Mon | May 29, 2023

Key eliminates deficits, returns to profit

Published:Sunday | February 27, 2022 | 12:07 AM
Don Wehby, chairman of Key Insurance Company Limited.
Don Wehby, chairman of Key Insurance Company Limited.
Tammara Glaves-Hucey, general manager of Key Insurance Company Limited.
Tammara Glaves-Hucey, general manager of Key Insurance Company Limited.

Key Insurance Company swung from losses to profit for the first time in four years, clearing its accumulated debt in the process.

The general insurance company also achieved record revenue of $1.9 billion, from which it generated earnings of $152 million and flipped the previous year’s losses of $300 million, mostly due to gains made in the fourth quarter.

The earnings generated a decent return of 15 per cent on Key’s $1 billion of capital, its preliminary year-end results show.

The company, owned by the GraceKennedy group and headed by General Manager Tammara Glaves-Hucey, holds a positive outlook, with expectations of continued growth despite the pandemic.

“The insurance market is increasingly competitive and difficult to navigate, but we will continue to increase our market share with continued underwriting prudence,” Key said in its earnings report.


Chairman Don Wehby said Key’s 15 per cent return on equity, or ROE, achieved in 2021 beats the average market ROE. He avoided giving a target range going forward, but said Key plans to better most firms in the sector over time. The general insurance market has a dozen players.

“Our internal analysis suggests that the general insurance industry in Jamaica has operated with average return on equity levels of around 10 per cent in recent years,” said Wehby, who is also the Group CEO for GraceKennedy Limited.

“Our goal at Key Insurance is to consistently be one of the top two performers with respect to ROE, by balancing customer and revenue growth with strong underwriting practices and effective risk-adjusted investment portfolio management,” he told the Financial Gleaner. He did not comment of what drove Key’s December performance.

GraceKennedy mounted a rescue of the cash-strapped insurance company in late 2019 to early 2020 – acquiring majority interest from the previous owners at a time when Key had fallen short of regulatory requirements – and subsequently recapitalised the business via a rights issue.

“Management continues to devise strategies to cauterise the impact of the ongoing COVID-19 pandemic and is projecting to evolve from this period even stronger. We are quite aware of some non-pandemic-related challenges in the industry and have been addressing these challenges daily,” Key said in its financial report.

Since the onset of the pandemic, the general insurance sector grew gross premiums to $56 billion in 2020, eight per cent higher than the $52 billion written in 2019, according to the latest data from the Insurance Association of Jamaica. The data for 2021 is yet to be released by the association.

Key last made a profit of more than $40 million in 2017. The general insurer, which was taken public and listed on the stock market in 2016, went through a period of financial growth and then turmoil under its previous family-led ownership.

At one stage, in 2018, Key’s revenues hit their first record of $1.8 billion. But then a year later, its underwriting losses ballooned to $793 million, leading the company to cull some risky motor policies to allow for a return to capital ratios set for the industry by the regulator.

Key struggled to turn around the business, and differences began to emerge among board members on how to resolve its problems.

The former executive directors and majority shareholders, Sandra Masterton, Kala Abrahams and Natalia Gobin-Gunter, subsequently sold portions of their holdings to GraceKennedy, as the conglomerate stepped in to help. GraceKennedy then increased its stake under a mandatory takeover offer to all Key shareholders, and later a rights issue, which raised some $670 million to recapitalise the company.

The conglomerate now holds a 73 per cent interest in Key.

Now, not only did Key hit a new high on revenues in 2021, but it also turned around its core insurance operations to achieve an underwriting profit of $79 million versus a loss of $535 million in 2020.

Additionally, with its capital strengthened, the general insurance company erased $514 million of deficits that had accumulated since 2018, and achieved a surplus of $3.9 million, its unaudited results show. Its transition included a restructuring of its reinsurance programme by forming synergies with GraceKennedy’s other general insurance business.