January 30, 2017 by Canadian Underwriter
Manitoba Public Insurance (MPI) has recorded a net loss for the first nine months of its fiscal year ending Nov. 30, 2016, compared to posting net earnings for the same period one year earlier.
MPI saw a net loss of $3.6 million for the first three quarters of its most recent fiscal year, a $14.5 million decrease compared to the comparable period the year before, notes a statement issued last week.
“The overall financial picture was affected by an increase of $158.0 million in total claims costs compared to the same period last year, while an increase of $101.8 million investment income helped offset these increased costs,” explains Heather Reichert, MPI’s vice president of finance and chief financial officer.
Compared to the first nine months of last year, the insurer notes, total claims costs included a $98.5 million increase in bodily injury claims and a $56.8 million increase in physical damage claims.
“The bodily injury increase is primarily due to the interest rate adjustment on unpaid claims. However, an increase in collision claims is also negatively impacting claims costs,” MPI advises.
The loss for the first nine months of MPI’s current fiscal year “includes net loss to the Basic insurance line of business of $31.2 million in the first nine months of the 2016-2017 fiscal year,” notes the insurer statement.
In mid-December, the Public Utilities Board (PUB) reported the overall average Basic insurance rate increase, effective Mar. 1, would be 3.7%. The hike marks only the third time in a decade that MPI will be increasing rates overall for Manitobans.
MPI acknowledges the “3.7% increase in premiums ordered by the PUB board will mitigate the risk of continuing to rely on interest rate forecasts of the five major Canadian banks, but that if interest rates continue to underperform against the projections the board has ordered the corporation (MPI) to use, the corporation will continue to remain financially vulnerable,” Reichert cautions.
There is also concern “that failure to establish an appropriately sized rate stabilization reserve for the Basic compulsory insurance program based on standard industry practice will continue to make it difficult to protect vehicle owners from large premium increases or the potential need for a rate stabilization reserve rebuilding fee in the future,” she points out.
More positively, with regard to MPI’s most recent financial results, the insurer reports that the total earned revenue for the first nine months was $896.3 million, a $48.5 million increase from the same period one year earlier.
The improvement was “primarily attributed to increases in motor vehicle premium revenue as the result of the number of motor vehicles insured, and the value of these vehicles,” the statement adds.