Guatemala insurers aim for 8% premium growth in 2021

Guatemala’s insurance sector reported 3.7% annual premium growth in 2020, despite shocks from the pandemic and two catastrophic hurricanes, with local insurance association (AGIS) reporting 7.52bn quetzales (US$966mn) in premiums at the end of 2020.

AGIS analyst Carme Negro de González said in an online event on Wednesday that AGIS sees a “stable and positive outlook” for the sector in 2021, with the group expecting 8% premium growth this year. 

The sector-wide combined ratio dropped to 88% in 2020 from 92% in 2019, with the claims ratio dipping to 56% from 60%. Meanwhile, net income rose to 596mn quetzales from 364mn in 2019 (+64%), as shown by the AGIS sector dashboard below. 

Source: AGIS

PROFITABILITY IN 2021

Negro added that the industry should continue to be profitable in 2021, resuming more normal behavior after claims fell in many segments in 2020 due to lockdowns. AGIS expects the combined ratio in 2021 “to remain below 100% as we had in previous years,” Negro said in response to a question from BNamericas.

“In medical expenses, we expect a worsening of the claims ratio" and, therefore, an increase in the combined ratio, said Negro, adding that unprocessed COVID-19 medical claims will stretch into 2021.

“We will also continue to pay for COVID cases, said Negro. “We understand that these [claims] are going to increase during the first quarter.”

She added that after the combined ratio jumped to 100% in 2020 from 86% in 2019. “It will remain more or less like the past year, at just 100%, because they'll still see COVID cases this year.”

In the auto segment, she said "we expect that the accident rate that has been seen in the last 10 years will continue, so the combined ratios should remain between 80% and 90%,” said Negro. 

HURRICANES AND PANDEMIC

Despite Hurricanes Eta and Iota causing an estimated US$770mn in economic damages in the country, Negro reported that the industry paid only 177mn quetzales (less than US$23mn) on 1,042 claims tied to the first storm Eta, and just 11.4mn quetzales on 42 claims for Iota – a reflection of the nation’s low insurance penetration.

Negro said that Guatemalan insurers processed 3,475 life claims associated with COVID-19 deaths in 2020, for claims amounting to 193mn quetzales, or 19% of all life claims paid in the year. The graph below shows life claims by age and gender.

Source: AGIS

AGIS reported 4,580 medical claims amounting to 90.9mn quetzales, or 6% of all medical claims in 2020. The majority (72%) were ambulatory cases that paid an average of 4,207 quetzales for customers who convalesced at home, while 1,299 claims were with policyholders hospitalized for COVID-19.

Looking at the following graph, showing the evolution of medical claims to date, Negro said, "in this curve we can see that both July and August were the highest months by comparison," adding that the group detected a small rebound in December and that they expect the same in January.

The graph does not yet reflect a major spike in infections, as has been observed in its northern neighbor Mexico.

Source: AGIS

AUTO LINES 

Auto insurance lines took the largest hit in 2020, with premiums down 3.6% year-on-year, as lockdowns and the general economy hit new car sales hard. This contraction compares to the historical average of 4.9% growth. The group reported there were 380,042 insured vehicles in Guatemala at the end of 2020, 11,754 less than in 2019.

Insurers, nevertheless, were helped by a 24% drop in auto claims to 530,256 quetzales, helping to bring the segment’s combined ratio down to 77% from 91%.