The Co-operators experiences improvements in loss ratio for home, commercial and farm lines

The Co-operators General Insurance Company has reported a combined ratio of 104% for the third quarter of 2015, down from 109.2% in the third quarter of 2014.

Co-operators General is part of The Co-operators Group Limited, a Canadian-owned co-operative. Through its group of companies, it offers home, auto, life, group, travel, commercial and farm insurance, wealth management as well as investment management products. [click image below to enlarge]

The Co-operators Management’s Discussion and Analysis for the third quarter ending Sept. 30, 2015, released on Oct. 29 along with its consolidated financial results, noted that the company experienced improvements in its loss ratio, mainly in its home, commercial and farm lines. For the third quarter of 2015, the home line loss ratio was 68.3%, from 93.1% in Q3 2014. Commercial was 52% in Q3 2015 from 70.3%, while farm went from 104.2% in Q3 2014 to 88.1% in Q3 2015. The auto loss ratio deteriorated from 71.9% in Q3 2014 to 81.6% in Q3 2015, primarily resulting from an increase in accident year claims, combined with less favourable runoff.

“The Western hail catastrophe in the prior year played a role in the 24.8 percentage point improvement in the home loss ratio experienced in the current quarter compared to the third quarter of the prior year,” the report said. “The Western hail catastrophe in the prior year was also a contributor in the 18.3 percentage point improvement in the commercial loss ratio experienced in the current quarter.”

For the farm line, a decrease in major events and the frequency of claims, partially offset by an increase in large losses, led to a 16.1 percentage point improvement in the loss ratio.

By geographic region, the hail cat also played a role in the 10 percentage point improvement in the Western loss ratio compared to the third quarter of 2014, the report noted. The Ontario region’s loss ratio improved by 4.8 percentage points, driven by a decrease in the frequency and severity of accident year claims in the home line of business, offset by an increase in auto accident year claims. [click image below to enlarge]

In Quebec, a decrease in severity of commercial claims, partially offset by an increase in claims severity in the home line of business and claims frequency of the auto line improved the loss ratio by 10.3 percentage points. “Given the size of our NEP [net earned premium] in Quebec, fluctuations in claims severity for a relatively few number of claims have a significant effect on the loss ratio,” the report said.

The Atlantic loss ratio deteriorated by 6.3 percentage points as a result of an increase in accident year claims in the auto line of business.

With regard to consolidated net loss, the insurer said it was $21.4 million for Q3, compared to a net loss of $10.8 million for the same quarter in 2014.

Direct written premium (DWP) improvements during the third quarter were attributable to policy and vehicle count growth in the home and auto lines of business, paired with higher average home and auto premiums. In the third quarter, DWP has increased by 6.7% – or $40.8 million – to $650.9 million. Net earned premiums (NEP) increased during the third quarter by 4.8% or $27.0 million compared to the same period last year. The increase in NEP was seen in all geographic regions and all product lines.

“Our underwriting results improved relative to the same quarter of 2014, and our capital position remains strong,” Kathy Bardswick, president and CEO of The Co-operators, said in a statement. “However, our results were impacted by weakness in the Canadian equity markets. We are pleased with the continued premium growth we have achieved in all lines of business across all regions of the country.”