shareholders was also $6 million for the quarter as market experience and other noncore net income were approximately neutral. Net CSM increased 1% quarter-over-quarter to $159 million.

Sagicor Jamaica maintained strong insurance sales in the quarter, supported by significant policy renewals and new business, resulting in net premium growth of 13% year-over-year. Sagicor's share of Sagicor Jamaica's core earnings to shareholders of $10 million for the quarter was driven by higher expected investment earnings from higher interest margins and growth in the commercial banking and investment portfolios. Sagicor's share of Sagicor Jamaica's net income to shareholders was $9 million for the quarter, marginally lower than core earnings to shareholders. Net CSM increased 3% quarter-over-quarter to $308 million, driven by strong new business production contributing $14 million of new business CSM.

Sagicor Life generated $116 million of net premium during the quarter, having maintained strong insurance sales supported by growth in single premium annuities. Core earnings to shareholders were strong at $14 million for the quarter with favorable core insurance experience in both the short-term and long-term businesses. Net income to shareholders of $25 million for the quarter was higher than core earnings to shareholders, driven primarily by favorable interest rate-related market movements. Net CSM was $248 million, a decrease of 7% quarter-over-quarter with organic growth offset by the impact of reinsurance contract modification.

At our head office, other operating companies and adjustments segment, core cost to shareholders were $22 million for Q2, consistent with the prior quarter and total reported cost to the shareholders were $23 million for Q2. With these results, Sagicor remained well capitalized in Q2. The group LICAT ratio was 134%, and our financial leverage ratio was 27.4%. Our book value per share increased to USD 7.65 in or CAD 10.87. We took advantage of some softness in our trading price later in Q2 to repurchase 0.5 million shares for just under USD 3 million.

We are also pleased to announce our 27th consecutive quarterly dividend to shareholders since we've been listed on the Toronto Exchange and third dividend at the higher level of USD 0.075 per quarter or $0.30 annualized.

On that note, I will hand back to Andre to close our prepared remarks.

Thank you, Kathy.

We are pleased to have seen some of the results revert after a slow first quarter, both in terms of insurance experience in aggregate as well as seeing market volatility being favorable, which as much as anything on the interest rate front came from just a particular moment in time at the end of March in terms of mark-to-market. Looking beyond our backward-looking results, we continue to make excellent progress on our strategic initiatives. Our growth strategy in the U.S. received another strong validation in our recent financial strength credit rating upgrade from A.M. Best to A in that market. Local credit ratings are very important in the U.S. market, and we believe that, that upgrade will help open up further distribution opportunities for us as we look to accelerate the growth of that business next year and beyond under its new leadership.

Our Canadian business continues to generate excellent financial returns as we optimize our balance sheet there. And our Caribbean transformation plan enabled by the pending combination of our segment, Sagicor Life and Sagicor Jamaica. That transformation plan is well underway and tracking to add significant value in years to come. As we make progress towards combining those organizations, we do expect we'll start to see more onetime charges and investments in the third and fourth quarters of this year ahead of closing that transaction. And we believe that the investments that we're making this year in that really significant transformation will enable us to drive significant earnings growth in the Caribbean in the years to come.

As we've observed in the first couple of quarters of this year and even in the first half of this third quarter, we may -- we should expect to see continued quarterly volatility around the balance sheet. That just seems to be the world we're in right now. But over the long term, we're very excited about the direction of our core ROE and ultimately, book value creation and total value creation for our shareholders.

So with that, George, I think we're ready to open the line for questions.

That's right. Operator, please open the line for questions.

[Operator Instructions] Your first question comes from Gabriel Dechaine with National Bank Equity.

I have a few questions here. One on the experience -- insurance experience, sorry. There was some improvement overall sequentially after what we saw in Q1. But the U.S. has had a few quarters now of negative mortality, I believe. Can you just give a high-level overview of what you're observing in that block? Is it legacy life annuities or what?

Yes. Thanks, Gabe. If you look at this quarter versus last quarter, kind of the Q1 was a little bit of -- if you flip 4 coins in a row, 1 in 16 times, they're always going to come up tails. You can kind of compare that to Q2 of last year where they all came up heads or in the positive. In aggregate, we were about flat. But you're right, we had negative in the U.S. segment again. The significant majority of that experience in that U.S. segment is around the legacy life block of business that we don't write anymore, and it's kind of a combination of kind of vintage 2016 through 2020 term business as well as some significantly older blocks.

And so you really have to get in and parse it on a block-by-block basis, and we're taking a really deep dive into that. And so as we've talked about in -- on our other calls, we're always looking at our actuarial assumptions. We're taking a very hard look at mortality across the board, including for our U.S. business for Q3 and then maybe that we end up strengthening so that we -- strengthening reserves on that block so that we don't have to be distracted in talking about it every quarter. In aggregate, the annuities business, the book that we put on the business we put on the book in the last 5 years or so as we've shifted to this strategy is in aggregate, more or less in line with the economics and the expectations that we had. And so you really have to get in and look at it on a business line-by-business line basis.

And the reserve adjustment would be CSM reduction perhaps, would that be how it would come through?

Yes. It's either through CSM or through equity. And the way it works is you have to get in on a cohort-by-cohort basis. And so if we knew what the answer was, we'd have put it out in Q2. And we're doing the work for the deep dive for Q3. And we're taking a look at that. We're taking a look at some of the -- we're taking a look at the balance sheet in aggregate. We're taking a hard look at the Canadian business. And with the combination of the Caribbean businesses, we're going to get a chance, whether it's in Q4 of this year or Q1 of next year to completely reset that as a new combined balance sheet, and we're going to take a look at those as well.

Conversely, the annuities persistency seems to have been quieter of late. So it looks like that's -- last year, and I believe the year prior, there was some noise around lapses, but that seems to have been settled out. Is that a fair statement?

Yes. So if you look at what we did last year, we said, okay, here's what's happening as the early stages of the cohorts come up for renewal and you would start to see patterns of behavior with a little bit of negative correlation between how they roll over and the size of the policy. And so we went in and tweaked those assumptions. And now what we're seeing on that is emergence that is more in line on what we had there. And we're tactically, I think, doing a good job of managing that business where, obviously, you want to encourage rollovers, but there are certain times where at some point, it becomes diminishing marginal returns where you're actually better off with the new policy because of the way U.S. statutory works and as the interest rate environment has moved.

Yes. And the annuities sales volumes, is there any connection there that were 15% or so below last year's first half production? Or is it just the rate volatility or market conditions that are causing you to step back a little bit relative to last year?

It's a little bit of all of the above. We're taking a disciplined long-term approach around, okay, what is the -- what are the IRRs? What are -- what's the ultimate ROE of the marginal dollar that we're building to. And so the environment has gotten more and more competitive. And for the time being, we've stuck and we said we're going to put rate in the right place where we're offering good value to policyholders, and we're happy with the returns that we're getting rather than stretching with rate and accepting lower returns as we build the balance sheet there.

And so what we're focused on is getting the pricing on what we're doing now right and then expanding our product and distribution and setting higher targets for next year. You see the run rate. We should still be through that -- well through that $1 billion production this year, if you look at that where we've been for the first 6 months. We have a comprehensive plan that has come with upgrading the balance sheet there. You saw that with the announcement with A.M. Best a few weeks ago and running with the new leadership of that organization to drive that growth next year and beyond because we still see a really significant opportunity to deploy our capital well there.

Okay. And then last one for me. Just the CSM reconciliation, there was a pretty big decline there tied to some reinsurance contract modification. Can you shed some light on that, please?

Yes. I put this under the category of kind of balance sheet cleanup of the Caribbean businesses as we move them towards the combination. And so these are -- these get down into individual matters with individual reinsurers, and we're kind of making decisions that are the right long-term decisions for the ROE looking forward.

[Operator Instructions] Your next question comes from Darko Mihelic with RBC Capital Markets.

So we could be looking at potentially some, let's call it, noise in the next couple of quarters with respect to investments in the Caribbean, maybe some reserve changes and so on. So maybe you can talk a little bit about what -- or maybe it's too early to talk about expectations going into 2027. So my question then is, we have witnessed a lot of volatility in investment results. And it's not just Sagicor. We've seen it across the board. But it does tend to be a bit more volatile for you. So my question is, Andre, have you considered at some point maybe altering the investment strategy a little bit, maybe some curbs or some hedges in place to reduce the volatility? Is that something that's crossed your mind at all with respect to how you operate, especially considering the inordinate impact it's had on your company versus some of the others that I cover. I'm not saying I've heard this from other insurers, but I'm curious if this is a thought and it's not necessarily just to remove the volatility. Maybe it's just even to remove some of the tails. So I'm very curious on your thought process with respect to your investment program.

Well, thank you, Darko. And it's a really important question. It's a great question. And the answer has it occurred to us. It's a resounding yes. And this is something that we discuss as an executive team, and it comes up at the Board level. And particularly, where at the Board level, we have representatives from our big shareholders who take this volatility themselves. And so I think your observation is correct with respect to IFRS 17 or at least I'd agree with it, that with IFRS 17, there's volatility for all life insurers. And as we have benchmarked ourselves against the bigger public peers here, our volatility is more pronounced. Now that is volatility in the -- based on our analysis in the statistical use of the word and not a euphemism for bad results because if you look at the aggregate of these -- whatever we're up to now, 14 quarters, I guess, under IFRS 17, our actual return versus reported core is at least as good, if not, and in some cases, better than the returns on that ratio to other public life insurance companies.

And so -- we do -- we have a couple of hypothesis on why it's the case that we are more volatile. And it's probably a combination of things, but we are more heavily tuned proportionally to old-fashioned balance sheet life insurance businesses than the big 4 Canadians who have, as you know, and you spend lots of time with them, have evolved to have more of their business in capital-light EBITDA type businesses, and that's what's enabling them to push up our ROEs into the 20% range. And so some combination of that and just simply kind of the economies of scale, the relative size of head office rather than relative to the operating entities. But it's not definitive, and we can observe it that we can say, okay, our reported net income tracks over a long period of time to your core in a pretty satisfactory way, but we're seeing a lot of volatility.

And so the question becomes what could you do to mitigate that? And you talk about tails and potentially, tactically, you could talk about tails. But fundamentally, what you can do is shorten up on your assets back in capital and make your assets back in capital that are not going to move more or less in line with your liabilities if you're getting ALM right, shorten it up, get less volatility on that and become more indifferent or less correlated on a quarterly basis. And what that basically means is taking away risk and taking away the tenor premium on your capital and ultimately reducing your net income over a long period of time, whether it's your core net income or the aggregate of the actuals that fall out.

So we are playing with a North Star here of generating strong long-term return on equity. And so we are making a -- we've made the strategic decision for the time being that we're going to optimize the economics for how much book value generation can we get over the next 2, 3, 4 years and beyond rather than shortening up and feeling it a little bit more comfortable. And so you're accepting that if you get a tougher mark like you did in the fourth or fifth week of March, your book value dips down to $10 a share and then market normalizes and you come back up to $11. But really, what we're trying to do is say, okay, as we draw that book value generation out over a long period of time, how do we optimize value for long-term shareholders.

Thank you for the thoughtful response. It's an interesting one and one that I have to think about as well because we do see even amongst just the 5 Canadian lifecos, let's say, we definitely see a difference in positioning and in returns, right? So -- and volatility. So it's all connected. I appreciate the response very much.

Your next question comes from Trevor Reynolds with Acumen Capital.

I think most of my questions have been answered. But just is there any update on when you expect the Caribbean transaction to be completed? And maybe just anything you can share on kind of the magnitude of noise that you expect over the coming quarters here and how you guys will kind of guide as to what to expect here over the coming quarters?

Yes. Thanks, Trevor. We're still pushing to get it closed in Q4 if we can, but we may -- it may end up going into the first half of next year. Because this is fundamentally an internal transaction, we can be nice to ourselves, so to speak, and close it on the first day of a quarter, which really, really simplifies things from an accounting point of view. And so if we're not ready to go September 30, it moves the transaction into next year. And so with that, it's hard for us to say -- it's hard for us to give specific guidance around the noise and when it shows up because if a lot of the transaction costs and investments that we're making happen in the same quarter that we closed, then we can -- it kind of all goes into the wash of the closing of the transaction, and we're going to have all sorts of significant noise to look through, whereas we are marching full speed ahead with this transformation kind of irrespective of when it's going to close.

And so if it moves into next year, you might start seeing some of these charges that show up in Q3 and Q4, which are good investments. But I wouldn't want to give guidance on how much because we don't even know yet which ones that they'd be. So I think we're kind of -- we're sticking to the story that we told the last couple of calls where we've said 2027 once the transaction closes, we see a path to the value creation. We see the path to being in a kind of 14% ROE target next year and then going to 15% in 2028 as these strategic initiatives really, really kick in. And so we're not modifying that and still comfortable with it given even this quarter, we're closer to 14% than we are to 13%. And so really trying to keep our eye on the ball for the results next year.

Great. And then in terms of realizing the synergies on that transaction, like will -- do you expect to realize that? Maybe just kind of the timing of what -- of how you see that playing out?

I think it's going to be a process that builds over a couple of years. Some of the stuff would be -- some of the stuff would even start showing up as soon as this year. It will be tough to parse through because you're spending money on the investments to get them. But we've got some -- we have some quick wins already and more will come through in '27. And then a lot of the things that are more around process reengineering and consolidating on more modern technology is realistically goes into 2028. And so that's all built into our pretty meaningful ROE growth guidance from '27 to '28.

