KEY reports $162.66 million in year end losses

KEY Insurance Company Limited (KEY), for the year ended December 31, 2018 reported a 27% increase in net premiums written to $1.18 billion from $930.30 million in 2017. For the fourth quarter ended December 31, 2018, Key Insurance Company Limited (KEY), reported a 20% decrease in net premiums written to $236.07 million from $293.58 million.

This was as a result of a 24% increase in gross premiums written from $1.44 billion to $1.79 billion. KEY noted, “The motor and non-motor business contributed 28% and 17% respectively, to this growth for 2018.”

Reinsurance ceded for the for the year rose 20% to close at $611.96 million (2017: $509.77 million). For the quarter there was also a 20% decrease from $113.64 million to $90.99 million a year ago.

KEY booked change in unearned premium reserve of $32.19 million relative to $151.65 million last year. As such, net premiums earned increased by 47% totalling $1.15 billion versus $778.65 million for the comparable period in 2017. Net premiums earned for the quarter amounted to $295.75 million (2017: $230.47 million). Changes in insurance reserves for the period went up from $14.74 million in 2017 to $25.30 million to in 2018.

The company reported $167.31 million for commission on premium written relative to $141.40 million for the comparable period of 2017, this represents a 18% increase year over year. Commission on reinsurance ceded totalled $117.12 million relative to $91.30 million the previous year.

Claims expense soared to $1.12 billion from the $334.06 million recorded in 2017. Management stated, “The primary contributor is the increased book of business with associated high risk factors. Actuarial adjustment of $126,000,000 for the year is the other component that has influenced the negative trajectory in our claims experience. However, pursuant to the directive from the Board during the third quarter, management has strengthened its risk assessment and pricing policies designed to improve the quality and profitability of new business written. The initial effect has resulted in the reduced premium growth of 20% between October and December 2018 for the comparative period. The claims profile is a reflection of the business written. The corollary improvement in the net claims expense will be reflected in 2019 and beyond as these improved underwriting practices are realized. This new risk management focus was facilitated by the restructuring of the Underwriting team along with the requisite external consultant injection. Additionally, a new Risk management unit has been instituted that is twinned with reinsurance and charged with the responsibility of proactively reviewing the risk-premium profile shift to provide operational assurance that these measures are effective and equates to the improvement in our underwriting performance. Management has also taken action to expedite implementation of its Information Technology strategy to improve internal processes and customer experience.”

A gain of $119.17 million was recorded for Reinsurance recoveries, while administration and other expenses inched down 6% to close at $405.16 million compared to $428.81 million recorded in 2017. Change in unexpired risk reserves for the year closed at a negative $33.30 million versus $8.12 million.

There was an underwriting loss of $315.91 million for the year compared to a loss of $63.04 million reported in 2017. Underwriting loss for the fourth quarter amounted to $173.39 million versus a profit of $ $8.67 million for the corresponding quarter of 2016.

Investment income for the period amounted to $54.33 million when compared to $49.41 million in 2017. Other income for the period amounted to $89.21 million relative to $38.67 million in 2017. Key booked $9.78 million for gains on revaluation of investment properties in 2018 versus $19.70 million for the year ended December 31, 2017.

Net loss before taxation for the year closed at $162.60 million compared to a profit of $44.74 million, followed by taxes of 60,000 (2017: $2.08 million). As such, net loss for the period amounted to $162.66 million (2017: $42.66 million), while for the fourth quarter losses of $89.73 million were recorded compared to profit of profit: $60.37 million.

Total comprehensive loss for the year amounted to $148.27 million, in contrast to an income of $77.54 million.

KEY also added, “Cost management continues to be a key focus of our organisation in that administrative expenses represent 23% of what was required to drive the 2018 premium. This is an improvement over 2017 as administrative expense was 30% of the gross premium written. Non-operating income for 2018 improved by $45,532,000 as a product of the composite strategy of investment of cash from our increased book of business and agile movement of our investment assets.”

Loss per share (LPS) for the quarter amounted to $0.24 relative to earnings per share of $0.16 in 2017. The LPS for the year totalled $0.44, relative to an EPS of $0.12 booked in the year before. KEY last traded at $3.07 as at February 14, 2019. The number of shares used in the calculation was 368,460,691 units.

Balance Sheet Highlights:

The company’s total assets amounted to $2.58 billion as December 31, 2018 up from $2.45 billion in 2017, representing a 5% increase. The overall growth in the asset base was attributed to a 17% increase in Cash and deposits and investment securities which closed at $470.36 million (2017: $403.06 million) and $753.86 million (2017: $713.22 million).

Total Stockholders’ Equity as at December 31, 2018 was $909.65 million (2017: $1.10 billion), resulting in a book value of $2.47 (2017: $2.99).

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