Combined ratio deteriorates 7.4 points for Desjardins P&C segment

Desjardins Group has reported a 3.9-point deterioration in the third-quarter loss ratio of its property and casualty insurance segment, while gross written premiums increased 77.1%.

Levis, Quebec-based Desjardins Group reported the combined ratio of its property and casualty insurance segment was 92.7% during the three months ending Sept. 30, up 7.4 points from 85.3% during the same period in 2014.

The loss ratio increased 3.9 points, to 63% in the latest quarter from 59.1% in Q3 14. “This increase was mainly the result of a higher loss experience in home and automobile insurance, partially offset by the favourable trend in automobile insurance claims taken over from State Farm Canada,” Desjardins Group stated in its management discussion and analysis.

On Jan. 1, Desjardins closed its acquisition – initially announced in January, 2014 – of the Aurora, Ont.-based Canadian operations of State Farm, which includes about 500 agencies. Desjardins uses the State Farm brand in Ontario, Alberta and New Brunswick. State Farm Canada home and auto policies are written by Desjardins subsidiary Certas Home and Auto Insurance Company. Desjardins acquired State Farm’s P&C, life, mutual fund, loan and living benefits operations in Canada.

Gross written premiums, for Desjardins’ P&C operations, increased 77.1%, from $633 million in Q3 2014 to $1.121 billion in the latest quarter, due mainly to the State Farm transaction.

Direct premiums written for Desjardins General Insurance Group Inc. were up 83%, from $582 million in Q3 2014 to $1.064 billion in the latest quarter, DGIG stated Thursday in a press release.

Desjardins Group’s P&C segment includes DGIG, the P&C operations of State Farm Canada and Western Financial Group Inc., the High River, Alta.-based firm that Desjardins Group acquired in 2011.

DGIG provides auto, property, pet, motorcycle and recreational vehicle coverage in Ontario, Alberta and Quebec. In Quebec, DGIG also writes business insurance, including property, liability, business interruption and equipment breakdown.

“The Property and Casualty Insurance segment’s cost of claims totalled $436 million for the third quarter, up $99 million, or 29.4%, compared to the third quarter of 2014, primarily due to the higher business volume resulting from the acquisition of State Farm Canada and organic business growth,” Desjardins said in its MD&A.

DGIG’s underwriting income – excluding market yield adjustment – dropped 42.4%, from $73.8 million in Q3 2014 to 73.8% in the latest quarter.

For the first nine months of the year, DGIG’s underwriting income, excluding market yield adjustment, nearly tripled, from $85.1 million in 2014 to $233.7 million this year.

Also for the first nine months, Desjardins Group reported its P&C gross premiums written increased 76%, from $1.853 billion in 2014 to $3.268 billion this year.

DGIG’s direct premiums written increased 82%, from $1.7 billion in the first nine months of 2014 to $3.1 billion year-to-date as of Sept. 30, 2015.

The loss ratio, for Desjardins Group’s P&C operations improved 3.4 points, from 66.3% in the first nine months of 2014 to 62.9% during the same period this year.

“The positive trend in automobile insurance claims taken over from State Farm Canada and the favourable loss experience in home insurance compared to the first nine months of 2014 chiefly accounted for the improved loss ratio,” Desjardins Group said in its MD&A.

The combined ratio for Desjardins Group’s P&C operations improved 4.9 points, from 94.2% in 2014 to 89.5% this year.

The P&C segment’s cost of claims increased 35.1%, or $397 million, year over year, to $1.528 billion in the first 9 months of 2015, “primarily due to the higher business volume resulting from the acquisition of State Farm Canada and organic growth.”

It was partially offset by an improvement in the loss ratio for the P&C insurers, which was 62.9% for the first nine months of 2015, versus 66.3% for the corresponding period of 2014. The positive trend in automobile insurance claims taken over from State Farm Canada and the favourable loss experience in home insurance compared to the first nine months of 2014 chiefly accounted for the improved loss ratio.