Canadian Underwriter

The Co-operators’ net income increases in fourth quarter, full-year 2015; keeping eye on the weather

February 19, 2016   by Canadian Underwriter

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The Co-operators General Insurance Company’s consolidated net income for the fourth quarter of 2015 increased to $103.3 million from $79.7 million in the prior-year quarter.

For 2015, consolidated net income again was up, rising to $162.3 million from $137.6 million in 2014, notes a statement Thursday from The Co-operators. [click image below to enlarge]

Combined ratio, excluding the market yield adjustment (MYA) for the fourth quarter of 2015, was 92.1% compared to 89.7% in the same quarter of 2014

Direct written premium (DWP) also increased for both the quarter ended Dec. 31, 2015 and for full-year 2015. Specifically, DWP was $614.9 million in 2015 Q4, an 8.2% increase over the $568.2 million in 2014 Q4.

“Growth was primarily in the auto and home lines of business in both the Ontario and Western regions, as well as new business growth in the specialty commercial line of business,” The Co-operators reports.

For the full year, DWP reached $2,435.9 million in 2015 compared to $2,305.7 million in 2014, an increase of 5.6%. “Improved results are primarily from sustained policy and vehicle growth, in addition to rate increases in certain lines of business,” the company adds.

Also up for The Co-operators was net earned premium (NEP), which amounted to $593.1 million in the fourth quarter of 2015 compared to $560.2 million in the same quarter of 2014.

NEP for all of 2015 was $2,297.0 million, up 4.9% from $2,189.6 million in 2014. The increase is “as a result of growth seen in all of our geographic regions and all core lines of business,” the press release states.

“Our fundamentals are solid and we are pleased with the premium growth we continue to achieve across all regions of the country, largely driven by policy and client growth,” says Kathy Bardswick, president and CEO of The Co-operators.

Despite a strong financial performance for 2015, Bardswick notes, “weakness in the equity markets, as well as the volatility of the Canadian dollar and Bank of Canada interest rate cuts, significantly impacted our results.”

Concern remains around climate change, she says. Although weather events were less severe in 2015, Bardswick points out, “we remain concerned about climate change and the rising costs of increasingly destructive weather patterns.”

Noting that The Co-operators was the first Canadian insurance company to introduce overland flood insurance to homeowners, the company remains “committed to working with a variety of stakeholders to make our communities more resilient in the years ahead,” she emphasizes.

Other financial results for 2015 Q4 and full-year 2015 include the following:

• Combined ratio, excluding the market yield adjustment (MYA) for the fourth quarter of 2015, was 92.1% compared to 89.7% in the same quarter of 2014. For the full year, excluding the MYA, the combined ratio improved to 97.1% from 99.1% in 2014 (largely the result of policy growth that more than offset related increase in claims, and more favourable claims development, which partially offset by higher accident year claims).

• The loss ratio, excluding MYA, for 2015 Q4 deteriorated to 58.7% from 56.6%. The Co-operators experienced increased large losses in 2015 within its auto, commercial and farm lines of business compared to the prior-year quarter.

• Net investment income and gains for the fourth quarter of 2015 were $85.7 million compared to $46.8 million for the same period of 2014 (primarily the result of higher realized common share gains and a positive change in the fair value of our preferred share holdings). For the full year, net investment income and gains decreased to $144.8 million from $181.4 million in 2014 (resulting from weaker equity markets combined with greater volatility in the Canadian dollar).