This quarterly earnings news release should be read in conjunction with our Second Quarter 2014 unaudited condensed consolidated interim financial statements and Management's Discussion and Analysis (MD&A) as well as our 2013 Annual Report which are available on SEDAR at www.sedar.com. Unless otherwise noted, all amounts are expressed in Canadian dollars.
GUELPH, ON, July 31, 2014 /CNW/ - Co-operators General Insurance Company (Co-operators General) today released consolidated financial results for the three months ended June 30, 2014. The consolidated net income was $58.1 million compared to a net loss of $5.9 million for the same quarter in 2013. This resulted in earnings per common share of $2.48 for the quarter compared to a loss per share of $0.56 in the same period last year.
"In the quarter, we experienced tremendous growth and increased net earned premium in our core lines of business in all regions of the country," said Kathy Bardswick, President and CEO of The Co-operators.
"The Co-operators has taken the lead in reducing auto insurance rates in Ontario by 16.6 per cent since 2012. We are hopeful that as a result of the majority mandate in Ontario, the new government will refocus its attention on meaningful cost saving measures to support the reduction in auto insurance rates for consumers. This would include new minor injury protocols, a clear and workable catastrophic impairment definition and a serious examination of other domestic and international models of auto insurance product delivery.
Overall, our claims costs decreased this quarter compared to the same period in 2013, which was marked by the devastating storms and flooding in southern Alberta. Excluding last year's catastrophic events, our claims costs continue to rise. Extreme weather is the new reality. We will remain vigilant and work collaboratively to engage stakeholders to encourage action to adapt and build more resilient communities."
CO-OPERATORS GENERAL'S SECOND QUARTER FINANCIAL HIGHLIGHTS
($ in millions, except for earnings per share and ratios)
| 2nd quarter | 2nd quarter | 2014 | 2013 | |
| 2014 | 2013 | YTD | YTD | |
| Key financial data | ||||
| Direct written premium (DWP) | 654.5 | 612.5 | 1,127.3 | 1,059.7 |
| Net earned premium (NEP) | 544.8 | 505.9 | 1,070.4 | 1,006.0 |
| Net income (loss) | 58.1 | (5.9) | 68.7 | 52.2 |
| Total assets1 | 5,119.7 | 5,031.5 | 5,119.7 | 5,031.5 |
| Shareholders' equity1 | 1,424.8 | 1,382.1 | 1,424.8 | 1,382.1 |
| Key success indicators | ||||
| DWP growth | 6.9% | 4.3% | 6.4% | 3.2% |
| NEP growth | 7.7% | 1.5% | 6.4% | 1.9% |
| Earnings (loss) per share | $2.48 | ($0.56) | $2.87 | $2.13 |
| Annualized return on average equity | 18.3% | (1.8%) | 10.9% | 7.9% |
| Combined ratio - excluding MYA | 93.9% | 112.8% | 98.7% | 104.1% |
| Minimum Capital Test (MCT)1 | 229% | 234% | 229% | 234% |
| 1Balance sheet data and MCT results for 2013 are as at December 31 |
Second quarter review
DWP improvements are attributable to vehicle and policy count growth in the auto, home, and commercial lines of business paired with home portfolio rate and inflation adjustments. DWP in the second quarter has increased by 6.9% or $42.0 million to $654.5 million. NEP increased during the second quarter by 7.7% or $38.9 million compared to the same period last year. The increase in NEP is seen in all geographic regions and our core product lines.
The combined ratio, excluding the market yield adjustment (MYA) for the quarter, was 93.9% compared to 112.8% for the same period last year. Undiscounted net claims and adjustment expenses have decreased by 16.3% from the second quarter of 2013, bringing the loss ratio to 61.8%. Claims results improved as the second quarter loss ratio for 2013 was characterized by the catastrophic Alberta floods. Excluding the impact of that event, claims costs increased over the same period of 2013 primarily due to an increase in weather related claims, mainly in the Western and Atlantic regions. The expense ratio decreased 1.2 percentage points to 32.1%, compared to 33.3% for the same period in 2013.
Net investment income and gains increased by $26.1 million versus the second quarter of 2013. Net investment gains increased because of the strength of equity markets in the second quarter compared to the same period in 2013. Investment income decreased slightly because of a shift from bonds to equities, as well as the impact of declining interest rates.
Our investment portfolio composition is conservative and is comprised of high quality and well diversified assets. The credit quality of our portfolio remains high with 99.4% of our portfolio considered investment grade and 92.5% rated A or higher. Our equity portfolio is 79.4% weighted in Canadian Stocks.
Capital
The Company's capital position remains strong, as the Minimum Capital Test (MCT) for Co-operators General was 229% at June 30, 2014, well above the internal and regulatory minimum requirements.
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 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. For further information, refer to our Second Quarter 2014 MD&A or our 2013 Annual Report.
SHAREHOLDER AND INVESTOR INFORMATION
About Co-operators General Insurance Company
With assets of more than $5.1 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 on the Toronto Stock Exchange (TSX). During the second quarter of 2014, all of the issued and outstanding Class E, Series D Preference Shares of Co-operators General were redeemed. 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
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