Following a steep plunge in the first quarter of 2020, when the COVID-19 pandemic began, and a downturn in Q2, Co-operators’ results soared in Q3.
The group reported net income of $152.3 million (M) in the third quarter, up 1,128.2% or $140.9 million from $12.4 million in Q3 2019.
This is the highest net income reported by Co-operators in at least the last 11 years.
"Favourable investment returns coupled with a reduction in claims events led to a significant increase in our net income compared to the third quarter of 2019," says Rob Wesseling, President and CEO of The Co-operators Group Limited, the cooperatives holding company for The Co-operators group of companies.
The group’s net claims and adjustment expenses totalled $590.3 million for the third quarter of 2020. This figure is down 2.1%, or $12.4 million, from the $602.7 million reported for Q3 2019.
Co-operators attributed this result to fewer current year claims in auto and home lines of business. This impact was partially offset by unfavourable claims development in auto and increased frequency of current accident year claims from the commercial and farm product lines.
Regarding stock market returns, Co-operators reported net investment income and gains of $146 million in Q3 2020 compared with $43.3 million in the third quarter of 2019.
This increase of 237.2% or $102.7 million is primarily due to gains Co-operators realized in its common share portfolio and an appreciation in the valuations of its preferred share portfolio, the company says.
“Accommodative fiscal and monetary policies in Canada and the US have continued to sustain the capital markets after their correction in March, resulting in an appreciation of our invested asset portfolio,” Co-operators explains.
Underwriting income grows
Excluding the market yield adjustment, Co-operators reported underwriting income of $77.9 million for the third quarter of 2020. This result corresponds to growth of $102.6 million from Q3 2019, when the group reported an underwriting loss excluding the market yield adjustment of $24.7 million.
This performance was the result of premium growth across all lines of business driven primarily by higher average premium from targeted rate adjustments in the auto and home lines of business, and to a lesser extent, an increase in policies in force in auto, Co-operators explains.
Co-operators reported direct written premiums of $1.1 billion, compared with $999.7 million in the third quarter of 2019, for an increase of 7.7% or $76.6 million.
Gross written premiums grew by 7.8% or $78.4 million. They stood at $1.1 billion in Q3 2020 versus $1 billion in the third quarter of 2019.
Net earned premiums increased by 9.7% or $81.6 million. They totalled $922.2 million for the third quarter of 2020 compared with $840.6 million for Q3 2019.
Combined ratio improves
Co-operators reported a combined ratio excluding the market yield adjustment of 91.6% in the third quarter of 2020. It improved by 11.4% since Q3 2019, when it was 103%.