One of the nation’s leading property and casualty companies got some help from its commercial auto book to offset the weather-related catastrophic losses incurred in the second quarter.
“Our second quarter results demonstrate the resilience of our insurance operations,” said Karen Gavan, president and CEO of Economical Insurance. “We were able to maintain an underwriting profit while delivering on our promise to be there when our policyholders in Alberta needed us most during the worst flooding in the province's history.”
Economical grew gross written premiums by 5.1 per cent in Q2, generating underwriting income of $5.5 million while maintaining a profitable combined ratio of 98.7 per cent for the quarter – despite incurring weather-related catastrophe losses of $33.1 million, net of reinsurance.
(For more, see Summer flooding a wake-up call for the industry?)
Commercial auto produced what Gavan considered an outstanding second quarter combined ratio of 76.2 per cent, compared to 108.8 per cent in the same quarter of 2012. For the second consecutive quarter, the company experienced a significant decline in the severity of losses for this line of business.
The commercial property and liability business recorded a combined ratio of 126.8 per cent, having been heavily impacted by weather-related catastrophe losses. These losses contributed 24.8 percentage points to the increase. (continued.)
“Since June 30, we have responded to torrential rain and flooding in the Greater Toronto Area as well as storm activity in other parts of the country,” said Gavan.
Excluding these losses, the combined ratio was 102 per cent compared to 103.4 per cent in the same quarter of 2012. Overall the commercial lines business posted a combined ratio of 109.3% for 2013 Q2, compared to 105.2 per cent for the prior year quarter – and a 108 per cent combined ratio on a year-to-date basis, representing a 1.7 percentage point deterioration year over year.
Personal property produced a combined ratio of 96.2 per cent in the second quarter of 2013 compared to 94.1 per cent during the same period a year ago. Weather-related catastrophe losses contributed 9.5 percentage points to the second quarter combined ratio, compared to nothing in 2012.
Excluding these losses, the combined ratio actually improved by 7.4 percentage points due to a decline in large loss activity and severity in the quarter.
Overall the personal lines business produced a robust combined ratio of 92.2 per cent 2013 Q2, compared to 86.7 per cent for the prior year quarter, and 91.5 per cent for the first half of 2013 compared to 88.4 per cent in 2012. (continued.)
Economical cites the deterioration in results reflects the substantial impact of the catastrophe losses in 2013 compared to 2012, partially offset by an underlying improvement in the personal property results.
The reorganization of Economical’s Information Technology department was completed in late May, a sign of the company’s push to improve efficiency and productivity, stated Gavan.
“We also continued to invest in transforming our business during the second quarter,” she said. “On May 29, we announced the completion of the organizational restructuring of our Information Technology department and the progress we continue to make in identifying opportunities for efficiency and productivity gains.”
