Canadian Market (December 01, 2009)

INSURERS CONTINUE TO TAKE BEATING IN AUTO ACCIDENT BENEFIT LINES IN 2009 Q3

Canadian and foreign insurers licensed with the Office of the Superintendent of Financial Institutions (OSFI) continued to take a beating in the auto-personal accident category (which includes accident benefits), according to OSFI’s 2009 Q3 results.

Canadian insurers saw their collective claims ratio in the auto personal accident segment jump from 98.84% as of the end of 2008 Q3 up to 120.48% as of the end of 2009 Q3.

Foreign insurers licensed with OSFI fared even worse in OSFI’s auto-personal accident area, reporting a claims ratio of 185.10% in 2009 Q3 — a substantial increase from the 125.86% claims ratio reported in 2008 Q3.

CCIR REPORT SUGGESTS GAPS IN CREDIT SCORE DISCLOSURE

Forty-two per cent of Canadian property and casualty companies that use credit-based insurance (CBI) scores — representing 17% of market share — do not disclose an adverse affect of the CBI scores to policy applicants or policyholders, according to a survey done for the Canadian Council of Insurance Regulators (CCIR).

In addition, 68.4% of the 19 companies that used CBI scores indicated they do not disclose on their declaration pages whether a credit-based insurance score positively or negatively affects an applicant or policyholder’s premium.

The Financial Services Commission of Ontario (FSCO) undertook the survey on behalf of the CCIR in April 2009. The full results of the survey are available on the CCIR Web site at: http://www.ccir-ccrra.org/CCIR/index.htm

NOVEMBER A CRUEL MONTH FOR KINGSWAY November was a busy month for Kingsway Financial Services Inc. (KFS).

On Nov. 17, 2009, Pennsylvania’s Department of Insurance announced it was taking legal action against KFS, alleging the insurer improperly disposed of its shares of Lincoln General Insurance Company in October 2009.

Kingsway is vigorously opposing the regulator’s action in court.

Kingsway announced in October 2009 that it had donated its indirect interest in troubled Lincoln General, now in run-off, to 20 different charities.

Each charity received 5% of Kingsway stock plus a cheque in the amount of US$20,000, according to the state regulator.

The regulator said the company failed to notify it of its disposal of the Lincoln shares, while Kingsway said such notification is not required.

Kingsway’s share prices fell 40% on the day of the Pennsylvania regulator’s announcement, to just under $2.

Meanwhile, A.M. Best downgraded Kingsway’s financial strength rating from a ‘B’ to a ‘B-‘ on Nov. 24, one day after Kingsway announced it would be disposing of its majority interest in Jevco Insurance Company.

SUMMER STORMS LEAD TO A 2009 Q3 LOSS AT INTACT

Thanks in part to an unusual number of summer storms, Intact Financial Corporation (TSX: IFC) reported a net loss of Cdn$8 million in 2009 Q3, compared to a profit of Cdn$57.3 million in the same period last year.

“While the pace of growth of our direct written premiums has been most encouraging, the high costs of property damage associated with the unusual number of summer storms resulted in one of our worst underwriting results since the 1998 ice storm,” Intact Financial Corporation president and CEO Charles Brindamour said in a company release. “Despite the disappointing impact of these events, our underlying home insurance results continued to improve and our auto insurance business performed well both during the quarter and throughout 2009.”

The company reported a 2009 Q3 underwriting loss of Cdn$53.2 million, down 185.9% from its underwriting profit of Cdn$61.9 million in 2008 Q3.