Canadian property and casualty industry reports reduced profits in 2007

The net income of Canada’s property and casualty industry dropped to Cdn$4.008 billion in 2007, a 3.6% decrease over the Cdn$4.158 billion it recorded in 2006.
MSA Research Inc. posted its year-end, aggregate financial data for 2007. In addition to the reduced profits, MSA figures also show increasing loss ratios and combined ratios.
The 2007 net loss ratio of 65.1% increased 1.58% over 2006, and the combined ratio of 94.6% exceeded the 2006 COR of 92.4%.
The direct loss ratio in Ontario auto lines went up almost 7% between 2006 and 2007 (from 71.6% to 78.5%, respectively). In Alberta, the loss ration in 2007 declined from 64.3% to 62.9%.
MSA’s report includes data for 129 Canadian insurers, represents more than 85% of Canadian primary writers when measured on a premium volume basis (as filed with MSA).
Key observations from the data, according an MSA release, include:
1. direct and net premium growth, 3.2% and 3.4% respectively, which MSA described as “somewhat anemic” after economic growth and inflation are taken into account;
2. net claims incurred were up almost 6% over 2006;
3. underwriting income in 2007 was down by more than 26% over the previous year, due primarily to increased claims and a very modest up-tick in expenses;
5. investment income* was up 8.1%;
6. reflecting the aforementioned and after adjusting the prior year result for fair value accounting, net income for the companies represented here declined by 4.8%; and
7. sixty-three companies reported lower net income in 2007 while sixty-five companies reported higher net income*.
(* Unless otherwise noted, 2006 results do not include the effect of fair value accounting.)
Summarized year-end statistics by company will be available after Mar. 24.