Net income up in second quarter for Economical Insurance

Economical Insurance has reported net income of $43.6 million for the second quarter of the year, up from $15.8 million in the same period of 2013.

The Waterloo, Ont.-based company also grew its gross written premiums by 2.9% over the second quarter of 2013, from $539.8 million to $555.5 million.

Personal lines premium grew by $15.5 million, or 4.8% in the second quarter, driven by Ontario auto, the insurer noted.

“The first phase of the mandated rate decreases for Ontario auto have now been implemented by the company,” its statement says. “The impact on longer-term profitability will continue to develop as policies are issued and renewed at the lower rates. Commercial lines growth was flat overall in the quarter as increasing rates were offset by lower retention levels in targeted products.”

For the year to date, gross written premiums grew by $29.2 million, with personal lines growing by $17.5 million and commercial lines increasing by $11.6 million, driven by rate increases in targeted markets in Ontario and western Canada.

The company also reported $22.5 million of underwriting income for the second quarter, “primarily due to strong personal lines and commercial auto performance combined with the absence of weather-related catastrophe losses.”

The insurer also reported a combined ratio of 95.1%, a 3.6 percentage point improvement from the same quarter a year ago, mainly due to reduced levels of weather-related catastrophe claims combined with strong underlying performance from its insurance operations.

For personal property, Economical’s combined ratio was 98.6% in the second quarter, a 2.4 percentage point deterioration over the same period in 2013.

“Although there were no weather-related catastrophe losses in the second quarter, compared to the prior year period where the Calgary flooding and other weather losses negatively affected the combined ratio by 8.2%, this was offset by higher volumes of claims in Atlantic and western Canada,” it noted.

The firm’s personal auto business also produced a second quarter combined ratio of 92.4%, a 2.0 percentage point deterioration from the second quarter of 2013.

“Our second quarter results reflect the strong performance of our insurance operations and represent a significant improvement from the severely weather-impacted first quarter of 2014,” Karen Gavan, Economical’s president and CEO commented in its statement.

“As we reach the first anniversary of the catastrophic Alberta flooding of June 2013, it serves as a potent reminder of the vital importance of our role and the protection we provide to our policyholders and the communities we serve,” she added.

“We continue to invest significantly in transforming our business, as illustrated by our recently announced agreement with Guidewire to replace our policy administration system, and in respect of our business transformation program which is nearing completion. These significant investments will provide the platform to support our future profitable growth goals.”