Net income drops at Economical after Alberta storm losses

Economical Insurance has reported a significant drop in its net income for the third quarter of the year, after incurring weather-related catastrophe losses of $25.7 million net of reinsurance.

Net income fell from $13.8 million in Q3 in 2013 to $0.9 million for the three months ended Sept. 30 this year. The Waterloo, Ont.-based insurer also reported an underwriting loss for the quarter of $38.3 million.

The combined ratio for the quarter was 108.2%, “reflecting a 4.5 percentage point deterioration from the same quarter a year ago, due primarily to disappointing commercial property and liability results and lower favourable prior year loss development performance for Ontario auto,” the insurer noted.

Net income for the first nine months of the year was $45.5 million compared to $56.5 million for the same period in 2013, with a combined ratio of 103.0% compared to 99.8% in 2013, or 100.2% versus 92.8% when excluding weather-related catastrophe losses

“Our disappointing third quarter and year-to-date underwriting results reflect difficult weather-related conditions, as well as increases in underlying claims frequency,” Karen Gavan, president and CEO of Economical commented in a statement on the results Wednesday.

“The third quarter saw a significant hail event in Airdrie, Alberta combined with a number of other storms throughout the country,” she noted.

“Commercial property and liability performance in particular continues to be of concern, and we are continuing to implement both targeted rate increases and underwriting strategies to address profitability. While we are not satisfied with our underwriting results in 2014, we remain confident in the long-term potential of the profitable growth strategies and rating actions we continue to implement.”

Gross written premiums for the third quarter this year rose $10.8 million, over the same quarter a year ago to $501.3 million. Personal lines premium also grew by $13.1 million, or 4.1% year over year, driven by auto growth in Ontario and Western Canada, Economical said.

“The impact of the mandated rate decreases on longer-term profitability for Ontario auto will continue to develop as policies are issued and renewed at lower rates,” the insurer said.

“Commercial lines premium was relatively flat in the quarter as targeted rate increases resulted in anticipated lower retention levels,” it also noted.