Insurers 1-Q Returns Confirm Strong Rebound

The Canadian property and casualty insurance industry increased net profit for the first quarter of this year by more than 4.3 times to $589.6 million compared with the $136.9 million reported for the same period in 2003, according to financial data collected by the Office of the Superintendent of Financial Services (OSFI). First quarter industry data collected by the Insurance Bureau of Canada (IBC) pegs insurers return on equity (ROE) for the latest reporting period at 14.9% (the OSFI data covers only federally-regulated companies, and subsequent to the release of the industry’s 2003 financial results, the IBC has indicated that it will no longer be releasing its more comprehensive data which includes that of many of the provincially licensed insurers).

Insurers were able to boost net written premiums by 27% year-on-year to $4.612 billion for the first quarter of this year (2003 1-Q: $3.628 billion) while net earned premiums grew by 23% to $4.889 billion (2003 1-Q: $ 3.976 billion) over the same period. The stronger growth in net written premiums over the latest reporting period suggests that pricing within the industry remains firm.

Insurers reversed the $172 million underwriting loss recorded for the first quarter of 2003 into a profit of over $250 million for the latest quarter. The industry also benefited during the first quarter from a 49% hike in net investment income (investment income and realized gains combined) to $594 million versus the $399 million disclosed the year prior, according to OSFI. Investment income for the latest reporting period clocked in at $375 million (2003 1-Q: $333 million) while realized gains more than doubled over the 12 month comparable period to $234 million (2003 1-Q: $76.5 million).

Insurers’ claims costs for the first quarter of this year grew by 9.5% to $3.237 billion compared with the $2.955 billion reported for the same period a year ago. The IBC data indicates that the industry finished the latest reporting period with a 66.9% loss ratio (2003 1-Q: 73.8%) with a combined ratio of 94.6% (2003 1-Q: 102.8%). Interestingly, the ratios calculated against the OSFI data for the first quarter of this year show little difference to the IBC numbers, with the loss ratio clocking in at 66.2% and the combined ratio at 95.2%.