GUELPH, ON, Feb. 15, 2017 /CNW/ - Co-operators General Insurance Company ("Co-operators General") today announced its consolidated financial results for the three months and year ended December 31, 2016. For the fourth quarter, Co-operators General reported consolidated net income of $128.8 million, compared to $103.3 million for the same quarter in 2015. Earnings per common share was $5.84 for the fourth quarter, compared to $4.69 for the same period last year. Direct written premium was $639.1 million in the quarter, an increase of $24.2 million as compared to $614.9 million in the fourth quarter last year.
Net income for the year amounted to $145.3 million, compared to $162.3 million in 2015. This resulted in earnings per common share of $6.33 compared to $7.17 in 2015. Direct written premium increased 5.6% over 2015, from $2,435.9 million in the prior year to $2,572.2 million. The impact of the devastating Fort McMurray wildfire was $90.3 million before tax, net of reinsurance and inclusive of reinsurance reinstatement premiums.
"Although the devastating wildfire in Fort McMurray had a significant impact on our bottom line, the organization is performing well and our fundamentals remain strong. Excluding that catastrophic event, our underwriting performance improved compared to the year prior. Our investment performance improved markedly in 2016 and we are pleased with our continued premium and client growth in our core lines of business throughout the country," said Rob Wesseling, president and CEO of The Co-operators.
"The fire in Fort McMurray was the worst natural disaster in Canadian history and a monumental challenge for the insurance industry. We are proud of the way our staff and advisors rose to the challenge to serve our clients in their time of extraordinary need. The event served as yet another reminder of the need to strengthen the resilience of our communities against natural disasters, and we are committed to continuing to make a positive contribution and being part of the solution."
CO-OPERATORS GENERAL FOURTH QUARTER FINANCIAL HIGHLIGHTS
| (in millions of Canadian dollars except ROE, EPS and ratios) |
||||
| 4th quarter |
4th quarter |
2016 |
2015 |
|
| 2016 |
2015 |
YTD |
YTD |
|
| Key financial data |
||||
| Direct written premium (DWP) |
639.1 |
614.9 |
2,572.2 |
2,435.9 |
| Net earned premium (NEP) |
620.6 |
593.1 |
2,400.4 |
2,297.0 |
| Net income |
128.8 |
103.3 |
145.3 |
162.3 |
| Total assets |
5,854.5 |
5,303.2 |
5,854.5 |
5,303.2 |
| Shareholders' equity |
1,578.9 |
1,458.6 |
1,578.9 |
1,458.6 |
| Key success indicators |
||||
| DWP growth |
3.9% |
8.2% |
5.6% |
5.6% |
| NEP growth |
4.6% |
5.9% |
4.5% |
4.9% |
| Earnings per share (EPS) |
$5.84 |
$4.69 |
$6.33 |
$7.17 |
| Annualized return on equity (ROE) |
42.6% |
35.0% |
10.5% |
12.3% |
| Combined ratio - excluding market yield adjustment |
86.2% |
92.1% |
101.0% |
97.3% |
| Combined ratio - including market yield adjustment |
82.7% |
93.2% |
101.1% |
97.6% |
| Minimum Capital Test (MCT) |
227% |
225% |
227% |
225% |
FOURTH QUARTER REVIEW
Fourth quarter DWP increased to $639.1 million, compared to $614.9 million in the fourth quarter of 2015. Growth was experienced primarily in the auto line of business across all regions and the home line of business in all regions, except the West.
The combined ratio, excluding the market yield adjustment (MYA) for the quarter, was 86.2% compared to 92.1% in the fourth quarter of 2015. The fourth quarter loss ratio, excluding MYA, improved to 51.2% from 58.7%. We experienced a decrease in the severity of current accident year claims and more favourable claims development primarily in our auto line of business compared to the same quarter of the prior year.
Net investment income and gains for the fourth quarter of 2016 was $52.5 million compared to $85.7 million for the same period of the prior year. The $33.2 million decrease in the current quarter was primarily the result of lower realized common share and bond gains and lower unrealized preferred share gains. Net investment gains reflects lower net realized stock and bond gains of $18.0 million as compared to $41.2 million in the same period of 2015.The total change in the fair value of preferred shares for the quarter was an $8.9 million gain as compared to a $14.0 million gain in the fourth quarter of 2015.
The Company's investment portfolio is comprised of high quality and well diversified assets. The credit quality of our bond portfolio remains high with 98.3% of our bonds considered investment grade and 85.9% rated A or higher. Our equity portfolio is 77.0% weighted in Canadian stocks.
ANNUAL REVIEW
DWP increased 5.6% to $2,572.2 million, compared to $2,435.9 million in 2015. Improved results are primarily from sustained policy and vehicle growth, in addition to rate increases within the home and farm lines of business.
NEP has increased by $103.4 million or 4.5% to $2,400.4 million as a result of growth seen in all of our geographic regions and all core lines of business. Additional ceded premium of $20.1 million was recorded against NEP during the year, mainly in the home and commercial lines of business, to reinstate our catastrophe coverage after the wildfire in Fort McMurray.
Net investment gains were $66.9 million higher than the prior year attributable to improvements in equity markets and a stronger Canadian dollar, partially offset by a decrease in realized bond gains. Net investment income decreased $11.0 million in 2016 as compared to the prior year. Dividend and other income was $6.3 million lower than in the prior year, primarily resulting from an $8.3 million decrease in distributions from international equity funds. Lower yields on fixed income investments driven by two Bank of Canada interest rate cuts in the prior year combined with portfolio turnover resulted in a $2.8 million decrease in bond interest income.
Excluding the MYA, the combined ratio deteriorated to 101.0% from 97.3% in 2015, largely a result of the catastrophic wildfire. Excluding the impacts of Fort McMurray, the combined ratio was 97.3%. An increase in severity of current accident year claims and less favourable claims development in the auto line of business was entirely offset by policy growth. The expense ratio increased 0.3 percentage points, to 33.2%, as compared to the same period in 2015, driven by an increase in distribution staffing levels and higher distribution costs.
CAPITAL
The Company's capital position remains strong, as the Minimum Capital Test for Co-operators General was 227% at December 31, 2016, well above the internal and regulatory minimum requirements. The increase in our MCT from 225% at December 31, 2015 resulted from the year-to-date net income results, partially offset by an increase in unpaid claims and adjustment expenses.
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 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. 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 $5.8 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, wealth management as well as investment management products. The Co-operators is well known for its community involvement and its commitment to sustainability, and is listed among the Best Employers in Canada by Aon Hewitt.
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
P. Bruce West, Executive Vice-President, Finance and Chief Financial Officer, Telephone: (519) 767-3036, Fax: (519) 824-0599
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