General insurer IronRock Insurance Company Limited ended third quarter September 2020 with an underwriting loss of $18.7 million, but had other income of $23.2 million, which resulted in profit for the quarter of $4.6 million.
However, other income declines due to a significant reduction in gains on the sale of investments –caused by the effect of COVID-19 on local and international financial markets – impacted the results for the nine months.
An increased loss for the nine months ended 30 September 2020 of $13 million was reported by Iron Rock, versus a loss of $9.6 million for the same period in 2019.
Evan Thwaites, managing director of IronRock in remarks attached to the period’s results said the insurance sector has seen a slowdown in revenues as deaths from COVID-19 have increased in Jamaica.
During the financial quarter ended 30 September 2020, the number of COVID-19 deaths and infections in Jamaica began to rise at an unprecedented rate, he outlined.
Thwaites said, “The primary effect on our operations has been a slowdown in revenue growth. Our experience is that brokers and their clients have been less willing to re-broke large commercial contracts as most parties prefer in-person meetings with new insurers, but these meetings are now associated with the risk of COVID-19 exposure.”
The company, consequently, turned its focus to “building and maintaining a profitable direct client portfolio.”
Thwaites stated, “We have launched several new motor insurance products and the early response from the market has been promising. Client engagement on our digital platforms has also continued to grow, with September 2020 showing the highest level of online client engagement ever. Looking ahead we are excited to build a truly modern insurance service for the digital age.”
Thwaites said while the island has had a lot of rain this hurricane season and a few storms (some lightning claims have been paid), luckily no hurricanes have occurred yet.
However, he noted, the effect of the damage being dealt to the Gulf Coast of the United States is likely to mean that pressure from reinsurers on regional insurers is likely to continue at least into 2021. “We expect property taxes to continue to increase in response to this pressure,” Thwaites stated.
In response to the uncertainty caused by the pandemic and also the onset of the hurricane season IronRock has adjusted investment strategy to increase liquidity and reduce risk.
The effect of this has been reduced yields. As hurricane season winds to a close and as the Jamaican economy adjusts to the pandemic, Thwaites outlined, “we have opted to move our investments to longer term, higher yielding debt instruments.”
He said the value of the company’s equity portfolio remains depressed with little recovery since the initial shock of COVID-19 back in March 2020. “We do not expect much of a recovery in the Jamaican equity market for the rest of the year, but intend to build on the income side of the portfolio,” the company head opined.
Gross premium by the insurance company for the quarter rose 16 per cent, net claims were reduced by 37 per cent and net commissions grew by $6.1 million.
However these gains were offset by increased payments to reinsurance companies and an increase in operating costs.
While investment gains fell as the company focused on liquidity, there was $6.6 million gained on the sale of investments and saw a significant increase in foreign exchange gains.
Year to date, gross premium written is up 27 per cent, net claims are down 24 per cent and net commissions are up $10.4 million. Underwriting loss has been reduced to $64 million, down from $67.7 million in 2019.
Shareholder equity has remained flat from the previous quarter’s results as the quarters’ profit was offset by a decline in the value of the company’s investment portfolio.