This quarterly earnings news release should be read in conjunction with our third quarter 2017 unaudited condensed consolidated interim financial statements and Management's Discussion and Analysis (MD&A) as well as our 2016 Annual Report which are available on SEDAR at www.sedar.com. Unless otherwise noted, all amounts are expressed in Canadian dollars.
GUELPH, ON, Oct. 26, 2017 /CNW/ - Co-operators General Insurance Company (Co-operators General) today released consolidated financial results for the three months ended September 30, 2017. The consolidated net loss was $7.4 million compared to net income of $16.3 million for the same quarter in 2016. This resulted in an earnings (loss) per common share of ($0.40) for the quarter compared to $0.71 in the same period last year.
"Compared to the same quarter of 2016, our underwriting loss has deteriorated slightly, driven primarily by an increase to claims provisions in the Ontario auto line of business. We also experienced a decline in our investment returns relative to the same period last year," said Rob Wesseling, president and CEO of The Co-operators. "Our balance sheet remains strong and we continue to achieve a strong rate of growth. In the third quarter, net earned premium increased across all core product lines and throughout all geographic regions."
| CO-OPERATORS GENERAL'S THIRD QUARTER FINANCIAL HIGHLIGHTS |
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| ($ in millions, except for earnings per share and ratios) |
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| 3rd quarter |
3rd quarter |
2017 |
2016 |
|
| 2017 |
2016 |
YTD |
YTD |
|
| Key financial data |
||||
| Direct written premium (DWP) |
746.2 |
691.0 |
2,055.2 |
1,933.1 |
| Net earned premium (NEP) |
656.3 |
614.8 |
1,894.3 |
1,779.7 |
| Net income (loss) |
(7.4) |
16.3 |
56.2 |
16.6 |
| Total assets1 |
5,877.3 |
5,854.5 |
5,877.3 |
5,854.5 |
| Shareholders' equity1 |
1,524.3 |
1,578.9 |
1,524.3 |
1,578.9 |
| Key success indicators |
||||
| DWP growth |
8.0% |
6.2% |
6.3% |
6.2% |
| NEP growth |
6.8% |
4.9% |
6.4% |
4.4% |
| Earnings (loss) per common share |
($0.40) |
$0.71 |
$2.33 |
$0.49 |
| Return on equity |
(2.1%) |
5.1% |
5.3% |
1.7% |
| Combined ratio - excluding market yield adjustment2 |
108.9% |
109.2% |
104.2% |
106.3% |
| Minimum Capital Test (MCT)1 |
213% |
227% |
213% |
227% |
| 1 Balance sheet data and MCT results for 2016 are as at December 31 |
| 2 The combined ratio for 2016 has changed as a result of a reclassification of commission revenue that was previously netted with commission and general expenses |
Third quarter review
In the third quarter, DWP increased by 8.0% or $55.2 million to $746.2 million. DWP improvements were attributable to growth in policy and vehicle counts in all lines of business, combined with rate adjustments. NEP increased during the third quarter by 6.8% or $41.5 million compared to the same period last year. The increase in NEP during the quarter is seen throughout all geographic regions and core product lines.
The combined ratio, excluding the market yield adjustment for the quarter, was 108.9% compared to 109.2% for the same period last year. Undiscounted net claims and adjustment expenses have increased by 6.3% from the third quarter of 2016, bringing the loss ratio to 76.8%. Claims costs increased compared to the same period of the prior year as a result of an increase to claims provisions to account for increased frequency and severity of claims in the Ontario auto line of business. Partially offsetting this was a decrease in the frequency of current accident year claims in the home line of business in the West and less unfavourable claims development.
The expense ratio increased by 0.1 percentage points to 32.1%, as compared to the same period in 2016, driven by a one-time tax re-assessment, an increase in premium tax rates during 2016 and higher spend on information technology system initiatives.
Net investment income and gains decreased by $41.7 million versus the third quarter of 2016 primarily a result of a decline in realized common share and bond gains. In the third quarter of 2017, common share gains of $7.7 million were $25.5 million lower than those recognized during the same period in 2016. Two Bank of Canada interest rate hikes during the current period negatively impacted bond valuations resulting in an $11.5 million unfavourable change in realized bond gains.
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 96.9% of our portfolio considered investment grade and 85.2% rated A or higher. Our equity portfolio is 78.9% weighted in Canadian stocks.
Capital
The Company's capital position remains strong, as the Minimum Capital Test for Co-operators General was 213% at September 30, 2017, well above the internal and regulatory minimum requirements.
CAUTION REGARDING 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 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 third quarter 2017 MD&A or our 2016 Annual Report.
SHAREHOLDER AND INVESTOR 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, as well as investment products. The Co-operators is well known for its community involvement and 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
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