General Accident shy on motor insurance in face of currency depreciation
GENERAL Accident Insurance Company will avoid rapidly growing its motor vehicle portfolio during periods of heavy currency movements, stated chairman PB Scott.
"In times when you have considerable devaluation of the Jamaican dollar, then underwriting performance always tends to be under pressure," said Scott in response to questions at the insurer's annual general meeting held at its head office in Kingston yesterday.
He added that car claims, which involve replacements or repairs, would substantially differ from the premiums received.
"When the dollar moves that contingent liability increases the longer you have that claim outstanding. So you have a dilemma. Do you quickly close the claim or diligently go through the process. That is not a good tension to have. So we will always take the rational approach," he continued.
The company which specialises in property insurance listed its overall insurance market share at 15 per cent in 2013 based on the $4.4 billion in gross written premiums, up from 13 per cent a year earlier.
But its motor market share was estimated at single-digit levels by Scott.
"Motor vehicle business can be profitable...but to grow a motor portfolio from a small base during periods of devaluation is probably not the most sensible thing," he said.
The dollar lost nearly 13 per cent of its value over 12 months to trade at $112 to US$1.
General Accident operates a high return on average equity at 24 per cent aided by its public listing which resulted in a tax holiday.
Roughly one-third of its $327.9 million in annual profit after tax came from foreign exchange gains at $143 million, compared to $50 million a year earlier.
The company listed on the Jamaica Junior Stock Exchange in 2012 saw its gross written premiums in 2013 rise by 18 per cent year on year.
Underwriting profit, which is the income generated from the company's core business of underwriting insurance, dipped to $58.5 million for its financial year compared to $117.3 million a year earlier.