Canadian P&C industry records first underwriting loss since 2002 in Q1

The Canadian insurance industry as a whole experienced an underwriting loss in 2008 Q1, marking the first industry-wide loss since 2002, according to the MSA/Baron Outlook Report.
The industry’s combined ratio has crept up past the 100% mark, from 2007 Q1’s 96.4% to 104.3% for this year’s first quarter.
Industry premiums experienced 1.4% of growth, from Cdn$7.33 billion, to Cdn$7.44 billion. But underwriting income plummeted from a profit of Cdn$289 million in 2007 Q1 to a loss of Cdn$353 million during the same period in 2008.
Overall, the industry experienced a 25% drop in net income in 2008 Q1 over 2007 Q1, from Cdn$903 million to Cdn$677 million.
Commercial insurers are “beginning to pay the piper,” the report says. Overall premium volumes for commercial companies dropped almost 6% versus 2007 Q1 (Cdn$2.031 billion in 2007 Q1 to Cdn$1.914 billion in 2008 Q1), while the sector’s combined ratio approached the 100-level (99.6%) for the first time since 2001.
The report authors note that without the effects of discounting and fair value accounting, the 2008 Q1 sector combined ratio would have been 95.5%.
Meanwhile, in Canadian personal lines, the sector’s combined ratio climbed to 106.6% in the first quarter over last year’s 99.6%.
Net income in the personal lines decreased 41.1% to Cdn$248 million from Cdn$422 million last year.
While Q1 results are typically worse than Q2 or Q3, the report notes, deterioration in Ontario auto, reserve increases due to the removal of the minor injury cap in Alberta and volatile financial markets as culprits for the less-than-spectacular results.