Key Insurance Company, which was recently taken over by GraceKennedy Group, saw its 2019 losses increase to $769.5 million, some four and a half times the loss of $167.5 million it experienced in 2018.
The financial haemorrhaging stemmed from, among other things, gross premiums written going down by $268 million in the fourth quarter, representing an 18 per cent decrease over the same period in 2018.
Reinsurance ceded premium and reinsurance recoveries on claims increased in comparison with 2018’s final quarter by $376,72 million and $274.6 million, respectively, aligned with the strategy of managing the motor business segment. The gross claims expense increased by $262.7 million in the final quarter of 2019 as against the similar period in 2018, reflecting the challenges with the motor segment.
However, strategic investment activities in the fourth quarter of 2019 exhibited an increase in non-operating income of $104.19 million. Its 2019 financials released yesterday showed that in the fourth quarter, the finalisation of the 2019 motor quota share reinsurance arrangement resulted in additional reinsurance premium ceded of $236 million.
“…anticipates improvements in the company’s operating performance going forward as a subsidiary of the GraceKennedy Financial Group.”– Key Insurance director and former chairperson, Natalia Gobin-Gunter
Additionally, the second actuarial review for 2019, which occurred in the final quarter, resulted in actuarial adjustment of $329 million.
TOTAL GROSS PREMIUMS WRITTEN DOWN 22%
However, for the year 2019 total gross premiums written of $1.4 billion decreased by 22 per cent or $388 million in contrast with the 2018 year. The motor business contribution to this reduction in 2019 was $265.58 million or 21.33 per cent, while the non-motor business income contributed was down $122.28 million or 22.38 per cent.
Reinsurance ceded increased by $791.5 million compared to 2018, resulting in net premiums written of $178,000 for the 2019 financial year. Gross claims expense increased by almost $500 million or 44 per cent for 2019 in comparison with 2018.
The primary contributor to this was the book of business with associated high-risk factors, which influenced the attendant actuarial adjustment increase of $409 million for the year.
Reinsurance was one component of the risk management strategy to mitigate the negative motor claims trajectory that resulted in an increase in reinsurance recoveries by $965.67 million in 2019.
There was a net improvement of $64 million in 2019 from other associated underwriting activities, alongside the reduction in gross premium written for the two business segments and the increase in the actuarial adjustment emanating from the existing risk profile of the motor business.
The management reports that it has taken action to expedite implementation of its information technology strategy to improve internal processes and customer experience.
Administration and other costs increased by $28 million in 2019 as the company implemented the various risk management strategies. Non-operating income for 2019 improved by $77 million, as a product of the investment strategy aligned with the risk management strategy.
GRACEKENNEDY’S TURNAROUND PLAN FOR KEY INSURANCE
GraceKennedy Financial Group Limited, which acquired 65 per cent of the shareholdings of Key Insurance last month, has presented a strategic plan to the new board of directors of the company. The turnaround plan sets the framework for Key Insurance to become a leading, local motor insurer in key market segments while driving growth in other non-motor segments.
This will be done by restructuring Key Insurance’s motor portfolio and expanding its customer base and product portfolio.
In her report to shareholders, Key Insurance current director and former chairperson, Natalia Gobin-Gunter made the point that the current board, which was put in place two weeks ago “anticipates improvements in the company’s operating performance going forward as a subsidiary of the GraceKennedy Financial Group”.
She said Key Insurance Company Limited (KICL) “will benefit from the replication of a strong corporate governance culture and a robust risk management framework, as well as leverage a wide cadre of expertise and talent in several functional areas. This is not only expected to enhance KICL’s internal control environment and accountability framework going forward, but also will enable operational efficiency in the roll-out of the company’s strategic plan to support a turnaround and return to strong operating performance for the benefit of shareholders”.
Gobin-Gunter added that, “There are some important and urgent activities which will be foremost during this transitionary period, regarding the recapitalisation of the company to meet regulatory compliance levels as well as to support the company’s strategy going forward. The company will be moving with alacrity around these matters in the upcoming months. The management and board remain committed to not only increase shareholder value but also to continue its corporate social responsibility in education and health.”