Home and car insurance set to rise, ING Canada warns

TORONTO

Home and car insurance premiums are set to rise across the industry, ING Canada warned yesterday while reporting a $36.3-million first-quarter loss and formally changing its name to Intact Financial Corp.

The vehicle insurance crunch is most severe in Ontario, chief executive Charles Brindamour said, while on the property side insurers are beset with more claims caused by changing weather patterns.

The name change to Intact Financial, approved at yesterday's annual meeting of shareholders, arises from the company's independence from former parent ING Group of Holland. In February, financially stressed ING Group sold its 70 per cent ownership for $2.2 billion.

The 7,000-employee insurer -- separate from the ING Direct branchless bank still owned by the Dutch financial services group -- said it was pushed into the red for the first quarter by a one-time charge of $82.9 million related to a new hedging program on financial-institution shares. There also were lower earnings from its investment portfolio as it moved into more conservative holdings.

The $36.3-million net loss, worth 30 cents per share, compared with a year-ago profit of $23 million, 19 cents per share.

The company, operating under the Intact Insurance, Novex Group Insurance, Belairdirect and Grey Power brands, said operating profit was up 3.6 per cent to $69.1 million or 58 cents per share. The increase beat a consensus analyst estimate of 56 cents per share.

"All our business lines performed well in the current environment except our home insurance business,'' Brindamour stated, noting that property and casualty insurance tends to be nondiscretionary and insulated from economic recessions.

However, "over the last few years, the industry's results, and ours, have been significantly affected by the growing number of severe storms that hit numerous communities from coast to coast,'' he said, and Intact has "a robust action plan'' to improve its home insurance results

Coverage is being restricted and premiums are rising by double-digit percentages in areas prone to water damage because of aging city infrastructure or climate change.

Intact is also tightening claims processes, which "will include evaluating the scope of all claims, price assessments for a larger sample of routine claims, and the reinspection of repairs after the work is completed.'' Claims as low as $10,000 will be subject to a bidding process.

Auto insurance results strengthened, but the home insurance segment lost $26.9 million due to storms and rapid snow melt.

The company has been raising personal auto rates in Ontario over the past 18 months but Brindamour said premiums have been outpaced by claim costs.

He said Ontario drivers already pay five per cent of their disposable income for car insurance, compared with three per cent in Alberta and the Atlantic provinces, and some proposed changes in a recent provincial five-year review of the industry would raise costs further. "If this situation is left unchecked, consumers may face the same affordability and availability issues that were prevalent earlier this decade.''

ING Canada shares declined $2.22 to $34.10 in late-afternoon trading, down from $43 before last autumn's financial-market mudslide but up from a TSX low of $26 in February after ING Group unloaded its holding at a below-market price of $25.