IronRock investment income injured by COVID-19 …maintaining conservative investment risk approach given pandemicWednesday, February 17, 2021
BY DURRANT PATE
Latest financial returns from IronRock Insurance Company have highlighted the extent to which the company's investment income has been injured by COVID-19.
IronRock's Managing Director R Evan Thwaites confirmed that investment income continues to come under pressure by the pandemic. Investment income for 2020 was slightly up by just under two million dollars year-over-year to $40.2 million coming from $38.7 million posted for 2019.
For the December 2020 quarter investment income was down by almost one million dollar moving from $10.55 million in 2019 to $9.3 million. According to Thwaites, “investment income continues to be affected by economic and market conditions, which have kept global debt yields relatively low, despite the arguably higher systemic risk present in most markets.”
IRONROCK PIVOTS TO ONLINE
Given this reality, IronRock has been pivoting online since the onset of COVID-19.
The insurance company, which is listed on the junior market, pointed to the significant growth in its online businesses.
For the third quarter in a row, online transaction volume grew significantly along with the value of these transactions. In its December 2020 fourth quarter, IronRock maintained its emphasis on increasing and improving client engagement through its digital platforms.
Also, during the quarter, IronRock introduced new motor products to the marketplace. In his report to shareholders, Thwaites explained that this being the final quarter of IronRock's financial year, the insurance company was able to calculate and recognise profit commissions from its various reinsurance treaties.
These commissions are tied to the performance of its portfolio and are therefore an indication that the company has upheld a high underwriting standard. At same time IronRock, which is a subsidiary of Granite Group Limited, incorporated and domiciled in St Lucia, managed to continue to grow revenue by 19 per cent for the fourth quarter.
CONSERVATIVE INVESTMENT RISK APPROACH
With the continued uncertainty caused by the pandemic, Thwaites reported that IronRock will be maintaining its conservative approach to investment risk. In the fourth quarter, IronRock generated an underwriting profit of $39.4 million.
When compared with the fourth quarter of 2019; this is a significantly improved result, primarily driven by increased net commissions, which rose to $48.0 million and reduced net claims, which fell to $8.2 million.
Gross written premium was flat at $233.8 million and net earned premium reduced to $48.4 million, due to increased reinsurance cessions. Operating expenses increased to $48.9 million while other income slid to $9.3 million.
This resulted in a net profit for the quarter of $48.6 million. On a full year basis, gross written premium increased by 19 per cent. Thwaites advised that, “given the difficult economic conditions caused by the pandemic, we are pleased with this outcome.”
Net claims fell by 35 per cent to $86.8 million while net commissions increased by $44.1 million, mainly due to the effects of additional reinsurance placements. After operating expenses of $186.1 million, the company recorded an underwriting loss of $24.7 million, which is much improved from the underwriting loss of $64.2 million recorded in 2019.
NET PROFIT OF $35.6 MILLION RECORDED
Other income amounted to $60.3 million, with the major contributor being investment income of $40.2 million, followed by foreign exchange gains of $11.8 million and gains on the sale of investments of $8.1 million. As a result for the year ended December 31, 2020, IronRock generated a net profit of $35.6 million, an increase of $30.6 million from 2019.
This resulted in earnings per share of $0.17 for 2020, up from $0.02 in 2019.
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