Co-operators General Insurance Company Reports Second Quarter 2020 Results
Jul 30, 2020
This quarterly earnings news release should be read in conjunction with our second quarter 2020 unaudited condensed consolidated interim financial statements and Management's Discussion and Analysis (MD&A) as well as our 2019 Annual Report which are available on SEDAR at www.sedar.com. Unless otherwise noted, all amounts are expressed in Canadian dollars.
GUELPH, ON, July 30, 2020 /CNW/ - Co-operators General Insurance Company (Co-operators General) today released consolidated financial results for the three months ended June 30, 2020. The consolidated net income was $47.9 million compared to net income of $79.1 million for the same quarter in 2019. This resulted in earnings per common share of $1.65 for the quarter, compared to earnings per share of $2.84 in the same period last year.
"Amidst the challenges of COVID-19, we are focused on supporting our clients, members and communities," says Rob Wesseling, President and CEO of The Co-operators Group Limited. "Through our Reduced Driving Refund we will return 15% of auto premiums paid between April 1 to May 31 back to clients, in addition to other payment relief options. While two catastrophic weather events in Alberta negatively impacted our clients personally as well as our underwriting performance, these financial losses were offset to a degree by a rebound in global capital markets. From our strong capital position, we will continue to provide financial security for Canadians and support community resilience."
CO-OPERATORS GENERAL'S SECOND QUARTER FINANCIAL HIGHLIGHTS
($ in millions except for earnings per share and ratios)
Key financial data
Direct written premium (DWP)
Net earned premium (NEP)
Net income (loss)
Key success indicators
Underwriting income (loss) - excluding market yield
Earnings (loss) per common share
Return on equity
Combined ratio - excluding MYA
Minimum Capital Test (MCT)1
1Balance sheet data and MCT results for 2019 are as at December 31
SECOND QUARTER REVIEW
Co-operators General recorded net income of $47.9 million compared to net income of $79.1 million over the same period of 2019. The second quarter results reflect pre-tax losses of $115.8 million, net of reinsurance and inclusive of ceded reinstatement premiums, related to the two catastrophic weather events in Fort McMurray, Alberta and Calgary, Alberta.
DWP decreased by 3.2% or $33.5 million to $1,016.3 million compared to the same quarter of 2019. The decrease in DWP was mainly attributable to the Reduced Driving Refund of $35.5 million in the auto line of business and other client initiated coverage changes. NEP increased during the second quarter by 4.0% or $32.3 million compared to the same quarter last year. Ceded premium of $8.8 million was recorded against NEP in the second quarter, across all lines of business except travel and other to reinstate our catastrophe coverage.
Undiscounted net claims and adjustment expenses increased by $96.9 million compared to the same quarter of 2019; this led to a deterioration in our loss ratio of 9.2 percentage points to 71.5% and was primarily the result of the catastrophic weather events experienced in the Western region. Excluding the impacts of the catastrophic events, our loss ratio was 57.0%, an improvement of 5.3 percentage points over the comparative quarter; this improvement was primarily a result of NEP growth in the period coupled with a reduced frequency of current accident year claims across all regions, excluding Ontario. Our expense ratio improved slightly by 0.6 percentage points to 32.5% and was mainly driven by premium growth outpacing operating expenditures. Excluding MYA, the combined ratio for the quarter was 104.0% compared to 95.4% for the same period last year. The MYA drove a $42.6 million unfavourable impact on net income before taxes as a result of a decrease in the discount rate used to measure our claims liabilities.
During the second quarter, accommodative fiscal and monetary policies resulted in a steep rebound in the capital markets after their correction in March, resulting in significant appreciation of our invested asset portfolio. Net investment income and gains of $135.1 million was recognized in the second quarter and was primarily driven by positive changes in the fair value of our preferred share and fixed income portfolios, including foreign exchange contracts, and was partially offset by a decline in realized gains on our common share portfolio and lower dividend distributions.
Despite the financial losses suffered from severe weather in the West, our balance sheet, liquidity and capital positions remain strong and enables us to continue to serve and meet the needs of our clients while also supporting our strategic areas of focus. Our investment portfolio is comprised of high quality and well diversified assets. The credit quality of our portfolio remains high with 97.0% of our portfolio considered investment grade and 85.3% rated A or higher. Our equity portfolio is 86.5% weighted to Canadian stocks.
Co-operators General's capital position remains strong, as the Minimum Capital Test for Co-operators General was 210% at June 30, 2020, well above internal and regulatory minimum requirements. We continue to closely monitor capital levels in response to the changing economic environment as it relates to the COVID-19 pandemic.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
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. These statements generally can be identified by the use of forward-looking words such as "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "plan", "would", "should", "could", "trend", "predict", "likely", "potential" 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, including the impact of the COVID-19 pandemic on our investments, operations and claims negatively affecting the results of our operations and financial position. 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 second quarter 2020 MD&A or our 2019 Annual Report.
ABOUT CO-OPERATORS GENERAL INSURANCE COMPANY
With assets of more than $7.7 billion, Co-operators General is a leading Canadian multi-product insurance company. Co-operators General is part of The Co-operators Group Limited, a Canadian co–operative. Through its group of companies, it offers home, auto, life, group, travel, commercial and farm insurance, as well as investment products. The Co-operators is ranked as #1 among Corporate Knights' Best 50 Corporate Citizens in Canada and lists among the Best Employers in Canada by Kincentric. For more information, visit www.cooperators.ca.
Co-operators General Class E, Series C Preference Shares trade under ticker symbol CCS.PR.C on the Toronto Stock Exchange (TSX). Further information can be found at www.cooperators.ca.
SOURCE The Co-operators
For further information: Karen Higgins, Executive Vice-President, Finance and Chief Financial Officer, Telephone: (519) 840-3167