Co-operators General Insurance Company reports second quarter 2010 net income of $6.5 million
Jul 30, 2010
GUELPH, ON, July 30 /CNW/ - Co-operators General Insurance Company ("Co-operators General") today announced its consolidated financial results for the three months ended June 30, 2010. For the second quarter, Co-operators General reported a consolidated net income of $6.5 million, compared to $13.9 million for the same quarter in 2009. Earnings per common share were $0.07 for the second quarter compared to $0.54 for the same period last year. On a year-to-date basis, net income was $38.3 million (2009 - $7.5 million) and earnings per common share were $1.48 (2009 - $0.16). 2010 second quarter results were impacted by a market yield adjustment that increased claims expenses by $11.5 million (2009 - $0.4 million) caused by lower yields on the Company's bond and mortgage portfolios.
"Earnings for the quarter were positive despite the challenging auto insurance market in the Greater Toronto Area and the impact of lower yields on the Company's bond and mortgage portfolios," said Kathy Bardswick, President and CEO of Co-operators General Insurance Company. "Significant improvements in our home line of business resulting from our segmentation initiatives, along with the impact of recent expansion of our agency distribution forces in British Columbia and Quebec were positive contributors."
------------------------------------------------------------------------- CO-OPERATORS GENERAL'S SECOND QUARTER FINANCIAL HIGHLIGHTS ------------------------------------------------------------------------- ($ in millions, except for earnings per share and ratios) 2nd quarter 2nd quarter YTD YTD 2010 2009 2010 2009 Gross written premium (GWP) 653.4 625.5 1,110.6 1,091.5 Net earned premium (NEP) 523.6 502.1 1,029.3 994.7 Net investment income and investment gains 33.6 39.4 80.8 80.2 Net income 6.5 13.9 38.3 7.5 Earnings (loss) per common share $0.07 $0.54 $1.48 $0.16 GWP growth 4.5% 1.7% 1.8% 3.4% NEP growth 4.3% 2.0% 3.5% 1.9% Return on equity (annualized) 2.1% 5.0% 6.4% 1.3% Combined ratio 104.5% 104.0% 102.5% 107.2%
Second quarter review
Gross written premium (GWP) in the second quarter increased by 4.5% to $653.4 million, compared to $625.5 million in the second quarter of 2009. GWP gains were achieved in all regions of the country. The expansion of our distribution lines through acquisition in British Columbia, and through the opening of additional agency offices in Quebec have contributed to this growth.
Net earned premium (NEP) has increased by 4.3% or $21.5 million compared to last year. The increase is seen in all of our core lines of business and across all areas of the country driven by strong retention and rate and inflation increases in premiums.
Net investment income, which is comprised of interest, dividends and other income less investment expenses, decreased $3.1 million versus the prior year. Investment in shorter term, lower yielding bonds in anticipation of a mid-year increase in interest rates has contributed to the decline. Net investment gains decreased by $2.7million in 2010 from the same period in 2009. Gains were achieved by the re-balancing of the bond portfolio and by taking advantage of favourable sale opportunities in the bond and equity markets.
The Company's invested asset portfolio composition is conservative and the assets are high quality and well diversified. The credit quality of our bond portfolio remains high with 96.1% rated A or higher. Our equity portfolio is 84.1% weighted to Canadian stocks, with a further weighting to large financial institutions.
The combined ratio for the quarter was 104.5%, up from 104.0% during the comparable period last year. The loss ratio declined 1.1 percentage points; however it was impacted by the effect of the market yield adjustment (MYA) recognized in the quarter. Adjusting for the impact of the MYA, the loss ratio is 68.8%, compared to 72.0% in the second quarter of 2009. The second quarter loss ratio was negatively impacted by the rapid escalation of auto claims costs in the Greater Toronto Area. As the auto insurance product is highly regulated in Ontario, we and the industry, have been hampered in our ability to properly price for spiraling claims costs. We remain uncertain whether regulatory changes to be implemented September 1, 2010 will remediate this imbalance between pricing and claims costs.
Offsetting the increased auto claims costs were improved home insurance results. The home line of business performed well due to increased pricing and client segmentation initiatives implemented in 2009. These steps have led to a significant reduction in the number of claims and improved profitability despite early season storm activity in Ontario and the West.
The expense ratio increased 1.6 percentage points due in part to increased salary and staff compensation costs as well as an increase in our provision for agent transition commissions.
The Company's capital position remains strong, as the Minimum Capital Test for Co-operators General Insurance Company was 232% at June 30, 2010 compared to 231% at December 31, 2009, which is well above the internal minimum requirement of 175%.
About Co-operators General Insurance Company
With assets of over $5.0 billion, Co-operators General is a leading Canadian-owned multi-product insurance company. Co-operators General Insurance Company is part of The Co-operators Group, a national group of companies owned by 47 Canadian co-operatives, credit union centrals and like-minded organizations. Co-operators General preference shares are listed on the Toronto Stock Exchange under the trading symbols CCS.PR.C. and CCS.PR.D. Further information can be found at www.cooperators.ca.