New GraceKennedy management steering company to consistent profitability

After reporting more than a year of quarterly losses, Key Insurance company, under new management by the GraceKennedy Group, is finally turning the corner into consistent profitability.

The GraceKennedy Financial Group acquired 65 per cent of the share capital of Key on March 24 last year. Following the acquisition, the company has reported three consecutive quarters of profit since September 2020. For the recently ended March quarter, the insurance company made a small pre-tax profit of $1.2 million, which is a significant improvement over the corresponding period of 2020, where losses amounted to $507.9 million.

The new management reports that this third consecutive quarter of profit, “demonstrates the benefits being realised from the continued execution of the company’s turnaround plan”.

The company grew its gross written premium by 54 per cent (or $145.5 million) over the corresponding period of 2020, while increasing reinsurance ceded by only three per cent (or $2.7 million).

This resulted in an 81 per cent (or $142.8 million) growth in net premiums written. Most importantly, Key Insurance showed improved underwriting performance during the quarter, reporting an increase of 93 per cent (or $478.8 million), which was largely due to better underwriting practices being employed since last year. This has resulted in reduced loss ratios when compared to the prior year corresponding period.

Gains made on sale of its investment property

During the quarter, Key sold its investment property realising a gain on the sale of $22.6 million which contributed to the company’s ability to better meet its capital adequacy requirements. The investment income earned during the quarter was $9.7 million, compared to $3.1 million in the corresponding quarter in 2020.

This was due to restructuring of the investment portfolio as well as additional investments obtained using the proceeds of the investment property. Through Key’s investment committee, the company’s management will continue to restructure the investment portfolio and place greater emphasis on its performance.

Capital adequacy vital to the ongoing operation of the insurance company is its compliance with the local regulatory framework, that is, passing the Financial Services Commission (FSC) Minimum Capital Test (MCT) requirement of 250 per cent. This ratio had deteriorated, as a result of the continued losses incurred by the company over the past several years.

An integral part of the turnaround plan involved addressing the capital adequacy requirement of the company.

Complying with FSC regulatory framework

As such, the new management executed a number of  critical measures in the review quarter to bring Key in compliance with the regulatory framework.

The measures include:

1. Raising capital via a rights issue

2. Selling of the investment property

3. Increasing our reinsurance arrangement in the form of a Funds Withheld Loss Portfolio Transfer.

KEY’s minimum capital test ratio stood at 257 per cent as at March, 31 2021 surpassing the FSC’s minimum requirement of 250 per cent.

Outlook for 2021

The management, in its report to shareholders, says, “the vision for the company is beginning to be realised and management is now focused on generating continued value for the company’s stockholders. Several critical areas have exceeded or are in line with management’s expectations for this quarter’s results and the outlook for Key remains positive”.

While management continues to actively address the COVID-19 challenges, opportunities presented by the pandemic are also being capitalised, particularly the introduction of digital offerings. The company has put in place a new online, which allows customers to renew their policies, notify the company in the event of claim and provide quotations to new and existing customers.