There are no further questions on the phone line. I will turn the call back to Mr. George Sipsis for some closing remarks.

Thank you, operator, and thank you, everyone, for joining the call today. As usual, a replay of this call will be available for 1 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. Have a great day, everyone.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.

Good morning. My name is Ina, and I will be your conference operator today. At this time, I would like to welcome everyone to Sagicor Financial Company's First Quarter 2026 Earnings Call. [Operator Instructions] Mr. George Sipsis, EVP, Corporate Development and Capital Markets, you may begin your conference.

Great. Thank you, operator, and hello, everyone. Thank you for joining us today to discuss Sagicor's First Quarter 2026 results. Our disclosures are available on our Investor Relations website at investors.sagicor.com, which include 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 the 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 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.

Thank you, George. Good morning, everybody. Thank you for joining us to talk about our Q1 financial -- and I'd also like to acknowledge and thank our shareholders who joined us earlier this week in Barbados for our Annual General Meeting. This is a bit of an unusual quarter because while so many of our strategic initiatives are trending in a very positive direction. In Q1, for the first time really in a couple of years, our core earnings were measurably softer than the core run rate of our business.

Our core earnings to shareholders of $25 million included $8 million of negative core insurance experience substantially all of which was due to mortality in our North American segment, which we often observe in our first quarter. However, unlike -- like last -- unlike last year where this was mitigated by insurance gains elsewhere in our system -- this time, it brought our core earnings below our best estimate of our run rate.

Absent that mortality, we estimate that we would have had a core ROE of approximately 13%. We also observed some adverse mark-to-market movements across all of our segments as asset prices broadly declined globally in Q1. And as we're net long assets, that effect is more than the revaluation of our liability. The majority of these negative marks are fixed income instruments, which continue to perform on a fundamental basis, meaning a $1 or foregone income in this quarter will mean $1 of more income in later periods.

In addition, we took some charges in the Caribbean as we settle open issues and drive forward on our integration plans as we look to give our new public holding company that will hold all of our Caribbean assets the best start that it can have in 2027. So let's have Kathy give a detailed financial review of a few ones, and then we can come back to me. Kathy?

Thank you, Andre, and good morning, everyone. As Andre mentioned, Sagicor's first quarter 2026 core earnings to shareholders were $25 million. The company's operating segments generated steady new business production, leading to solid new business CSM of $37 million.

Core ROE was 9.9%. When adjusted for core insurance experience losses, core ROE would have been approximately 13%, consistent with management's expectations. Reported net loss in Q1 was adversely affected by $49 million of market experience losses related to lower asset prices in the U.S. and Canadian fixed income and equity markets.

This is partially offset by the mitigating impact of liability revaluation. Q1 was also affected by certain onetime charges related to our Sagicor Life segment as we prepare to merge our Caribbean subsidiaries. Now I'll give you some more details on the segment financials.

Sagicor Canada's core earnings to shareholders of $23 million for the quarter decreased 9% year-over-year, driven by insurance experience losses from higher-than-expected mortality. Net loss to shareholders of $1 million for the quarter was lower than core earnings to shareholders due to unfavorable market-related impacts from higher interest rates and negative equity returns.

New business CSM generated $10 million in the quarter, but net CSM decreased 2% quarter-over-quarter in U.S. dollars to $557 million due to a devaluation of the Canadian dollar. Sagicor Life's USA's new business production of $298 million was another solid quarter of production and in line with management expectations.

Core earnings to shareholders for the quarter of $5 million decreased year-over-year and were impacted by adverse mortality experience similar to what we saw in Canada. Also, like our Canadian segment, net loss to shareholders of $7 million for the quarter was lower than core earnings to shareholders due to adverse market experience from higher interest rates partially offset by favorable changes in actuarial assumptions.

Net CSM increased 5% quarter-over-quarter to $158 million. Sagicor Jamaica achieved robust insurance sales resulting in 7% net premium growth year-over-year. Sagicor share of Sagicor Jamaica's core earnings to shareholders of $10 million for the quarter was unchanged from year-over-year due to improved core net investment results from growth in loan and investment portfolios, offset by a modest amount of residual Hurricane Melissa related experience recognized in the quarter.

Sagicor's share of Sagicor Jamaica's net income to shareholders of $6 million for the quarter was lower than core earnings to shareholders due to timing differences between the payment and recognition of asset tax throughout the year. Net CSM increased 2% to $298 million, driven by strong new business production.

Sagicor Life's core earnings to shareholders of $10 million for the quarter decreased 7% year-over-year as a result of favorable mortality experience -- unfavorable mortality experience -- sorry, favorable mortality experienced in Q1 2025 that did not repeat this quarter. Net loss to shareholders of $11 million for the quarter was lower than core earnings to shareholders due to unfavorable mark-to-market impacts from interest rate movements and nonrecurring reinsurance-related costs.

Net CSM was $268 million, an increase of 2% quarter-over-quarter driven by new business CSM of $8 million. At our head office, other operating companies and adjustment segment core cost to shareholders were $22 million for Q1, consistent with the prior quarter. Net cost to shareholders were also $22 million for Q1.

Even having been through the noticeable asset price devaluations in the quarter, Sagicor remained well capitalized in Q1. The group LICAT ratio was 134%, and our financial leverage ratio was 27.5%. Our book value per share was USD 7.18 or CAD 10.01. Our deployable capital or shareholders' equity plus net CSM to shareholders was $2.1 billion or USD 15.47 per share or CAD 21.57 per share.

We are also pleased to announce our 26th consecutive quarterly dividend to shareholders since we've been listed on the Toronto Stock Exchange. And second, dividend at the higher level of USD 0.075 per quarter or $0.30 annualized. On that note, I will hand back to Andre to close our prepared remarks.

Thank you, Kathy. I'm excited to talk about our strategic initiatives, but just to put a fine point on the financial piece. Just as we had asked our investors not to annualize the $46 million of core net income that we delivered in Q2 last year to 17% or 18% ROE run rate. We would advise against annualizing this quarter's $25 million figure. We believe our true ROE run rate today is approximately 13% and that really there's a little long-term information value in the quarterly oscillation around that figure.

Similarly, while we did have adverse market mortality in the quarter, our best estimate is that if Q2 closed today, the market volatility would be mildly positive in our favor. We do continue to make excellent progress on our strategic initiatives to drive our return on equity expansion into 2027 and beyond. You have seen in April, we're very pleased to announce the hiring of Eric Sandberg as President of our U.S. subsidiary, which was an addition that we've been hinting out for a while.

Eric joined us from National Life where he was the CFO, where he was the CFO and Chief Risk Officer. National Life is a $60-plus billion U.S. insurer top 10 annuity provider in the market. And so Eric brings to us a lot of that expertise and discipline and he's going to be laser-focused in helping to drive our U.S. team to even faster growth than we've exhibited over the last five years.

With the addition of our conviction on our U.S. growth opportunity is as high as it's been since we've launched our annuity strategy 5 or so years ago. In the Caribbean, we're also making excellent progress in this case, towards merging our Caribbean businesses. While we believe that -- the transaction will close towards the end of the year due to all the approvals involved.

We're hard at work now to reengineer our business processes, upgrade our technology stack, focus our vendor relationships and redesign our entire organizational structure in anticipation of closing. When completed, we will have radically transformed our businesses across the Caribbean, resulting in a better customer experience, which will solidify our competitive position, and improved employee experience and significant margin enhancements. We do intend to further -- to incur some further costs in 2026 in anticipation of this merger, and all of these will be in service of a higher ROE going forward.

So -- all of this gives us strong conviction on our growth prospects and the path ahead, which enabled us to reiterate our 2027 and 2028 targets for 14% and 15% core returns on shareholders' equity, respectively.

With that, operator, ready to open the lines for any questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions]. And your first question comes from the line of Gabriel Dechaine from National Bank.

I got a couple of questions. So firstly, on the mortality experience in Canada, your obviously flagging that. We're 1.5 months into Q2. Have you seen any normalization of that trend or improvement, suggesting that what we saw in Q1 is idiosyncratic? .

Thanks, Gabe. We don't get our information quite as real time as that on mortality as they roll in. There tend to be a lag of several weeks. So it would be too early to have a view on that. As we have looked particularly at the Canadian business, we've only owned it for two years, in each of the prior two years we had negative mortality in Q1.

In 2024, it actually came back and was quite positive in Q2. Well in 2025 Q2 was negative again. So we still think that we're appropriately reserved, but just due to the size of the book, there's going to be some oscillation around that.

And how -- what segment would have been in like some more small number of high net worth or more broad-based type cases?

It's pretty broad-based. Our book is a large number of names relatively smaller exposure, and we have -- we significantly reinsure it on a no-names basis.

Got it. Switching over to the U.S. It sounds like it was also mortality, but I was reading the release and it sounded more like described as seasonal factors. I'm just wondering was meant by that -- just for clarification.

Seasonal also means mortality in the U.S. sense. And so just to...

Flu season that thing?

Yes, indeed. And this is something that is described and hotly debated among the insurance community. A lot of the primaries reinsure a lot of the mortality risk. So if you want to read about this, you can go to the reinsurers disclosure, RGA, for example, does talk about this effect.

With the U.S. is, again, as the fourth year in a row where we've had negative mortality in Q1. In two of the three years, we were quite positive in Q2 in the U.S. So in 2023 and 2025, we had very positive emergence. In 2024, which was backwards of what I just told you from ivari, the negative piece persisted into Q2. So again, -- these are big numbers relative to our quarterly income statement. But if you look at the overall liability profile, we think we're properly reserved -- and we just see this as noise.

Yes. Is there any way you can maybe address that in the line item sense that your experiences -- you have some patterns there. So maybe it goes through the expected insurance earnings -- and then we have some sort of a seasonal expectation where Q1 is the low watermark typically for the year and it ramps up from there on out as opposed to going through an experience outline...

As a nonactuary, you'd love to do that because if you looked at other principles that you have. If you have onetime items, you kind of -- you take it and you amortize it over the period. I think what we've been told is that the pretty black and white principle of IFRS 17 is that when you have insurance experience outside of market experience, when you have insurance experience, you take it now, and you don't get to amortize it.

So if you go back and you look at the supplement and look at our insurance experience, you'll see that three years in a row, Q1, going back to 2023, three years in a row, Q1 was the lowest quarter.

Okay. Last one, just on expenses. On the last call, I believe you were talking about the -- this year being more of an investment year to ultimately get you to that mid-teens ROE target. Did we see any of that this quarter? I'm looking at -- does that go through your insurance earnings or there's the other OpEx, which was $112 million, but that's not really a core number, I don't think. So it's -- I don't know what the answer is to my own question, which is why I'm asking you.

Right. No, no. There -- most of what we are referring to there, we believe, is going to run through -- we believe, it's going to run through noncore. Not all of it well -- so if you think about investments that we're making to build, we've just brought on a new executive to run our U.S. business. So that's a definable cost that we'll start seeing running through core in the U.S. business. But if you look at the onetime reinsurance costs, which were noncore, for example, we had a small recapture of a piece of business that we move to another reinsurer, which is net income accretive going forward, but you incur a bit of a cost upfront.

There was another long-standing issue out there with the reinsurer where we added disagreement and -- we've taken a provision on what we believe will be the ultimate settlement. Again, in an attempt to have that balance sheet be clean and pristine for 2027. And so that's what you saw in Q1 going forward throughout the year, as I said in my remarks, we're not waiting in particular on the Caribbean to do all of our restructuring work in terms of bringing the companies together.

It's an unusual situation because ultimately, we control both companies even if we don't -- even if the ownership is disproportional. So we're able to get going on merger integration earlier than what would be usual. And so usually, when you would merge by an entity, you kind of -- you stuff the integration costs into the same quarter as closing, whereas if we start moving -- continue to move ahead of that, we may take through noncore some additional costs in 2026 that normally you would run through as just part of merging a business.

Okay. All right. Well, I look forward to the next catch-up.

And your next question comes from the line of Mike Rizvanovic from Scotiabank.

Just sticking to the mortality. Just wondering -- how would you characterize the magnitude this quarter? I'm just trying to get a sense of is this as bad as it can get in terms of a single quarter of negative mortality experience? And then secondly, is there any way to minimize these types of quarters in future periods?

If you look back at Q1 2024, the mortality piece was, the dispersion was different, but it was quite similar in North America, and it actually had a looking at SLI, it had other negative experience, which was more around policyholder behavior. And so just looking -- if you look through at the supplement [ 20 ] --Q1 had, had negative experience in each of the last three years. And in two of those years, it had gone on to be.

In one of the years, it had gone on to be net positive and the other two, it has been -- one was negative and one was just slightly negative. So all to say that this quarter seems to be at the edge, but not necessarily an outlier in terms of something that you would see once a year. And if you look back again at our supplement, last year, in Q2, we had even more of this in terms of positive emergence of $15 million or $16 million.

So this is volatility that we do believe is a feature of IFRS 17 as opposed to being a bug in the system. And that applies equally to the market volatility piece. I talked about in the prepared remarks that we don't see much information value around it as long as the investments are money good. It's just net income moving through time, and we feel very good about our investment portfolio.

With the market volatility, it would be possible to make a choice and basically by completely taking any sort of market movements out of your assets back in capital, which would mean basically taking your balance sheet in all your segments in your asset back in capital to cash, which would have a couple of point reduction in your expected ROE going forward kind of indefinitely.

