Co-operators General Insurance Company Reports 2013 Fourth Quarter and Year End Results
Feb 14, 2014
GUELPH, ON, Feb. 14, 2014 /CNW/ - Co-operators General Insurance Company ("Co-operators General") today announced its consolidated financial results for the three months and year ended December 31, 2013. For the fourth quarter, Co-operators General reported consolidated net income of $74.6 million, compared to $115.8 million for the same quarter in 2012. Earnings per common share was $3.40 for the fourth quarter compared to $5.44 for the same period last year.
Net income for the year amounted to $88.9 million, compared to $259.3 million in 2012, resulting in earnings per common share of $3.51 compared to $11.92 in 2012.
"We continued to experience customer growth in all core lines of business and in all regions in the fourth quarter and our underlying financial strength remains strong. This was accomplished despite the challenges of December's ice storm in Ontario and Quebec," said Kathy Bardswick, President and CEO of The Co-operators. "2013 will be remembered for its devastating natural disasters. After consideration of reinsurance, our losses related to the heavy rains and flooding in southern Alberta and the Greater Toronto area totalled $126.6 million. We are very proud of our employees' and advisors' hard work and professionalism as they helped clients through the recovery process."
"The effects of climate change and severe weather related events have become a reality for our industry. I am proud of the leadership that we have taken on the issue of flood resiliency and we remain committed to finding a sustainable solution. The Co-operators will build on the recommendations from the report that we commissioned in 2013, "Assessing the viability of Overland Flood Insurance: the Canadian Residential Property Market" through direct advocacy to governments and a wide stakeholder engagement. At the end of the day, it is incumbent on us to find ways to reduce the risk for our clients, our members and our communities through concrete adaptation measures, weather hardening of our infrastructure, and possible risk transfer solutions. Now is the time to act. We need to discontinue the current approach that relies on a management by crisis mentality."
"We continue to be challenged by ongoing issues in the Ontario auto insurance marketplace. 2013 marked a second consecutive year that The Co-operators reduced auto insurance premiums, bringing the total to 12%. Despite efforts to combat fraud and duplication within the system, costs continue to rise. We will work with the government and the industry to identify further measures that help to reduce those costs, enabling us to deliver an efficient product that provides consumers with appropriate protection that is accessible and affordable."
CO-OPERATORS GENERAL'S FOURTH QUARTER FINANCIAL HIGHLIGHTS
|(in millions of Canadian dollars except ROE, EPS and ratios)|
|4th quarter||4th quarter||2013||2012|
|Key financial data|
|Direct written premium||542.6||518.7||2,196.6||2,106.6|
|Net earned premium||537.1||517.7||2,071.9||2,016.4|
|Net income from continuing operations||74.6||76.0||88.9||213.8|
|Net income from discontinued operations||-||39.8||-||45.5|
|Key success indicators|
|Direct written premium (DWP) growth||4.6%||2.8%||4.3%||2.8%|
|Net earned premium (NEP) growth||3.7%||4.5%||2.8%||4.7%|
|Earnings per share from continuing operations||$3.40||$3.48||$3.51||$9.68|
|Earnings per share from discontinued operations||-||$1.96||-||$2.24|
|Earnings per share (EPS)||$3.40||$5.44||$3.51||$11.92|
|Annualized return on equity (ROE)||23.2%||34.0%||6.9%||19.2%|
|Combined ratio - excluding MYA||94.0%||93.7%||104.1%||95.1%|
|Combined ratio - including MYA||93.6%||93.5%||103.2%||96.3%|
|Minimum Capital Test (MCT)||234%||260%||234%||260%|
|1 2012 balances include the adjustments to retrospectively adopt International Accounting Standard 19R "Employee Benefits".|
FOURTH QUARTER REVIEW
Fourth quarter DWP increased to $542.6 million, compared to $518.7 million in the fourth quarter of 2012. Growth was primarily in the auto and home lines of business in both the Ontario and Western regions.
The combined ratio, excluding the market yield adjustment (MYA) for the quarter, was 94.0% compared to 93.7% in the fourth quarter of 2012. The fourth quarter loss ratio, excluding MYA, deteriorated from 58.2% to 63.7% and is attributable to claims from the late December ice storm in Ontario paired with commercial line of business fire losses. This was partially offset by higher favourable claims development in the auto line of business.
Net investment income and gains for the fourth quarter of 2013 was $58.0 million compared to $63.1 million for the same period of 2012. Net investment income was positively impacted by higher dividends and fund distributions from our equities portfolio. Net investment gains reflect net realized gains of $15.8 million compared to $21.8 million in the same period of 2012.
The Company's investment portfolio composition is conservative and the assets are high quality and well diversified. The credit quality of our bond portfolio remains high with 99.9% of our bonds considered investment grade and 89.7% rated A or higher. Our equity portfolio is 79.3% weighted to Canadian stocks, with a further weighting to large financial institutions. Commercial mortgages make up 11.6% of our total invested assets.
DWP increased 4.3% to $2,196.6 million, compared to $2,106.6 million in 2012. Improved results are primarily from policy and client growth although there have also been rate and inflation increases in certain lines of business.
NEP has increased by $55.5 million or 2.8% to $2,071.9 million as a result of growth, which was partially offset by ceded premiums to reinstate our catastrophe coverage following the storms and flooding events in Alberta and Toronto. NEP growth was seen in all of our geographic regions and all core lines of business.
Net investment income and gains decreased to $154.8 million from $205.8 million in 2012 resulting from increases in the interest rates which lowered the fair value of our bond and preferred share holdings. We also realized net gains of $37.3 million compared to $65.2 million in 2012.
Excluding the MYA, the combined ratio deteriorated to 104.1% from 95.1% in 2012 largely driven by the storms and flooding in Alberta and Toronto, a late December ice storm in Ontario and several summer hail storms in the West. Higher accident year claims and lower favourable claims development compared to 2012 drove net claims and adjustment expenses up $205.9 million or 16.4% compared to 2012.
The Company's capital position remains strong, as the Minimum Capital Test (MCT) for Co-operators General was 234% at December 31, 2013, well above the internal and regulatory minimum requirements. The MCT has decreased from 260% at December 31, 2012 from increases to unpaid claims and unearned premiums, dividends paid to the parent company, CFSL, and MCT methodology changes that became effective in 2013.
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", "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. 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 $5.0 billion, Co-operators General is a leading Canadian-owned multi-product insurance company. Co-operators General is part of The Co-operators Group Limited, a Canadian-owned 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, and is listed among the 50 Best Employers in Canada.
Co-operators General Class E, Series C Preference Shares trade under ticker symbol CCS.PR.C and the Class E Series D Preference Shares trade under ticker symbol CCS.PR.D. Both series of shares trade on the Toronto Stock Exchange (TSX). Further information can be found at www.cooperators.ca.
SOURCE The Co-operators
For further information:
P. Bruce West
Executive Vice-President, Finance and Chief Financial Officer
Telephone: (519) 767-3036 Fax: (519) 824-0599