ICBC’s 2005 net income drops substantially

ICBC reported a net income of CDN$198 million for the year ended December 2005, compared to its restated 2004 net income of CDN$373 million.
“Last year was a challenging year for ICBC,” ICBC president and CEO Paul Taylor said. “Net income is about half of what it was in 2004 due to a significant increase in claims costs, which particularly impacted the basic side of our business.”
Net claims costs increased by approximately 13% to CDN$2.5 billion in 2005, compared to CDN$2.2 billion in 2004. There was a small decrease in the number of claims reported in 2005, but this was more than offset by an increase in the average cost per claim particularly injury claims, ICBC announced in a press release.
“For approximately half of those customers who purchase optional and basic insurance for their private passenger vehicle from ICBC, rates in 2006 will be lower than they were in 2004,” said Taylor. “However, we know we have significant challenges ahead of us as we work to keep rates low and stable in the long term.”
Insurance premiums earned for the whole company increased slightly from CDN$3 billion in 2004 to CDN$3.1 billion in 2005, mainly due to a 3.2% increase in the number of basic policies sold.
In June 2005, ICBC announced a CDN$100-million reduction in optional rates for 1.6 million, better-risk customers. This resulted in savings for approximately 85% of customers who purchase optional coverage from ICBC for private passenger vehicles.
In addition, approximately CDN$41 million in refunds were issued in 2005 as part of the rate reduction for optional coverage. These reductions will not fully impact ICBC’s bottom line until 2007.
Operating costs for ICBC’s insurance operations increased by approximately 1% to CDN$424 million in 2005 from $419 million in 2004. This is “mainly due to increased investments in road safety programs,” ICBC reported.
Investment income increased by CDN$184 million (to CDN$579 million) in 2005, mainly due to increased bond and equity gains. Income produced by ICBC’s investments lowered the average premium for each policyholder by $203 in 2005.