And so -- and similarly, right now, we hedge away half of the equity exposure that we have that's kind of an output of our the asset management piece of our Canadian business. And we take a couple of points of reduced ROE just on the basis of that hedge. And so if you hedge the other half, it would be another couple of points of ROE. So we think that our NorthStar here is to generate the best risk-adjusted returns on equity to our shareholders over a long period of time. And we'd rather do so at mid-teens core ROE and core compounding of value while accepting some of this market volatility, then have something in the high single digits that had no market volatility.

Okay. Okay. And then maybe just a quick one on the dividend -- sorry, on the buybacks, a very minimal this quarter. Any updated thoughts on the buyback? I know it's not a priority in terms of how you want to deploy capital. But just with the stock trading below book, any thoughts on maybe getting potentially a bit more aggressive on the buybacks.

Yes. We have -- as you pointed out, we've lightened up on the repurchases just in the last couple of quarters as we have been trying to let the market develop a little bit more liquidity. And you can see the purchases are publicly disclosed, and we've had a little bit of a magic number around the days where the stock was below $9 a share, which hadn't happened much in Q1. And so while we're conscious of wanting to get the market -- give the market the opportunity to develop the liquidity, further we get from both value, the higher the ROE to all the shareholders as we buy it back and sitting here in our position or allowed, we're in a position to have quite a bit of conviction around our forward guidance. And so I think you could infer that the further that we get from book value, the more we're going to lean in to buybacks.

[Operator Instructions] And your next question comes from the line of Darko Mihelic from RBC Capital Markets.

I have a couple of questions, but I just wanted to revisit your answer to Mike's question on mortality. You -- in your answer, you didn't discuss a couple of things I was hoping you would touch on. The first is your risk appetite around adverse mortality -- and if that adverse mortality -- the sensitivity tables you just provide, if this kind of quarter changes that. And then secondarily, you didn't touch on reinsurance, which is always available.

I presume in this market, it's not pricing necessarily very well given the path that you've just discussed. But I wonder if you could just touch on if this kind of quarter kind of makes you sort of reassess your appetite for adverse mortality. And then as an addendum to that, maybe, obviously, I think your ROE target must at some point and at some level, bake into it adverse mortality on a seasonal basis. So sorry for that long-winded question, but I just really wanted to revisit it, Andre, in light of the quarter sort of played out.

Right. And so it's a good question, and this is something that we talked about this week at in the boardroom. The short answer is we're managing this basis on an annual and a longer-term basis. And so this does not change our appetite to assume the level of mortality risk that we have. And that mortality risk has been developed through the risk appetite over the years, and we do -- you can see in the line items, we do carry quite a bit of reinsurance on our book.

And on the Canadian book, in particular, because it is a big old book of business that's been developed with hundreds of thousands of policies. Our -- it's our view that our net mortality experience is not negative in aggregate. It just happens to be negative in Q1. And so if we were managing this business to nail annualized targets on a quarterly basis you might have -- if that was your NorthStar, you might avail yourself of a little bit more reinsurance, and that would cost you with some core earnings.

We're not managing this basis this business on a quarterly basis. We're managing this for the best long-term return on equity. And we think we are properly reinsured and adequately reserved.

Okay. And I just wanted to follow up on a couple of other questions. But first, what fronted the change to the discount rate for your liabilities. It's a bit unusual. We don't hear that too often. I don't think the nature of the liabilities change much often. So if you can just discuss real quick, why the discount curve changed for your liabilities?

The discount change every quarter. And so this is a function of IFRS 17. Like if you think about the old world of IFRS for you would take your asset price movements, which are observable. And then you would almost have a fix or sell through your liabilities to get them to match the asset price movement, precisely, which is why you didn't see this market volatility unless you actually had an asset that went back.

When IFRS decoupled the assets -- IFRS 17 decoupled the assets from the liabilities, it decoupled that, it removed the explicit fixer cell but you're still required to revalue your liabilities using a discount curve every quarter, that is informed by the market movement. And so whereas before it was explicit, you would just have your assets back in capital going up and down through -- usually through OCI -- now you have your assets back in capital going up and down largely through the income statement, plus you have some tracking error where your actuaries have gone out in the U.S. and calculated the liability curve in Canada.

We have one that is prescribed for us every quarter and that revalues your liabilities as well. But as long as you have a net asset position because you have assets back in capital, you would expect your assets to be more volatile than your liabilities.

Okay. Maybe I misunderstood. I'm aware of that liability curves change every quarter. I thought it was the way you guys have made it sound in your written work that there was a change in maybe methodology, for example, that would have shifted the curve -- but it doesn't sound like that's the case. So.

There was one small -- in the U.S., in particular, where the curve is not prescribed. There was one small change in methodology this quarter, where we added one of our asset classes that have been excluded before. And so as we had seen liquid assets becoming a larger proportion of our portfolio, we said even though it's harder to calculate these because they're less observable than the public assets getting to a material portion of the U.S. balance sheet. So we should take an estimate on that and put it into the calculation. So we did do that in Q1.

I see. So it's like a reference portfolio and it's got a wider credit spread. Is that the right interpretation? .

Yes, it is.

Okay. Great. And then so my last question, Andre, is clearly, volatility hit this quarter. That's fine. Should expect some sort of normalization. But it's still -- the question for me is still a couple of things we sort of still stand out. One is it does sound competitive in the U.S. with crediting rates. And the question is, does that do you see that also as something that will ease into the future and maybe this year? And/or are you contemplating other changes like new products or so on to, to sort of improve maybe not just production, but also profitability? Or am I reading too much into the competitive environment in the U.S.?

So the competitive environment is robust in the U.S. Although, I would say we had a pocket in time in Q1 where it appeared less so. A lot of our competitors in the annuity space are affiliated with some of the big private capital pools that have been going through their own private capital in digestion with respect to taking liabilities that allow for redemption. And so in Q1, there was a pocket of time where rates and spreads went up and the competitive environment did not adjust to that. And so the spreads that we earned on our Q1 vintage were actually well above our target, but I'd be cautious. I wouldn't say that's necessarily that something that's going to persist.

I think if you look through in Q2 as spreads have come in even as rates have gone up, that has mitigated itself somewhat. I do think that we are -- we want to continue to grow. We're excited about the opportunity, and that was a big part of bringing in dedicated leadership. He comes from a place that was writing 3x as much annuities in a given year as we were under a broader product set than ours, which has been particularly focused on the MYGA product, the multiyear guarantee of annuity. So we would expect to drive forward with further product diversification. And our goal is to grow that business faster than we've grown it over the last four or five years.

Okay. That's helpful. So the pathway to the higher ROE is predominantly normalization of mortality from here plus continued growth in the U.S.? And roughly, how do you characterize that sort of, call it, waterfall of improvement in ROE. Is it like 90% mortality improvement or normalization and just 10% sort of growth in the business? Or just give us a rough guideline of how we get back to your typical 13% to plus, I would say, ROE from here?

So if you asked us for an estimate of Q2, there the best estimate would still be in the ZIP code of that 13% number. And that would, over the course of one quarter be more or less 100% the reversion to the mean on mortality. As we see the ROE growth potential into the mid-teens and pushing through that. It is evenly dispersed between the growth of the U.S. balance sheet where we think on a marginal basis that we are adding assets at a high-teens structured ROE and getting to economies of scale as gross margin grows faster than the SG&A.

And so that's a portion of it. We think there is a meaningful uplift in the ROE of the combined Caribbean business going forward. That is more or less an equal part to it over the next two years or so. And we also think that there is the opportunity. I haven't talked a lot on this call, but to take some of the thinking that we've done on asset allocation in our U.S. business bring all of that to the Canadian balance sheet, which because of its size is quite tweaky and we think there's a point or 2 in aggregate of ROE with that opportunity as well. So all of those things are not Q2 issues. This is why we're focusing on 2027 and 2028 as we tweak up the guidance beyond what our current best estimate is, which is around that 13% number.

Great. That's very helpful. Thank you, Andre. Have a great long weekend.

All right. Thank you. You too.

And your last question comes from the line of Trevor Reynolds from Acumen.

Yes, I think we've -- you touched on it quite a bit. But in terms of forecasting for future Q1s and the mortality that we've seen in Q1 for the last three years? Is it not safe to be assuming that we'll see this kind of every Q1 and potentially the offset in Q2.

I think it would be, Trevor. So if I was doing a quarterly forecast model, and I do focus myself internally on the annual numbers. But if I was putting together a forecast model for this company on a quarterly basis, I'd figure out what I wanted to do for the annual ROE and then I would notch it down by some number for Q1. And I would actually notch Q2, Q3 and Q4 up proportionately and say the one thing we can observe with significance is that Q1 is the negative outlier, but then I would notch the other ones up.

Yes. Okay. That's fair. And then in terms of -- I think you mentioned it in your pre remarks that kind of where the market sits to today in terms of the mark-to-market, it's probably safe to assume that we see a big bounce back in terms of that in Q2 given where things sit today?

Yes. I mean it's quite easy to observe where things sit today. The equity piece of the volatility, right? And so I think the equity volatility was $10-ish million of negative in Q1 and equity levels are higher now than they were at the end of December. And so we'd expect that to if it closed today to reverse and more.

But obviously, that's subject to the whims of all the geopolitical and all that. Fixed income is a little tougher because you can observe data points. Broadly, you would say fixed income maybe as flat to negative-ish, although our investments, people might tell you something a little bit different based on some of our names. But if you ask for an estimate today, I would say that the positive piece of -- from the equity would overwhelm the flatness of very slight negativeness of fixed income.

Great. And then just lastly on the lingering impacts from Hurricane Mellissa, do you think that's pretty much worked its way through. And -- and maybe what -- I know you mentioned previously like probably about a $5 million overall impact net of reinsurance. Is that still like -- is that still kind of the right range?

Yes, as we're taking our running tally, we -- the provision and Kathy, if you're on, I think the provision to us this quarter was about $1.5 million, $1 million to $1.5 million. And our -- the total is still less to us than $5 million.

Yes. That's correct. It's around $1 million, slightly less than $1 million actually for this quarter inside the core. Yes, after tax. .

Right. Yes, right. Okay.

That ends the question-and-answer session. I will now hand the call back to Mr. George Sipsis for any closing remarks.

Thank you, operator, and thank you for joining the call today, everyone. That concludes today's Q1 2026 results call. 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.

And this concludes today's call. Thank you for participating. You may all disconnect.

Good afternoon. I am Mahmood Khimji, Chairman of Sagicor Financial Company Ltd. Welcome to the 2026 Annual and Special Meeting of Shareholders. The meeting is held in a hybrid format, both in person and live via webcast.

I'll now ask the Corporate Secretary, Althea Hazzard, to share today's agenda and procedures.

Good afternoon. Please set your phone to silent if you have not already done so. The Annual and Special Meeting of Shareholders will start with the Chairman's opening remarks, followed by a financial overview from the President and CEO, Andre Mousseau. Next, each business item will be voted on and discussed as needed. Afterwards, voting closes and a shareholder Q&A session begins.

The Chair will report voting results at the end of the meeting. If you are a registered shareholder or proxy holder attending virtually, you can submit comments or questions via the messaging platform and vote using the electronic ballot, which is now available. Please submit your comments or your questions in advance of the Q&A session.

Voting for the virtual meeting. If you are registered shareholder attending virtually and you haven't given your voting instruction, you can vote your shares at any point during the meeting's formal business by using the electronic ballot displayed on your screen. Proxy holders of record participating virtually may also cast their vote in the same way. The polls will stay open until right before the end of the formal business portion. If you have already voted your shares before the meeting began, your vote has been counted by the company's scrutineers and there is no need to vote those shares again during the meeting unless you want to revoke or change your vote.

To those physically present, if you are here, you would have received a ballot when entering. The Chair will announce when to vote on each item, but you may use your ballot any time while polls are open, Polls close before formal business ends. Please stay seated and your ballot will be collected. Again, if you voted before the meeting, your vote is already recorded unless you wish to change or revoke it. Final results will be posted on the Investor Relations period or website and filed under the company's profile on SEDAR+ at www.sedarplus.ca soon after the meeting.

In relation to shareholder questions, during the formal business of the meeting, we will address relevant questions concerning the items of business currently under consideration. Questions submitted via the online messaging platform pertaining to agenda items will be responded to accordingly.

For attendees present here at the Hilton Barbados Resort, there will be opportunity to pose questions related to specific business matters at designated times. Questions unrelated to official agenda will be handled during the question-and-answer session following the formal proceedings. To ensure equitable participation, we kindly request that each individual limit themselves to two brief questions or remarks. Should time constraints prevent us from addressing any questions during the meeting, both the questions and the company's responses will be posted on our website shortly thereafter.

Please note that when comments or questions are submitted online, the legal name of the shareholder or proxy holder may be announced before the question is addressed. To those asking questions in person, remember to state your name and, if applicable, the name of the shareholder you represent as a proxy or corporate representative speaking.

Questions and comments deemed inappropriate, and therefore not addressed, may include matters irrelevant to the company's business on the annual and special meeting, references to nonpublic information about the company, personal grievances, derogatory remarks of individuals or content considered otherwise unsuitable, repetitive inquiries or items determinedly out of order or not appropriate for the conduct of the Annual and Special Meeting addressed by the Chair or the Corporate Secretary in their sole discretion and reasonable judgment.

If we encounter any technical difficulties in the webcast, during the course of the meeting, please remain logged on and we will have the matter addressed as soon as is practicable.

Finally, I would like to remind everyone that there may be forward-looking statements made and non-IFRS measures discussed during today's meeting. These forward-looking statements are, unless otherwise noted, given as of today's date and involve risks and uncertainties discussed in our filings with our securities regulators. A number of factors and assumptions were applied in the formulation of such statements, and actual results could differ.

