Co-operators General Insurance Company Reports 2020 Fourth Quarter and Year End Results
Feb 12, 2021
GUELPH, ON, Feb. 12, 2021 /CNW/ - Co-operators General Insurance Company ("Co-operators General") today announced its consolidated financial results for the three months and year ended December 31, 2020. For the fourth quarter, Co-operators General reported consolidated net income of $139.1 million, compared to $60.7 million for the same quarter in 2019. Earnings per common share was $5.05 for the fourth quarter, compared to $2.30 for the same period last year. Direct written premium was $988.1 million in the quarter, an increase of $42.8 million as compared to $945.3 million in the fourth quarter of last year.
Net income for the year amounted to $290.4 million, compared to $174.0 million in 2019. This resulted in earnings per common share of $10.49 compared to $6.40 in the previous year. Direct written premium increased by 4.2% to $3,909.9 million, compared to $3,752.4 million in the prior year.
"In 2020, Co-operators General maintained our position of financial strength, largely driven by a favourable investment performance and a continued focus on improved underwriting performance," says Rob Wesseling, President and CEO of The Co-operators Group Ltd. "In a year of great uncertainty and challenges stemming from the pandemic, we prioritized the needs of our members and clients through financial relief measures and increased community investments. Our financial position equips us with the stability required to navigate continued uncertainty, including market volatility and the increasing trends of climate-related events, to ensure we can continue protecting the financial security of Canadians in 2021 and beyond."
CO-OPERATORS GENERAL FOURTH QUARTER FINANCIAL HIGHLIGHTS
(in millions of Canadian dollars except ROE, EPS and ratios)
Key financial data
Direct written premium (DWP)
Net earned premium (NEP)
Key success indicators
Underwriting income (loss) - excluding market yield adjustment (MYA)
Earnings per share (EPS)
Annualized return on equity (ROE)
Combined ratio - excluding MYA
Combined ratio - including MYA
Minimum Capital Test (MCT)
FOURTH QUARTER REVIEW
Fourth quarter DWP increased by 4.5% to $988.1 million, compared to $945.3 million in the fourth quarter of 2019. The increase was attributable to higher average premiums from targeted rate increases achieved pre-pandemic in the auto line of business. In addition, DWP was impacted by an increase of $15.2 million due to a partial reversal of the Reduced Driving Refund initially recognized in the second quarter; the reversal represents the unclaimed portion of the Reduced Driving Refund, with the unclaimed refunds donated to charitable organizations in December.
Our combined ratio, excluding the MYA, improved by 6.4 percentage points to 90.9% compared to 97.3% in the fourth quarter of 2019. Our fourth quarter loss ratio, excluding MYA, improved by 6.7 percentage points to 57.8% from 64.5%, the result of premium growth outpacing increases in claims and adjustment expenses. Undiscounted net claims and adjustment expenses decreased compared to the same period of the prior year, due to lower major event losses and lower current year accident claims particularly within our commercial and auto lines of business.
Investment performance in the fourth quarter was strong as we recognized net investment income and gains of $108.2 million compared to $74.7 million recognized in the prior year. The favourable change was largely driven by unrealized gains on our preferred share portfolio and realized gains on our bond portfolio.
The Company's investment portfolio is comprised of high quality and well diversified assets. The credit quality of our bond portfolio remains high with 97.2% of our bonds considered investment grade and 84.5% rated A or higher. Our equity portfolio is 85.3% weighted in Canadian stocks.
DWP for the year increased by 4.2% to $3,909.9 million, compared to $3,752.4 million in 2019. The increase was driven by higher average premiums due to targeted rate adjustments across all lines of business and geographical regions.
NEP increased by $307.4 million or 9.4% to $3,582.1 million as a result of growth seen across all our geographic regions and all core lines of business.
Excluding the MYA, the combined ratio improved by 6.1 percentage points from 101.1% in 2019 to 95.0% in 2020, largely the result of premium growth coupled with lower frequency of current accident year claims, partially offset by unfavourable claims development on prior year accident claims. While other operating expenses increased over the prior year by $66.8 million, the expense ratio declined by 0.9 percentage points, as premium growth outpaced operating expenses during the year.
Accommodative fiscal and monetary policies in Canada and the United States have sustained capital markets throughout the year after their correction in March, resulting in an appreciation of our invested asset portfolio. Net investment income and gains increased by $16.9 million as compared to the prior year as a result of an increase in realized gains on our common share and bond portfolios, partially offset by an increase in impairment losses due to the market correction in the first quarter of 2020. Included in net investment income and gains were realized gains from a strategic shift in our invested asset portfolio to reduce our investment in common shares.
Co-operators General's capital position remains strong, as the Minimum Capital Test for Co-operators General was 232% at December 31, 2020, well above the 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.
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 risks, 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.
ABOUT CO-OPERATORS GENERAL INSURANCE COMPANY
With assets of more than $8.2 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 well known for its community involvement and its commitment to sustainability. The Co-operators is ranked as one of the Corporate Knights' Best 50 Corporate Citizens in Canada and is listed among the Best Employers in Canada by Kincentric (formerly AON). 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 Group Limited
For further information: Karen Higgins, Executive Vice-President, Finance and Chief Financial Officer, Telephone: (519) 840-3167