Canadian Underwriter

EGI reports record quarterly underwriting profits in 2014 Q4; net income and net operating income up for both Q4, full year

February 18, 2015   by Canadian Underwriter

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EGI Financial Holdings Inc. has reported net income of $8.4 million and net operating income of $8.5 million for 2014 Q4, pushing year-end results for both to $18.7 million and $16.9 million, respectively.

EGI’s net income for 2014 Q4 was up 626% to $8.403 million compared with $1.158 million in 2013 Q4, notes a statement issued late Tuesday by EGI, which operates in the property and casualty insurance industry in Canada and Europe, primarily focusing on non-standard automobile insurance and other specialty p&c insurance products.

EGI operates in Canada through Echelon General Insurance Company and The Insurance Company of Prince Edward Island (ICPEI), the company noted Tuesday in a securities filing.

 EGI Financial Holdings Inc., which writes insurance in Canada and Europe, reported a 7-fold increase in net income.

Comparing 2014 and 2013, net income for EGI was $18.732 million, up 51% from $12.367 million.

Net operating income also saw a dramatic increase. EGI’s results show that in 2014 Q4, net operating income was up 804% to $8.472 million compared with $937,000 in 2013 Q4. For the full year, net operating income was $16.890 million in 2014 compared with $10.575 million in 2013, a 60% improvement.

Related: SGI completes sale of 75% stake in Insurance Company of PEI

“We are delighted with the performance of our company in the fourth quarter and our strong finish to 2014,” notes Steve Dobronyi, chief executive officer of EGI.

EGI Financial Holdings reported positive underwriting income in 2014

Net operating income is defined as net income plus or minus after-tax impact of change in discount rate on unpaid claims, realized losses or gains on sale of investments, discontinued operations, unrealized fair value changes on Fair Value Through Profit or Loss investments and one-time non-recurring charges.

Related: Echelon General president resigns

EGI reports the increase in net operating income for the three months ended Dec. 31, 2014 compared with the fourth quarter of 2013 was primarily driven by higher underwriting income. Underwriting income for 2014 Q4 was $7.6 million compared with an underwriting loss of $4.3 million in 2013 Q3.

EGI Financial Holdings provides personal, specialty and international insurance

Looking at Q4 results for 2014 and 2013 by line, EGI reports the following:

* Personal Lines had underwriting income of $4.789 million compared with $1.767 million – non-standard auto, motorcycles and recreational vehicles all performed strongly in 2014 Q4 as a result of favourable weather and driving conditions;

* Specialty Programs had underwriting income of $1.704 million compared with a loss of $4.732 million – the line saw an improvement in current accident year results, favourable prior-year reserve development, and management actions in 2013 and early 2014 to reduce exposure to volatile programs appear to have been effective;

* ICPEI had an underwriting income of $1.016 million (newly acquired in 2014) – performance in Nova Scotia and P.E.I. auto was strong; and

* International had an underwriting income of $1.293 million compared with a loss of $338,000 – U.K. auto programs performance improved, while warranty and other special programs in Scandinavia and Continental Europe continued to perform strongly.

With regard to full-year results for 2014 and 2013, per line figures show that Personal Lines had an underwriting income of $11.014 million compared with $8.181 million; Specialty Programs had an underwriting income of $770,000 million compared with a loss of $7.614 million; ICPEI had an underwriting income of $1.307 million (newly acquired in 2014); and International had an underwriting loss of $3.179 million compared with an underwriting income of 393,000.

EGI Financial's specialty insurance programs returned to profitabiliity

Beyond record quarterly underwriting profits and record quarterly operating earnings, Dobronyi points out that equally notable is the consistency of underwriting results that has emerged across all lines of business. “For the second quarter in a row, all segments were profitable,” he says.

“We will continue to direct our efforts at growing our core auto business in Canada and generating consistent underwriting profitability in the International division,” Dobronyi reports. “Our goal is to grow organically and to accelerate our strategies through targeted acquisitions in Canada. At the same time, we will continue to invest heavily in our business, infrastructure, systems and people.”

EGI Financial Holdings reported an increase in underwriting profit in 2014

For the quarter ending Dec. 31, 2014, EGI reports direct written premiums (DWP) increased by 6% compared with 2013 Q4 to $78.8 million – attributable primarily to $6.6 million of premium for the newly acquired ICPEI entity.

Investment income also improved, up to $6.4 million in 2014 Q4 compared with $4.8 million in 2013 Q4, and operating expenses, excluding restructuring charges incurred in the fourth quarter in 2014, increased by 20% over the year, far lower than the 30% increase in net earned premiums.

“As a result, EGI’s general expense ratio decreased by 0.8% compared to the fourth quarter of 2013,” notes the company statement. As well, EGI’s combined operating ratio of 90% in 2014 Q4 compared with 107% in 2013 Q4.

With regard to full-year results, EGI reports the following:

* underwriting profit was $4.9 million in 2014 compared with an underwriting loss of $2.6 million in 2013 (primarily due to improved underwriting income in Specialty Programs and underwriting income in ICPEI);

* DWP premiums increased overall by 36% (attributable primarily to an increase in written premium from the International division and the inclusion of six months of written premium from ICPEI in 2014); and

* investment income was $24.3 million compared with $17.7 million in 2013 (primarily due to higher dividends and interest income and improved mark-to-market performance of preferred shares in 2014).

“We have a solid balance sheet and a clear and focused strategy,” Dobronyi says. “We maintain confidence in the profitability of our business, as we continue our steady progress toward our goal of
a 12% post-tax return on shareholder equity,” he adds, emphasizing that EGI is looking forward to building on this momentum in 2015.

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