SGI Canada’s growth outpacing industry average

Joe Hargrave speaks to supporters during the 2016 election campaign. Herald file photo.

Saskatchewan Government Insurance (SGI) trumpeted its expanding services and $35.8 million dividend payout in its annual report, released Thursday.

SGI’s competitive arm, SGI Canada, outperformed the Canadian insurance market on several metrics, while the Auto Fund wrote over $900 million in gross premiums.

The Auto Fund is administered by SGI, and is self-sustaining, operating on a break-even basis over time. It doesn’t receive money from, nor does it pay dividends to, the provincial government.

The Auto Fund made $162.8 million in investment earnings and saw a 1.3 per cent decrease in claims incurred.

During the 2017-18 fiscal year, the Auto Fund was able to add $210.1 million to the Rate Stabilization Reserve, which acts as a cushion protecting costumers from severe rate increases when an influx of claims comes in, whether due to a storm or a downturn in markets.

The other arm of SGI, SGI Canada, which offers insurance in Saskatchewan, Alberta, BC, Manitoba and Ontario, also had a solid year, posting a $59.4 million profit and boasting an 8.7 per cent premium growth, outperforming the industry’s three per cent average. That growth occurred both inside and outside Saskatchewan.

SGI Canada also managed a 15.8 per cent return on equity after tax, well ahead of the eight per cent industry average.

About 35 per cent of all of the $802.8 million in premiums written came from outside Saskatchewan. The $35.8 million dividend was 60 per cent of its net income.

SGI Canada’s combined ratio was 98.5 per cent. A number below 100 per cent indicates an underwriting profit. The Crown corporation is aiming for a ratio of 96.3 per cent for 2018-19.

“The company is on track to continue its growth trajectory, gaining customers and partnering with brokers throughout the country,” said Minister Responsible Joe Hargrave in a written statement.

“It is in a position to provide profitable returns in the future.”

SGI has an internal goal of $1 billion in direct premiums written by 2020. A chunk of that growth will come from premiums written outside of Saskatchewan. In 2017, SGI Canada began selling personal property and auto insurance in Ontario. It also launched its farm business unit. The Crown corporation hopes to see growth from both of those sectors going forward.

The growing business outside of Saskatchewan is important in keeping the Crown sustainable, its president and CEO wrote.

“Notably, 35.2 per cent of the company’s premium was written outside of Saskatchewan. This reflects a growth strategy to spread risk across the country so that losses in one province can be offset by profits in another. Geographic diversification is critical to SGI Canada’s continued success, and remains a priority as extreme weather events continue to escalate and contribute to claims losses.”

Those escalating weather events made an impact in the 2017-18 fiscal year.

“Storm costs have been extremely high in the last four years, with estimated net storm costs being greater than $50 million, compared with the 10-year average of 34.7 million,” the report said.

That was especially true in British Columbia, where the loss ratio increased from 88.6 per cent last year to 121.2 per cent this year due to an increase in claim volumes, including catastrophic claims from wildfire. B.C. had $1.9 million in catastrophic claims, compared to none the year prior.

The highest storm costs were in Saskatchewan, where they made up $41.1 million in claims. Saskatchewan tends to have higher storm claims, SGI Canada said, because of the corporation’s “significant exposure in the province.”

However, it is seeing growing numbers of disaster claims in Alberta as more people buy SGI-written insurance.

Thierman Financial