May 9, 2011
This quarterly earnings news release should be read in conjunction with our First Quarter 2011 consolidated financial statements and Management's Discussion and Analysis (MD&A) as well as our 2010 Annual Report which are available on SEDAR at www.sedar.com. Unless otherwise noted, all amounts are expressed in Canadian dollars. Effective January 1, 2011, we adopted International Financial Reporting Standards (IFRS); as such, all financial data is presented under this accounting framework, including comparative amounts for 2010 which have been restated according to the transitional provisions of IFRS. For a complete discussion of our transition to IFRS, refer to our First Quarter 2011 consolidated financial statements and MD&A.
GUELPH, ON, May 9 /CNW/ - Co-operators General Insurance Company (Co-operators General) today released consolidated financial results for the three months ended March 31, 2011. Consolidated net income was $25.8 million compared to $31.8 million for the same quarter in 2010. This resulted in earnings per common share of $1.11 for the quarter compared to $1.39 in the same period last year.
"Earnings in the first quarter were positively impacted by strong results in the home insurance portfolio and improving claims experience related to the Ontario auto insurance market. Six months after the implementation of the Ontario auto reforms, we have seen a decline in the volume of claims; however we remain concerned about a potential increase in bodily injury claims. We applaud the recognition of the lingering problems related to fraud in the recent Ontario Budget, but we still remain guarded about the long-term impact of the reforms", said Kathy Bardswick, President and Chief Executive Officer of The Co-operators. "We were challenged in this quarter by large losses in the commercial portfolio in Western Canada and farm business losses in Quebec. Net earned premium grew by 3.6% and our capital position remains very strong."
CO-OPERATORS GENERAL'S FIRST QUARTER FINANCIAL HIGHLIGHTS
($ in millions, except for earnings per share and ratios)
|Key financial data|
|Gross written premium (GWP)||479.7||462.2|
|Net earned premium (NEP)||529.1||510.5|
|Key success indicators|
|Earnings per share||$1.11||$1.39|
|Annualized return on average equity||8.1%||10.3%|
|Combined ratio - excluding MYA||103.4%||100.2%|
|Minimum Capital Test (MCT)2||241%||242%|
|1 Growth metrics for 2010 are based on Canadian GAAP values as comparisons do not exist|
|2 2010 MCT is as at December 31|
First quarter review
First quarter GWP increased by 3.8% to $479.7 million, compared to $462.2 million in the first quarter of 2010. This increase relates to average premium growth and rate increases, offset by declines in policy growth and downward pressure in pricing within the competitive commercial portfolio. Adjusting for the impact of the cancellation of a co-insurance arrangement with a related party, GWP increased by $1.0 million or 0.2%.
Net investment income, which is comprised of interest and dividends less investment expenses, increased by $1.3 million versus the prior year. Increased yields in the bond portfolio, improvements in the value of our collateralized debt obligations, and lower impairment losses compared to last year have driven the increase.
The combined ratio, excluding the market yield adjustment (MYA) for the quarter was 103.4%, which is an increase from 100.2% during the comparable period last year. Net claims and adjustment expenses have increased by 4.6% from 2010 bringing our first quarter loss ratio to 67.6%. This is partly attributed to a number of large losses in the commercial line of business in Western Canada and Quebec. This was offset by improved loss ratios in Ontario auto due to more favourable claims run-off in the quarter compared to last year. The expense ratio has increased by 2.6 percentage points caused by increases to agent transition costs and system development.
Our portfolio composition is conservative and is comprised of high quality and well diversified assets. The credit quality of our portfolio remains high with 92.5% of our bonds rated A or higher. Our equity portfolio is 84.7% weighted to Canadian stocks.
The Company's capital position remains strong, as the Minimum Capital Test (MCT) for Co-operators General Insurance Company was 241% at March 31, 2011, well above the regulatory minimum requirement of 150%.
This document may contain forward-looking statements and forward-looking information, including statements regarding the operations, objectives, strategies, financial situation and performance of Co-operators General Insurance Company. These statements generally can be identified by the use of forward-looking words such as "may", "will", "expect", "intend", "estimate", "anticipate", "believe" or "continue" or the negative thereof and similar variations. These statements are not guarantees of future performance and involve known and unknown risk, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in the forward-looking statements or information. Although we believe that the expectations reflected in the forward-looking statements and information are reasonable, there can be no assurance that such expectations will prove to be correct. Consequently, we make no representation that actual results achieved will be the same in whole or in part as those set out in the forward-looking statements and information. For further information, refer to our First Quarter 2011 MD&A or our 2010 Annual Report.
SHAREHOLDER AND INVESTOR INFORMATION
About Co-operators General Insurance Company
Co-operators General Insurance Company is a part of The Co-operators Group Limited (CGL), a Canadian-owned co-operative with more than $40 billion in assets under administration. Through its group of companies CGL offers home, auto, life, group, travel, commercial and farm insurance, as well as investment products. CGL is well known for its community involvement and its commitment to sustainability, and is ranked #2 among the 50 Best Corporate Citizens in Canada by Corporate Knights. It is also listed among the 50 Best Employers in Canada.
Co-operators General preference shares are listed on the Toronto Stock Exchange under the trading symbols CCS.PR.C. and CCS.PR.D. For more information visit www.cooperators.ca.
For further information:
P. Bruce West
Executive Vice-President, Finance and Chief Financial Officer
Telephone: (519) 767-3036