- Grew gross written premiums by 5.7%
- Improved underwriting results by $5.6 million
- Improved combined ratio by 1.5 percentage points
- Increased net income by $11.9 million
- Increased total mutual policyholders' equity by $40.8 million
WATERLOO, ON, May 24, 2012 /CNW/ - The Economical Insurance Group ("Economical"), one of Canada's leading property and casualty insurance companies, today announced consolidated financial results for the three months ended March 31, 2012.
Economical reported consolidated net income of $40.9 million for the first quarter of 2012 compared to $29.0 million a year ago. Economical posted a combined ratio of 96.5% for the first quarter, a solid improvement of 1.5 percentage points from the same quarter a year ago.
"Our first quarter results show that Economical is continuing to produce strong profitable growth," said Karen Gavan, president and CEO. "The company registered 41% growth in net income over the same quarter of 2011, while maintaining strong growth trends in gross written premiums and mutual policyholders' equity. We continue to position our business for sustained profitable growth and a successful demutualization."
Economical's total mutual policyholders' equity was $1,340.9 million at March 31st, a 3.1% increase in the first quarter of 2012.
Commenting on Economical's planned demutualization, Gavan said: "We continue to closely monitor the federal Department of Finance's progress in establishing a regulatory framework for demutualization, and we remain actively supportive of that process."
The Economical Insurance Group Consolidated Highlights*
($ in millions, except as otherwise noted)
|Gross written premiums||381.0||360.6||20.4|
| March 31,
| December 31,
|Total mutual policyholders' equity||1,340.9||1,300.1||40.8|
*Note: Claims ratio, combined ratio and underwriting income exclude the impact of discounting.
Gross written premiums showed strong growth in the first quarter at $381.0 million compared to $360.6 million in the same quarter a year ago, a 5.7% increase. Both personal and commercial lines of business achieved growth during the quarter at 5.2% and 6.4% respectively. Premiums were also higher across all regions with notable growth in Quebec and Alberta.
Underwriting results for the first quarter improved $5.6 million over the same quarter in 2011. The first quarter combined ratio improved 1.5 percentage points to 96.5% compared to 98.0% a year ago. The 2.4 percentage point improvement in the claims ratio was offset by a 0.9 percentage point increase in the expense ratio, driven by higher commissions due to a change in mix in business and improved underwriting profitability. The improved underwriting results were driven by stronger personal lines performance in the first quarter of 2012 compared to a year ago, reflective of management actions undertaken to improve the overall quality of business written, enhanced claims management and benign weather conditions.
Economical's personal auto business continued to generate positive underwriting results during the first quarter with a combined ratio of 92.1%, compared to 93.5% in the same quarter a year ago. Ontario personal automobile remained profitable in the first quarter of 2012, continuing the trend established throughout 2011, as a result of management's actions to restore profitability to this line of business through enhanced claims management, improved risk selection and the favourable impact of reforms. The underwriting profit in personal property improved $9.7 million compared to the first quarter of 2011, resulting in an excellent combined ratio of 85.6% compared to 97.1% a year ago. The mild weather conditions experienced during the first quarter of 2012 contributed to this performance.
Commercial auto recorded a first quarter underwriting loss of $3.2 million compared to an underwriting profit of $2.2 million a year ago. An increase in severity of losses year-over-year has impacted the results in this line of business. The commercial property business recorded an underwriting loss of $8.2 million, compared to $7.3 million for the same quarter a year ago, driven by an increase in non-weather fire related large losses in the first quarter of 2012 combined with the continuation of highly competitive market conditions. Overall commercial lines business produced an underwriting loss of $11.4 million during the quarter compared to $5.1 million for the same quarter a year ago.
Discounting positively affected the discounted combined ratio by 3.9 percentage points, or $16.0 million, due to higher investment yields. The effect of discounting on claims liabilities was offset by recognized investment losses of $16.3 million on the matched bond portfolio.
Investment income increased $9.9 million from the first quarter of 2012, driven primarily by higher realized gains from the equity portfolio. Overall investment quality remains strong with over 82% of total investments held in high quality government and corporate bonds, with the balance primarily held in common and preferred shares.
Economical's capital position continues to strengthen and total mutual policyholders' equity has increased by $40.8 million during the first quarter of 2012. Economical's minimum capital test ratio remains very strong at 287.9% as of March 31, 2012.
Forward looking statements
This document may contain forward looking statements that involve risks and uncertainties. The Group's actual results could differ materially from these forward looking statements as a result of various factors.
|Combined ratio||Claims and adjustment expenses (excluding the impact of discounting), commission expenses and premium taxes during a defined period expressed as a percentage of net premiums earned for the same period.|
|Discounting||To reflect the time value of money, claims liabilities are discounted using the market yield rate of the investments used to support those liabilities (matched investments). Provisions for adverse deviation are also included when determining the discounted value.|
|Minimum capital test||A regulatory formula, defined by The Office of the Superintendent of Financial Institutions, that is a risk-based test of capital available relative to capital required.|
About the Economical Insurance Group
Founded in 1871, The Economical Insurance Group is one of Canada's leading property and casualty insurers, with $4.6 billion in assets and mutual policyholders' equity exceeding $1.3 billion. In 2010, Economical made history by announcing its decision to become the first federally-regulated mutual property and casualty insurance company to demutualize. Economical is currently reviewing strategic options and will submit a comprehensive demutualization proposal for regulatory and mutual policyholder approval following the federal government's completion of demutualization regulations.
The Economical Insurance Group's member companies include: Economical Mutual Insurance Company® (including Western General® Farm Division), Waterloo Insurance Company®, Perth Insurance Company®, The Missisquoi Insurance Company®, Federation Insurance Company of Canada™, Family Insurance Solutions and The Mattei Companies.
For further information:
The Economical Insurance Group
(T) 519.570.8500 ext. 48249