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- Net operating income up 62.5% on improved underwriting performance
- Top-line growth accelerating to reach 5.2%
- Combined ratio improves 6.0 percentage points to 93.2%
- Operating ROE reaches 10.9%
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Direct premiums written increased 5.2% to
Net income for the quarter was
CEO's Comments
"This was a particularly strong quarter with one of the best underwriting performances in the past three years as we benefited from remarkably mild weather conditions. All business lines performed well as a result of the positive impact of our action plans, especially in home insurance, which recorded excellent results," said
"Direct premiums written growth continued to accelerate on the strength of our ongoing initiatives and improved pricing conditions across all lines of business. However, the unpredictability of weather patterns and the increasing costs of medical claims in
Dividend
The Board of Directors of
Current Outlook
Although mild weather has been experienced for the past six months, personal property premiums are increasing to reflect the impact of more frequent or severe storms, as well as water-related losses which are the leading cause of home insurance claims. In personal auto, the Ontario Government adopted a new auto insurance regime in March that should result in better cost control while offering consumers some of the best protection in the country. These changes take effect
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Consolidated Highlights
(In millions of dollars, except as
otherwise noted) Q1-2010 Q1-2009 Change
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Direct premiums written (excluding pools) 914.3 868.8 5.2%
Underwriting income(1) 69.0 7.9 773.4%
Net operating income(2) 112.3 69.1 62.5%
Net income (loss) 119.7 (36.3) n/a
Net operating income per share (dollars) 0.94 0.58 62.1%
Earnings per share - basic and diluted
(dollars) 1.01 (0.30) n/a
Return on equity (ROE) for the last
12 months 10.3% 2.4% 7.9 pts
Operating ROE for the last 12 months(3) 10.9% 11.5% (0.6) pts
Combined ratio (excluding MYA) 93.2% 99.2% (6.0) pts
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(1) Underwriting income is defined as underwriting income excluding
market yield adjustment (MYA).
(2) Net operating income is defined as the sum of underwriting income,
interest and dividend income and corporate and distribution income
after tax.
(3) Operating ROE is defined as net operating income for the last 12
months divided by the average shareholders equity (excluding
accumulated other comprehensive income) for the same 12-month period.
The average shareholders equity is calculated by adding the beginning
balance and the ending balance and dividing by two.
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Operating Highlights
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- Net operating income for the quarter was $112.3 million , up
$43.2 million from $69.1 million for the same quarter in 2009, as a
result of strong underwriting performance.
- Direct premiums written increased 5.2% in the first quarter to
$914.3 million , continuing the trend of accelerated growth that began
in early 2009 due to rate increases across all lines of business and
an increase in insured risks in business insurance.
Personal insurance premiums grew 6.6% as a result of higher rates for
both home and auto insurance. Increased insured amounts in home
insurance and growth in the number of risks written in auto insurance
also contributed. Business insurance written premiums grew 2.1% as a
result of a 4.0% increase in the number of risks insured and rate
increases offset by the cancellation of a number of group accounts in
late 2009.
- Underwriting income in the quarter increased to $69.0 million from
$7.9 million for the same period last year and the combined ratio
improved by 6.0 percentage points to 93.2% as performance in home
insurance and commercial P&C continued to improve.
Home insurance was profitable for the second consecutive quarter,
with an underwriting gain of $29.0 million compared to a loss of
$26.9 million for the same period last year. The solid combined ratio
of 87.8% reflects a significant improvement in that line of business
resulting from continued progress under the company's home insurance
action plan and a milder winter. Personal auto underwriting income
declined slightly to $15.9 million , with a combined ratio of 97.0%,
mainly as a result of higher medical costs in Ontario which offset
improvements in other provinces.
The combined ratio in business insurance improved 3.2 percentage
points to 90.9% on stronger commercial P&C results. Commercial auto
results remained strong despite a 6.9 point decline in the combined
ratio compared to the same quarter in 2009.
- Interest and dividend income, net of expenses remained healthy at
$73.1 million , up 0.8% from the same period of last year.
Market-based yield was 4.1%, down from 4.7% in the first quarter of
2009, mainly because of lower market yields and the increased value
of our investment portfolio.
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Investment Gains
Net gains on invested assets, excluding held-for-trading bonds, amounted to
Capital Management
At the end the quarter, the company's book value per share was
In February, the company also launched a Normal-Course Issuer Bid to acquire up to 5.0% of its shares. At the end of March, the company had acquired 3.9 million shares at an average price of
Analysts Estimates
The average estimate of earnings per share and net operating income per share for the first quarter among the analysts who follow the company was
Conference Call
The conference call is also available by dialling (647) 427-7450 or +1 (888) 231-8191 (toll-free in
A replay of the call will be available today at
Annual Meeting of Shareholders
About
Forward Looking Statements
This document may contain forward looking statements that involve risks and uncertainties. The company's actual results could differ materially from these forward looking statements as a result of various factors, including those discussed in the company's most recently filed Annual Information Form and annual Management's Discussion & Analysis. Please read the cautionary note at the end of the MD&A.
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