Echelon Insurance Reports First Quarter 2017 Results
TORONTO, May 3, 2017 /CNW/ - Echelon Financial Holdings Inc. ("EFH" or "the Company") (TSX: EFH), which operates in the property and casualty insurance industry in Canada, today reported net income attributable to shareholders on continued operations of $7.5 million, or $0.62 per diluted share, for the three months ended March 31, 2017.
All operating results below refer to continuing operations.
First Quarter 2017 Highlights
- Net operating income on continued operations of $0.19 per share compared to an income of $0.09 per share in the first quarter of 2016.
- A Canadian combined operating ratio of 94% compared to 100% in the first quarter of 2016 driven by strong results in both Personal Lines and Commercial Lines.
- A 30% increase in direct written premiums over the same period in 2016 to $54.6 million as a result of growth in existing products in Personal Lines and new Commercial Lines products.
- Total pre-tax gain on invested assets of $5.1 million in the quarter compared to a pre-tax loss of $0.6 million in the first quarter of 2016 due to strong Preferred Share and Fixed Income performance.
- Closing book value per share of $12.10, an increase of 3.4% over the fourth quarter of 2016.
"We are pleased to report strong results this quarter in both Personal and Commercial lines, despite adverse weather conditions in the Maritime provinces" commented Serge Lavoie, Chief Executive Officer.
"Direct Written Premiums increased by 30% compared with the prior year quarter, driven by growth in both new and existing business lines", he continued. "Our full suite of products is being well received by the broker community, and the introduction of our enhanced systems will continue to support Echelon's growth in 2017 and beyond. We look forward to further building our relationships with our brokers across Canada, and are committed to building strong and sustainable insurance solutions, aligned directly to their needs".
Financial Summary on Continued Operations
| $000s (except per share amounts) |
Three Months Ended |
Three Months Ended |
% |
| Direct written and assumed premiums |
54,586 |
42,121 |
30 |
| Net earned premiums |
49,025 |
43,348 |
13 |
| Underwriting income |
716 |
(2,055) |
NM |
| Investment income |
8,487 |
3,945 |
115 |
| Net income |
7,466 |
901 |
729 |
| Net operating income(1) |
2,316 |
1,025 |
126 |
| Net income per diluted share |
$0.62 |
$0.08 |
675 |
| Net operating income per diluted share(2) |
$0.19 |
$0.09 |
111 |
| Book value per share |
$12.10 |
$15.16 |
(20) |
| (1) |
Net operating income is defined as underwriting income plus interest and dividend income, net of tax, excluding catastrophe losses. |
| (2) |
Net operating income is adjusted to that attributable to shareholders for per share calculation. |
First Quarter Review
Net operating income of $2.3 million or $0.19 per share was recorded in the quarter, compared to an income of $1.0 million or $0.09 per share in the first quarter of 2016.
Personal Lines generated underwriting income of $1.9 million compared to an underwriting income of $0.7 million in the same period last year primarily due to strong performance in non-standard auto and motorcycle, partially offset by weaker performance in Atlantic Canada related to severe winter weather conditions.
Commercial Lines generated an underwriting income of $1.0 million compared to a $0.8 million underwriting loss in the same period last year primarily due to strong performance in warranty, commercial property and liability lines. The Company continues to focus on growing the Canadian business through product expansion, technology investments, and strong broker relationships.
Direct written premiums increased by 30% to $54.6 million, primarily due to growth in Ontario personal lines and Quebec commercial lines, driven by broker transfers on existing products and the launch of new products in 2016.
Investment income was $8.5 million compared to $3.9 million in the first quarter of 2016 primarily due to realized foreign exchange gains arising on investment hedges from the sale of the European operations. The total pre-tax gain on invested assets was $5.1 million in the quarter compared to pre-tax loss of $0.6 million in the first quarter of 2016, primarily due to strong performance of Preferred Share and Fixed Income investments. The fair value of Echelon's investment portfolio, including finance receivables, was $417 million.
Net favourable development of prior year claims of $3.3 million was recorded in the first quarter of 2017 compared to favourable development of $2.1 million in the same period in 2016.
