August 9, 2013 by Canadian Underwriter
EGI Financial Holdings Inc., the Toronto-based parent firm of Echelon General Insurance recorded a nine-fold year-to-year increase in premiums from international operations but is getting out of the U.S. non-standard auto market.
The company released Thursday its financial results for the three months ending June 30 and also announced that White Pine Insurance Company of Southfield, Mich. has agreed to buy EGI Financial’s non-standard auto carrier in Florida.
For the second quarter of 2013, EGI reported net income of $8.218 million, compared to a net loss of $2.82 million in the second quarter of 2012. Last May, EGI had reported an underwriting loss of $4.4 million and net loss of $910,000 for the first quarter of 2013.
For the second quarter of this year, underwriting income was $3.166 million, compared to an underwriting loss of $4.273 million in Q2 12. In its management discussion and analysis posted to SEDAR, EGI reported Q2 net written premiums of $72.07 million this year, up 26% from $57.318 million during the same period in 2012.
EGI operates in Canada through Mississauga, Ont.-based Echelon General Insurance Company, which also has offices in Laval, Que. and Penticton, B.C. In Denmark, EGI owns the majority of Qudos Insurance A/S, which offers motorcycle, taxi, non-standard auto and warranty insurance, primarily to the Danish and British markets.
EGI also offers non-standard auto through American Colonial Insurance Company. It left the Texas market and claims in Texas are currently in run-off status.
Under the terms of the agreement announced Thursday, EGI will sell subsidiaries, including American Colonial and a managing general agent, to White Pine.
EGI acquired American Colonial for about US$4.6 million in 2010, which had been in business since 1957 but at the time of the EGI acquisition had not written any insurance since 2002.
EGI stated Thursday the transaction to sell American Colonial “is expected to close in the fall, subject to regulatory approval.” EGI Financial said the stock purchase agreement with White Pine will result in a $5.7 million pre-tax reduction in book value.
“American Colonial wrote US$10 million of direct premiums in 2012,” EGI stated. “It is currently writing new and renewal non-standard automobile insurance in Florida and also has insurance licenses in Georgia, Louisiana and Alabama. EGI will remain responsible for the run-off of its discontinued Texas operations.”
EGI reported in its regulatory filing in Canada that its U.S. division had an underwriting loss of $900,000 in the second quarter of this year, compared to a $2.3-million underwriting loss in Q2 2012. It attributed the improvement, in part, to its exit from the Texas market.
The combined ratio improved in its U.S. division (from 172.8% in Q2 2012 to 125.4% in Q2 2013) but Q2 net written premiums were down 12% year-over-year, from $3.251 million in 2012 to $2.871 million this year.
“The results of our U.S. business were not tracking to profitability as quickly as originally planned,” EGI chief executive officer Steve Dobronyi stated in a press release.
But in the international division, Q2 net earned premiums rose 918%, from $1.73 million in 2012 to $11.947 million in 2013. The Q2 combined ratio in its international division improved from 174.6% in 2012 to 91.5% this year.
“The strong growth in written premiums is due to the increase in the number of programs offered,” EGI stated. “At the end of the second quarter the International division wrote 26 programs, mainly in the UK and Denmark.”
In personal lines, which includes coverage for motorcycles, antique and classic vehicles, trailers, motor homes and recreational vehicles, the company reported underwriting income of $4.5 million in the most recent quarter, compared to $4.2 million in the second quarter of 2012.
It attributed the improvement in part to the performance of Ontario non-standard auto, “which recorded a combined ratio of 82% and underwriting income of $3.6 million in the second quarter compared to 88% and underwriting income of $2.3 million in the second quarter of 2012.”
Echelon General’s specialty coverages include higher-premium property, primary and excess liability, legal expense and extended warranty.
“Specialty Programs recorded an underwriting loss of $0.7 million compared to an underwriting loss of $4.4 million recorded in the second quarter of 2012,” EGI Financial reported in its regulatory filing. “The division’s combined ratio decreased to 109% in this quarter compared to 153% in the same period last year.
The liability line, which recorded an underwriting loss of $4.1 million in the second quarter of 2012, broke even in the most recent quarter, the company said.