Sonnet Insurance’s exit from the Alberta auto market has allowed the online insurer to generate a profitable underwriting performance in 2024 Q4, Definity Financial Corporation president and CEO Rowan Saunders said Friday during the company’s fourth-quarter and full-year 2024 earnings call.
In June 2024, Definity subsidiary Sonnet announced it would phase out its auto insurance operations in Alberta. At the time, it said Dec. 13, 2024 would be its intended date of withdrawal, when it would no longer issue new or renewal auto policies in the province.
During the financial results call, Saunders said the insurer ended the year with premiums approaching $4.5 billion.
“In the fourth quarter, underlying growth of 9% was driven by auto rate and unit count increases, continued rate increases in property and strong retention and rate achievement in commercial insurance in what remains an attractive market overall,” he said. “On a reported basis, growth of 7.4% reflected the impact of the exit of Sonnet’s Alberta personal auto business, which we classify as an exited line.
“Given the loss-making nature of Sonnet’s Alberta auto book, withdrawing our business there enabled the consolidated Sonnet business to generate a profitable underwriting performance in the quarter,” Saunders said. “The negative drag on profitability from Sonnet is now behind us.”
He added that “being in position to generate a modest underwriting profit in 2025 is not the end goal, but it is an important milestone. I’m confident that we can profitably scale the business in the years to come, creating further value for Definity.”
The operating environment remains conducive to sustaining firm market conditions overall, Saunders said. “We expect conditions in auto lines to remain firm as insurers aim to keep pace with the combined impact of ongoing cost pressures, regulatory constraints in Alberta and uncertainty related to the extent and impact of potential U.S. tariffs and retaliatory actions.”
Phil Mather, Definity’s executive vice president and chief financial officer, said removing Sonnet’s personal auto business in Alberta from operating results impacted auto growth by 4.1 points in 2024 Q1.
The personal auto segment saw a combined ratio of 96.1% in the last quarter of 2024. For full-year 2024, the personal auto combined ratio was 96.7% — a 1.6-point improvement from 98.3% in 2023.
“The performance reflects an improvement in the core accident year claims ratio, driven by higher earned rates, stabilized lost cost trends and the improved Sonnet performance,” Mather said. “In 2025, we expect to continue to deliver a mid-90s combined ratio in personal auto, with a reminder that the first quarter of the year typically experiences higher combined ratios due to winter seasonality.”
Gross written premiums (GWP) for Definity’s personal auto segment were $438.7 million in the fourth quarter of 2024, up 5.5% from $416 million in 2023 Q4. Adjusted for the exit of Sonnet Alberta auto, GWP were up 9.6% quarter-over-quarter.
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