Major drop in net income for Economical Insurance in Q1 after severe winter weather

Economical Insurance’s first quarter 2014 net income of $1 million declined dramatically over the same period of 2013, when it saw a $26.9 million result.

Severe winter weather also caused the Waterloo, Ont.-based insurer’s combined ratio to increase to 105.5% from 96.9% in Q1 of 2013. Pre-tax catastrophe losses for the firm totaled $13 million in the first quarter, mainly from severe winter weather in Ontario.

The company reported a Q1 underwriting loss of $25.1 million, compared with an underwriting income of $13.4 million for the same period last year.

Gross written premiums increased to $413.7 million, from $400.4 million in the first quarter of 2013.

“This growth was driven by commercial lines which grew by $11.4 million, or 6.9% primarily due to increased average premium levels,” Economical said. “The personal lines premium growth slowed in the first quarter mainly due to actions taken in personal property to increase rates and improve profitability. The impact of the recently announced mandated rate decreases for Ontario auto will begin to be felt in the second quarter.”

For personal auto, Economical reported a combined ratio of 97.7%, a 6.9 percentage point deterioration from the first quarter of 2013, largely because of a higher claims volume from challenging winter driving conditions.

Commercial auto had a first quarter combined ratio of 106.7% compared to 89.3% in the same period of 2013.” An increase in claims volumes and severity of losses contributed significantly to the deterioration in results during the quarter in this line of business,” Economical said.

“Our first quarter results reflect the impact of the very severe winter weather conditions experienced across the country which produced a higher than normal volume of claims as well as higher catastrophe costs,” the company’s president and CEO, Karen Gavan, said in a press release Wednesday.

“We take pride in our claims service to our policyholders and are committed to being there when our customers and broker partners need us the most. We continue to invest significantly in transforming our business, most recently in our newly announced national processing centre that will enhance the broker and customer experience, and provide a platform to support our future profitable growth goals. We are also pleased that A.M. Best recently reaffirmed the company’s financial strength rating of ‘A-(Excellent)’ and issuer credit rating of ‘a-’” she added.