August 8, 2014 by Canadian Underwriter
EGI Financial Holding Inc. has reported a net loss of $603,000 for the second quarter of 2014 – down from net income of approximately $8.7 million in the same quarter of 2013 – with strong results in Canada overshadowed by poor performance in the company’s International division.
“The strong results in Canada and Investments have been overshadowed by the poor performance in International, which was badly affected by wet weather conditions experienced in the U.K. earlier in the year,” notes Steve Dobronyi, chief executive officer of EGI, which operates in the property and casualty insurance industry in Canada and Europe.
That said, “we continue to believe strongly in our European business and are reviewing the experience on the specific programs to determine whether underwriting changes are needed,” Dobronyi adds in a company statement issued Thursday.
In July, EGI injected $2 million of capital into its European subsidiary to support its strong premium growth and strengthen its regulatory ratios. As a result, EGI’s ownership stake will increase to 75% from 71% as at March 31, 2014, and 51% at the beginning of the year, the statement notes.
“We are pleased with the performance of our operations in Canada,” Dobronyi says, noting that the company continues “to demonstrate consistent profitability in our core Personal Lines business, which has now recorded an underwriting profit in 14 of the past 15 quarters.”
Overall, EGI Financial had an underwriting loss of about $3.3 million for the three months ended June 30, 2014 compared to income of about $4.1 million in the second quarter 2013.
Specifically for Q2 2014, Personal Lines generated underwriting income of $2.5 million (with all geographies and products contributing to the strong results) compared to about $4.5 million in Q2 2013, Specialty Programs recorded a $0.6 million underwriting profit compared to a loss of about $667,000, and International produced an underwriting loss of about $5.4 million compared to an underwriting income of approximately $1 million.
“The performance was primarily the result of increased claim frequency in U.K. auto due to warm and extremely wet winter weather conditions. Claim frequency increased by 30%, which adversely impacted underwriting profit by $1.6 million,” EGI reports. “An additional IBNR (incurred but not reported) of $3.3 million was also included to reflect the increased frequency and further strengthen the reserves,” the company statement adds.
With regard to direct written premium, Q2 2014 saw a 30% increase to $101 million – driven by the increase in premiums in the International division – compared to about $78.1 million in Q2 2013.
Other results for the second quarter of 2014 compared with the same quarter of 2013 include the following:
net earned premiums was about $61.8 million compared to about $50.4 million;
investment income was about $5.5 million compared to about $5.3 million;
net income attributable to shareholders was $0.02 per share compared to $0.49 per share; and
combined operating ratio was 105.3% compared to 91.8%;
Dobronyi notes, in the second quarter of 2014, EGI also finalized the transaction to acquire a majority ownership in the Insurance Company of Prince Edward Island (ICPEI). EGI acquired 75% of ICPEI from SGI Canada for $9.7 million.
ICPEI is the largest Maritimes-based p&c insurance company, operating through independent brokers in Prince Edward Island, New Brunswick and Nova Scotia. “ICPEI gives us a strong foundation for growth in the Maritimes and we are already well along in our integration of the business with our operations,” Dobronyi adds.
With regard to EGI’s results for the first half of 2014 and the first half of 2013, the company reports as follows: