The insurance company reported net income of $82.4 million ($M) for this quarter, compared with a net loss of $3.2 million in the first quarter of 2020, when the COVID-19 pandemic began.
Net income grew by $85.6 million. It topped the record set in Q4 2020, which at the time was the highest growth the company posted since at least 2012.
Economical also recorded a combined ratio of 91.3 per cent, compared with 102.1 per cent in Q1 2020. The ratio improved by 10.8 points.
Economical's growth in both its net income and combined ratio is “driven by a reduction in claims frequency from reduced driving activity related to COVID-19,” and by “ongoing actions to enhance profitability in commercial lines” says Economical president and CEO Rowan Saunders.
The company reported underwriting income of $58 million, versus an underwriting loss of $12.3 million in the first quarter of 2020.
This $70.3 million increase is due primarily to a decrease in the core accident year claims ratio
Premiums: 29 per cent increase in commercial insurance
Economical reported total gross written premiums of $658.7 million in the first quarter of 2021, compared with $576.2 million in Q1 2020.
This increase of 14.3 per cent or $82.5 million was dampened by the impact of customer relief measures linked to COVID-19, but nonetheless reflected “firm market conditions and our strategic expansions in Sonnet, commercial lines, and personal property measures," the insurer says.
Looking at the results in closer detail:
- Commercial Lines gross written premiums surged to $184.8 million versus $143.1 million in Q1 2020. This increase of 29.1 per cent or $41.7 million reflects “increased capabilities and focus on growth in this line of business as well as our relationship with Uber which launched in the third quarter of 2020.”
- Personal Insurance garnered gross written premiums of $473.9 million, compared with $433.1 million in the first quarter of 2020, for an increase of 9.4 per cent or $40.8 million.
Sonnet stokes personal insurance
Economical says the brokerage network fuelled a 7.3 per cent increase in personal lines premiums in the first quarter of 2021 versus Q1 2020. Sonnet alone spurred a 28.9 percent increase.
Premiums for its direct digital platform were $40.8 million in the first quarter of 2020. They soared to approximately $52.6 million in the first quarter of 2021.
“We are pleased with results in our digital direct business, Sonnet, which is making great progress as it continues to mature its business model, consolidate its customer base, and position for future growth,” Rowan Saunders said.
“I believe we have built a solid base in advance of our planned demutualization later this year, which will be voted upon next week,” he added in the press release disclosing the results, dated May 14, 2021.