Set up costs spur underwriting loss at IronRock
General insurance start-up IronRock closed its first full year of operation with a loss of $48 million, but Managing Director R. Evan Thwaites says the numbers are in line with expectations.
"We are pretty much bang on with our predictions, so to that extent we are pleased," he said in an interview with Gleaner Business. The company does not expect to make a full-year profit until around 2019.
Gross premiums year end December 2016 amounted to $127.3 million, and the company earned an additional $11 million in commissions, but operating expenses and the cost of writing business overtook revenues, leading to an underwriting loss of $80 million.
The underwriting loss was partially offset by foreign exchange gains and investment income, narrowing net losses to $48.2 million.
Thwaites said operating Expenses associated with the full establishment of the company amounted to $91 million, funds spent, he said, to put IronRock on a firm footing, while catching its bearings in a competitive market.
"Our projections were based on that model, that is, to develop a sound portfolio in the first year, bed down the company, make sure all our systems were up to scratch, and so on - really developing a basis for growth going forward," Thwaites said.
He noted that the company closed the year with a low claims ratio - that is, the amount of claims measured against the premiums written - and that claims totalling $1.9 million were well below projections.
The underwriting loss of $80 million was also better than projected, he said, which he touted as good news for the start-up.
"Our loss ratio, both gross and net, was very low, and so that suggests that we've been underwriting well; and that's a good sign because a big part of an insurance company's costs is claims," Thwaites argued.
IronRock relies on a small team of eight persons, backed by technology. Thwaites says the bulk of their business comes from maritime insurance, and that IronRock staff works with tablets, apps and other software to do the bulk of the work.
"Our business model is to have relatively low staff numbers, with technology doing most of the humdrum work that's associated with insurance - leaving us to focus on customer service and underwriting," Thwaites said.
IronRock debuted on the junior market of the Jamaica Stock Exchange in March 2016. Thwaites says that while the company expects to grow in 2017, investors in the company should not expect a profit before year four as outlined in the prospectus for its initial public offering.
"We're still likely to produce an underwriting loss this year. By the third year we expect to see that come closer to break even, and then we see profits coming in the fourth year," Thwaites said.
IronRock Insurance Company was founded by Thwaites, an insurance veteran who formerly ran Globe Insurance Company, and William 'Billy' McConnell, who formerly ran the conglomerate Lascelles deMercado that once owned Globe.