How pandemic is affecting this Top 5 insurer’s bottom line

Delays in construction projects, business interruption, and reduced frequency of vehicle accidents will have an impact on insured losses, but it’s too early to predict exact numbers, The Co-operators General Insurance Company suggested in recent securities filing.

“Given the many unknowns related to COVID-19, it is too soon to gauge the full impact of the outbreak on our claims and adjustment expenses,” reported Guelph, Ont.-based Co-operators in its management discussion and analysis of its 2020 Q1 financial results, posted Apr. 28 to SEDAR, a Canadian securities administration website.

As of March 31, The Co-operators estimated the coronavirus pandemic would add $12.9 million to its new claims and adjustment expenses.

“As time progresses, we expect claims development to be impacted by, but not limited to, the following: reduced frequency of auto claims driven by physical distancing measures; inflationary costs due to delays in construction projects, shortage of labour, and supply chain disruptions,” said The Co-operators, the fifth largest Canadian insurer, measured by 2018 premiums, according to the Canadian Underwriter 2019 Statistical Guide.

Rob Wesseling, president and chief executive officer, The Co-operators Group Limited

The Co-operators lost $48.9 million during the three months ending Mar. 31, compared to net earnings of $21.8 million during the same period in 2019. It was mainly investment results – not underwriting – that made the difference. In fact, The Co-operators had an underwriting profit of $49.8 million in 2020 Q1 compared to an underwriting loss of $33.4 million in the same period in 2019.

The combined ratio improved 10.1 points, from 104.4% in Q1 2019 to 94.3% in the most recent quarter.

But investment results went the opposite way, which the Co-operators attributes to the uncertain economic and political environment caused by the COVID-19 pandemic.

While The Co-operators had investment gains of $76.9 million in Q1 2019, its investment losses in the latest quarter were recorded at $100.3 million.

“During this challenging time, significant turmoil in the global capital markets has negatively impacted the value of our invested assets, resulting in large investment losses for our company this period,” said Rob Wesseling, president and CEO of The Co-operators Group Limited, in a release Apr. 28. “These losses were offset to some degree by significantly improved underwriting performance. This is not only a difficult time for our organization, but for all Canadians. With our strong capital position, we continue to focus on finding ways to support Canadians and their communities, to enable their financial security and peace of mind today and in the future.”