Non-IFRS measures are discussed in our management's discussion and analysis for the year ended December 31, 2025. For additional information with respect to forward-looking statements, factors and assumptions and non-IFRS measures, we direct you to Sagicor public filings.

I now turn the proceedings over to the Chair of the meeting, Mahmood Khimji.

Thank you, Althea, for outlining today's agenda, procedures and guidelines. The meeting will now come to order.

I would like to introduce the members of the Board of Directors of the company and executives who are with us today. On my far left is Mr. Peter Clarke; next to him, Mr. Reza Satchu; The Most Honourable Dodridge Miller; Ms. Kathryn Jenkins, Group Chief Financial Officer; Mr. Andre Mousseau, Director and President and Chief Executive Officer. On my immediate right, Ms. Althea Hazzard, Corporate Secretary; Dr. Archibald Campbell, Director; Sir Hilary Beckles, Director; Mr. Alan Ryder, Director; and Mr. Monish Dutt, Director.

My fellow directors who are also joining us virtually today are Mr. Gilbert Palter, The Honorary Keith Duncan, Ms. Cathleen McLaughlin, Mr. Dennis Harris. We have an apology for the absence of Ms. Aviva Shneider.

We will turn to the formal business of the meeting, after which there will be time for general shareholder questions. Althea Hazzard, the Corporate Secretary of the company, will serve as Secretary and record the proceedings of the meeting. Christopher de Lima and Rebecca Prentice from the TSX Trust Company will act as scrutineers. Voting at today's meeting will be by ballot as this best facilitates a hybrid meeting format.

We will now proceed with the meeting. This year, Sagicor used notice and access to provide its annual financial statements and meetings materials. The notice of meeting and management information circular are available on Sagicor's website, SEDAR+ and in the Documents tab if attending virtually. Shareholders of record as of March 24, 2026 received a mailed proxy or voting instruction form. TSX Trust Company has confirmed that the meeting notice and proxy form properly set to shareholders.

The preliminary scrutineers' report confirms that enough shareholders are present or represented by proxy to form a quorum. With proper notice given, the meeting is now officially constituted for business. The scrutineers report will be included in the minutes.

I will now turn to Andre Mousseau, President and Chief Executive Officer, who will provide a review of the financial results.

Thank you very much, Chairman, and good afternoon, everybody. It's a pleasure to be here at the lovely Hilton Barbados, and it's wonderful to see many of our old friends and colleagues and shareholders here today. And thank you, each and every one of you, for taking the time to join us at this important annual piece of our governance process.

I'm going to quickly take you through a summary of Sagicor's financial performance in 2025 and give a little bit of direction for this year and going forward. This is on me to click. Apparently I cannot see. Please just disclaimer carefully.

Having done that, 2025 was, by all measures, a banner financial year for the company. The most important metric that we track is core earnings to shareholders, and that number outperformed even the most optimistic projections, We delivered over 50% growth over the prior year of USD 142 million. It was quite extraordinary performance. Sometimes all things go well at once, and we've talked about in a lot of our investor discussions through the release of our financials.

We did benefit in 2025 both from the operational improvements, which we as a Board and executive team have been working on. We also simply had a good fortune of positive emergence through our insurance portfolio. Being a life insurance company and being very much on various sorts of risk, sometimes that risk takes the form of underperformance. Sometimes it takes a form of better performance than plan, and that certainly was the case in in 2025.

And so a metric that we cover and focus on very carefully, which you'll hear repeated on, is the core return on equity to the shareholders. In this year, we delivered over a 14% return on equity. I think absent the positive fortune that came from our long-term life insurance portfolio, that number would have been more like 13%, but still by any measure an excellent outcome and really a validation of all of the work that we have been doing.

Running through the other metrics here. We continue to grow our book of business through new insurance sales through all of our segments. Shows up on the pages, CSM, or new business contractual service margin. which is a measure of the future profitability of the business that we sold in the year continued to be robust. Our net income to shareholders inclusive of market-driven volatility was still a robust $67 million. We continue to grow our book value per share. We continue to grow the measure of the worth of our book of business, which is what shareholders' equity plus net CSM to shareholders per share is.

And we continue to be robustly capitalized as measured by the life insurance capital adequacy ratio and appropriately financially capitalized in terms of a leverage ratio, which is the measure of how much debt we have proportional to our total capital well within the guidelines that we set out. And so strictly through a financial lens, 2025 was a resounding success.

And you'll see here, for those of you who come every year, some common content and two prior presentations. And that is on purpose. First of all, we are a life insurance company. Our strategy should not be changing every year. Second of all, I think it's quite useful to come back to the same measures and show that accountability year-over-year. And as we look at our business through the lens of the transformation that we have undertaken since 2019 when Sagicor raised all of its capital and set out on the new direction to grow.

Taking that 6-year lens, we really have transformed this company. And so whether you're looking at total assets, which have grown nearly to 3x what they were in 2020 or 2019, the like-for-like profitability over doubling the value of the insurance book that accrues to shareholders looking through the different accounting treatments and significantly expanding our assets in invest-grade jurisdictions. We continue to press forward on a really robust transformation of this company.

We have been very pleased to be able to share in this progress with you, with our shareholders. When we announced our full year results for 2025 back in March, for the third year in a row, we delivered a meaningful increase in the shareholder dividend. It is something that we aspire to continue to do going forward, and it gives us great pleasure in having the ability to share the fruits of our labor with all of our partners in this business and shareholders.

And again, since we raised that $0.5 billion or so back in 2019, we've delivered over 40% of that back to the shareholders in terms of dividends. And we have further increased the return of capital to shareholders by selectively and very accretively repurchasing our shares. And so as we continue to keep a focus on growing our risk-adjusted returns on equity into the future, we're all very minded that for the here and now we're going to continue to allow our shareholders to participate in that growth with us along the way.

And we are making progress in terms of creating a robust trading market. This chart would go back to the start, scooching up to see my screen, of 2023, which really marked a milestone period in terms of our deployment of the capital that was raised all the way back in 2019 with the acquisition of the fourth pillar of our business, so to speak, which is our Canadian subsidiary. And so if you look at where our share price was when that transaction closed in the fourth quarter of 2023, we have more than doubled our share price.

As I've said, on a cumulative basis, we've increased our dividend significantly. And we are starting to see better and better liquidity, which benefits all of the shareholders, and in particular those who want to participate in the market, whether it's by selling shares or having the opportunity to buy new ones. So this story is not over, but it's certainly trending in the right direction.

So I've spoken about the financial performance. But very importantly, right at the end of 2025, we made a keystone announcement for our strategy. And you've heard me talk over the years about acting as One Sagicor and working as a unified group. After quite a bit of discussion and work with all the various parties involved, in December, we announced the creation of Sagicor Group Caribbean, which really is the logical conclusion of all of the work that we have done over the years to have Sagicor act as a single entity and to take advantage of the critical mass and all of the scale that we enjoy in all of our Caribbean markets.

And this is a logical conclusion, I'd say, of the journey that Sagicor undertook some 20 years ago when we entered the Jamaica market in force. And we couldn't be more excited about the prospects here. So we are forming a new company. So Sagicor Group Caribbean only exists notionally today as an idea and perhaps a company that's been formed in the lawyer's office. It doesn't have operations yet. And Sagicor Group Jamaica and Sagicor Life Inc. and its subsidiaries will both form the pieces of Sagicor Group Caribbean, which will inherit the public listing that the Jamaica Group currently enjoys.

And we'll have a unified shareholder base, and that unified shareholder base is critical for us to enjoy the ability to pursue all of the avenues of growth and efficiencies together as a single organization. And so as Sagicor Financial, we will go from owning 100% of Sagicor Life and 49% of Sagicor Group Jamaica to owning approximately 60% of the combined Caribbean entity that we believe is very well positioned for growth.

We have talked about the desire and our ability to transform this company in the manner in which it does business through the use of technology. Having the critical mass and having the agreement that all of Sagicor across the Caribbean will work together, will be on common platforms, have common practices, benefit from common best practices and the very best of the leadership from the combined organization is going to unlock a tremendous amount of value.

And we have conviction that our employees and our team members are going to feel it and we're very energized by this already. Our policyholders will feel it as we are able to make investments with this critical mass in digital technology that will make it easier and easier to interface with us throughout the Caribbean. And as shareholders of this business, we have conviction that this will unlock a trajectory of growth of net income and returns on equity and position us extraordinarily well for the future.

This is a complex process. The Jamaica Group is a publicly listed entity. We are subject to fulsome and collaborative regulation everywhere we operate and one must ask permission appropriately. And so we'd expect this transaction to close towards the end of this year. But we're not waiting for the financial close of this transaction to start working together, and I look forward to sitting here on the stage next year and telling you about all the progress we'll have made in truly transforming our Caribbean Group.

And just as the Caribbean has always been key to Sagicor's history and strategy, the creation of a single Caribbean company to unlock the ability to grow forms one of the three cornerstones to the initiatives that we have to increase the return on equity for all shareholders. Front and center, what we've talked about is the creation of a Caribbean champion, a true champion through the merger of our two subsidiaries.

In addition to that, we have robust initiatives to continue to grow our net income in both our Canadian and American platforms. Our Canadian business is a solid life insurer, has brought stability and profitability to us. And we believe that there is some incremental net income that we can get by applying some of the asset management and investment banking that we've used in our American subsidiaries and bring that to the Canadian market.

You would have also seen just in the last months that we've brought onboard a new executive to lead our U.S. business, and we're very excited about the ability to continue to scale our U.S. platform in a market that is not only investment grade but provides us with the opportunity to continue to grow and compound our capital at exceptional risk-adjusted returns.

I talk about return on equity and these risk-adjusted returns just as one of the lenses through which we, as a Board and as an executive team, can measure value creation over time. And if you think about each of the three initiatives that I've just talked to you about, we believe that any one of them could add between 1 and 2 full percentage points of return on equity to shareholders over the next 2 years to 2028. We have committed to our shareholders to a target of a 14% core return on equity to shareholders in 2027 and 15% in 2028, and we have internal targets that are even more robust than that.

But having done so, we would be in a position to unlock significant shareholder value for this enterprise, in addition to have created a better functioning and more stable operation for the company indefinitely.

So this is a repeat slide. Other than 2026 and 2025, we've been preaching better as one and the need to embrace change for years. And what I've talked about here in the Caribbean is acting on that. And so I think we have had a unity of sense of purpose towards all these initiatives, and we're really, really excited to keep working on them and going forward and translating it into growing the return on equity as a measure of growing our value to you, the shareholders.

So I'd like to thank shareholders in advance, for those who have submitted questions and will ask, and I look forward to that engagement. But in the meantime, that does conclude, Chairman, my remarks.

Thank you, Andre. The first matter on the agenda is for the shareholders to receive the company's audited consolidated financial statements the year ended December 31, 2025 together with the notes thereto and the independent auditor's report thereon, both of which can be found in our annual report. The 2025 annual report is available to all shareholders through the Investor Relations page of our website and on SEDAR+. The annual report is also available in the Documents tab on the left-hand side of your screen. Copies of the annual report were also available at the entrance to the meeting room.

I invite shareholders or proxy holders who are physically present to ask any questions which relate to the 2025 audited financial statements. Madam Secretary, have we received any online questions related to this item of business?

No questions online.

Are there any questions in the room related to the financial statements?

In accordance with the Bermuda Companies Act and the company's bylaws, the audited financial statements are presented to the meeting, but no other action is required with respect to them.

The next matter is the election of our directors. The second item of business is the election of the directors of the company. The management information circular for the meeting lists the 14 director nominees. The nominees identified in the management information circular for election as directors are: Andre Mousseau, Sir Hilary Beckles. Dr. Archibald Campbell, Peter Clarke, The Honorable Keith Duncan, Monish Dutt, Dennis Harris, Cathleen McLaughlin, Most Honorable Dodridge Miller, Gilbert Palter, Alan Ryder, Reza Satchu, Aviva Shneider and Mahmood Khimji.

I ask a shareholder to move to formally nominate as a director each of the proposed director nominees named in the management information circular for this meeting for election as a Director of Sagicor Financial Company Ltd, each to serve until the next Annual Meeting of Shareholders or until their respective successor is elected or appointed or until their office is otherwise vacated in accordance with the company's bylaws. Thank you.

I ask a shareholder to second this motion. Thank you.

As no notice of additional director nominees was received in accordance with the company's bylaws, I declare nominations closed. I ask a shareholder to move to elect each of the 14 named individuals as directors of the company. Thank you.

I ask a shareholder to second this motion. Thank you.

I invite shareholders or proxy holders who are physically present to ask any questions which relate to the election of directors. Madam Secretary, have we received any online questions relating to this item of business?

Chairman, no questions online.

Persons voting at the physical meeting are invited to use the ballot received to cast their votes on this item of business. As a reminder to shareholders and proxy holders voting online, to vote on this item of business, use the electronic ballot on the left-hand side of your screen. And under item #1, you will find the names of the 14 nominees for election to the Board of Directors listed in the management information circular.

For each nominee, you may vote for or withhold voting. As previously noted, the results of the voting will be shared later in the meeting.

The next item of business is the appointment of the company's external auditor for the next year and authorizing the Board of Directors to fix their remuneration. In 2025, the Audit Committee conducted a comprehensive request for proposals process in respect of the external audit services. The Board on the recommendation of the Audit Committee determined to propose PricewaterhouseCoopers Canada for appointment as auditor of the company. Prior to this, PricewaterhouseCoopers Barbados served as the auditor of the company since 2019 and, before this, as auditor of Sagicor Financial Corporation Ltd.

