Fri | Dec 4, 2020

Crashes are fewer but more severe, says insurer IronRock

Published:Friday | October 23, 2020 | 12:18 AMSteven Jackson - Senior Business Reporter

Managing Director of IronRock Insurance Company, Evan Thwaites.
Managing Director of IronRock Insurance Company, Evan Thwaites.

The number of car crashes have fallen since the April imposition of COVID-19 curfews, but the damage sustained in motor accidents were found to be more severe.

The upshot for IronRock is that claims are tracking apace with last year, despite fewer accidents, according to Evan Thwaites, managing director of general insurance company IronRock.

Thwaites, a veteran in the business, said claims are generally booked more immediately than revenue, and as such, he was cautious about the company’s financial results for the full year ending December.

“At IronRock, we have seen a reduction in the number of motor vehicle accident reports, so there was less frequency of claims. However, the severity of claims has gone up significantly. Our assessment is that because less cars were on the road, people were driving faster when they had accidents,” said Thwaites, the guest presenter at the regular Mayberry Virtual Investor Forum on Wednesday.

“Claims incurred are tracking almost the same as 2019,” he said.

IronRock Insurance Company Limited, which entered the market five years ago, sells motor and marine insurance. Its shares were listed on the junior arm of the Jamaica Stock Exchange in 2016.

Jamaica’s Road Safety Unit reports regularly on road accidents, and the number of fatalities, but not necessarily the severity of injuries or damage to vehicles. The most recent data shows that fatal car crashes increased in the first quarter, but fell dramatically to an eight-year low in the April to June period – at the height of the lockdown against the virus – at 77 deaths, compared to 119 in same quarter in 2019. In the July to September quarter, however, fatal crashes were up, at 125 deaths, compared to 98 in 2019.

Looking beyond the virus, Thwaites, in his presentation, said IronRock had a new two-year path to profitability, with long-term plans to expand to other Caribbean markets.

“In a year or two, we expect to post an underwriting profit, subject to nothing catastrophic happening,” he said, with the caveat that no severe hurricanes or earthquakes emerge in the period.

The timeline for regional expansion is dependent on the achievement of goals set for its home market.

“That is our long-term plan, but we have a job to do in Jamaica that we have not yet finished. Once we have accomplished what we set out to do in Jamaica, then we will turn to the region,” said Thwaites, who added that the company can use its technology platform to snap up clients in the Caribbean.

Even with the onset of the coronavirus, the company continues to book revenue at a quicker pace than 2019. Gross premiums over three months to September totalled $181 million, compared to $156 million in the prior year. Over nine months to September, gross premiums totalled $603 million, up from $475 million.

However, IronRock made an underwriting loss from its insurance operations, both for the quarter, at $19 million, and over nine months, at $64 million.

Its bottom line in the September quarter was rescued by other income, leading to net profit of $4.6 million. Over nine months, however, it was mired in red with a loss of $13 million.

The company witnessed gross premium growth in each of its quarters in 2020, but with slower growth after March, with the onset of COVID-19. Premiums grew 50 per cent in the first quarter, 37 per cent in the second quarter, and 27 per cent in the third quarter, Thwaites said.

“So COVID-19 has begun to affect our growth rate, but I cannot tell you how pleased we are with the results,” he said, adding that some of his insurance peers recorded fewer premiums. There are a dozen general insurance companies operating in Jamaica, with IronRock as the latest market entrant.

“Over six months, three of our competitor companies wrote less premiums, but IronRock had the highest growth rate in the industry,” Thwaites said.

IronRock’s cash flow, currently at $40 million, outperformed its cash flow projection of $8.7 million in its prospectus. The company, however, underperformed in its booking of revenue, profit and capital when compared to its original projections. For instance, its $540 million in capital as at September is half of the $1 billion it projected it would hit by the end of this year.

“We have realised that COVID-19 has not caused the sky to fall. We were all terrified in the beginning, but society has adapted to the new pandemic environment and its consequences,” the IronRock MD said.