ING Canada Inc.’s profits dropped almost six percent in the second quarter as escalating property claims outweighed the benefits of investment gains and a lower tax rate, the company said on Wednesday.
The insurer reported earnings of C$194.3 million ($184.7 million), or C$1.56 a share, for the three months ended last June 30, compared with C$206 million, or C$1.54 a share, a year earlier, wrote Lynne Olver of Reuters Canada. A C$500 million share buyback earlier this year bolstered earnings on a per share basis.
ING Canada, which is 70 percent owned by Dutch bank ING Groep, said that it had expected industry profits to fall in 2007 from the high levels of recent years. "The margins were very high and they have come to lower levels at this stage... but continuing top-line growth, we think, over time will drive earnings upwards," the President and CEO Claude Dussault told Reuters in an interview.
Canada’s biggest property and casualty insurer said that it is seeking regulatory approval for an auto insurance rate increase. The personal auto segment represents about half of direct premiums written by ING Canada. "We expect to see some (auto) increase next year," Dussault noted. That could be great news for the manufacturer of
spark plug wires Canada
, other auto parts makers and domestic automakers.
Single-digit rate increases are also working their way through ING Canada's personal property policies. Personal property represents about 20 percent of business at ING Canada, which operates under the ING Insurance, belairdirect and Grey Power brands.
The company is interested in making acquisitions and has sufficient resources to pursue them despite this year's share buyback, Dussault said. "It's a matter of finding the right fit at the right time, and a willing seller," he said. "We're still exploring that."
The insurer’s underwriting income dropped 44.3 percent in the second quarter to C$92.3 million on more severe property losses and seasonal storm damages in some areas, Reuters noted.
The company is seeing greater water-related damage claims from sewer back-ups and hail, and homeowners and municipalities should make greater efforts to protect themselves from those perils, Dussault said. Not every city has the infrastructure to absorb the heavier rainfalls of recent years, he noted. "In the medium and long term, systems within municipalities in many areas need to be improved," Dussault said.
Underwriting income in the latest quarter was also hurt by C$14.9 million in catastrophe-related claims from floods in Calgary, Alberta, and hail storms in Edmonton, Alberta. A year earlier, there were no catastrophes, defined as an event resulting in net claims of at least C$5 million.
The report also stressed that the insurer's combined ratio, a measure of how much money was spent on claims and expenses relative to how much was earned in premiums, increased to 90.6 percent in the second quarter, from 82.7 percent a year earlier. Additionally, direct written premiums, those that are collected from policyholders before subtracting reinsurance premiums, increased 2.5 percent to C$1.21 billion. Return on equity, meanwhile, dropped to 18.3 percent from 27.5 percent.
