IronRock posts biggest quarter, positive annual results
Published:Friday | February 4, 2022 | 12:09 AM
General insurance company IronRock is reporting its most profitable quarter in its six years of operation, with earnings rising by ten per cent to $68 million.
Managing Director Evan Thwaites says the increase was mainly driven by profit commissions earned on reinsurance treaties during the October-December fourth quarter.
Reinsurance companies essentially pay back a part of the premiums from a ceding company such as Iron Rock, to encourage a better quality underwriting and good management of the account.
“Profit commission is a contingent income. Therefore, by accounting rules we cannot book it cumulatively on a monthly basis, but rather. at the end of the year,” Thwaites explained.
The fourth-quarter earnings helped the small company offset losses in previous periods, resulting in annual profit of $59 million, or 28 cents per share, its unaudited results show. That’s up from $48 million, or 22 cents per share, in 2020, results that got a substantial bump that year from $15 million of tax credits.
IronRock Insurance Company Limited was founded in 2015 by Evan Thwaites, the late William ‘Billy’ McConnell, and Wayne Hardie and taken public in early 2016.
Making use of technology to deliver its services, IronRock has been offering products such as cargo, boat and renter’s insurance. More recently, it’s been going after more motor business.
“We’ve never ignored motor, we’ve always written those, but we’ve just been selective in who we insure,” Thwaites said, adding that such clients are vetted. “They just don’t walk in off the road; they have to meet our criteria,” he said, further explaining that IronRock tries to do more fleet insurance, citing examples such as that of key account, J. Wray & Nephew.
Thwaites says the company has also tried to innovate by introducing new motor insurance products aimed at specific demographics. The company has been writing niche market policies such as Matrimotor for married people, another targets women drivers, while other policies are targeted at executives.
“We do our marketing and advertising through social media channels, in addition to very little print. That’s how we generate our business,” Thwaites said.
IronRock ended its financial year in December with a five per cent increase in gross premium income to $881 million. It’s still making losses on its core business, but that, too, has improved substantially. Underwriting losses of $27 million in 2020 fell to $16 million in 2021.
Profit in 2021 and 2022 was therefore due to investment and other income, including foreign exchange gains.
Its improved financials, notwithstanding, the company is still about two years behind its projections, not all of which is due to the pandemic.
When the company initially approached the stock market for equity capital as a start-up in early 2016, it then projected that it would have amassed more than $2 billion in assets and make around $237 million of net profit in 2020.The numbers for 2021 are still stubbornly short, with total assets at $1.52 billion and just over $59 million in earnings, a 23 per cent improvement over 2020.
Thwaites says the first blow to the projections was the company’s expectation on average insurance rates. He said the market softened to the point where projections are still higher than what the market is even showing right now.
“We were a little too confident in low-hanging fruit, so we did not budget for a marketing person for the first few years. After one year, we realised that was a mistake, so we hired and that pushed up our salary expenses quite a bit,” he said.
The other source of pain at IronRock, according to Thwaites, was the gradual and sustained fall in interest rates. Investment income is a key line item for insurance companies as they set aside money for projected and actual claims, investing those funds until the claim is settled.
Going forward, the company is looking to innovate the types of policies offered, while keeping costs low by continuing to leverage technology.
With the advent of COVID-19 and the gathering and contact restrictions that resulted from it, Thwaites said IronRock was able to leverage efficiencies from its technology-focused business model. Of its 14 staff, only two to four executives and a single administrative staff member go into office to receive paperwork and interface with clients.