Co-operators General reports loss due to major summer claims

Co-operators General Insurance Company reported a net loss of $45.2 million for the third quarter of 2024. In 2023, during the same period, the insurer reported a loss of $0.2 million.

“The third quarter of 2024 was challenging for many Canadians and our clients with four major weather events resulting in devastating impacts,” stated Rob Wesseling, President and CEO of Co-operators.

“This illustrates, once again, the critical need to broaden the traditional approach of risk protection to also prioritize risk reduction and loss prevention,” he added.

“These events impacted our underwriting loss in the quarter which was offset by policy growth across all lines of business and positive investment results, ensuring our overall capital position remains strong,” Wesseling emphasizes.

The company has also revised its first quarter net income announced on May 9, 2024. Reported earnings of $47.2 million have been revised upwards to $93.8 million.

The explanation for this change appears in its Unaudited Condensed Consolidated Interim Financial Statements for the third quarter ended September 30, 2024. “A reassessment of the Company’s identification of portfolios of insurance contracts during the quarter resulted in retrospective adjustments to correct measurement of the respective groups, identification of onerous contracts and measurement of losses on onerous contracts recognized since January 1, 2024, the effective date of changes in management processes,” the company points out in its documentation.

Underwriting result  

The insurer experienced five consecutive quarters of negative underwriting results, throughout 2023 and in the first quarter of 2024, due to a very high claims ratio, before achieving a positive result in the second quarter of the current year.

In the third quarter of 2024, this underwriting result was again negative, with a loss of $180.9 million. In the same period of 2023, the insurer reported an underwriting loss of $44.5 million.

“The unfavourable result was primarily due to a combination of increases in the net undiscounted claims and adjustment expenses of $230.3 million and acquisition and other expenses of $38.5 million when compared to the third quarter of 2023. This result was partially offset by growth in NIR (net insurance revenue) of $132.4 million compared to the same quarter of the prior period,” stated the company in the press release accompanying its results.

Combined ratio  

On the claims side, excluding discounting and risk adjustment, the combined ratio reached 114.7% in the third quarter of 2024. In the same period of 2023, the ratio stood at 104%. This represents a decline of 10.7 points.

As with earnings, the combined ratio for the first quarter was also revised from that announced when the results were released in May 2024. Instead of a combined ratio of 106.2% as announced, this ratio has been revised to 100.6%.

Still excluding discounting and risk adjustment, the claims ratio was 84.8% in the third quarter of 2024, compared with 74% in 2023. This represents a difference of 10.8 points.

The 12-month loss ratio for auto insurance fell slightly to 78.6% in the most recent quarter, compared with 80.2% a year earlier.

Major claims in the summer of 2024 particularly affected home insurance claims experience. In this respect, the claims ratio reached 12.8% for the quarter ended September 30, 2024, compared with 80.2% for the same period last year.

The decline in claims affected the two main regions where the insurer collects 85% of its premium volume, namely Ontario and the Western region, where the Toronto flood, Calgary hail and Jasper wildfire occurred.

In commercial lines, the loss ratio was relatively stable at 58.5% in the third quarter of 2024, compared with 57.6% a year earlier.

“Four major events had a significant impact on our results this quarter resulting in higher claims, primarily in the home and auto lines of business. The quarter-to-date losses, net of reinsurance and inclusive of costs relating to reinsurance reinstatement premiums from these events were a total of $180.6 million,” stated the company. 

Premiums  

Direct written premium (DWP) totaled $1.5 billion in the third quarter of 2024, compared with $1.3 billion a year earlier. Year-over-year, this represents an increase of $200 million or 15.2%.

The insurer states that growth was observed in all core lines of business, particularly in the auto line, where DWP increased by 21% compared to the same quarter last year. DWP growth was also seen in all regions, most notably in Ontario, where premium volume climbed 16.1%, the company notes in its management report.

“Growth in both DWP and NIR was a result of increases in average premiums and growth in vehicles and policies in force primarily due to new business, as well as higher retention,” stated Co-operators General.

Investment income  

Net investment income and gains amounted to $174.7 million for the third quarter. This compares with $5.8 million for the same period in 2023.

“The increase was primarily driven by unrealized gains on common shares and bonds driven by more favourable valuations in equity markets and fixed income,” stated the insurer.