P&C industry results show improvement in Q2: MSA

2017 is proving to be a “more normal CAT year” following the Fort McMurray fires in 2016, said MSA CEO

A relatively “more normal CAT year” has led to overall improved year-over-year second quarter (Q2) results for the Canadian P&C industry, with an increase in net premiums and net income and a healthier combined ratio.

The results are available in MSA Research’s quarterly outlook report for Q2. The report states that net income for Q2 2017 was $1.97 billion after being in the red in Q2 2016. Net premiums rose to $24.64 billion in Q2 2017 compared to $23.88 billion in Q2 2016. And the combined ratio sat at 97.71% in the most recent quarter compared to 104.77% one year ago.

Related: “Substantially deflated” P&C economic results in Q1: MSA

“At [the six-month mark in] 2016, the industry was reeling from the historic Fort McMurray fire losses,” wrote Joel Baker, president and CEO of MSA Research, in the report. “Now, with a more normal CAT year (Atlantic hurricanes notwithstanding), the market has largely strengthened its footing with a seven-point improvement in [combined ratio] to 97.7% and improvement in investment income marred only by an adverse $0.5 billion swing in [other comprehensive income].”

However, Baker noted that there are significant variations in the results between sectors and regions and that the entire industry is still in the red on an underwriting basis.

The commercial insurance segment of the industry, with the exclusion of Lloyd’s, saw a slight increase in net premiums to $3.28 billion in the most recent quarter from $3.24 billion one year ago. Net claims and adjusted expenses were $1.96 billion in Q2 2017, compared to $2.01 billion in Q2 2016. Net income landed at $4.42 million in the most recent quarter, a year-over-year jump from $1.36 million in Q2 2016. Commercial insurance saw its combined ratio hit 95.96%, a healthier result than the 101.39% of one year ago.

Related: MSA partners with DBRS

The results of personal and multi-line insurers were not as improved as other segments of the industry, the report noted, as a result of a number of smaller CAT losses in 2017, which meant less support from reinsurers. Auto results also continue to be a challenge in many parts of the country for personal and multi-line insurers.

Net premiums for personal lines and multi-line writers saw a slight bump to $17.58 billion in Q2 2017, up from $17 billion in Q2 2016. Net claims and adjusted expenses were $11.87 billion for the most recent quarter, a year-over-year increase from $11.62 billion. Net income was $9.03 million in Q2 2017, up from $5.02 million in Q2 2016. The combined ratio was 101.07% in Q2 2017, compared to 101.64% one year ago.

Related: How Joel Baker shapes the industry’s most crucial conversations

The reinsurance part of the industry had written premiums of $6.97 million in Q2 2017 compared to $7.93 million in the same quarter in 2016. Net claims and adjusted expenses were $3.89 million in the most recent quarter, a sizeable decline from the result of $8.28 million in Q2 2016. Net income was back in the black in the last quarter with a result of $0.77 million compared to the loss of $1.78 million in Q2 2016. Reinsurers saw the most dramatic improvement in its combined ratio, compared to other parts of the industry, with a result of 93.5% in Q2 2017 compared to 140.56% in Q2 2016.

“Reinsurers were the main beneficiaries of lower CAT severity in the first half of 2017 having borne the brunt of [Fort McMurray] losses last year,” the report states.

Copyright © 2017 Transcontinental Media G.P.
Transcontinental Media G.P.