Belton third-quarter predictions

During the third quarter of 1998, preliminary net earning returns of Canadian property and casualty companies were down $59 million in comparison to the same quarter in 1997, says the latest issue of The Belton Report.

The combined impact of the claims and expense numbers in third quarter 1998 was a $188 million loss, compared to a $129 million loss in third quarter 1997. Still, Ted Belton, the reports author, warns to be weary of third quarter results as they are based on the returns of insurers representing 43.8% of the total assets of insurers.

Still, despite a relatively small sample, the current statistics are consistent with forecasted trends — claims incurred are on the rise and investment income is on the decline. Claims growth in third quarter 1998 was at 1.7% versus 1997’s -3.7%. Investment income declined $245 million from 1997’s $887 million to 1998’s $642 million.

The preliminary figures show a declining trend in net earnings, consistent with the second quarter results. During the second quarter of 1998, Canadian company net earnings were down $143 from the second quarter period of 1997. Belton notes that bottom line figures are unlikely to improve in the coming year, with insurer expense ratios likely remaining high due to Y2K compliance costs.

In his commentary, Belton reports that “assurebanking” — insurers entering the banking sector — is a growing trend throughout North America. Already, insurer State Farm Mutual has received a charter to become a federal savings bank in the U.S. In Canada, insurers appear to be positioning themselves for similar action, says Belton in pointing to ING’s recent strategic alliance with Equisure.