Economical reports combined ratio up 2 points to 102.1% in 2014, investment income up 56%

Economical Insurance reported Thursday an underwriting loss of $38.4 million in 2014, while the combined ratio deteriorated by 2 points to 102.1% and gross written premiums increased by 2.3% from 2013.

“While weather-related catastrophe losses of $46.7 million are down from record levels of $103.4 million in 2013, this has been more than offset by lower levels of favourable prior years’ loss reserve development during 2014 and an overall increase in frequency of claims largely driven by the severe winter conditions experienced in the first quarter of 2014,” Economical stated of its financial performance.

Net income dropped 4%, from $87.7 million in 2013 to $84.2 million in 2014. Gross written premiums were up 2.3%, from $1.919 billion in 2013 to $1.963 billion in 2014.

“Despite a reduction in weather-related catastrophe losses from the record levels set last year, 2014 continued to be a challenging year for Economical which began with a particularly tough first quarter” stated Karen Gavan (pictured), president and chief executive officer of Waterloo, Ont.-based Economical Insurance, in a release. “While we continued to perform well in three of our four lines of business in 2014, the corrective underwriting and rate actions we have taken on our commercial property and liability business should begin to be felt in 2015.”

In commercial lines, Economical reported a combined ratio of 109.9% in 2014, up 2.7 points from 107.2% in 2013. This resulted in underwriting losses of $71.2 million compared to $48.9 million in 2013.

The insurer reported an underwriting profit in personal lines of $32.8 million in 2014, down from $46.6 million in 2013, with the combined ratio rising 1.4 points to 97.1% in 2014.

“Personal property produced a very strong combined ratio of 80.0% in the fourth quarter of 2014, compared to 93.7% in the fourth quarter a year ago,” Economical stated. “Net weather-related catastrophe losses contributed 5.2 percentage points to the fourth quarter combined ratio, compared to 12.6 percentage points in 2013 which was heavily impacted by the December ice storm.”

On the weekend before Christmas 2013, Environment Canada reported about 30 mm of freezing rain at Toronto-Pearson airport. That ice storm brought tree branches down on buildings, vehicles and power lines throughout the region.

Related: Successful demutualization would help position Economical Insurance as P&C leader, company says

In the quarter ending Dec. 31, 2013, Economical reported a combined ratio of 101%. That ratio improved 1.5 points, to 99.5%, in the most recent quarter. Underwriting income was $2.5 million in Q4 2014, compared to an underwriting loss of $4.7 million in Q4 2013.

Fourth-quarter gross written premiums were up 0.8%, from $488.6 million in 2013 to $492.5 million in the same period last year.

“The personal lines premiums grew by $12.3 million, or 4.6% in the fourth quarter of 2014, driven primarily by increased volumes of auto policies in Ontario,” the company said. “Overall, the commercial lines business posted a combined ratio of 109.8% in the fourth quarter of 2014 compared to 105.1% in the fourth quarter of 2013.”

Also in Q4, Economical reported combined ratios of 108.1% and 110.7% in commercial auto – and commercial property and liability – respectively.

In Q4 2013, the combined ratio in commercial auto had been 16.8 points lower, at 91.9%.

“The deterioration in performance compared to the same quarter last year is due primarily to increases in both frequency and net severity of claims, particularly in Ontario and Western Canada,” Economical noted.

The commercial property and liability combined ratio was a 1.5-point improvement over Q4 2013.

Investment income was up 56%, from $105 million in 2013 to $164.2 million in 2014. For the fourth quarter, investment income increased 29%, from $40.4 million in 2013 to $52.3 million last year.

“Lower net weather-related catastrophe losses and reduced levels of large losses were partially offset by adverse development on prior years’ reserves, primarily for the commercial liability business.”

In addition to Economical, the company’s brands include Western General, Perth Insurance, Family Insurance and Federation Insurance.