Canadian P&C industry sees 23% increase in net income

Aug., 2012 – The Canadian property and casualty (P&C) industry reported a 23% increase in net income compared to the first quarter of 2011, according to a new report by Swiss Re. Net income (after tax) increased by $186 million to $1 billion, and the annualized ROE increased to 11.4% from 9.7% a year ago.

Investment income increased by 12.7% year-over-year (compared to a 14.2% decline in the first quarter of 2011). The current investment yield (excluding realized capital gains) increased slightly to 2.9% in the first quarter of 2012 from 2.7% in the same period last year. Industry capital increased 8.3% year-over-year during the first quarter.

Growth in direct premiums written was flat year-over-year at 4.5%, with the majority of the growth coming from personal lines as the commercial lines market remained highly competitive. Property premiums were up 5.6% to $2.7 billion, driven mainly by growth in personal property ( up 7.5%), while commercial property premiums increased by 3.2%. Automobile premiums grew by 4.2% year-over-year to $4.1 billion, driven by 6% and 4% growth in the personal accident and motor liability segments respectively. Approved rates for Ontario auto averaged � 0.2% for the entire market during the first quarter of 2012.

The industry posted an underwriting profit of $630 million in the first quarter of 2012, up significantly from a gain of $277 million a year ago. The reported industry combined ratio also improved by 3.8 pts to 93.4%, mainly due to reserve releases. The industry wide expense ratio was up about a point to 31.2% compared to a year ago. The personal accident (auto) loss ratio improved to 60.3% compared to 88.9% in the first quarter of 2011, however, the improvement was driven almost entirely by reserve releases. Loss ratios improved in personal and commercial property and in most casualty lines in the first quarter of the year. For 2012, Swiss Re expects the overall combined ratio to be around 100% however, substantial reserves releases could result in lower reported combined ratios.