Full disclosure of the change is provided in the management information circular. The process followed complies with the requirements of both Canadian securities laws and the Bermuda Companies Act. If appointed by shareholders at this meeting, PwC Canada will become the successor auditor of the company in place of PwC Barbados.

I ask a shareholder to move that PricewaterhouseCoopers Canada be appointed as the company's external auditor until the next Annual Meeting of Shareholders and that the Board of Directors be authorized to fix the auditor's remuneration. Thank you.

I ask a shareholder to second this motion. Thank you.

I invite shareholders or proxy holders who are physically present to ask any questions which relate to the appointment of remuneration of the auditor. Madam Secretary, have we received any online questions relating to this item of business?

Chair, no questions relating this item.

To vote online on this item of the business, use the electronic ballot on your screen, and under item #2, you may vote for or withhold in respect to the motion. Persons voting at the physical meeting are invited to use the ballot received on arrival to cast their votes on this item of business.

The next item of business relates to the company's long-term incentive plan, the LTI Plan. The purpose of the LTI Plan is to promote a greater alignment of interest between the directors, officers and employees of the company and our shareholders. As set out in the management information circular, the long-term incentive plan is subject to Toronto Stock Exchange rules.

Shareholders are being asked to approve an ordinary resolution confirming and approving the adoption of the company's new long-term incentive plan and unallocated restricted share units and options to acquire common shares thereunder. A copy of the LTI Plan was made available on the company's website and on SEDAR+. It is anticipated that share units and options representing an aggregate of 13,541,302 million common shares will be unallocated and available for grant pursuant to the long-term incentive plan, representing approximately 10% of the issued and outstanding common shares as of March 13, 2026.

The resolution is set out on Page 11 of the circular reads: be it resolved that, one, the adoption of the long-term incentive plan by Sagicor Financial Company Ltd., as more particularly described in the management information circular of the company accompanying the notice of this meeting is hereby authorized and approved, all unallocated restricted share units and options to acquire common shares under the plan are hereby approved.

Number three, the company will have the ability to continue granting RSUs and options under the LTI Plan until May 13, 2029, being the date which is 3 years from the date hereof.

Four, any one director or officer of the company is hereby authorized and directed for and in the name of and behalf of the company to execute or cause to be executed and to deliver or cause to be delivered all such documents and to do or cause to be done all such acts or things as in the opinion of such director or officer may be necessary or desirable in order to carry out the terms of this resolution. Such determination to be conclusively evidenced by the execution and delivery of such documents are the doing of such act or thing.

I ask a shareholder to move the resolution to approve the adoption of the company's LTI Plan and all unallocated RSUs and options to acquire under the long-term incentive plan as set out in the management information circular. Thank you.

Will someone second the motion? Thank you.

I invite shareholders or proxy holders who are physically present to ask any questions which relate to this item of business.

[ John Moore ] representing [indiscernible]. First question here would be what effect with this incentive plan have on the share price medium and long term?

Andre, would you like to address that?

Sure. Thank you. The principle of our incentive plans is to align the executive team with shareholders. And so the explicit intent is to drive shareholder value and have a positive effect on the aggregate shareholder returns.

Okay. My follow-up to that would be what is the executive management and the Board's prediction for the stock market and the share price over the same term or period of this incentive plan?

I saw you come in a little bit late so you may have missed my disclaimer slide. I'm explicitly not allowed to provide forward-looking statements. Look, as I said out in the strategic objectives, and you may or may not have seen it, our goal, our North Star is to drive long-term growth of our risk-adjusted return on equity. That would drive an increase in intrinsic value of the company and of everyone's shares.

At the same time, it is a secondary objective but still an important one of ours to drive more robust trading and liquidity at a better valuation in our stock specifically. And I did have a slide on that, which would have shown more than 100% return on our shares over the last 3 years. We would all be aiming for that to continue. But we do not have a crystal ball with respect to the market itself.

I would just add to your question that the company has an internal plan over the next 3 years to significantly increase the net income of the company, which, if the market functions correctly, would suggest a higher share price. And if you look back, as Andre suggested, to the last 3 years, the company has achieved significant increments of net income over that period of time.

And so the objective of the LTI program is to align the executive team led by Andre and Kathy and the rest of their broader team to focus very heavily on the continued growth of the balance sheet and net income of the company, which hopefully over time will continue to reflect in the growth of the share price.

Thank you for the answer, Mr. Chairman, because that leads perfectly into my next point. Stock markets are too high and set to fall. Bank of England at Deputy Governor tells BBC. This is August 24, 2026 (sic) [ August 4, 2025 ]. And she went on to say that there is a disconnect between the share price and the economy. And this prediction about the falling share prices is for the global stock market.

So that being said because, I mean, I don't want to go to all the mechanics of that, so the Bank of England Deputy Governor is stating publicly that share prices are set to fall, is this a good idea to have a long-term incentive plan that ties to 10% of the shares? Because if you have -- I think that would be considered a material amount of shares overall.

Well, if you're asking us if it's good idea, you might direct that to the executives who are receiving shares instead of cash in terms of their compensation, if you're taking the view that any shares are overvalued. But the point of this is to align the executives with the shareholders precisely. And so that if the shareholders feel some shrinking in the valuation of their shares, that will be borne by the executive team as well.

So this is all about aligning compensation to behaviors that we want to tie of our executive team, which is to keep the eye on the ball on delivering shareholder value.

I would just add to that because, essentially, the executive team which is closest to the business is doubling down by taking shares rather than cash compensation on their view about the positive trend of share prices over the long term. And I would also suggest to you in what makes Sagicor different potentially from the forecast of the Governor of the Bank of England is that we think that the shares under value the future value creation of this company and that, over time, that will normalize.

So the issue for us is the inverse of what she's talking about. We're viewed as a value stock and we perceive opportunity to grow the value of the stock.

Okay. And this is my last point on this one. We're talking about value and future or, yes, creating increased benefits for the shareholders. Online -- because has sat through the booklet. So same for your Sagicor Life. You recorded -- you had a profit of $42 million, $41.9 million in 2024. And in 2025, it was a loss of $12.2 million. Is that correct? Or was that -- well, this quarter 4 2020 and quarter 4 2024 -- sorry, net income to shareholders. My apologies there. And then also the revenue for Sagicor Canada decreased by 30% from $321 million to $224 million. You might have gone through that already, right?

If the question is whether those numbers are correct, we do have our auditors here and they have been through it. Revenue is a particularly tricky line under IFRS 17 because you have market movements and your asset prices run through your revenue. And so the revenue line, for better or for worse, now is much more volatile than simply the cash collections that you get from collecting premiums from your policyholders, which is why it's a quirk of the accounting standard. And so we really don't focus on it as a reporting metric.

Right. So my question was in light of these figures, they're correct because I got in from your Sagicor website, seeing that you've had such dramatic drops in the revenue and net income in two of your largest markets, is this a good time, in light of the numbers I just gave you, to roll out such an incentive plan?

We're a big and complex company and there are a number of different metrics. There are a number of different subsidiaries and, for better or worse, we have to report every 13 quarters. And so if one looks close enough, one can find some negative momentum in some KPI in any quarter.

As I reported in my presentation for the 2025 financials, 2025 was an extraordinarily positive year financially in the aggregate for Sagicor Financial. And we are excited about the future. And I would say, to tie it back to the incentive plan, it's the same answer I gave before in that this incentive plan appropriately aligns the executive team, aligns their compensation with the shareholders. And if the stock price goes down, the compensation that the executive team goes down as well. And that's the way it should be.

Thank you for your questions. Matan Secretary, have we received any online questions related to this item of business?

No question.

[ Howell ]. So I just have one question for the clarity regarding the vesting of the shares. Is it that the shares are allocated for when the person is a duration employee, and then when they're no longer an employee in executive capacity of Sagicor, they will relinquish the assets to sell shares? And then if not that taking place, do they then become a regular shareholder like the rest of us?

So the concept of vesting is in the direction that you talked about. In a sense, you allocate shares or options as the case may be to an executive, but they only gain the rights to those shares over time as they vest. And once vested, they do become ordinary shareholders with ordinary rights over that.

And so you'll see within the plans and provision for restricted share units as well as performance share units, both the RSUs and PSUs have time-based vesting over it. And so an executive that would be allocated RSUs and PSUs under this plan, the majority of those shares would not vest until the executive would have performed 3 more years of service. And if they cease to -- if they leave, they would forfeit many of those shares. And so that works as an incentive in the company's favor for the executive team in effect to stick around.

Understood. Because, obviously, I see the [indiscernible] stating that it's aiding the attracting of best talent. But beyond that, I'm looking beyond when the person serves in capacity job. I would have made the recommendation that when the person is no longer an executive that the company needs the decision to offer a piece in what they value. Because we see very many other companies across the world always use it as a mechanism to attract the highest talent. That when the person gets ready to retire, that they compensate the person based on the value of the shares so that the company still retain the ownership but then have those same shares to be able to invest in the next generation of executives going to share base.

The intent behind things like that are positive. And certainly, in a private company context, it can very often be appropriate. As a public company, it's difficult and not always appropriate for us to selectively buy shares from any one individual. So one of the benefits of being a public company is that an executive retires, and if they choose to liquidate their shares, there's a mechanism through the public market for them to do it.

And to the extent that we buy back shares, we undertake a normal course issuer bid over the Toronto Stock Exchange, which, by definition, is a blind bid, where we don't know who we're buying from. And the principle of that is that don't advantage any one shareholder over another.

Good afternoon. I can just hear you, but you're welcome to you to the microphone.

I just have one simple question. I noticed our shares, at least mine, is tied to the U.S. dollar, and there are many changes that are happening there. I'm wondering if our shares would be affected if they're changing retaining our share coming from U.S.

Just to clarify, you mean changes to the U.S. dollar and to foreign exchange rates?

Yes, please.

Sagicor has made it an explicit strategy to pursue as many assets as are practical beyond what we hold locally here in our Caribbean markets and hard currency assets. And we've chosen the U.S. dollar as our functional currency. We are net holders of U.S. dollars as well as Canadian now. And so depending which currency you're thinking, and we are exposed in a good way, we think, to owning both U.S. dollar assets and Canadian dollar assets that earn over time, in addition to all of the normal course assets that we have that are denominated in Barbados dollars, Trinidad dollars, Jaimaca dollars, et cetera.

So if the U.S. dollar is changed, if there are any changes, would you switch in Canadian?

I think the U.S. dollar is well recognized as close to a neutral functional currency. You are correct. It causes some noise as the Canadian dollar and U.S. dollar don't always move in tandem in terms of in terms of our share price and multiples and all that. So there would be some elegance to a Canadian dollar. But functionally, the feedback that we get from our shareholders is that people like a U.S. dollar dividend and that people across our confederation, I think, in so many different currencies. Everyone can have a lens on the U.S. dollar.

I was looking back from 2025 up to about 2 days ago on my Internet computer. I heard a lot about this thing with Trinidad? What is that all about? Is Trinidad like the rest of the like Barbados? Or is Trinidad Sagicor is still rounded up or rounded down?

Could you be a bit more specific?

Well, more specifically, is Trinidad [indiscernible] boos themselves through all of these allegations where, let's say, when it comes to like social and medical to help around Trinidad, basically, you put money into the medical purposes. Sagicor Medical.

Another thing too, I was wondering about interactive thing, the same to interactive brokers right? You said it only was it 2 years or 3 years ago shareholders to embrace [indiscernible] because they're saying that they had imbursed that, got back their money.

Robert, I see you sitting there in the front row. I see our Chief Executive of Sagicor Life Inc., who is based in Trinidad. Do you have any comment with respect to the Trinidad market? Do you want to take the microphone?

I wasn't sure if I understood the question. There were two elements. One has to do with health and one is it to do with international.

Robert, can you speak to the microphone, please?

Sure. I'm sorry. I'm not sure I understand the question, quite frankly. Could you help me?

A guide I was looking at, thinking it was from 2010, was correct, 2016, I was right. And we're saying that the fact that there's not a lot of incentives going on in Trinidad. So you [indiscernible] and all sorts of things. And I'm wondering if you all have the background of a financial aspect to broaden different things like medical, culture, food, Got a lot of people like a lot in agriculture.

Well, I guess thank you for that question. What I would say is the Sagicor predecessor, [ Bobby Richard ], has been in Trinidad since 1845, I think. Forgive me. And we have been an integral part of the community since then. From an insurance perspective, we would be the second largest insurer in Trinidad on both our life insurance and participating in general insurance and investments. So we cover our a full suite of products.

[indiscernible]

We will form part of such Sagicor Group Caribbean through Sagicor Life because Sagicor Trinidad is owned by Sagicor Life. And as Mr. Mousseau articulated earlier, the formation of Sagicor Group Caribbean will own both Sagicor Group Jamaica and Sagicor Life. So all of the Caribbean entities, including the operations in Trinidad, will form under the ownership of Sagicor Group Caribbean.

Pretty interesting. Another question was asking is how come that your people are carrying at least 1,000 in shares to interact with the innovative brokers.

So we do continue to work on initiatives to make it easier for local shareholders. And Althea, perhaps I'll ask you to comment on some of the progress we're making there.

Yes. The intention really is to make it as easy as possible for shareholders. And we find that shareholders who hold a small number of shares have had difficulties in terms of the cost of cashing those shares. We have tried to encourage those who have a direct deposit in the account in Barbados who assist in that. Some people have not taken that offer.

