Mounting claims cut profit at General Accident
Mounting claims have put a dent in profits at General Accident Insurance Company Limited.
Managing Director Sharon Donaldson is reporting worrying first-quarter results that show claims moving up nearly 26 per cent to $185 million, compared to $147 million for the same period in 2014. This resulted in an underwriting loss of $13 million and pushed down Q1 profits to $26 million from $99 million in the same period last year - an erosion of $73 million.
Donaldson, while hoping that the trend will abate, says that is the nature of the insurance industry over which General Accident has no control.
"We're an insurance company and what we do is sell a promise to pay claims, and when they do come, we have to pay them. We hope that for the rest of the year this trend will improve and less claims will lead to a better rate of return," the insurance executive said while reporting to shareholders at General Accident's annual general meeting on Monday.
The yearly results told a similar story. General Accident paid out $678 million in claims for 2014, up from $647 million the previous year. Expenses also moved from $381 million to $442 million despite staff cuts. This left General Accident with profits of $320 million, down from the $328 million.
Contacted for further comment, Donaldson said her company is experiencing both an increase in "severity of claims costs" as well as the number of claims. And while motor represents General Accident's second-largest line of business and just 18 per cent of gross premiums, she said it accounted for the bulk of claims increases in 2014 as well as the first quarter ending March 2015.
The increase in expenses saw salaries moving from $175 million to $200 million. This, as total staff went down from 83 in 2013 to 78 in 2014. Donaldson pointed to new hires at the management level as the reason for the spike in salaries.
General Accident has 16,087 policies in force from which it grossed $5.07 billion last year, reflecting growth across all six business lines - fire, motor, liability, miscellaneous accident, marine, and homeowner and burglary. Fire policies brought in 63 per cent of all business, or $3.2 billion.
The company is worth $1.6 billion by book value and $2 billion by market value.