Echelon Insurance Reports First Quarter 2018 Results

TORONTO, May 3, 2018 /CNW/ - Echelon Financial Holdings Inc. ("EFH" or "the Company") (TSX: EFH), which operates in the property and casualty insurance industry in Canada, today reported net income attributable to shareholders on continued operations of $5.8 million, or $0.48 per diluted share, for the three months ended March 31, 2018.

All operating results below refer to continued operations.

First Quarter 2018 Highlights

• Net operating income on continued operations of $0.29 per share compared to $0.19 per share in the first quarter of 2017.
• A combined operating ratio of 95% compared to 94% in the first quarter of 2017.
• A 45% increase in direct written premiums over the same period in 2017 to $79.3 million as a result of organic growth, supported by rate increases in Commercial Lines.
• A pre-tax gain on invested assets of $0.9 million in the quarter, compared to a pre-tax gain of $5.1 million in the prior year quarter, attributable to weak performance of the preferred shares portfolio.
• Closing book value per share of $12.47, an increase of $0.46 or 4% from the fourth quarter of 2017. The increase is driven by strong underwriting income, investment returns, the impact on claims liabilities from the change in discount rate and the recognition of a $0.17 per share deferred tax asset from the utilization of capital losses.

"Our first quarter results were positive," commented Serge Lavoie, Chief Executive Officer. "We finished the quarter with an overall combined ratio of 95%. While the industry as a whole experienced severe losses during the early winter months, our results were largely unaffected, due to our focus on small to mid-sized customers, and our prudent retention limits."

"We experienced an increase in written premium across all lines and regions, attributable to organic growth and rate increases, particularly in Commercial Lines," he continued. "We are actively implementing further rate and underwriting changes to ensure ongoing profitability."

"We are pleased with the accomplishments made in systems this quarter," he explained. "We added additional automation functionality to our policy management system, and piloted the launch of our Passport Portal in Ontario. These enhancements have begun to streamline our business submission and policy issuance process internally, and for our broker partners," he concluded. "Our brokers have been very receptive to the latest round of system improvements, and are eager to see these features cascaded across our other regions and lines of business."

Financial Summary on Continued Operations

First Quarter Review

The Company reported net operating income of $3.5 million or $0.29 per share in the quarter, compared to income of $2.3 million or $0.19 per share in the first quarter of 2017, an increase of 53%.

Direct written premiums increased by 45% to $79.3 million, due to organic growth in all lines supported by Commercial rate increases.

Personal Lines generated an underwriting income of $2.0 million, comparable to an underwriting income of $1.9 million in the same period last year, with stable growth coming largely from our automobile lines of business.

Commercial Lines generated an underwriting income of $1.2 million compared to an underwriting income of $1.0 million in the same period last year due to strong performance in commercial property.

Investment income was $2.0 million compared to $8.5 million in the first quarter of 2017. The pre-tax gain on invested assets was $0.9 million in the quarter, compared to a pre-tax gain of $5.1 million in the first quarter of 2017. This was due to weak performance in the preferred shares portfolio. The fair value of Echelon's investment portfolio, including finance receivables, was $461 million.

Net favourable development of prior year claims of $3.6 million was recorded in the first quarter of 2018, compared to favourable development of $3.3 million in the same period in 2017.

Operating Results

Capital Management

All related entities remain well capitalized.  The Minimum Capital Test (MCT) ratio of EFH's subsidiary, Echelon Insurance, as at March 31, 2018, was 235%, which comfortably exceeds the supervisory regulatory capital level required by the Office of the Superintendent of Financial Institutions (OSFI). ICPEI's MCT ratio of 335% was also in excess of provincial supervisory targets.

As at March 31, 2018, the Company has approximately $21 million of excess deployable capital invested in liquid assets at the holding company. EFH currently intends to use any excess capital in addition to capital generated from its operations to fund the growth in its insurance operating companies.

For the three-month period ended March 31, 2018, total shareholders' equity increased by $6.0 million to $148.9 million from December 31, 2017.

Full Financial Statements and Management's Discussion and Analysis (MD&A) are available on SEDAR and on the Company's web site at echeloninsurance.ca.

Non-IFRS Financial Measures

EFH uses International Financial Reporting Standards (IFRS) and certain non-IFRS measures to assess performance.  Readers are cautioned that non-IFRS measures do not have a standardized meaning under IFRS and may not be comparable to similar measures used by other companies. EFH analyzes performance based on operating income and underwriting ratios such as combined, expense and loss ratios.

Forward-looking Information

This news release contains forward-looking information based on current expectations. This information includes, but is not limited to, statements about the operations, business, financial condition, priorities, targets, ongoing objectives, strategies and outlook of EFH for 2018 and subsequent periods.

This information is based upon certain material factors or assumptions that were applied in drawing a conclusion or making a projection as reflected in the forward-looking information. By its nature, this information is subject to inherent risks and uncertainties that may be general or specific. A variety of material factors, many of which are beyond EFH's control, affect the operations, performance and results of its business and could cause actual results to differ materially from the expectations expressed in any of this forward-looking information.

EFH does not undertake to update any forward-looking information. Additional information about the risks and uncertainties about Echelon's business is provided in its disclosure materials, including its Annual Information Form and Management Discussion & Analysis, filed with the securities regulatory authorities in Canada, available at www.sedar.com.

Conference Call

A conference call for analysts and interested listeners will be held on Friday, May 4, 2018, at 11:00 a.m. (ET). The call-in numbers for participants are 647-427-7450 or toll free 1-888-231-8191, Conference ID 5193545. A live audio feed of the call will be available online through the Company's website at echeloninsurance.ca, or directly at the following link.

A replay of the call will be available until May 11, 2018. To access the replay, call 416-849-0833, or toll free 1-855-859-2056, password 5193545. An archive will be available on our website following the event.

About Echelon Financial Holdings Inc.

Founded in 1998, Echelon Financial Holdings Inc. operates in the property and casualty insurance industry in Canada, providing personal and commercial lines insurance exclusively through the broker channel. The Company distributes insurance products through Echelon Insurance and The Insurance Company of Prince Edward Island. It trades on the Toronto Stock Exchange under the symbol EFH. For more information, please visit echeloninsurance.ca.

SOURCE Echelon Financial Holdings Inc.