But if you own your shares through to a brokerage, the truth is that, that is easier in terms of where you decide at some point to sell the share when and you decide hold your position because there is a facility there that will hold those funds with the broker or transfer to your account as you wish. I think in some cases, you can also keep it in the U.S. dollars. So it is really a question of facility to shareholder as opposed to wanting to get rid of the shareholder. Because if you go to a brokerage account, you are still a shareholder. You're just not on the direct register.

Any questions online, Althea?

No questions here.

Okay. Persons voting at the physical meeting are invited to use the ballot received on arrival to cast their votes on this item of business. To vote online on this item of business, use the electronic ballot on the right-hand side of your screen. And under item #3, you may vote for or against in respect to the motion.

This is the final formal item of business. As such, discussion of the items of business is now closed and online voting will close in 15 seconds. Please ensure you register your votes now if you wish to do so and have not already done so. We invite the polling assistants to collect the ballots from those physically in attendance.

[Voting]

The polls are now closed with respect to voting on all of the motions. Voting results are being tabulated by the scrutineers and will be provided later in the meeting or shortly thereafter. The report on voting results will be incorporated into the minutes of the meeting. The final voting results will be posted on the Investor Relations page on Sagicor's website and filed under the company's profile on SEDAR+.

I'm advised by the Secretary that there are no other matters of business to properly come before the meeting. At this time, we would like to open the floor to any other questions that shareholders or properly attending proxy holders may have related to the company.

I will ask the Corporate Secretary to review the online procedure for our shareholder question period.

Thank you, Mr. Chair. If you are a shareholder or an authorized proxy holder and would like to ask a question or share a comment please use the messaging platform displayed on your screen. I will read out the questions submitted to the web portal and group similar ones together. If we are unable to address all appropriate questions during today's session, a list of those questions along with the company's answers will be posted on our website Investor Relations page.

Please remember the question guidelines mentioned earlier. Out of courtesy, limit yourself to two brief questions or comments.

Do you want me to see who's going to first so I can give a everyone a chance to answer the question. I have no problem with that. Okay. I'll proceed until someone indicates they want to.

Chair, may I add that we have quite a number of questions online as well.

Please proceed and then we'll go online.

Ms. Hazzard wants to go first with her questions. Okay. A question I didn't get to ask earlier. Mr. Mousseau was talking about -- sorry, John Moore. You were talking about investments for Sagicor. So could you just give a brief summary of those investments that Sagicor has invested in?

I think our asset composition is well documented in the financial statements. We own...

Sorry, investments. Not necessarily asset, but investments.

What do you mean by investments?

Okay. You could have investment in other shares and treasuries and government bonds, annuities.

We primarily own financial assets. The majority of those are bonds. We also have mortgages and other loans. The large majority of our assets are investment-grade assets. The majority of those that are not are the highest quality assets that we can find in investment grade -- in markets that do not themselves enjoy investment-grade ratings.

Okay. And has Sagicor invested in any gold?

Not to my knowledge, no.

Okay. All right. And I guess it's a good thing too because who wants to have a 100% increase in the year. No one needs that. You were talking about your investments in mortgages and bonds. So I don't know if your investment in mortgages leaves any exposure in the private credit market in the U.S., which is now about $2.5 trillion. And again, the Federal Reserve, JPMorgan and other banks are predicting that there will be a crash. There will be a crash in this market because you already have -- because of first financial or challenges, inflation, cyclation, et cetera.

You are having a lot of the creditors -- not creditors, the debtors are not paying off on this private credit. So this is going to result in a lot of losses within the next 5 years. So I just want to know if Sagicor has any exposure to the private credit market in the U.S. Canada and the European Union. And if so, what effect could that exposure have on your medium-term financial performance.

That's an excellent question and something that must be top of mind to an insurance team operating in North America. We have a modest exposure to private credit, not through the Canadian subsidiary but through our American one. It is a small but measurable component of our U.S. balance sheet, and depending where you draw the lines around private credit, in the mid-single-digit percentages. Certainly, we're watching it very closely.

As with our broader investment philosophy, we have taken a conservative and investment-grade approach. And so much for the same reason that we do not own any gold, which would have been a good bet over the last year or 2, but it's fundamentally these days a speculative asset, we don't own the speculative portion of private credit as well. We are not overly exposed. It's an appropriate piece of our U.S. balance sheet portfolio. And just like yourself, we're watching it very closely.

As I wasn't here earlier, I missed your presentation. I'm not sure if you made a presentation on Sagicor Bank.

Not specifically, no.

No? Okay. But that's included in this group because my question on Sagicor Bank, I'm not an executive, so maybe you can explain to me what a bill in means. And as you explain that, can you explain if Sagicor Bank is under the provisions or any bail in provisions in any jurisdiction in which it operates.

Bail in as your term and not mine and not one I would have used for any of our assets, it's an opportunity, though, for a point of clarity. Right now, the formation of Sagicor Group Caribbean, the sole assets under that will be the companies under Sagicor Group Jamaica and the companies under Sagicor Life, which is a Barbados entity, which then includes Trinidad elsewhere in the Eastern Caribbean. It does not as of yet includes Sagicor Bank Barbados. It does include Sagicor Bank Jamaica,

It would be our intent to put Sagicor Bank Barbados to into the mix there eventually. But notionally, the transaction has been structured right now as the coming together of the two life insurance companies. So technically, the Barbados bank is not subject to that contract yet, but we intend to do so over time.

Okay. Because your Chairman probably would be aware of this, under the Canadian Deposit Insurance Corporation, a bail in is when that the bank's depositors or the bank's depositors' deposits are used to bail out the bank, instead of a bail out it's a bail in. So that's why I wanted to know if Sagicor Bank is supervised by the provisions of a bail in.

No. It's supervised by us and by the regulators, but we're not subject to any of those. Althea, do you have any commentary on that?

Online questions?

Yes. There are several online questions. Many of them relate to Sagicor Group Caribbean.

[ David Rulz ]. For the Sagicor Group Caribbean Limited merger, is it a new holding company we created to own Sagicor Group Jamaica and Sagicor Life Inc. or will Sagicor Group Jamaica be renamed as Sagicor Group Caribbean and become the new Caribbean holdco?

Right. I believe I answered that. We're forming a new holding company and both will be falling under that.

The question from [ Margaret Nielsen ]. Notwithstanding the need to streamline the company's organizational structure, it seems counterintuitive to give up 100% of SLI and 49% of SGJ for 55% stake in a new entity SGC. How is the 55% determined and what is the anticipated financial impact on SFC?

So the combination was subject to third-party negotiations as appropriate with the independent directors of the Jamaica Group, which was necessitated by the third-party shareholding. I think we've disclosed publicly that the intent is that it would be approximately earnings neutral on the basis of the combination to Sagicor shareholders.

So if you expected, one, earnings per share number, the year of close that, that would be materially unaffected before the effect of positive financial impacts from the combination. And obviously, we think that earnings growth will be faster together and that, ultimately, this will be net earnings accretive to SFC shareholders and to Jamaica Group shareholders for that matter.

Another question. Is it contemplated that the shareholders of SFC will be offered shares in Sagicor Group Caribbean in exchange for the SFC shares?

Not at this time, but both entities will be listed and persons will have the opportunity to invest where they like.

Again, a questionable about Sagicor Group Caribbean. The original press release in December 2025 indicates that this transaction was subject to SGJ raising certain financing for the deal. Is it that Sagicor Group Jamaica will be raising certain financing to purchase SLI? Also is it that Sagicor Financial Company will be investing or deploying capital in the Sagicor Group Jamaica to complete the purchase of SLI?

The interpretation there is partially right. There is the intention of the combined Caribbean Group to go for an additional capital raise. The use of proceeds for that capital is not for a purchase, this is really a combination, but it will be into the entities to position them going forward.

I think there is a process that will be undertaken this year to explore raising third-party capital. And Sagicor Financial is pleased to stand behind and does intend to invest capital additional incremental into the combined group so that it can be robustly capitalized on its own and well positioned for growth. But thank you, it's a great question.

Do you see opportunity to develop back across synergies from a business integration standpoint under the SGC holdCo structure? In other words, the ability to better offer cross-market financial services across the Caribbean region from Jamaica to the Eastern Caribbean? Is it better cross synergies?

In a word, yes. That's a big part of the commercial logic.

On the digital transformation journey in the Caribbean, how will this be expected to transform and create incremental earnings to FSC shareholders? Also when will some of these initiatives be reflected to the benefit of the wider customer base?

That's a good question, too. The digital transformation will appear in a sense in two places: one where the customers and policyholders can see it and one in the background where they cannot. The piece that will reach policyholders and customers and make it easier to do business with us will have operational efficiencies associated with it, but it will also unlock growth.

If you think about a sales force and anything that you can do to relieve their administrative burden and allow them to focus on generating incremental revenue. I think it will drive growth, at the same time, the opportunity to modernize, streamline, digitize systems in the back end and move to a more cost-effective technology structure in terms of third-party vendors and infrastructure costs. It's less about growth and more about margin improvements and improvements to our bottom line. So we see benefits from both.

And another question from [ David Rulz ]. Was the move to recruit David Noel as the COO to FSC a move to support the operational integration of the Sagicor Group Caribbean merger?

So I think there's a question specifically about bringing on David Noel, who joined us in September of last year. Is that right, David? This is certainly a big part of David's mandate. He has become the Chief Transformation Officer of the pro forma organization led by Chris Zacca. And so that certainly has become a big part of David's mandate.

And from [ Herbert ]. With the creation of one Sagicor entity within the Caribbean result in a dilution of Sagicor Financial shares as the former non-Sagicor shareholders in Sagicor Jamaica are compensated or become shareholders in SFC?

Quick answer is no. It's the same answer as what I gave with respect to the expected financial earnings per share. The additional share ownership that we'll have in the combined group will offset the minority interest that will be foregoing in SLI. And then all gains from the combination, we expect to accrue evenly across shareholders.

There are also some questions on Canada. How has the ivari integration been since acquisition? And will appoint a permanent management executive to the role currently held by the SFC CEO?

Very quick here, Althea. Easier when people handle up to the microphone. But changing gears. The integration of what is now Sagicor Canada has been a resounding success. The financial results of that company in the 2 and a bit years that we've owned it have been outstanding. But more than that, as we've had an opportunity to integrate their team into ours into the Sagicor family, we've seen little bits and pieces of collaboration and expertise in terms of the team that has come from that.

We just perhaps last year appointed actuary, who is a very talented Canadian actuary who came from the ivari team. And she is spreading her best practices across the organization. Similarly, I can name half a dozen different instances where our teams are working together and some of it is under the North American platform where, as an example, we formed a single underwriting team across the group in our risk and finance expertise. So it's been very positive.

With respect to the appointment of a Chief Executive that is not the Chief Executive of Sagicor Financial. And so I'd be speaking in the third person here a little bit. Maybe eventually. We've very recently, as I remarked, appointed a President of our U.S. business. And so it would be the logical outcome from a principal point of view to have a local President or Chief Executive and a Group Chief Executive. I have held a keen interest in the integration process, and I think it's been a positive having the dual role. But I could use more hours in the day, and so we'll take that under consideration.

Chair, I have three more questions. I don't know if you want me to take them now.

Sure. What don't we proceed with these last 3 questions online.

Okay. The SFC CEO mentioned in the Q1 or Q2 2025 earnings call that the company has scaled back a bit on the buyback program as they sought to lead volume on the market and allow for wider market ownership. Is this still the case? Or will the company be more aggressive in buying back shares, especially as corrections arrive in 2026?

So this question relates to repurchasing our shares pursuant to our normal course issuer bid, which I alluded to in an earlier question. It's a matter of the public record that we have not repurchased many shares over the last couple of months, but we intend to renew our ability to do so and would reserve the right to allocate capital to the shares to the extent there were a correction.

Unfortunately, the number keeps growing. Okay. Do you expect the net CSM for Sagicor candidates to continue growing at about 6% annualized subject to market experiences?

On the assumption that 6% is the number that it was last year. What I would say is I wouldn't expect a change in posture. The contractual service margin has grown at a modest pace in our Canadian operation and you see a little bit of volatility around it because we report in U.S. dollars. But it's a modest grower, but it's more than replacing itself.

Okay. Do you see the opportunity to gain additional market share within the annuities market within the U.S.A.? Or is there an opportunity to create additional value from new insurance opportunities?

I'll answer that so Andre can catch his breath. The answer to both parts of that question is yes. The U.S. annuity market is massive. It's the largest in the world. We have a fractional share of that market. We're very well positioned to grow our share in that market. And as Andre was saying earlier, we just hired a President who is extremely capable and well experienced to come in and prepare the company for accelerated growth.

So it would be our expectation that we will continue to grow the annuity base in the United States and that we will launch new products over time. We've launched a fixed income annuity product that is in its earliest stages of launch, another very, very significant market in the United States. And over time, we will add additional products. But there is still plenty of room in our core annuity business for us to grow.

Next question. Does the annual assumption review now get reflected as an adjustment to the insurance service expense in a comparable manner to an annual release of strengthening the IFRS 4.

I think it's a highly technical question. We can have that answered on the website after this meeting.

Okay. Does the head office see opportunity to better deploy capital across various subsidiaries or purchase opportunities to assets in the current 2026 financial year?

I think again I'll let Andre catch his breath. But I think we're going to continue to be very opportunistic. Our base case is to continue to invest actively in all of our businesses. And at this moment, we're not fixated on any merger or acquisition candidates. We're very, very intensely involved in completing the merger of our Caribbean businesses, and that will take -- the merger and integration and growth of those businesses. So that will continue to take a lot of our attention through this year and a portion of next year.

