Economical sees improvement in 2002

Waterloo, Ontario-based The Economical Insurance Group posted improved results in 2002, despite it being the toughest year ever for the industry as a whole.
“Amidst these difficult business conditions, I am pleased to announce that The Economical Insurance Group achieved, or exceeded, virtually all its financial goals for 2002,” says president and CEO Noel Walpole.
The group posted a return on equity of 3.6%, up from 0.6% in 2001, and above the industry average for 2002 of 1.6%. Net income was $23.6 million, a dramatic rise from the $3.6 million posted in 2001.
Its combined ratio dropped to 106.6% from 111.2% in 2001. Walpole notes that the group has a high proportion of business in the troubled Ontario auto market, accounting for its combined ratio begin slightly higher than the industry average for 2002 of 105.8%.
Direct written premiums grew 12.7% year-on-year to $1.3 billion from $1.15 billion, and the group’s loss ratio improved to 75.6% from 80.1% in 2001, although this is still viewed as unacceptably high.
The group’s underwriting loss was somewhat less last year than in 2001, but it was investments that drove profits, despite the slumping stock market. Realized gains were $14 million, a sharp drop from the $38.1 million posted in 2001, and total investment income came in at $94 million, off the $124.4 million brought in for 2001.
“Although the group’s profitability remains below acceptable levels, the positive developments generated in 2002 prove that we’ve developed a sound business strategy for the current market conditions,” says Walpole. This means a conservative investment strategy and focus on profitable underwriting over marketshare.