Canadian 1-quarter ratios rise on consolidation costs

Queensway Financial Holdings Inc. and St. Paul Companies released their first quarter earnings, with both showing results mirroring industry trends. Both companies followed the industry’s alarming trend of rising operating ratios. And while Queensway’s premium volume rose considerably — the result of 1998 acquisitions just now being added to the books, St. Paul Companies experienced a decline in overall volume.

Queensway Financial Holdings Ltd. generated substantial revenue gain for the first quarter of this year at $59.1 million from 1998’s $34.3 million. The increase results from a series of acquisitions last year — including North Pointe Financial — which boosted gross written premiums to over $68 million for the first three months of this year (more than double 1998’s volume of $34.2 million).

The company’s net earnings dropped from 1998’s $4.5 million to $1.9 million for 1999. This brought earnings a share down to 12c from 1998’s 35c. The company’s profit decline is attributed to the worsening claims environment, with the combined ratio in 1999 having risen from that of the first quarter of 1998’s 83.7% to this year’s 96.6%. Queensway’s investment income for the first quarter 1999 rose to $7.2 million compared with $6.5 million for the same period in 1998.

Similarly, St. Paul Companies reported first quarter 1999 revenues of $2244.3 million, compared with 1998’s first quarter $2324.8 million. Net income dropped from $194.7 million in first quarter 1998 to 1999’s $164.9 million. The change in revenue is reflected in net written premiums which dropped slightly from 1998’s $1654.6 million to $1566.0 million in 1999. St. Paul’s CEO Doug Leatherdale says the company is just beginning to see the expense savings and stronger market presence resulting from its 1998 merger with USF&G. “I am particularly pleased with the results of our reinsurance and surety operations, both of which had combined ratios of less than 100.” The overall company combined ratio rose slightly in 1999, up to 107.8 from 1998’s 107.0. The company was able to offset the underwriting loss with investment income of $322.0 million, also down from 1998’s $331.8 million.

On the adjusting front, Lindsey Morden Group Inc. produced significantly higher business volume on the back of its UK-based Ellis & Buckle and Hambros Insurance Services Group Plc. acquisitions. Revenue for the first quarter of this year clocked in at $109.8 million (1998 period: $42.5 million). Net earnings, however, dropped from the 1998 first quarter volume of $600,000 to a loss this year of $2.3 million. The company says it slipped into the red due to a decline in claims business in the UK and Canadian markets. Earnings a share for the first quarter of this year came in at a loss of 20c compared with a profit of 12c a share disclosed for the same period in 1998.