Canadian Reinsurers Reap 2003 Profit Boon

Canadian reinsurance companies lifted net taxed earnings for 2003 by more than 5.8 times to $310.8 million compared with the $52.9 million in after tax income reported the year prior. “The sharp rise in income was mostly attributable to a significant improvement in the incurred claims to premiums earned ratio [loss ratio],” says Cam Macdonald, chairman of the Reinsurance Research Council (RRC).

Reinsurers were able to reduce their average loss ratio by almost 12 percentage points to 70.9% for 2003 (2002: 82.6%), which saw the combined ratio for last year clock in at 96.4% versus the 110.2% ratio reported by companies the previous year. Despite the dramatic underwriting improvement for 2003, with reinsurers having produced a $91.5 million profit against the $226.3 million loss incurred the year before, Macdonald remains concerned with the relatively high combined ratio of companies. “The collective combined ratio for these 20 companies [RRC members] (96.38%) remained unacceptably high given the relative lack of catastrophic losses in 2003.”

While reinsurers notched up healthy gains in earned premiums and investment income over 2003, the relatively “almost static” annual growth of 4.6% in net written premiums of $2.48 billion (2002: $2.37 billion) reported for last year suggests that pricing has lost significant momentum. Reinsurers increased net earned premiums year-on-year by 13.9% to $2.53 billion for 2003 while investment income rose over the same period by 19.7% to $378.5 million (2002: $316 million).