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- Net operating income per share up 34% on improved underwriting
performance
- Solid combined ratio of 93.7% driven by improvements in home and
business insurance
- Top-line growth of 5.4%
- Twelve-month trailing Operating ROE of 11.7%
>>
Net operating income for the first six months of the year increased by
CEO's Comments
"This is the third consecutive quarter of solid underwriting performance across most of our lines of business. Today's results reflect the continuation of more favourable industry conditions and the positive impact of the strategic initiatives we launched over the last two years," said
"Home and commercial insurance results continued to improve significantly, reflecting the effectiveness of our action plans, while the performance of our auto insurance business remains solid. However, as anticipated, the severe summer storms and the increasing cost of medical claims in
"Our financial position remains strong with more than
Dividend
The Board of Directors declared a quarterly dividend of
Current Outlook
Personal property premiums continue to increase across the industry 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, conditions remain stable across the country, except in
The unpredictability of weather patterns and the increasing cost of medical claims in
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Consolidated Highlights
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In millions of
dollars, except as YTD YTD
otherwise noted Q2-2010 Q2-2009 Change 2010 2009 Change
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Direct premiums
written (excluding
pools) 1,317.8 1,250.6 5.4% 2,232.1 2,119.4 5.3%
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Underwriting
income(1) 66.3 43.2 53.5% 135.3 51.1 164.8%
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Net operating
income(2) 118.6 92.9 27.7% 231.0 161.9 42.7%
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Net income
(loss) 120.2 74.2 62.0% 240.0 37.9 533.2%
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Net operating
income per share
(dollars) 1.03 0.77 33.8% 1.97 1.35 45.9%
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Earnings per share
Basic and diluted
(dollars) 1.04 0.62 67.7% 2.05 0.32 540.6%
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Operating ROE
for the last 0.8
12 months(3) 11.7% 10.9% pts
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Combined ratio (2.0) (3.9)
(excluding MYA) 93.7% 95.7% pts 93.5% 97.4% pts
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Average number of
shares outstanding
(millions) 115.2 119.9 (4.7) 117.1 119.9 (2.8)
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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.
Operating Highlights
- Net operating income for the quarter was $118.6 million , up
$25.7 million from the same quarter in 2009, as a result of a
continuing solid underwriting performance. The operating ROE for the
last 12 months was 11.7%. On an annualized basis the operating ROE
for the quarter was 17.1%. Net operating income for the first
six months of the year was $231.0 million , up from $161.9 million
during the same period last year.
- Direct premiums written increased 5.4% in the second quarter to
$1,318 million on contributions from all lines of business. Personal
insurance premiums grew 5.8% mainly as a result of higher rates.
Commercial insurance premiums also gained momentum, increasing 4.0%
with moderate premium rate increases and a higher number of risks
insured.
For the first two quarters of the year, total direct premiums written
increased 5.3% to $2,232 million compared to the same period in 2009.
- Underwriting income in the quarter increased 53.5% to $66.3 million
from the same period a year ago, as a result of significant
improvements in both home and commercial P&C insurance. Overall, the
combined ratio improved by 2.0 percentage points to 93.7%.
The underwriting performance in home insurance improved for the third
consecutive quarter with a 7.6 percentage point reduction in the
combined ratio from last year as a result of the company's action
plan. However, the severe storms that occurred in the month of June
resulted in losses of $19.2 million and affected the performance of
the portfolio, resulting in a combined ratio of 100.3%. Personal auto
underwriting income was down by $30.6 million to $23.0 million with a
combined ratio of 95.7%. The decline mainly reflects the increased
cost of medical claims in Ontario .
Commercial insurance underwriting income improved significantly
during the quarter, increasing from $8.0 million in the same quarter
of last year to $44.1 million . Commercial auto results were excellent
with a combined ratio of 74.6% while the combined ratio in commercial
P&C insurance improved by 19.1 percentage points to 87.6% on improved
current accident year experience and more favourable development on
claims from prior years.
Total underwriting income for the first six months of the year was
$135.3 million , up from $51.1 million in the corresponding period of
2009.
- Interest and dividend income, net of expenses remained robust at
$75.4 million , up 3.9% from the same period of the previous year. The
market-based yield remained constant at 4.4%. Total interest and
dividend income, net of expenses, for the first six months was up
2.3% to $148.5 million .
>>
Investment Gains
Net gains on invested assets, excluding HFT bonds, were modest at
Capital Management
The company's book value per share rose
At the end of June, the company had acquired under the Normal course issuer bid launched in February, 5.6 million shares at an average price of
On
Analysts Estimates
The average estimate of earnings per share and net operating income per share for the second 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 later today at
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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