Tue | Sep 26, 2017

BCIC takes No 1 spot, AGI still most profitable general insurer

Published:Friday | April 22, 2016 | 4:00 AMCamilo Thame

British Caribbean Insurance Company (BCIC) switched places with Advantage General Insurance (AGI) as the top grossing general insurer in Jamaica in 2015.

AGI fell to fourth place in terms of gross premium written, a position previously held by BCIC in 2014.

In between, in a switch of their 2014 positions, General Accident edged out Guardian General for second place in 2015, pushing the latter to third spot.

JN General (JNGI) moved up from seventh to fifth, Insurance Company of the West Indies (ICWI) remained at sixth, followed by GK General and then Key Insurance.

Combined, the eight general insurers took in $38.2 billion in gross premiums last year, up from $33 billion in 2014. This reflected increases to the top line to all but AGI.

But none of the companies come close to Advantage General in terms of its profitability. The $1.1 billion it posted last year improved on its $840-million earnings in 2014.

The subsidiary of National Commercial Bank Jamaica has the most sizeable investment portfolio (over $10 billion) in the industry, and its non-core income of $826 million dwarfed its competitors by far.

Strong underwriting profit

But even though, like the rest of the industry, AGI gets most of its income from earning assets about 55 per cent the insurer posted a strong underwriting profit of $677 million, up from $590 million. Put another way, its underwriting ratio claims and expenses to net premiums at 86 per cent is the best in the business.

JN General also achieved an underwriting ratio of 86 per cent last year, but its net premiums of $1.9 billion was considerably smaller than AGI's $4.8 billion, so it posted $260 million in underwriting profit in 2015.

Advantage's risk exposure to motor insurance was nearly three times that of JNGI, while the latter's exposure to liability insurance was three times that of the former's. Thus, reinsurance cost would have been higher for JN General, plus its gross premiums were smaller than AGI's.

AGI also did well to achieve core profitability, in that motor insurance tends to be the most risky in terms of making losses. For example, General Accident incurred underwriting loss of $136 million from $990 million in gross premiums written under its motor business last year. All of its other business segments were profitable and thus the insurer posted $115 million in underwriting profit overall.

Similarly, Key's motor insurance business incurred a $59-million underwriting loss compared with an $8-million loss to its non-motor business, even though the two segments generate similar amounts of revenue - $473 million for motor to $488 million for other.

And when comparing BCIC and GK General, which have almost the same amount of risk exposure to motor, the one with the greater exposure to liability - BCIC - posted higher core profit of $205 million to GK General's $173 million.

What's more, ICWI appears to be second to AGI - the market leader in the motor insurance business - but its underwriting profit totalled $48 million last year.

As a whole, in terms of their core business, the general insurance industry fared better last year than in 2014. Combined, underwriting profit across the eight companies increased from $1.1 billion to $1.5 billion in 2015.

Also, the industry's underwriting ratio fell from 93 per cent to 91 per cent, by Financial Gleaner calculations, with all firms showing an improvement, including Key, which still has an underwriting ratio above 100 per cent.

That company's recent IPO, which raised $119 million in capital for the insurer, is expected to drive expansion of its core business. Its investment income put it in the black last year when its earnings totalled $23 million, like the year before when its net profit was $25 million and its underwriting loss totalled $71 million.

For the other insurers, non-core income from investments and other gains ranged from 61 per cent to 86 per cent of profit before tax. Collectively, the earnings of general insurers rose from $3 billion in 2014 to $3.3 billion last year.

camilo.thame@gleanerjm.com