Increased underwriting income drives EGI Financial’s higher net operating income for Q1

An increase in underwriting income has contributed to EGI Financial Holdings Inc. posting net operating income of $3.7 million in 2014 Q1 compared to nil for the same quarter a year ago.

The increase was due to a rise in underwriting income to $532,000 in 2014 Q1 compared to an underwriting loss of $3.5 million for the same quarter in 2013, notes a statement issued Thursday by EGI Financial Holdings Inc.

Including Echelon General Insurance Company, EGI Financial operates in the property and casualty insurance industry in Canada and Europe, primarily focusing on non-standard automobile insurance and other niche and specialty general insurance products.

Personal Lines accounted for the lion’s share of underwriting income, generating $2.9 million in the quarter ended March 31 compared to a loss of about $1.3 million in the first quarter of 2013.

“Ontario Auto had an improved underwriting income of $1.2 million, despite the severe winter driving conditions experienced in Ontario in the quarter. Quebec, Maritimes and Motorcycle also made strong contributions to the results, with an underwriting income of $1.7 million,” the company reports.

Underwriting income for Specialty Programs was a loss of approximately $1.6 million in 2014 Q1 (compared to a loss of about $1.1 million in 2013 Q1), and for International, underwriting income increased to $387,000 (compared to a loss of $333,000).

“We are very pleased with our strong start to the year,” Steve Dobronyi, CEO of EGI Financial, notes in the statement. “We continue to demonstrate consistent profitability in our core Personal Lines business, which has now recorded an underwriting profit in 13 of the past 14 quarters. All Personal Lines products and geographies contributed to the underwriting profit,” Dobronyi says.

He points out, however, that Ontario auto insurance remains an unpredictable environment. “We consistently outperform the industry average and consistently make an underwriting profit in Ontario auto, but it is not meeting its profitability target. We are fully supportive of the government’s initiative to reduce premiums, but we cannot have a sustainable and functional auto insurance industry without a commensurate reduction in claims costs,” he emphasizes.

Other results for EGI Financial – comparing 2014 Q1 and 2013 Q1 – include the following:

• net income of approximately $5.4 million compared to $30,000;
• 50% increase in direct written premiums to about $79.8 million (from $53.2 million), driven by the increase in premiums in the International division;
• net earned premiums of about $62.1 million compared to about $44.6 million; and
• book value per share of $14.92 compared $14.09.

With regard to EGI Financial’s combined operating ratio, that fell to 99.1% in the first quarter of 2014 compared to 107.9% in the same quarter of 2013.

The loss ratios by line of business – which excludes the impact of change in discount rate on unpaid claims – also fell in all areas: 58.1% in 2014 Q1 compared to 74.7% in 2013 Q1 for Personal Lines; 62.8% in 2014 Q1 compared to 69.8% in 2013 Q1 for Specialty Programs; and 54.9% in 2014 Q1 compared to 61.5% in 2013 Q1 for International.

Looking ahead, says Dobronyi, “our primary focus is to generate growth and underwriting profits in our core auto insurance business in Canada. We’re confident that the acquisition of the Insurance Company of Prince Edward Island and the profitable growth of our International business will accent this further.”