And one I hope is the final question, Chair. Will FSC be moving to reallocate more capital from the subsidiary level to the holdco level as it ramps up its annual dividend payment?

I'd say capital management is core to what we do. We do have excess capitalization in each of our each of our operating subsidiaries, and so that's part of the inner workings. But we're pleased to have been able to provide an increase in the quarterly dividend again for the third year in a row.

I would like to extend to our friend on the floor the opportunity to ask one more question and then bring questions to close.

Chair, I only had 30 more but one more.

It could be one very long question

Now this question has two parts. I don't know who will answer it. But this is in relation to [ marco.com ].

We may only answer 1 of the 2 parts, but you can ask both.

Sure. And it's talking about insurance trends. And again, I missed the earlier presentation. So what -- does Sagicor expect any increased regulatory pressures and new compliance checks related to AI or artificial intelligence processes that you may be including in your business?

The answer to the first question is yes.

Yes. Okay. And litigation trends. You do have significant business in the U.S. and Canada, and there is increased litigation around insurance claims, et cetera. And that, of course, increases pressure on your business. So are you currently experiencing this phenomenon of increased litigation? Do you expect -- do you forecast that going forward?

The answer to that question is generally no. The more complete answer to your first question is that we are preparing intensely for AI, including the regulation of AI and will be a very active contributor to any regulatory regime.

I'm going to open the floor up to any last questions before we conclude. Could you come to the speaker? Again, we prefer questions from people who haven't asked questions, but we'll take one more.

I was wondering, as a shareholder -- for the balance of the time period, I was wondering about this thing called pension mortgages and probably at a special bursaries. Is that possible? Can shareholders money together? As you know, you say we have millions and billions of dollars on bringing something in the 5 years, which is like 50, 55. We work again come at 60, 65. Would that be possible?

I think what you're describing might be a little bit like what we sell in the U.S. with our annuities products, which are deferred annuities where they make a single payment and then provide value later over time. And those are focused on kind of later working career persons towards early retirees. So we do offer those products. I encourage you to speak to a Sagicor agent.

Thank you. Thank you, everybody, for all of your questions, and some of us will be around after this meeting if your questions haven't been answered.

The scrutineers have reported to me regarding the matters voted on today, and I will now announce the results. With respect to the resolution regarding election of each of the individuals nominated as directors, I declare that each of the 14 nominees is elected as a director of the company.

With respect to the resolution to appoint PricewaterhouseCoopers Canada as the auditor of the company for the ensuing year and to authorize the directors to fix their remuneration, I declare this resolution duly carried.

With respect to the resolution regarding the adoption of the company's long-term incentive plan and approval of unallocated awards, I declare this resolution carried.

This completes the business of the meeting. On behalf of the entire Board of Directors and the management team of Sagicor, we thank you for your ownership interest and your attendance at the Annual and Special Shareholders Meeting today. Those of you who have joined us physically are invited to share in light refreshments outside. Thank you.

Good morning. My name is Joelle, and I will be your conference operator today. At this time, I would like to welcome everyone to Sagicor Financial Company's Fourth Quarter and Full Year 2025 Earnings Call [Operator Instructions] Mr. George Sipsis, EVP, Corporate Development and Capital Markets, you may begin your conference.

Thank you, operator, and hello, everyone. Thank you for joining us today to discuss Sagicor's Fourth Quarter and full year 2025 results. As a reminder, our disclosures are available at our Investor Relations website at investors.sagicor.com, which includes the 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, including guidance 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.

Thank you, George. Good morning, everybody, and thank you for joining us. We are pleased to report on the conclusion of an exceptional 2025 with another quarter of solid core results. Our full year core earnings delivered record core earnings to shareholders of $142 million, up 57% over last year and well above our guidance. Our core return on shareholders' equity for the year was 14.2%, and this was helped by in aggregate about $15 million of positive emergence from our short-term and long-term insurance portfolio.

Absent this positive emergence, which we do welcome, of course, is a good sign of our overall reserving, we believe we're currently running at approximately $125 million to $130 million core earnings to shareholder run rate. What that means is we've hit our medium-term target that we issued back in 2024 of a 13% ROE about a year ahead of schedule. And this reflects all the work that we've done throughout our portfolio of operating companies to enhance our returns on equity there and how we've improved our debt cost of funding.

2025 was a banner year operationally, too. Our U.S. business continued its asset growth by nearly $1 billion to $6.8 billion as we continue to get to scale in that market. Our Canadian subsidiary completed a major milestone in its digital transformation, completing an industry-leading migration of all its admin data for 750,000 in-force policies to a modern cloud-based system that will allow quicker and more efficient product and service launches, better scalability and cost improvement and cost certainty.

And we capped off the year with the announcement of a definitive agreement to merge our 2 Caribbean subsidiaries under a single publicly listed entity. This incredibly exciting development will allow us to launch a full AI-driven digital transformation initiative in our Caribbean operations at full scale and ultimately create an exciting additional pillar of ROE growth for our shareholders. I'm going to come back to this and more on our forward outlook after Kathy gets through a more detailed financial review of 2025. So let's go to that. Kathy?

Thank you, Andre, and good morning, everyone. As Andre mentioned, we are reporting a strong fourth quarter of 2025 to cap off another outstanding year. For Q4, core earnings to shareholders was up 13% from 2024 to $32 million. For full year 2025, Sagicor's core earnings to shareholders was $142 million, exceeding management's revised guidance of $120 million to $130 million. In Q4, net loss to shareholders was $14 million, reflecting some continuing volatility from market movements and foreign exchange. And for the full year, net income to shareholders was $67 million.

Total comprehensive income to shareholders, which in particular, tells the full story of our foreign exchange position through both our net assets and liabilities was between the reported in core earnings at $110 million, which allowed us to grow shareholders' equity by $77 million while returning over $40 million of capital to shareholders between our dividends and share buybacks. Revenues were $3 billion for the year compared to $3.1 billion for last year. New business CSM of $167 million was within the revised guidance of $155 million to $175 million, net of reinsurance.

Now I will give you some more details on the segment financials. Sagicor Canada's sales production of $17 million of annualized new premium for the quarter and $69 million for the year was consistent with management expectations, resulting in new business CSM of $12 million for the quarter and $44 million for the year. Core earnings to shareholders of $27 million for the quarter and $103 million for the year increased 12% and 19% year-over-year, respectively, reflecting improved net investment results and insurance experience in line with expectations as compared to unfavorable insurance experience in Q4 2024.

Net income to shareholders of $9 million for the quarter and $76 million for the year was lower than core earnings to shareholders due to unfavorable market-related impacts from lower asset prices due to higher Canadian interest rates. Net CSM in aggregate increased 1% quarter-over-quarter to end the year at $566 million. Sagicor Life USA new business production was $268 million for the quarter, resulting in $1.3 billion of total production for 2025, which is our highest ever year of production and in line with our expectations. This resulted in AUM growth of over $900 million year-over-year.

Core earnings to shareholders for the quarter of $8 million were slightly lower year-over-year, driven by increased operating expenses in support of business growth. Core earnings to shareholders of $41 million for the year increased 2% year-over-year as increased net investment results were offset by increased cost allocation. Net loss to shareholders of $12 million for the quarter was lower than core earnings to shareholders due to market experience losses of $18 million from interest rate movements impacting our liabilities more so than our assets, similar to what we saw in Canada. Net income to shareholders was $8 million for the year. Net CSM was $151 million, flat quarter-over-quarter.

Sagicor Jamaica recorded strong new business sales in both long-term and short-term insurance lines and the Commercial Banking segment showed profitable expansion in its loan and credit card portfolios with higher net interest margin and fee revenues year-over-year. Sagicor's share of Sagicor Jamaica's core earnings to shareholders of $12 million for the quarter and $48 million for the year, both increased year-over-year, driven by better margins on short-term business, favorable insurance experience and improved net interest margin and fee revenue in the Commercial Banking business.

Sagicor's share of Sagicor Jamaica's net income to shareholders was $51 million for the year. Net CSM was $293 million, flat quarter-over-quarter. Notably, this strong performance was inclusive of the net effect of Hurricane Melissa in Q4, which ended up for our previous guidance being barely material. Sagicor Life posted strong new business sales in the quarter and in 2025, reflecting higher single premium annuities and general growth in the portfolio as a result of repricing initiatives. Core earnings to shareholders of $7 million for the quarter and $42 million for the year increased 17% and 59% year-over-year, respectively, due to improved profitability in the short-term business from price adjustments and favorable insurance experience.

Net income to shareholders of $16 million for the quarter and $57 million for the year were higher than core earnings to shareholders due to positive market experience. This showed the opposite effect of interest rate movements to our North American businesses as our Caribbean segment has a modestly net short asset position compared to liabilities from a duration point of view as opposed to our North American segments, which have long net asset positions relative to our liabilities. Net CSM was $262 million, an increase of 3% quarter-over-quarter.

At our head office, other operating companies and adjustments segment core cost to shareholders was $23 million for Q4, consistent with the prior quarter. For 2025, it was $92 million, a 2% improvement from the prior year. Net cost to shareholders was $37 million for Q4 and $126 million for 2025. With these results, Sagicor remained well capitalized in Q4. The group LICAT ratio was 136%, and our financial leverage ratio was 26.9%. Our book value per share significantly increased during the year to USD 7.65 or CAD 10.49.

Our deployable capital or shareholders' equity plus net CSM to shareholders was $2.2 billion or USD 15.95 per share or CAD 21.87 per share. We are also pleased to announce another increase to our dividend, making this the third March in a row. Our new payout will be USD 0.075 per share or $0.30 annualized, about an 11% increase over last year. Even with this payout, we anticipate we will be towards the bottom of our 30% to 40% core earnings target payout ratio, which reflects our belief that we can continue to generate strong risk-adjusted returns by reinvesting the majority of our earnings and growing our future earnings going forward. And we will be in a good position to keep delivering a growing dividend as we grow our earnings going forward. On that note, I will hand back to Andre to talk about that forward outlook.

Thank you, Kathy. This really is an exciting time for Sagicor and not just because we believe we've more than executed on the original vision that we set out in '22 and '23 when we were putting this asset portfolio together. I remember back in 2023 when we originally closed the acquisition of ivari and had it form a cornerstone of our combined business, we had guided in our year-end earnings release to about $90 million to $105 million of core earnings, and we said that we believe we could eventually get the business to a 13% core return on equity or beyond. And we used medium-term target as a euphemism for 2027.

Here we are a couple of years later, and we've exceeded that. Even without the help of the positive insurance emergence in 2025, we are running at a solid 13% ROE today, and we have very meaningful upside beyond that. So I'm going to take some time here to go through some of the details on ROE expansion that we see from here. We believe that we have 3 robust avenues for growth, all within our control, which can drive ROE expansion going forward well beyond our full guidance. And these 3 things are the continued growth in our U.S. annuities business, which we have talked about over the last couple of years, margin expansion in our Canadian business and a huge digital transformation opportunity in our newly combined Caribbean segment.

So first of all, I'd like to talk about our U.S. business, which we continue to believe will drive our asset growth going forward. So we challenged ourselves to deliver over $1 billion of new annuities in 2025, and we surpassed that while maintaining a laser focus on spread discipline, not compromising on asset quality to do it, all of this in a competitive environment. So we grew our assets in that segment to nearly $7 billion, and we have a clear path over a 3-year planning cycle to get that near $10 billion, where we believe we'll see some meaningful margin expansion.

In this past year, we made some additions to its expense base through new systems and executive hires, which has set us up to grow earnings more than proportional to that asset growth going forward. That's number one. Number two, we have the Canadian business. Now this one is more mature than our U.S. business. I think I mentioned it before. There are about 750,000 policies. And with our niche distribution, we have relatively modest new business generation relative to the size of the back book.

But the financial margins in this segment are strong, and they have outperformed our expectations going back to 2023. And in 2025, you really saw that come through the asset growth of the universal life policies and ultimately, through the drivers of earnings and the strong investment earnings performance. We believe that there is more asset margin growth possible by applying some of the lessons that we've learned on our posture on our U.S. balance sheet and porting them to the Canadian balance sheet, which is still -- has a very, very conservative posture with a lot of low-yielding provincial assets and other low-yielding fixed income instruments.

Third, we have an enormous opportunity to deliver value through the combination of our Caribbean subsidiaries into one entity called Sagicor Group Caribbean. Prior to this combination, which we believe will close in the fourth quarter of 2026 or thereabouts, our Jamaican subsidiary was constrained from full cooperation with the rest of Sagicor by the dynamic of having a different shareholder base.

Now with this combination, we are working hand-in-hand with our partners in the Caribbean to drive not just a combination with traditional synergies, but to use the combination as a catalyst to run a full digital-enabled transformation of the entire way that we do business in the Caribbean. And whether good or lucky, we are doing it at a fabulous time because the emergence of AI powerful enough to tackle the data transformation challenges involved will make this a faster and more comprehensive transition than what we could have embarked on even 12 months ago.

This project is going to require a robust investment of time and resources, but we have conviction that we will look up at this business in 2 or 3 years and find it a truly transformed champion relative to solidify and build upon our market-leading position in the English-speaking Caribbean and beyond. So I've talked about 3 initiatives here. We believe that each of these initiatives fully realized has the opportunity to contribute between 1% and 2% return on equity growth to our overall financial results over the next 3 to 5 years.

