• We announced in excess of $70 million of customer relief actions in 2020. Our support efforts are ongoing and we remain committed to assisting our customers with managing the challenges of the ongoing pandemic
  • Gross written premiums exceeded $2.8 billion in 2020, increasing 13.3% for the fourth quarter and 12.1% for the full year versus the same periods in 2019, as robust growth in our personal property and commercial businesses was partially offset by the impact of customer relief efforts
  • Benefits from underwriting actions, a reduction in auto claims frequency, and benign weather led to combined ratios of 89.1% for the fourth quarter and 94.6% for the full year, representing substantial year-over-year improvements of 14.5 points and 10.4 points, respectively
  • Continued momentum evidenced by our $255 million improvement in underwriting income in 2020, following the $147 million improvement in 2019
  • Net investment income declined $5 million in 2020, a headwind to performance that is expected to persist given low fixed-income yields
  • Solid year-end financial position benefitted from net income of $154 million, with total equity higher by $207 million to $1.8 billion and MCT up 29 points to 268%

WATERLOO, ON, February 11, 2021 —Economical Insurance today announced consolidated financial results for the three months and full year ended December 31, 2020.

“We reported an historically strong $136 million in underwriting income in 2020. This is a clear indication that the substantial work we have put into transforming our business has been successful. A reduction in claims frequency from favourable weather conditions and reduced driving activity related to COVID-19 also contributed to a mid-90 full year combined ratio that was delivered ahead of expectations. Our performance marked the tenth consecutive quarter of improvement over the prior year, and puts us on a confident footing as we approach our planned demutualization and IPO later this year,” said Rowan Saunders, President & CEO. “The combination of firm market conditions in property and most commercial lines, our recent investments in digital platforms and talent, and our disciplined approach to pursuing growth opportunities led to premiums increasing 13.3% for the fourth quarter and full year premiums exceeding $2.8 billion.”

“Our capital strength and robust operating results position us well as we continue to support our customers, brokers, and employees during this uncertain time,” stated Philip Mather, EVP & CFO. “We ended 2020 with total equity near record levels and exceeding $1.8 billion, almost 13% higher than a year ago, reflecting effective value creation and supporting our financial strength and resilience in the face of ongoing uncertainty and the low-yield environment.”

“Looking ahead, we are continuing to provide relief across the business to support customers in need. While our profitability in 2020 was strong, the impact of our customer relief actions will take time to fully earn into our results and will serve as a headwind going forward,” noted Saunders. “We could not have delivered our 2020 performance without the dedication of our engaged employees. As we move into 2021, we maintain our focus on prioritizing the health and safety of our employees, actively managing the evolving human and financial impact this pandemic continues to have, and meeting the needs of our customers and broker partners.”

Economical Insurance Consolidated Highlights

($ in millions, except as otherwise noted)

  Three months ended December 31 Year ended December 31
  2020 2019 Change 2020 2019 Change
Gross written premiums1 755.9 667.0 13.3% 2,814.7 2,511.0 12.1%
Net earned premiums 665.5 585.5 13.7% 2,508.7 2,343.2 7.1%
Claims ratio1,2 57.1% 71.4% (14.3) pts 62.3% 73.1% (10.8) pts
Expense ratio1,2,3 32.0% 32.2% (0.2) pts 32.3% 31.9% 0.4 pts
Combined ratio1,2,3 89.1% 103.6% (14.5) pts 94.6% 105.0% (10.4) pts
Underwriting income (loss) 72.7 (20.9) 93.6 136.4 (118.3) 254.7
Investment income 27.7 16.5 11.2 180.1 173.7 6.4
Net income 66.7 6.8 59.9 153.9 17.4 136.5
2020 Q4 Consolidated Highlights - As At
  As at December 31
  2020 2019 Change
Total equity 1,818.0 1,611.0 207.0
Minimum Capital Test 268% 239% 29 pts

1These items are non-GAAP measures which are defined below.

2The claims ratio, expense ratio, combined ratio, and underwriting income (loss) exclude the impact of discounting.

3The expense ratio and combined ratio are presented in the news release net of other underwriting revenues.

