The turnaround plan submitted by Key Insurance will cull risky motor policies as an important strategy to return to profit in 2020.
Key Insurance will cull risky motor policies under a turnaround plan that is meant to return the general insurer to profitable status in 2020.
The 20-page plan references the company’s regulatory breach and offers a three-year forecast on its financial performance to 2021. It comes after Key Insurance fell short on a solvency test last year. Its Minimum Capital Test, MCT, ratio clocked in at 112.5 per cent, less than half of the regulatory requirement of 250 per cent.
The MCT is a computation of the capital that an insurer is required to hold relative to its risks.
“The outlook is positive,” Managing Director Sandra Masterton told the Financial Gleaner. “We won’t have a massive growth in motor and we are culling some of that business,” she said.
Key is a relatively small player with assets of about $2.6 billion in a general insurance market last valued at $84 billion, based on industry data from the Financial Services Commission for June 2018. Another large player, Massy United, has entered the market since then.
CHALLENGING SECTOR
Masterton described the sector as “very challenging”, with expectations of waning rates due to increased competition. Key Insurance made a loss of $167.5 million last year, and that was followed up with an additional bleed of $28 million in the first quarter of this year.
Masterton has her eye set no so much on this year, but the next.
“By December 2020, we expect to return to profitability,” she said, although she was unwilling to say what those profit projections look like.
Under the turnaround plan, Key plans to focus its growth in the realms of property, professional indemnity, liability, and cyber insurance. The company also sold some of its real estate assets in order to place those funds in fixed income securities.
“So far, the actions taken have allowed us to surpass the 250 per cent minimum capital test level,” Masterton said. “We are also keeping our expense ratios in line to not exceed 30 per cent at year end. We also disposed of some non-bearing properties in favour of interest-bearing securities.”
In 2018, Key Insurance Company held equity of $889 million and liquid assets of $1.4 billion.
Its investment securities clocked in at $510 million in December, but that has more than doubled subsequently to an estimated $1.18 billion in the March first quarter.
As reported on Wednesday, Key Insurance also took the decision to buy additional reinsurance coverage to reduce the property and motor risk it holds.
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