Economical Insurance records combined ratio of 95.9%, net income of $33.8 million for second quarter of 2015

Waterloo, Ont.-based property and casualty insurer Economical Insurance has recorded a combined ratio of 95.9% and net income of $33.8 million for the second quarter of 2015, ending June 30.

Economical Insurance released its second quarter and first half results on Thursday. Gross written premiums for the second quarter 2015 grew by $16.8 million, or 3%, over the same quarter a year ago, while personal lines premiums grew by $15.5 million, or 4.6%, over the same quarter a year ago, Economical said in a press release.

Commercial lines premium grew by $1.3 million, or 0.6%, over the same quarter a year ago as decreased policy volumes were more than offset by targeted rate increases in commercial property, the insurer reported. Year-to-date, personal lines premiums grew by $25.8 million or 4.5% while commercial lines premiums declined by $0.7 million or 0.2% over the same period a year ago.

Underwriting activity for the second quarter of 2015 produced a $19.6 million underwriting profit, resulting in a combined ratio of 95.9%, compared to an underwriting profit of $22.5 million and a combined ratio of 95.1% in the same quarter of 2014. “The slight decline is due to an increase in loss costs and the strengthening of reserves, primarily for Ontario auto accident benefit costs and the British Columbia auto liability line,” Economical said. [click image below to enlarge]

The personal auto combined ratio increased slightly over the same quarter a year ago (from 92.4% to 92.8%) as lower frequency was more than offset by lower levels of favourable reserve development and the continued impact of the mandated rate reductions in Ontario.

The personal property combined ratio improved 1.6 percentage points compared to the same quarter a year ago (from 98.6% in Q2 2014 to 97% in Q2 2015), due to targeted rate increases and benign weather conditions. Overall, personal lines produced an underwriting profit of $17.3 million compared to $16.1 million in the same quarter a year ago. Year-to-date, personal lines produced an underwriting profit of $25.1 million compared to $21.7 million in 2014.

The commercial auto combined ratio increased over the same quarter a year ago primarily due to higher claims severity and lower levels of favourable loss reserve development (from 74.4% in Q2 2014 to 88.7% in Q2 2015). The commercial property and liability combined ratio improved over the same quarter a year ago primarily due to the impact of underwriting actions, rate increases taken in 2014, and reduced claims severity, from 108.2% in Q2 2014 to 100.1% in this quarter, the release noted. [click image below to enlarge]

Overall, commercial lines produced an underwriting profit of $7.4 million compared to $6.4 million in the same quarter a year ago. Year-to-date, commercial lines produced an underwriting loss of $17.7 million compared to $24.2 million in 2014 as the first quarter was impacted by a number of large losses.

“We delivered a strong performance in the quarter with solid contributions from each of our lines of business,” said Karen Gavan, president and CEO, in the release. “While the mandated rate reductions in Ontario continue to place pressure on our results as average premiums have declined, the overhaul of our commercial pricing strategy is well underway and we expect the benefits will be realized over time as policies renew and earn through.”