Gross written premiums (“GWP”) for the fourth quarter of 2020 increased by $88.9 million or 13.3% compared to the fourth quarter of 2019, driven by new business and rate increases being realized across our business, partially offset by customer relief actions in relation to COVID-19. These ongoing actions will continue to impact written and earned premiums in 2021. Personal lines premiums were up 9.7% over the same quarter a year ago, with increases in both our broker and direct businesses. Commercial lines premiums increased 23.6% over the same quarter a year ago, reflecting our increased capabilities and focus on growth in this line of business and our new relationship with Uber which launched on September 1. For the year, personal lines premiums increased $191.9 million or 10.1% and commercial lines premiums increased $111.8 million or 18.1% as compared to the prior year.

Underwriting activity for the fourth quarter of 2020 improved substantially, producing underwriting income of $72.7 million and a combined ratio of 89.1%, compared to an underwriting loss of $20.9 million and a combined ratio of 103.6% in the same quarter a year ago. The underwriting improvements of $93.6 million for the quarter and $254.7 million for the year were due primarily to a decrease in the core accident year claims ratio. Key contributors to the lower claims ratio were ongoing underwriting actions, earned rate increases, lower claims frequency which benefitted from relatively benign weather and COVID-19 related reduced activity levels, and favourable business mix shift to personal property. These were partially offset by the impact of our ongoing customer relief actions.

Line of Business Results

Personal insurance

  Three months ended December 31 Year ended December 31
  2020 2019 Change 2020 2019 Change
   Auto 339.2 322.6 5.1% 1,335.4 1,261.9 5.8%
   Property 201.1 169.9 18.4% 750.7 632.3 18.7%
Total 540.3 492.5 9.7% 2,086.1 1,894.2 10.1%
Combined ratio1
   Auto 95.1% 114.8% (19.7) pts 96.4% 111.7% (15.3) pts
   Property 78.0% 84.5% (6.5) pts 89.2% 94.4% (5.2) pts
Total 89.2% 104.9% (15.7) pts 94.0% 106.2% (12.2) pts

1 These items are non-GAAP measures which are defined below.

Overall, personal lines premiums increased 9.7% in the quarter. Sonnet generated GWP of $66.4 million, an increase of 13.1% over the same quarter a year ago. Our broker business grew by 9.2% driven by growth in personal property. Personal lines produced underwriting income of $54.2 million in the quarter, representing an improvement of $75.8 million over the same quarter a year ago. For the year, personal lines produced underwriting income of $114.2 million compared to an underwriting loss of $108.4 million in 2019.

Personal auto premiums increased 5.1% in the quarter and 5.8% for the year. Growth was driven by rate increases approved in 2019 and early 2020, an increase in new business, and the growth in Sonnet, partially tempered by the impact of customer relief actions. The combined ratio of 95.1% in the quarter and 96.4% for the year improved from the same periods a year ago due primarily to lower auto claims frequency which benefitted from COVID-19 related reduced activity levels and benign weather. Underwriting and broker management actions also contributed to improvements in profitability.

Personal property premiums increased in the quarter by 18.4% and 18.7% for the year, benefitting from the organic growth enabled by our digital platforms and continued firm market conditions. The combined ratio of 78.0% in the quarter and 89.2% for the year improved due primarily to prior rate increases earning through, and benign weather including low levels of catastrophe losses.

Commercial insurance

  Three months ended December 31 Year ended December 31
  2020 2019 Change 2020 2019 Change
GWP1 215.6 174.5 23.6% 728.6 616.8 18.1%
Combined ratio1 88.8% 99.5% (10.7) pts 96.4% 101.7% (5.3) pts

1 These items are non-GAAP measures which are defined below.

Overall, the growth momentum in commercial lines continued, with premiums increasing 23.6% in the quarter and 18.1% for the year. Growth was driven by higher rates, improved retention, and new business in the context of firm market conditions. Our new relationship with Uber further bolstered growth and is part of our wider strategy to diversify our book of business and complement our regular P&C lines business with new specialty lines products.

