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Insurers post healthy underwriting gain for 1-Q (May 26, 2005)


May 26, 2005   by Canadian Underwriter


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Canadian property and casualty insurers lifted net income for the first quarter of this year by 16% to $683.5 million compared with the $589.6 million reported for the same period in 2004, according to industry financial data collected by the Office of the Superintendent of Financial Services (OSFI). The OSFI data indicates that insurers’ net profitability for the latest quarter was driven by a significant gain in underwriting while investment earnings declined and premium growth flattened.
The industry boosted its underwriting profit for the first quarter of this year by 57% to $392.6 million compared with the $250.1 million reported for the same period in 2004 (insurers produced an underwriting loss of $171 million for 2003’s first quarter). Insurers’ claims costs for the latest reporting period clocked in 1.2% higher at $3.27 billion versus the $3.24 billion disclosed a year ago.
Notably, net written premium growth for the latest quarter dwindled to a mere 4% at $4.42 billion compared with year-on-year growth of 27% for the first quarter of 2004. Similarly, net earned premiums for the first quarter of 2005 rose by 6.5% to $5.2 billion versus the 23% year-on-year growth rate achieved for the same period last year. The modest rise in premiums (despite the almost flat growth in claims costs) tempered the improvement of the industry’s combined ratio which clocked in at 92.8% for the latest quarter showing a 2.4 percentage point reduction on 2004’s first quarter ratio of 95.2%.
Although insurers were able to lift investment income for the first quarter of this year by 6.5% to $399.5 million (2004 1-Q: $374.8 million), companies’ realized gains dropped by 22% to $182.4 million compared with the $234.3 million posted for the same period in 2004. As a result, total net investment income (income and realized gains combined) for the latest quarter came in 5.5% lower at $560.1 million versus the $593.8 million reported a year ago.


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