IronRock rues IPO target delay
Published:Friday | October 8, 2021 | 12:09 AM
After posting end-of-year 2020 profits of $48 million, but a half-year loss of nearly $18 million as of June 2021, general insurer IronRock is tempering expectations after falling short financially in year five of its start up.
IronRock Insurance Company approached the stock market for equity capital as a start-up in early 2016 and has been slowly building up its business since, but it still sits in the lowest quartile of the 11 listed general insurance companies.
The company initially projected that it would have amassed more than $2 billion in assets and make around $237 million of net proft in year ending 2020. But it fell shy of those marks, at $1.4 billion in assets and $48 million in earnings.
Managing Director Evan Thwaites says the missed targets were mainly related to issues around the average rate at which insurance is sold in the market.
“Our IPO was based on evidence that insurance rates would be maintained. Shortly after we entered the market it went very soft, and the average price of insurance products actually declined in our second year of operation, and have remained far below our IPO numbers,” Thwaites said.
Revenue was affected by lower-than-expected investment returns.
Insurance industry leaders say that, depending on the timing of premiums coming in and factoring for claims, insurance companies generally invest premiums paid by policyholders to generate more income. It means that insurance revenue is sensitive to any shift in interest rates.
“At the time of our IPO, I believe Treasury bill rates were about 4-5 per cent. those rates are now down to 1-2 per cent,” Thwaites told shareholders at the company’s annual general meeting on Tuesday, in explanation of the lower-than-expected revenue flows.
“If there is no change in the investment returns and current conditions around premiums pricing remain, then we are talking another two years to, say, 2023 before we get to that $2-billion assets mark,” Thwaites told shareholders.
The Bank of Jamaica has just increased its policy or benchmark interest rate, which could eventually lead to a rise in yields on debt instruments.
Going forward, IronRock is looking to leverage technology for competitive advantage. Its latest offering was the April 2021 launch of an insurance product using telematics, called PAYD, or ‘pay as you drive’. The policy is designed to encourage safety on the roads by promoting good driving habits, which, hopefully, will result in less fatalities and injuries.
Thwaites is not giving specifics, for competitive reasons, but said IronRock is “extremely pleased” with the performance of the product.
“Our clients have indicated that it is a very useful product, and to date, none of the clients who have taken up this product has had an accident. That is an excellent result for us,” he said.