Canada’s Top 5 insurers — Intact, Aviva, Desjardins, TD Insurance and The Co-operators — wrote a combined 42% of the insurance business in the country in 2022, but each showed different growth trends, MSA Research said in its latest quarterly outlook report.
Overall, Intact has a commanding lead. Intact wrote $14 billion in direct written premiums (DPW) last year, more than twice as much as its closest competitor, Aviva ($6.4 billion). For its part, Aviva “had some internal reinsurance transactions in 2022 that distorted its net results,” but edged out Desjardins (DPW of $6.1 billion) as Canada’s Number 2 writer last year, MSA Research president and CEO Joel Baker wrote in the MSA Quarterly Outlook Report for 2022 Q4.
Intact’s results are presented on an ‘as-is’ basis going backwards, Baker noted. In other words, the numbers reflect as if Intact owned RSA in the past. Similarly, Desjardins’ financial results are shown as if it owned State Farm.
“Examining the Top 5 groups yields some interesting information,” Baker wrote. “In terms of performance they exhibited, as a cohort, similar results to those of the personal and multi-line carriers of which they are a constituent.”
But the Top 5 showed different growth patterns. “It is evident that Co-operators grew organically faster than its competitors, with Aviva coming in second,” Baker wrote. “Surprisingly, when major M&A growth is stripped out, ‘Intact’s’ organic growth was the slowest of the group.
“Intact is in quotes because the historical numbers are a combination of their own, and those of RSA’s (pre-acquisition number). It’s nigh impossible to break out Intact’s true organic growth due to the serial nature of its M&A activity.”
On a direct loss ratio basis, the Top 5 had periods of divergence and congruence, Baker noted. “Most recently, Desjardins was out of sync, with better loss ratios in 2021 [less than 50%] and worse ones in 2022 [about 65%]. TDI underperformed from 2013 to 2016 [85-95%] and again, on a less pronounced basis, from 2019 [about 75%] to an even lesser degree in 2022 [about 55%].”
As of year-end 2022, the industry saw a combined ratio of 85.4% and solid underwriting results due to a “historically large reserve release of over $7 billion,” Baker wrote. “Without that reserve release, the run rate COR [combined operating ratio] would have been closer to 96.”
But the industry didn’t benefit from the current interest rate environment and volatile equity markets on the investment side. DPW (up 7.41% from the previous year) were only narrowly keeping pace with inflation, as Baker pointed out. “Net premiums written are slipping behind with a tepid 1.5% growth. The industry is flooring the accelerator, but the car isn’t speeding up.”
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