So with full follow-through on these initiatives, we're looking at a vision of a company that would be delivering ROEs that would be beyond the midpoint of mid-teens and would be delivering significantly more net income than we are today, again, over a 3- to 5-year planning period. So let me tie this back to the near term. We delivered $142 million of core earnings to shareholders in 2025 unaffected by the positive results that we got off our insurance book. We see a run rate today of between $125 million and $130 million that would carry into 2026 and have some growth based on compounding of capital, absent these strategic initiatives.

Now we see 2023 as an investment year. And so we're not putting out specific core earnings target or ROE target. And there are a number of reasons behind this. First, when our Caribbean subsidiaries merge at some point this year, the geography and proportions of the earnings and the drivers of earnings or how the financials come together are going to change. And this might happen in the third quarter or the fourth quarter or potentially even in early parts of next year.

But mechanically, the proportion of earnings are going to change as our proportion of SLI in the Southern Caribbean goes down from 100% to about 55%. Our ownership of Jamaica will go the other way from 49% to about 55%. And then our internal financing costs pro forma will improve by about $20 million or so as we restructure and retire intercompany debt. So in addition to this, there are going to be direct and indirect first around the closing of the transaction itself and then around staffing and executing the transformation.

And we'll continue to make investments in people and systems so that we know that we're in a proper position to manage growth. So a lot of these costs may run through the noncore line, but not necessarily all. In aggregate, since converting to IFRS 17, we've actually had higher reported net income than core to shareholders. But in 2026, we would not plan it that way as we believe that we're going to have some of these closing costs and transformation costs around the Caribbean transaction, which we believe as extraordinarily high IRR investments and forward earnings.

So looking out to 2027 and 2028, once these transaction costs have gone away, there, we have conviction from the early wins on each of these 3 initiatives. And so the guidance we're giving is core return on shareholders' equity, taking no view on either positive or negative emergence from the insurance portfolios of approximately 14% next year in 2027 and approximately 15% in 2028.

And at those levels, we would see plenty of upside potential beyond that in the years to come. And we're putting guidance out here that is based on these initiatives that we view as within our control. So there's a lot there to digest. We are very happy to -- we're happy to be here putting some meat on the bone of some of the things that we have right in front of us to accomplish. We're really proud of what we've accomplished over the last 3 or 4 years, and we're very excited to build on it and go and do it again.

So as this goes forward, we intend to continue to put details around this in our public disclosure to engage with analysts, to engage directly with our investors, and we're very excited about that. And in the meantime, if there are any immediate questions, George, I think we'd be happy to take it.

Thank you, Andre. With that said, operator, we can begin the Q&A.

[Operator Instructions] Your first question comes from Pranoy Kurian with National Bank Capital Markets.

I just had a question on expenses. Could you give us some color on the year-on-year increase in Canadian and the U.S. segment expenses? I think you cited business growth as a reason for the increase in the U.S.

From a big picture point of view, there are 2 things that are happening at the same time. The first one is, as I made in the commentary in the prepared remarks, as we're growing the business, we're making sure that we're developing the people and the systems to be able to be responsible stewards of, call it, that gross margin growth. And if you look at the gross margin growth in the North American segment in aggregate, I compare 2023 to 2025, you say, okay, it makes sense that you're putting more expenses in there for that.

Now there was a second piece in Q4, which is for a matter of tax planning, we're being more structured about allocating expenses down into the operating segments. So segments where costs appropriately can be offset against taxable net income. So there are -- we have executives at kind of a nontaxable holding company, even me, I'm the Chief Executive of SFC, but I'm also the Chief Executive of our North American subsidiaries. And -- so to manage down our overall tax rate, we're allocating a bit of costs down appropriately into the operating subsidiaries. And so there's kind of a onetime step change of expenses in Q4.

Assumption review, the impact on CSM, I think $12 million impact, major driver expenses in Canada and Jamaica.

We couldn't quite hear. Could you repeat the question?

The impact on the assumption review impact. So the CSM, there was a negative impact of around $12 million.

So that's kind of a knock-on effect of -- and Kathy, you could expand on this, but it's kind of a knock-on effect of some of those -- of the expense run rate. CSM is just one way for earnings to emerge. But if you have a $12 million reduction in CSM, maybe that's $1 million or so less of CSM emergence out of the operating subsidiary on an annual basis, but then it's offset by less expenses up at the head office. So it just kind of CSM math, but it ends up being a bit of a wash. By definition, that ends up being a wash. Kathy, is there anything else you'd say to that?

Yes. I would mention that it's -- if you recall, in Q4 is when we do our annual assessment of our expenses, we do our expense studies. And as a result of that, we identified through inflation, through that sort of thing as we're growing the business, there are additional expenses and some of that would be what you call maintenance expenses that would then be part of the actuarial assumptions. So to the extent that the portfolio has CSM, it will go -- it will -- increases in the maintenance expenses would reduce CSM to the extent that there isn't existing CSM, then it runs through the P&L. So this is due to our -- it's part of our annual assumption review.

Right, right. And I just had a second question on private credit. So there's been some scrutiny on these asset managers with in-house insurance arms and some of these players are quite active in the fixed annuity sales space. And you've mentioned competitive spread environments in the past. I was just wondering maybe over the medium term, could we see some indirect impacts, if there's some negative impacts on private credit. Could we see maybe a lower competitive environment in fixed annuities, maybe with healthier spreads?

So what I'd say is our production in 2025 reflects production in a competitive environment, right? Because in 2025, for the majority of the year, there was not this noise around private credit. And so that competitive environment includes players that were tied to the most aggressive of the private credit houses, which would include reinsurers that managed to keep their names out of the headlines, but would include the larger entities where there's headline risk that those are the names that you're reading about in the New York Times or the Wall Street Journal every day.

They're all tied, and they were all part of the competitive environment. We have inched our way into kind of some of the asset class, but we've never -- it's a very small proportion, and we haven't been in any of the adventurous that as the last few weeks have happened, we've gone and done a full portfolio review and because of our conservative posture, we're underweight the sectors where there's the particular anxiety around software and other technology sectors where there's either the risk of disruption for AI or the risk that there's a building bubble.

All of those, we are very underweight and relative to, in particular, the more aggressive players. And so look, I want to be cautious about this, but all things being equal, if the most aggressive private equity or private credit players need to become less aggressive, that improves the competitive dynamic. Standing aside from this whole shift in asset allocation, there is a -- continues to be a huge demographic shift as the boomer bulge goes through retirement into these new products.

And I can tell you anecdotally that global volatility, which we don't like in aggregate is as a life insurer, we are long economic growth and stability at a fundamental level. But I can tell you our U.S. plain vanilla annuity sales had their best week ever last week, and we didn't raise rates, but it's just when volatility happens and people remember that there can be volatility in the equity markets, the portion of their retirement savings that can go into these plain vanilla annuities I think people have woken up over the last couple of weeks and remember why these are an important piece of the portfolio. So I don't want to jump up and down and say that this is good for the competitive environment, but you could sketch out that case.

[Operator Instructions] Your next question comes from Mike Rizvanovic with Scotiabank.

Andre, I wanted to go back to the ROE guidance for 2027, just so that I understand it. So it sounds like next -- sorry, this year is more of an investment year, can you talk a bit about the trajectory? And when you mentioned the 14%, that's not exiting 2027, not like you're getting there at the very end of the year. That's for the full year, correct?

Correct.

Okay. And then the trajectory, so you're not offering anything for 2026, but you are going to be investing. What sort of impact do you see on the ROE? Just wondering if there's a bit of a retraction here before you start to see the trajectory going up.

Right. So we ran at a 14.2%, I think, for the full year -- last year in -- or 2025, the year that we're talking about. And that includes because the core emergence doesn't let you -- the core earnings includes how does your insurance portfolio do relative to your reserves. In some years, that's negative. And if you're properly reserved, some years, it's positive. It was positive for us in aggregate in 2025, enough to poke ROE up by just over 1 point.

So I sit here today and say, okay, absent these initiatives, you'd say, okay, your best guidance would be a 13% unaffected ROE and maybe you'll continue to have good emergence out of your insurance portfolio or maybe not. And we reserve not to have a view on that, which would mean that going to mechanically as we compound our capital, you would have earnings growth, but you would not have ROE expansion. What I do know is we intend to invest in closing and transaction costs in the Caribbean and the Caribbean merger and then make a robust investment in a transformation project.

I can sit here not being encumbered by being an accountant and say, I think those are going to be noncore costs. But you have to be able to see where that's going to come through in when you get together and do your reviews, what's core and what's noncore. So we'd rather not put a number on the table for 2026. We'll tell you throughout every quarter in 2026, where we think we would be running kind of absent onetime costs, whether that's core or not.

But it's a lot easier to get conviction around the 2027 and 2028 numbers because we know where we're running at now. We see some of these quick wins where we have high enough conviction to stand behind meeting or exceeding it. And so that's why we're putting a finer point on '27 and '28. And look, the implication kind of getting at your first question around timing is that by the end of next year, will be through a 14.0% ROE because we see it as accelerating.

Okay. And in terms of the 3 initiatives that you've outlined, is this relatively equally weighted? Just ballpark, it sounds like you've got 3 very distinct strategies or strategic initiatives here. Which one is -- is there any one that's a lot more meaningful in terms of getting that ROE up? Or are they all sort of playing a similar role?

They're more similar than they are different. I would sit here on each of the 3 and say, mechanically, I'd be disappointed if we didn't get a full percent of ROE expansion of each of them over a 3-year cycle. Now some of them have more headroom than others. I think the case for growth in the Caribbean would have the opportunity to really be transformative to the way that we do business in 3 and 5 years.

So I think the cap on that is higher and would be pretty meaningful, whereas with the Canadian investment expansion, fundamentally, we're a public company, and we're not going to get hyper aggressive. And so with that one, if I was to range from kind of the smallest of the opportunities, that would cap out at still a meaningful number, but maybe a 2% move in our overall ROE.

Okay. And just to sneak one last quick one. And just a quick numbers question, maybe for Kathy, but just the tax rate in the quarter, effective tax rate did come in a bit low. I'm not sure if it's geographic mix of your earnings this quarter, but anything on the tax line that's temporary? Does it sort of revert to recent quarters?

Kathy, that's definitely for you.

Yes. Sorry, I was trying to take it off mute. Yes, I think it's a mix. We did see some in Jamaica. There was some -- it really is the mix of earnings. So that -- and some work we've been doing to plan.

So a lower tax rate versus, say, the last few quarters as a run rate?

It was mix. I probably -- I would say, yes, it's probably a little premature for that. So I would say it would be more conservative, but it is -- we are continuing to take our -- to work on our effective tax rate.

Your next question comes from Trevor Reynolds with Acumen.

Just curious on the hurricane Melissa. Is that fully baked into the numbers now?

Kathryn?

Yes. Yes. So I would say most of it is in there. We have our -- like net of insurance -- of reinsurance rather, it's in our core in terms of the claims, and we're well reinsured. So it was in there. And then in our noncore, that's where we have a little bit in terms of additional rebuilding of infrastructure, like our infrastructure that was impacted.

But in order of magnitude, it was around [ $2.1 ] million, net in our core and maybe $3 million in the noncore, and it was less and then we only take a portion of that. In terms of next year, there'll probably a little bit more in terms of noncore and maybe a little bit. But again, the numbers are very small, and we're well reinsured in terms of the core.

Right. And Kathy, I think you mean to say a little bit more -- a little bit incremental to this as opposed to more than what we saw in Q4.

Sorry. Yes, sorry. Yes. Thank you for clarifying that...

The point here was that barely scratched materiality for Q4. And in terms of noncore stuff, we're being good citizens and making donations to community initiatives and all that sort of stuff. But we're talking the $1 and $2 millions of dollars. It's the right thing to do. But I think the thing that we should take away from that and we wanted to allude to this in Q4 without being too hasty is that we -- both from an operational planning point of view and from a financial exposure point of view, we're responsible and our anticipated exposures even to catastrophic events, and this was a once-in-generation weather event, just barely scratches materiality because of the safeguards that we have in place.

Great. Thanks for the update there. Just on the Caribbean transformation. So -- you kind of provided some guidance in terms of when we might see that take place on -- in terms of your reporting. Like what is the time line on an actual digital transformation? Is that -- do you expect that to -- just maybe just some updates on kind of the time line of that actually occurring. Would that all be done when you start reporting under the new segment? Just curious on that.

So I mean we are embarking on a full transformation effort being guided by outside parties who have done this before for similar large organizations globally. And we're deliberately doing that so that we can get best practices. I think if you talk to some of the other companies that you cover around really robust transformations, they are 2-, 2.5-year projects, and we're not waiting until close, but this is stuff we're going to be working on in '27 and '28 as well. And so when we're putting forward guidance in 2027, it's incorporating any quick wins from that sort of project, but we're going to continue to work on it, and it's one of the big sources of margin expansion looking out into '28 and beyond.

There are no further questions at this time. I will now turn the call over to George Sipsis for closing remarks.

Great. Thank you, operator, and thank you, everyone, for joining the call today. A replay of this call will be available for 1 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, everyone. Have a great day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

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.

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.

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.

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.

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 Instructions] Your first question comes from the line of Gabriel Dechaine from National Bank.

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?

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.

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...

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.

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?

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.

Your next question is from the line of Mike Rizvanovic from Scotiabank.

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?

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.

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?

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.

Your next question comes from the line of Trevor Reynolds from Acumen Capital.

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.

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.

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?

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.

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?

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.

Your last question comes from the line of Darko Mihelic from RBC Capital Markets.

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?

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.

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?

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.

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?

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.

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.

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.

Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.