Intact Financial's US P&C subsidiary OneBeacon reported a one-point deterioration in its combined ratio along with a slightly higher expense ratio in the second quarter compared with the same period a year ago.
The US unit of the Canadian insurance group reported a combined ratio of 94.8 percent for the quarter. Its expense ratio rose by 1.8 percent compared with the same period a year ago, driven by higher commissions, the company said on Wednesday.
Meanwhile, premiums written by the US subsidiary grew by 10 percent, or $425mn, compared with the prior-year period.
"Strong new business, rate increases and higher retention levels are driving growth as market conditions remain favourable across most business lines," the insurance group said of OneBeacon.
Along with the results for its US P&C subsidiary, Intact Financial reported that it has been affected by a change in Canadian law, which led the insurance group to increase reserves for auto claims.
Speaking on an earnings call CEO Charles Brindamour said the carrier had bolstered its reserves for prior year claims by CA$93mn ($70.5mn) following a deterioration in claims.
The carrier said it was making progress on a plan to increase profitability at the division and achieve a combined ratio in the low-90s by the end of 2020.
Ontario’s provincial government in April raised the maximum awards available to individuals with catastrophic injuries to CA$2mn. Previous legislation had reduced the sum to CA$1mn.
Speaking on the earnings call today Brindamour said the change in compensation limit had led to the reclassification of some claims and that the carrier had changed its view of ultimate payouts.
“In Ontario the catastrophe determination has not expected as diminished,” he said.
“The level of claims development in prior years was higher than expected in the last few months, leading us to update our view of the ultimate payouts,” he added.
According to the executive the company’s prior action plans have tempered auto claims inflation in Alberta.
The uptick in auto prior year development in Ontario hit profits at Intact’s Canadian division, which slumped by 29.1 percent year on year to CA$55mn.
Intact’s US operations also reported a 16.7 percent reduction in reported profits, which declined to CA$18mn from CA$21mn in the previous period.
The combined ratio for its Canadian business worsened by 0.8 percentage points to 97.4 percent, while its US portfolio deteriorated by one percentage point to 93.8 percent.
At a group level the carrier’s combined ratio deteriorated by 0.9 points to 97 percent.
Intact reported normalized earnings per share of CA$1.44 for the quarter, missing median analyst consensus of CA$1.79 per share as compiled by SNL.
The carrier reported a 0.1 percentage point increase in operating return on equity, which rose to 12 percent.