Significant cost to set up Barbados subsidiary

Jamaica-based regional insurance company General Accident has completed the reorganisation of its foreign subsidiaries, which took a toll on the company’s finances.

The company has admitted that the reorganisation was expensive, noting that the launch last year of its Barbados subsidiary incurred significant start-up costs, which were expected and budgeted. The company says it expects that the subsidiary will be profitable in 2021.

As the group continues to grow in size, the management says it expects to achieve the scale and resilience projected by its business model. Net profit for 2020 totalled $283.25 million, a decline of 57 per cent compared to the $651.56 million reported in 2019.

Net profits suffered in 2020

In its 2020 report, the management reports that, “our outlook remains positive for 2021. We expect our profitability to improve in 2021 due primarily to premium growth in Barbados and Trinidad. In addition, as the reorganisation of our foreign subsidiaries is now fully completed we expect our overhead costs to stabilise.”

Net profit for the December quarter was $158.61 million, 65 per cent less than the $459.02 million booked in the corresponding quarter in 2019. Net profit attributable to shareholders for 2020 amounted to $323.26 million (2019: $558.76 million). While, for the quarter, net profit attributable to shareholders closed at $176.07 million (2019: $366.23 million).

General Accident ended 2020 with gross premium written of $12.05 billion, 12 per cent higher than the $10.73 billion reported for 2019. Reinsurance ceded rose 11 per cent to close at $9.07 billion relative to $8.15 billion booked in 2019.

Excess of loss reinsurance trended up by 33 per cent to $173.66 million (2019: $130.18 million). As a result, net premium written increased by 15 per cent from $2.47 billion last year to $2.81 billion for the year ended December 31, 2020.

Net changes in unearned premiums totalled $71.72M

Net premium written for the fourth quarter amounted to $823.19 million relative to $801.35 million booked for the corresponding period in 2019. Net changes in unearned premiums totalled $71.72 million, 66 per cent lower than the $212.39 million recorded last year.

Consequently, net premiums earned, for the year ended December 31, 2020, grew by 22 per cent to a total of $2.73 billion compared to $2.23 billion for the prior year. For the quarter, net premium earned totalled $710.84 million compared to $698.90 million booked for the similar quarter of 2019.

Commission income fell 11 per cent, year over year, from $857.54 million in 2019 to $762.87 million in 2020, while commission expenses increased by seven per cent from $451.86 million to $483.99 million. Net changes in commission amounted to $53.51 million (2019: nil).

Claims registered a 49% increase

Claims expenses saw an increase of 49 per cent, closing the period at $1.79 billion (2019: $1.21 billion), while management expenses climbed by 23 per cent to total $1.22 billion compared to 2019’s total of $991.99 million.

Underwriting profit for the year totalled $58.41 million, this compares to a profit of $442.14 million in 2019. The company also made an underwriting profit of $64.61 million relative to a profit of $333.50 million within the fourth quarter.

Investment income closed at $201.78 million, a decrease of 12 per cent when compared with last year’s $229.89 million, while other income totalled $178.98 million, relative to $202.18 million in 2019. Other operating expenses grew by 24 per cent to $119.19 million relative to $96.47 million in 2019.

General Accident booked finance charges of $2.71 million for 2020 coming from $7.57 million in 2019. Total comprehensive income amounted to $288.98 million coming from the 2019 amount of $700.96 million, a contraction of 59 per cent.

For the fourth quarter, total comprehensive income amounted to $142.89 million coming from $500.30 million in 2019. Total assets increased by a meager one per cent to $11.11 billion as at December 31, 2020 from $11.04 billion a year earlier.

 ‘Cash & short term investments’ and ‘Other receivables’ contributed the most to the growth in assets with a 72 per cent increase to $1.10 billion (2019: $642.33 million) and a 230 per cent increase to $552.27 million (2019: $167.41 million), respectively.