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Scotiabank Jamaica's headquarters in downtown Kingston, Jamaica.

Scotia explains why sale of its insurance subsidiary to Sagicor Jamaica failed

Scotiabank Jamaica's headquarters in downtown Kingston, Jamaica.

The inability to arrive at a “sweet spot” is the explanation being given by Scotiabank as to why its one year old negotiation to sell Jamaican insurance subsidiary, Scotia Jamaica Life Insurance Company, to Caribbean insurance giant, Sagicor failed.

Scotiabank head office in Downton Kingston, Jamaica. (Photo: Jamaica Observer Limited)

Scotia Group has sought to clear the air regarding its sudden decision not to go ahead with the sale to Sagicor. Scotiabank Jamaica Group President and CEO, David Noel and Scotia Jamaica Life Insurance Company President, Dr Adrian Stokes responded to questions from Caribbean Business Report about the sudden change of heart not to sell its insurance business.

Forced to answer

When pressed to answer questions posed by journalists about the failed deal, the two Scotiabank executives emphasised that the inability between Scotia and Sagicor to find common ground on a 20-year distribution agreement was the spoiler to the deal.

“…over the past year we recognised that we could not arrive at a sweet spot so we decided to end the pursuit of that strategic initiative.”

– Scotia Jamaica Life Insurance Company President, Dr Adrian Stokes

The deal was announced in November last year, where Scotiabank would sell its life insurance business in Jamaica to Sagicor and in return Sagicor would engage in a 20-year distribution agreement through which an enhanced suite of market-leading insurance products and solutions, underwritten by Sagicor, would be offered to Scotiabank customers in Jamaica.

However, responding to questions at its media briefing on the Group’s 2019 financials, the Scotiabank top management was forced to comment on the deal falling through and the reasons for this.

Scotiabank Jamaica Group President and CEO, David Noel

Mutually agreed “sweet spot” never materialised

Without going into much detail, Noel made the point that the sweet spot for Scotiabank was the distribution deal and this was the sticking point in the negotiations.  Noel emphasised that the distribution component of the deal was the most important noting that the sale of the insurance business would have made no sense to Scotia without securing the distribution deal.

For this part Stokes emphasised, “over the past year we recognised that we could not arrive at a sweet spot so we decided to end the pursuit of that strategic initiative.” The Scotiabank Group management team declared that there is no intention on the future horizon to sell the insurance business, rather it will be investing heavily in its insurance subsidiary, which has done well in the just ended year.

Scotia Jamaica Life Insurance Company President, Dr Adrian Stokes (Photo: Development Bank of Jamaica)

The subsidiary registered a 20 per cent increase in policies sold year over year. Having decided not to pursue the sale, the Group’s management remains committed to providing the highest levels of customer service and high quality insurance solutions and is more than ever focused on growing the business.

Stokes pointed to the 2019 positive performance noting the strong growth in core business and expressed his delight with Scotia Insurance’s strong performance going forward. “As you see from the performance of the business this year the decision not to pursue was the right one as we invest in the business as a going concern,” Stokes trumpeted. 

The Sagicor building in New Kingston, Jamaica.

Refreshing product shelf

Given the investments that will be made in Scotia Insurance, the Group will be closely examining its product line. Already Scotia Insurance is looking to “refresh our product shelf”, explained Stokes. He made the point that “most of our products were developed in a period of high interest rates but now it’s time to take advantage of the current low interest rate environment.”

Stokes expressed delight at some of  the things Scotia Insurance will be doing promising new products that will be rolled off the production line to reflect the new market dynamics.