Commercial lines produced a combined ratio of 88.8% and underwriting income of $18.5 million in the quarter compared to 99.5% and $0.7 million in the same quarter a year ago. For the year, the business achieved a combined ratio of 96.4% and produced underwriting income of $22.2 million, compared to an underwriting loss of $9.9 million in 2019. The significant increase in profitability was the result of underwriting and portfolio management actions, lower claims frequency as a result of COVID-19 and benign weather, and favourable claims development. These were partially offset by an increase in catastrophe losses as we recorded $30 million in 2020 for COVID-19 related exposures.

Investment income

  Three months ended December 31 Year ended December 31
  2020 2019 Change 2020 2019 Change
Interest income 17.7 20.4 (2.7) 75.3 82.5 (7.2)
Dividend income 7.4 6.3 1.1 29.1 27.0 2.1
Investment expenses (1.4) (1.4) - (4.1) (4.1) -
Net investment income 23.7 25.3 (1.6) 100.3 105.4 (5.1)
Total recognized gains (losses) on investments 4.0 (8.8) 12.8 79.8 68.3 11.5
Total investment income 27.7 16.5 11.2 180.1 173.7 6.4

Net investment income decreased in the quarter and for the year compared to the same periods in 2019, as the negative impact on interest income from lower yields more than offset higher dividend income. Recognized gains on investments in the quarter and for the year increased due primarily to higher gains on bonds. This was partially offset by lower gains on common stocks, driven by reduced trading activity in our investment portfolio and an impairment charge of $17.6 million in the year, reflective of the significant volatility in global equity markets in 2020 largely due to the COVID-19 pandemic.

Net income increased to $66.7 million compared to $6.8 million in the fourth quarter of 2019 due primarily to our improved underwriting performance. For the full year, net income increased by $136.5 million.

Economical’s capital position remained well in excess of both minimum internal capital and external regulatory requirements as of December 31, 2020, with total equity exceeding $1.8 billion and a Minimum Capital Test ratio of 268%.

About Economical Insurance

Economical Mutual Insurance Company (“Economical” or “Economical Insurance”, which includes its subsidiaries where the context so requires) is a leading property and casualty insurer in Canada, with over $2.8 billion in annual gross written premiums for the year ended December 31, 2020 and over $6.6 billion in assets as at December 31, 2020. Economical is a Canadian-owned and operated company that services the insurance needs of more than one million customers.

Forward-looking statements

Certain of the statements made in this news release regarding our current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements, or any other future events or developments may constitute forward-looking statements. When used in this news release, the words “may”, “will”, “would”, “should”, “could”, “expects”, “plans”, “intends”, “trends”, “indications”, “anticipates”, “believes”, “estimates”, “predicts”, “likely”, “looking to”, “potential”, or negative or other variations of these words, or other similar or comparable words or phrases suggesting future events or outcomes, are typically intended to identify forward-looking statements.

Forward-looking statements are based on estimates and assumptions made by management based on management’s knowledge, experience, and perception of historical trends, current conditions, and expected future developments, as well as other factors that management believes are appropriate in the circumstances. Many factors could cause Economical’s actual results, performance or achievements, or future events or developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the following factors:

