Definity Financial Corporation declined for the fourth consecutive quarter.
The holding company, which includes Definity Insurance Company [Editor's note: formerly known as Economical Mutual Insurance Company], Sonnet and Petline, reported net income of $41.1 million in the third quarter of 2022, down from $53.3 million in Q3 2021.
This decrease of 22.9 per cent or $12.2 million is due “primarily to lower underwriting income, partially offset by higher net investment income.”
Definity reported net underwriting income of $27.9 million in Q3 2022, compared with $55.1 million in Q3 2021. This amounts to a plunge of 49.4 per cent or $27.2 million.
“Our underwriting results were solid despite the impact of catastrophe losses, including Hurricane Fiona in the Atlantic region in September,” the insurer explains.
Definity had a combined ratio of 96.6 per cent in the third quarter of 2022, versus 92.4 per cent in Q3 2021, equal to a deterioration of 4.2 points.
“Catastrophe losses impacted the combined ratio by 5.7 percentage points, compared to 5.1 percentage points in the same quarter a year ago,” Definity says, adding that “The combined ratio increased due to a rise in the core accident year claims ratio and higher catastrophe losses, which were partially offset by higher favourable prior year claims development.”
In contrast, Definity reported net investment income of $36 million in Q3 2022, compared with $24.6 million in Q3 2021.
This increase of 46.3 per cent or $11.4 million is “driven primarily by higher fixed income yields, as well as the investment of funds generated from our underwriting results and business growth, and net proceeds retained by the Company from the initial public offering (“IPO”) and related transactions.”
Definity's gross written premiums (GWP) were $944.1 million in the third quarter of 2022, compared with $851.5 million in Q3 2021.
This increase of 10.9 per cent or $92.6 million was “driven by the success of our strategic expansions across the business and ongoing firm market conditions,” Definity notes.
Looking at the results in closer detail:
- In commercial lines, gross written premiums were $257.3 million in the third quarter of 2022, up from $220.5 million in Q3 2021. Definity attributes this increase of 16.7 per cent or $36.8 million from its decision to continue “to focus on profitable growth in this line of business.
- In personal lines, gross written premiums were $686.8 million in Q3 2022, versus $631 million in Q3 2021. The upturn of 8.8 per cent or $55.8 million is driven by “increases in both our broker and direct businesses.”