Insurance side: Zurich evaluates, financials for Q2 and FSCO creates a furor

By Jeff Sanford

Toronto, Ontario — August 7, 2015 — A lot of news from the insurance side of the auto claims economy this week, especially considering the flood of financial reports released as companies finish crunching the numbers for the second quarter of 2015. Here’s a quick round up:

– Zurich Insurance Group announced it is evaluating a potential offer for RSA Insurance Group plc. The announcement “does not amount to a firm intention to make an offer.” But such a deal could see the ownership of RSA change.

– RSA Group reported an underwriting profit this week for Canada of $113 million for the first half of the year, ending June 30. This is a big improvement over a slight loss in the second half of 2014. This is “the strongest first half performance in Canada for 10 years,” according to a press release. “Household premiums included continued rate increases, whilst lower Motor premiums were primarily driven by the government mandated rate reductions in Ontario,” the report said. RSA reported that net written premiums in Canada were down 4 percent, with a 6 percent reduction in Motor offset by growth of 5 percent in Household.

– Waterloo, Ontario-based property and casualty insurer Economical Insurance announced net income of $33.8 million for the second quarter of 2015. Gross written premiums for the second quarter grew by $16.8 million, or 3 percent, over the same quarter a year ago. Underwriting activity produced a $19.6 million profit and a combined ratio of 95.9 percent, a decline from the same period a year ago.

“The slight decline is due to an increase in loss costs and the strengthening of reserves, primarily for Ontario auto accident benefit costs and the British Columbia auto liability line,” Economical said in a statement. The personal auto combined ratio increased slightly (from 92.4 percent to 92.8 percent) over the same period last year…“lower frequency was more than offset by lower levels of favourable reserve development and the continued impact of the mandated rate reductions in Ontario,” according to Economical. The commercial auto combined ratio increased over the same quarter a year ago primarily due to higher claims severity and lower levels of favourable loss reserve development (from 74.4 percent in Q2 2014 to 88.7 percent in Q2 2015).

– Aviva plc released its interim financial results for the first six months of the year, reporting a 1 percent increase in general insurance premiums from its Canadian business and a 5.5-point improvement in its combined ratio. “Improved weather and higher prior year reserve releases were somewhat offset by an increase in personal motor claims frequency and higher large losses in personal property,” according to the release.

– The Financial Services Commission of Ontario (FSCO) created a bit of furor this month when it issued a report point out that the Liberal government has failed to live up to its promise to reduce auto insurance premiums by 15 per cent as promised in the last election. A cut in rates was a promise included in the minority Liberal government’s 2013 budget in order to the get the New Democrats to let it pass. According to FSCO, the reduction so far is only 6.56 per cent, which is down from 7 per cent in April. That is, auto insurance premiums in Ontario have actually risen a bit. No wonder, according to FSCO 26 companies providing auto insurance coverage, representing 52 percent of the provincial market, have requested rate increases. These insurers have increased premiums by an average of 0.6 percent in the second quarter of this year after raising rates in Q1 as well.