Operating Results
| Underwriting Income (Loss)(1) |
Three Months Ended |
Three Months Ended |
| Personal Lines |
1,890 |
743 |
| Commercial Lines |
1,000 |
(763) |
| Key Operating Ratios |
||
| Loss ratio |
58.9% |
65.3% |
| Expense ratio |
35.2% |
34.7% |
| Combined ratio |
94.1% |
100.0% |
| Loss Ratios |
||
| Personal Lines |
62.5% |
65.7% |
| Commercial Lines |
47.9% |
63.8% |
| (1) |
Excluding head office overhead costs |
Capital Management
All related entities remain well capitalized. The Minimum Capital Test (MCT) ratio of EFH's Canadian subsidiary, Echelon Insurance, as at March 31, 2017, was 258%, which exceeds the supervisory regulatory capital level required by the Office of the Superintendent of Financial Institutions (OSFI). ICPEI's MCT ratio of 354% was in excess of provincial supervisory targets.
The Company has approximately $10 million of excess deployable capital invested in liquid assets in the holding company. All regulated entities remain well-capitalized.
For the three months ended March 31, 2017, total shareholders' equity increased by $5.6 million to $143.0 million from December 31, 2016.
Full Financial Statements and Management's Discussion and Analysis (MD&A) are available on SEDAR and on the Company's web site at echeloninsurance.ca
Non-IFRS Financial Measures
EFH uses International Financial Reporting Standards (IFRS) and certain non-IFRS measures to assess performance. Readers are cautioned that non-IFRS measures do not have a standardized meaning under IFRS and may not be comparable to similar measures used by other companies. EFH analyzes performance based on operating income and underwriting ratios such as combined, expense and loss ratios.
Director Elections
Daniel Courtemanche has, for personal reasons, withdrawn his name as director nominee for the Company Board of Directors. The Board of Directors has resolved that 8 directors will be elected at the May 9, 2017 Annual General Meeting. With the exception of Mr. Courtemanche, the slate of director nominees will remain the same as previously set out in the Proxy and Management Information Circular.
Forward-looking Information
This news release contains forward-looking information based on current expectations. This information includes, but is not limited to, statements about the operations, business, financial condition, priorities, targets, ongoing objectives, strategies and outlook of EFH for 2017 and subsequent periods.
This information is based upon certain material factors or assumptions that were applied in drawing a conclusion or making a projection as reflected in the forward-looking information. By its nature, this information is subject to inherent risks and uncertainties that may be general or specific. A variety of material factors, many of which are beyond EFH's control, affect the operations, performance and results of its business and could cause actual results to differ materially from the expectations expressed in any of this forward-looking information.
EFH does not undertake to update any forward-looking information. Additional information about the risks and uncertainties about Echelon's business is provided in its disclosure materials, including its Annual Information Form and Management Discussion & Analysis, filed with the securities regulatory authorities in Canada, available at www.sedar.com.
Conference Call
A conference call for analysts and interested listeners will be held on Thursday, May 4, 2017, at 11:00 a.m. (ET). The call-in numbers for participants are 647-427-7450 or toll free 1-888-231-8191, Conference ID 2940919. A live audio feed of the call will be available online through the Company's website at echeloninsurance.ca, or directly at conference call.
A replay of the call will be available until May 11, 2017. To access the replay, call 416-849-0833, or toll free 1-855-859-2056, enter password 2940919. An archive will be available on our website following the event.
About Echelon Financial Holdings Inc.
Founded in 1998, Echelon operates in the property and casualty insurance industry in Canada, primarily focusing on non-standard automobile insurance and other specialty P&C insurance products. The Company operates and distributes insurance products through Echelon Insurance and The Insurance Company of Prince Edward Island. It trades on the Toronto Stock Exchange under the symbol EFH. For more information, please visit echeloninsurance.ca.
SOURCE Echelon Financial Holdings Inc.
Kathy Shulman, Manager, Investor Relations, 905-214-7880, [email protected]
Share this article