GUELPH, ON, Feb. 15, 2018 /CNW/ - Co-operators General Insurance Company ("Co-operators General") today announced its consolidated financial results for the three months and year ended December 31, 2017. For the fourth quarter, Co-operators General reported consolidated net income of $64.8 million, compared to $128.8 million for the same quarter in 2016. Earnings per common share was $2.84 for the fourth quarter, compared to $5.84 for the same period last year. Direct written premium was $685.2 million in the quarter, an increase of $46.1 million as compared to $639.1 million in the fourth quarter last year.
Net income for the year amounted to $121.1 million, compared to $145.3 million in 2016. This resulted in earnings per common share of $5.17 compared to $6.33 in 2016. Direct written premium increased 6.5% to $2,740.4 million, compared to $2,572.2 million in 2016.
"Claims expenses increased in 2017 compared to the year prior, despite the impact of the tragic wildfire in Fort McMurray in 2016. Contributing to this increase were the large number of wind and rain storms that affected homes and farms, and an increase in the frequency of auto claims," said Rob Wesseling, president and CEO of The Co-operators.
"Client growth in all geographic regions of the country continues to drive sustained policy growth across all core product lines. Client engagement is a key part of our strategy, and as our results in JD Power's 2017 studies of home and auto insurance client satisfaction show, we are an industry leader in this area."
CO-OPERATORS GENERAL FOURTH QUARTER FINANCIAL HIGHLIGHTS
| (in millions of Canadian dollars except ROE, EPS and ratios) |
||||
| 4th quarter |
4th quarter |
2017 |
2016 |
|
| 2017 |
2016 |
YTD |
YTD |
|
| Key financial data |
||||
| Direct written premium (DWP) |
685.2 |
639.1 |
2,740.4 |
2,572.2 |
| Net earned premium (NEP) |
664.8 |
620.6 |
2,559.1 |
2,400.4 |
| Net income |
64.8 |
128.8 |
121.1 |
145.3 |
| Total assets |
5,922.1 |
5,854.5 |
5,922.1 |
5,854.5 |
| Shareholders' equity |
1,531.1 |
1,578.9 |
1,531.1 |
1,578.9 |
| Key success indicators |
||||
| DWP growth |
7.2% |
3.9% |
6.5% |
5.6% |
| NEP growth |
7.1% |
4.6% |
6.6% |
4.5% |
| Earnings per share (EPS) |
$2.84 |
$5.84 |
$5.17 |
$6.33 |
| Annualized return on equity (ROE) |
19.8% |
42.6% |
8.5% |
10.5% |
| Combined ratio - excluding market yield adjustment1 |
100.3% |
85.5% |
103.2% |
101.0% |
| Combined ratio - including market yield adjustment1 |
98.0% |
81.9% |
102.4% |
101.1% |
| Minimum Capital Test (MCT) |
216% |
227% |
216% |
227% |
| 1 The combined ratios have changed for 2016 as a result of reclassification of commission revenue that was previously netted with commission and general expenses |
||||
FOURTH QUARTER REVIEW
Fourth quarter DWP increased to $685.2 million, compared to $639.1 million in the fourth quarter of 2016. Growth was experienced in all our core products and regions, but primarily in the home and auto lines of business in the Ontario and West regions.
The combined ratio, excluding the market yield adjustment (MYA), for the quarter was 100.3% compared to 85.5% in the fourth quarter of 2016. The fourth quarter loss ratio, excluding MYA, deteriorated to 67.7% from 51.2%. Undiscounted net claims and adjustment expenses increased compared to the same period of the prior year as a result of an increase in the frequency of claims and less favourable claims development in our auto line of business in Ontario. An increase in the severity and frequency of current accident year claims in our home line of business and an increase in severity of current accident year claims in our commercial operations also contributed to the deterioration of our loss ratio.
Net investment income and gains for the fourth quarter of 2017 was $65.4 million compared to $52.5 million for the same period of the prior year. The $12.9 million increase in the current quarter was primarily the result of higher realized common share gains and interest income. Net investment gains reflects higher net realized gains of $25.1 million as compared to $18.0 million in the same period of 2016.
The Company's investment portfolio is comprised of high quality and well diversified assets. The credit quality of our bond portfolio remains high with 96.7% of our bonds considered investment grade and 83.5% rated A or higher. Our equity portfolio is 80.8% weighted in Canadian stocks.
ANNUAL REVIEW
DWP increased 6.5% to $2,740.4 million, compared to $2,572.2 million in 2016. Improved results are primarily from sustained policy and vehicle growth across all regions, in addition to higher average premium within the auto and home lines of business in the Western region.
NEP increased by $158.7 million or 6.6% to $2,559.1 million as a result of growth seen in all of our geographic regions and all core lines of business.
Excluding the MYA, the combined ratio deteriorated to 103.2% from 101.0% in 2016, largely a result of an increase in the frequency of claims in our auto, home and farm lines of business. Other operating expenses increased over the prior year by $49.3 million; however, NEP rose at a faster pace resulting in an improvement in the expense ratio of 0.1 percentage point to 33.1%.
Net investment income increased $5.0 million in 2017 as compared to the prior year as a result of an asset mix shift which decreased the weighting of fixed income holdings in the portfolio in favour of preferred shares. Net investment gains were $3.7 million lower than the prior year driven by a decrease in net realized gains, partially offset by improvements in the preferred share market and higher foreign exchange gains.
CAPITAL
The Company's capital position remains strong, as the Minimum Capital Test for Co-operators General was 216% at December 31, 2017, well above the internal and regulatory minimum requirements. The decrease in our MCT from 227% at December 31, 2016 is largely driven by the declaration of $160.0 million in common share dividends, partially offset by net income results for the year.
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 $5.9 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, and is listed among the Best Employers in Canada by Aon Hewitt and Corporate Knights' Best 50 Corporate Citizens in Canada.
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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