One of the major insurance stakeholders in the Ontario auto market is upbeat on legislative changes to drive down rates that are “still way too high.”
Sylvie Paquette, president and COO of
Desjardins General Insurance Group (DGIG), a
Desjardins Group subsidiary specializing in property and casualty insurance, commented that although the newly acquired Canadian operations of State Farm are heavily concentrated in the challenging Ontario market, she is confident about the future.
“Auto insurance rates in Ontario are still way too high, amounting to about five percent of average disposal income, compared to three per cent in the other provinces,” said Paquette, as part of the group’s 2014 fourth quarter and year-end results announcement. “That being said, the situation has been improving and recent legislative changes should help drive down loss ratios and fraud costs."
Paquette says that much more needs to be done by government and other stakeholders, including insurers, to develop a more affordable and sustainable auto insurance market in Ontario.
DGIG announced a net income of $151.3 million, a decrease of $43.9 million compared to 2013. Return on equity (ROE) was 12.9 per cent, compared to 19 per cent in 2013, which still ranks the company among the best in the industry.
Excluding costs related to the acquisition of State Farm's Canadian operations, net income would have been relatively stable at $197.8 million compared to $204.3 million in 2013. ROE would have been 16.4 per cent compared to 19.8 per cent in 2013, this decline is mainly due to a lower contribution of the investment portfolio and to an increased capital base in preparation for the closing of State Farm's Canadian operations transaction.
Monique F. Leroux, Chair of the Board, President and CEO, Desjardins Group and CEO of DGIG, said she was pleased by the solid growth and progress on the strategic goals of the company.
“With the State Farm transaction, which almost doubles the size of our P&C insurance business, DGIG has achieved its objective to be in the top three in the industry,” says Leroux. “It has also made solid progress in improving customer experience and in positioning itself as a partner of choice for our members and clients.” (continued.)
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Paquette says that even with all the work related to the acquisition, DGIG's existing operations remained focused on the company's other major priorities.
“We continued our record of above market organic growth and profitability in the year, and we have good momentum,” she says. “In addition, we made solid progress in our goal to lead the industry in customer experience, winning three J. D. Power awards for service quality during the year.”
Direct written premiums increased by 5.9 per cent to $2,235.7 million and the number of policies in force rose by almost 115,000, reaching 2,284,000. This was achieved entirely through organic growth. The combined ratio (excluding MYA) was 93.8 per cent, slightly higher by 0.7 points compared to 2013.
In the fourth quarter, net income was $22.1 million, compared to $81.8 million for the corresponding period in 2013. ROE was 7.2 per cent compared to 29.6 per cent in the fourth quarter of the previous year. Excluding costs related to the acquisition of State Farm's Canadian operations, net income in the fourth quarter would have been at $36.7 million in 2014 compared to $88.5 million in 2013 and ROE would have been 11.5 per cent compared to 31.9 per cent in 2013.
These declines were largely due to a less favourable loss ratio compared to the fourth quarter in 2013 and to a drop in investment income.
As for the direct written premiums, they increased by 6.3 per cent in the quarter, compared to the same period in 2013.
