April 1, 2021
Key Insurance Company Limited (KEY) for the year ended December 31, 2020 reported net premiums written of $942.37 million relative to a negative net premiums written of $340.49 million recorded for the same period in 2019. This performance was due to a 72% decrease in reinsurance ceded which closed the period at $489.72 million (2019: $1.74 billion). Notably, gross premium written for the year improved 2% to $1.43 billion relative to $1.40 billion for the year ended December 31, 2019. For the quarter, net premium written improved to $299.52 million in contrast to a negative net premiums written of $540.11 million reported for the same quarter of 2019.
Change in unearned premium reserve related to current year gross closed the period under review at a deficit of $108.18 million, relative to a surplus of $31.86 million booked last year. As a result, net premiums earned improved to $834.18 million relative to a loss of $308.63 million in 2019. KEY highlighted, “despite the challenging economic environment stemming from the COVID-19 pandemic, the Company has again delivered a strong performance for the quarter, demonstrated by a 141% increase in net premiums earned for the quarter ended December 31, 2020.”
Claims expenses amounted to $563.19 million (2019 income: $49.28 million), while administrative and other expenses increased by 12% to $489.40 million (2019: $435.48 million) for the year end. Also, commission expense amounted to $171.33 million, relative to $167.11 million booked in 2019.
Commission on premium written closed at $159.93 million compared to $132.85 million for the same period of 2019. There was a surplus in unexpired risk reserves for the year which amounted to $31.71 million relative to a deficit of $64.40 million the prior year and amortization of underwriting assets stood at $323.14 million (2019: nil) as at December 31, 2020.
KEY noted, “following the acquisition by GK Financial Group and the subsequent decision take to terminate the Company’s MQS policy, KICL recorded a one-off amortization of underwriting assets of $323.1 million in June 2020 which has materially impacted the Company’s reported performance for the year ended 31, December 2020. When normalized for this non-recurring expense, the Company would have generated an underwriting loss of $211.8 million- a 73.3 improvement over the $793.5 million underwriting loss recorded for 2019.”
As a result, underwriting loss closed the year at $521.23 million compared a loss of $793.49 million experienced in 2019. As for the quarter, the Company booked an underwriting profit of $47.90 million in contrast to a loss of $452.22 million documented for 2019. Management noted, “we are encouraged by the improved underwriting results for 2020 and further highlight that we have seen a significant improvement in net premiums which have increased”.
Investment income for the year totaled $27.49 million, 16% less than the $32.90 million recorded for 2019, while other income fell 85% to $17.66 million from $114.34 million booked in 2019.
Gain on revaluation of investment properties closed at $26.58 million, versus $80 million reported for 2019.
Consequently, loss before taxation closed at $449.50 million for the year, relative to a loss of $566.26 million in 2019. There was a tax credit of $149.83 million for the year, compared to a tax credit of $298.78 million in 2019. As such, net loss for the period totaled $299.67 million relative to $267.48 million for the period ended December 31, 2019. Net profit for the quarter however, closed at $58.72 million versus a profit of $31.33 million for the prior comparative quarter in 2019.
Total comprehensive loss for the year amounted to $310.22 million (2019 Total comprehensive loss: $228.46 million), while comprehensive income for the quarter amounted to $71.97 million (2019: $79.34 million).
Loss per share (LPS) for the nine months totaled $0.81 relative to a loss per share of $0.73 in 2019, while EPS for the quarter totaled $0.16 compared to an EPS of $0.09 in 2019. The number of shares used in the calculation was 368,460,691 units. KEY stock last traded on April 1, 2021 at $5.43.
KEY highlighted, we will “continue to make progress towards achieving profitability and have seen improved performance over the last three quarters. there has also been significant improvement in the Company’s underwriting results, attributable to specific initiatives implemented by management, such as the issuing of a new motor rate guide, improvements in the Company’s service standards and the restructuring of the underwriting team. Improvements in customer engagement has also been driven by an active marketing campaign and enhanced service offerings.”
Balance Sheet Highlights:
The Company’s total assets amounted to $2.91 billion as at December 31, 2020, 36% below the $4.51 billion as at the corresponding period in 2019. This was mainly as a result of a decline in ‘Due from reinsurers’ to $363.95 million (2019: $2.04 billion) and ‘Cash and Deposits’ amounting to $745.18 million (2019: $937.03 million).
Total Shareholders’ Equity as at December 31, 2020 closed at $258.98 million (2019: $660.34 million), thus resulting in a book value of $0.70 (2019: $1.79).
Analyst Certification -The views expressed in this research report accurately reflect the personal views of Mayberry Investments Limited Research Department about those issuer (s) or securities as at the date of this report. Each research analyst (s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendation(s) or view (s) expressed by that research analyst in this research report.
Company Disclosure -The information contained herein has been obtained from sources believed to be reliable, however its accuracy and completeness cannot be guaranteed. You are hereby notified that any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be unlawful. Mayberry may effect transactions or have positions in securities mentioned herein. In addition, employees of Mayberry may have positions and effect transactions in the securities mentioned herein.