In a year in which financial services investment holding company Somers Limited sold the Bermuda Commercial Bank, it has reported record net income and disclosed that most of the proceeds of the bank sale are in a loan to the buyer.

Somers had reported at the close of the sale in July that purchaser Provident Holdings Ltd was making the acquisition for a total consideration of $72.8 million, satisfied by a combination of cash and a loan facility provided by Somers to Provident.

But in a filing with the Bermuda Stock Exchange, Somers has now disclosed that the loan involved $52.8 million to Provident Holdings to complete the sale of BCB.

Counted as an asset, Somers Limited reported record annual net income of $197.8 million, after a fourth-quarter net loss of $64.9 million (2020: gain of $51.3 million).

Commenting on the financial results, Somers chairman Peter Durhager said: “2021 was a record year for Somers with net income of $197.8 million and a total return for shareholders of 44 per cent.

“Our investments continue to perform extremely well in what remains a difficult economic environment. During the year, our NAV [net asset value] increased by over 40 per cent to $27.70 and shareholders’ funds increased to $617.8 million.

“Our largest investment, Resimac, continues to report record results and this was rewarded with a 44 per cent increase in its share price during the year.

“Other investments such as Waverton and The Market Herald have also produced excellent results in 2021.

“As global central banks remove liquidity from the system, interest rates are expected to rise, and we continue to get Covid-19 developments such as the recent Omicron variant, we anticipate that market volatility will increase in 2022.

“However, our investee companies have shown over the last 20 months how their business models can adapt and indeed flourish and therefore we look forward cautiously to the next 12 months but remain cognisant of the potential for downside risk.

“The directors are pleased to recommend a 12 per cent increase in the final dividend to $0.38 per share bringing the total dividend for the year to $0.86 per share including the special dividend of $0.24 per share which was paid in September.”

During the fourth quarter, Somers recorded a $59.6 million unrealised loss on its investment portfolio, principally due to a decrease in the value of the company’s largest investment, Resimac, whose share price decreased 16 per cent during the quarter despite reporting record profits.

Partially offsetting this were valuation increases at Waverton (improving financial results and increased AuM), The Market Herald (record financial results for the year) and West Hamilton (to reflect higher property valuations).

This resulted in a net loss in the quarter of $64.9 million (2020: gain of $51.3 million) and the loss per share was $3.29. Net foreign exchange losses were $13.7 million for the quarter (2020: gains of $10.0 million).

At the end of the quarter, 96 per cent of Somers' investment portfolio was exposed to foreign currencies, primarily sterling and the Australian dollar. Over the course of the quarter, the Australian dollar decreased in value versus the US dollar by 3.8 per cent while sterling decreased by 2.5 per cent.

These exchange losses were primarily unrealised. Somers’ total assets decreased over the quarter to $715.4 million (September 30, 2020: $508.6 million) because of the valuation decreases and currency movements outlined above.

The investment portfolio was $660.7 million as at September 30, 2021 (September 30, 2020: $500.9 million) with equity investments ($652.0 million) accounting for 98.7 per cent of this total.

The remaining portfolio investments consisted of other financial investments. Total assets included a loan of $52.8 million to Provident Holdings relating to the sale of BCB.

Within investments, Resimac at $376.3 million, Waverton at $117.2 million and PCF at $37.5 million together represent 80.4 per cent of total investments.

Somers’ net asset value per share ended the quarter at $27.70 (September 30, 2020: $19.78). Total borrowings were $77.1 million at September 30, 2021 (September 30, 2020: $76.0 million).