  • Economical’s ability to appropriately price its insurance products to produce an acceptable return;
  • Economical’s ability to accurately assess the risks associated with the insurance policies that it writes;
  • Economical’s ability to assess and pay claims in accordance with its insurance policies;
  • litigation and regulatory actions, including COVID-19 related class-action lawsuits that have arisen and which may arise, together with associated legal costs;
  • Economical’s ability to obtain adequate reinsurance coverage to transfer risk;
  • Economical’s ability to accurately predict future claims frequency or severity, including the frequency and severity of weather-related events and the impact of climate change;
  • the occurrence of unpredictable catastrophe events;
  • unfavourable capital market developments, interest rate movements, or other factors which may affect our investments;
  • Economical’s ability to successfully manage credit risk from its counterparties;
  • foreign currency fluctuations;
  • Economical’s ability to meet payment obligations as they become due;
  • Economical’s ability to maintain its financial strength rating;
  • Economical’s dependence on key employees;
  • Economical’s ability to attract, develop, motivate, and retain an appropriate number of employees with the necessary skills, capabilities, and knowledge;
  • Economical’s ability to appropriately manage and protect the collection and storage of information;
  • Economical’s reliance on information technology and telephony systems and the potential disruption or failure of those systems, including as a result of cyber security risk;
  • failure of key service providers or vendors to comply with contractual or business terms;
  • changes in legislation or its interpretation or application, or supervisory expectations or requirements, including risk-based capital guidelines;
  • deceptive or illegal acts undertaken by an employee or a third party, including fraud in the course of underwriting insurance or settling insurance claims;
  • Economical’s ability to respond to events impacting its ability to conduct business as normal;
  • Economical’s ability to implement its strategy or operate its business as management currently expects;
  • the impact of public-health crises, such as pandemics or other health risk events including the COVID-19 pandemic, and their associated operational, economic, legislative and regulatory impacts, including impacts on Economical’s ability to maintain operations and provide services to customers and on the expectations of governmental or regulatory authorities concerning the provision of customer relief;
  • general economic, financial, and political conditions, particularly those in Canada;
  • the competitive market environment and cyclical nature of the P&C insurance industry;
  • the introduction of disruptive innovation;
  • distribution channel risk, including Economical’s reliance on independent brokers to sell its products;
  • Economical’s ability to manage capital and liquidity effectively; and
  • periodic negative publicity regarding the insurance industry or Economical.

All of the forward-looking statements included in this news release are qualified by these cautionary statements. These factors are not intended to represent a complete list of the factors that could impact Economical, and other factors and risks could impact our actual results, performance and achievements; however, these factors should be considered carefully, and readers should not place undue reliance on the forward-looking statements we make. We do not undertake and have no intention to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.


Catastrophe loss An event causing gross losses in excess of $2 million, and generally greater than 100 claims.
Claims development The difference between prior year end estimates of ultimate undiscounted claim costs and the current estimates for the same block of claims. A favourable development represents a reduction in the estimated ultimate claim costs during the period for that block of claims.
Customer relief Actions taken to ease the burden of the pandemic on our individual and business customers, in the form of rate relief and flexibility in underwriting rules.
Discounting To reflect the time value of money, the expected future payments of claim liabilities are discounted back to present value using the market yield rate of the investments used to support those liabilities. Provisions for adverse deviation are also included when determining the discounted value.
Frequency A measure of how often a claim is reported as a function of policies in force.
Large loss A single claim with a gross loss in excess of $1 million.
Minimum capital test (MCT) A regulatory formula defined by the Office of the Superintendent of Financial Institutions, that is a risk-based test of capital available relative to capital required.
Severity A measure of the average dollar amount paid per claim.
Total equity Retained earnings plus accumulated other comprehensive income.
Underwriting income (loss) Net earned premiums for a defined period less the sum of claims and adjustment expenses (excluding the impact of discounting), net commissions, operating expenses (net of other underwriting revenues), and premium taxes during the same period.
Also included in this news release are a number of measures which do not have any standardized meaning prescribed by generally accepted accounting principles (“GAAP”). These non-GAAP measures may not be comparable to any similar measures presented by other companies.
Claims ratio Claims and adjustment expenses (excluding the impact of discounting) during a defined period expressed as a percentage of net earned premiums for the same period.
Combined ratio Claims and adjustment expenses (excluding the impact of discounting), commissions, operating expenses (net of other underwriting revenues), and premium taxes during a defined period expressed as a percentage of net earned premiums for the same period.
Core accident year claims ratio Claims ratio excluding catastrophe losses and claims development.
Expense ratio Underwriting expenses, including commissions, operating expenses (net of other underwriting revenues), and premium taxes during a defined period, expressed as a percentage of net earned premiums for the same period.
Gross written premiums The total premiums from the sale of insurance during a specified period.

For further information, contact:


Media Inquiries:
Sarah Attwells, Director, Public and Media Relations
(T) 877.859.4950, ext. 54042
(C) 416.986.9360

Stakeholder Relations Inquiries:
Dennis Westfall, Head, Investor Relations
(C) 416-435-5568