SGI prevails despite storms and wildfires
Diversification offsets weather
Mild winter weather and geographic diversification helped Saskatchewan Government Insurance (SGI) to increase profits in its general insurance business, SGI Canada, while Saskatchewan Auto Fund, the mandatory automobile accident insurance plan administered by SGI, hiked rates in late 2014, boosting its rate stabilization reserve to a record high in fiscal 2015-16.
SGI Canada, which sells property and casualty insurance in Saskatchewan, Alberta, Manitoba, Ontario and B.C., posted a pre-tax profit of $65 million in 2015, up nearly 60 per cent from $40.7 million in 2014. (With Crown corporations adopting the government’s fiscal year, the corporation also announced an $84.5-million profit and paid a $47.3-million dividend for the 15-month period ended March 31.)
The Auto Fund, which operates on a break-even basis, had premium income of $936 million in 2015 ($1.1 billion for the 15 months), largely due to a 4.4 per cent rate hike in September 2014, which helped increase its rate stabilization reserve by $159 million to $377 million — an all-time high.
“Overall, in 2015-16, it was a very successful year for both sides of the company,’’ said Don McMorris, minister responsible for SGI.
“SGI Canada’s profitability is due to both favourable underwriting results and investment earnings,” McMorris said, noting the company achieved an underwriting profit of $42.4 million and investment income of $46 million in 2015-16.
Geographic diversification in five provinces, including B.C. where SGI Canada began operating last year, also contributed to the positive bottom line. “In 2015-16, SGI achieved growth in all provinces where it operated, despite economic downturns both in Saskatchewan and Alberta,’’ McMorris said. SGI Canada has about 29 per cent of its business outside the province and aims to increase that to 32 per cent in 2016-17.
Increased earnings were achieved, despite $55.1 million in claim losses due to summer storms and wildfires in Northern Saskatchewan. In fact, four of the last six years have seen major weather events, like $12 million in damages from a hailstorm in Kindersley last year, that have boosted catastrophe claims well above the 10-year average of $28.2 million.
“The mitigation strategy is expansion, spreading yourself across the country so that when you have a major event in one province it’s offset by premiums from another area,’’ McMorris said. Rate increases are “driven by industry,’’ he said. “We need to be competitive.’’
“The insurance industry is unique in that you’re trying to price a product when you don’t know what your costs are going to be,’’ added Jeff Stepan, chief financial officer of SGI.
Similarly, the Auto Fund saw relatively low damage and injury claims last year, due in part to the unusually mild winter and traffic safety initiatives, such as photo radar in high-traffic areas, like the Ring Road in Regina and Circle Drive in Saskatoon.
With 121 fatalities in 2015, the lowest in decades, the preliminary numbers for 2015 are encouraging. “That’s 121 too many,’’ McMorris said.
“But it’s the lowest number that I can remember for a very long time.’’
The Auto Fund also introduced optional reduced injury coverage for motorcyclists, streamlined auto damage claims appraisal processes and received government approval for changes to auto injury coverage and the Safe Driver Recognition program.