ICBC maintains performance through second quarter — August 22
ICBC has reported its financial results through the first half of 2008. Net income at ICBC for the first half of the year was $255 million, approximately the same as the $256 million for the same period in 2007.
"ICBC's consistent financial performance for 2008 to date is the result of higher premium revenue - due, in large part, to the growth in the number of insured vehicles on the road and an increasing number of optional coverage policies - offset by higher claims and related costs," said Geri Prior, ICBC's interim president and CEO. "Our retained earnings act as a contingency fund and generates investment income, both of which help to keep rates low and stable for our customers over the long term."
As of July 1, 2008, ICBC's optional premium rates decreased by an average of three percent while basic rates are remaining the same as ICBC has not proposed an increase in 2008.
ICBC's investment income for the first half of the year was $269 million, which is 2.5 percent lower than for the same period last year, of $276 million. Claims and related costs for the six months ending June 30, 2008, were $1.5 billion, 3.8 percent higher than for the same period in 2007, of $1.45 billion.
Higher claims costs remain a concern at ICBC. The increasing numbers of vehicles on BC's roads mean claims costs are increasing, albeit at a slower rate than in previous years. However, for every $1.00 in premiums-earned, ICBC incurs approximately $1.03 in claims costs and operating expenses. Investment income helps ICBC offset some of this shortfall.
"With recent uncertainty in the financial markets and changing economic trends, we cannot rely on investment income to the same extent we have in the past," said Prior. "The current downturn in the equity markets will have a negative impact on our investment income as we move forward through 2008."
Insurance premiums- Premiums earned for the first six months of 2008 increased to $1.79 billion from $1.70 billion for the first six months of 2007, in large part due to the increased number of insured vehicles on BC's roads - approximately 80,000 more in the first six months of 2008 compared to the same period last year.
- ICBC continues to lead the industry in low operating costs. The expense ratio - operating costs, broker commissions and premium taxes as a percentage of earned premiums - was 18.4 percent for the first six months of 2008, which continues to compare very favourably to the insurance industry.
- Claims costs are still increasing which is in line with an increasing number of ICBC policies being sold, but the cost of the average claim is rising at a slower rate as compared to recent experiences. While claims costs are lower than expected due to the unusually dry weather so far this year, the wetter autumn and winter months are still to come.
- ICBC's investment income for the first six months of 2008 was lower than for the same period last year. Results saw lower gains on equities and higher gains on bonds compared to the same period in 2007. The current market volatility will have a negative impact on our investment income in the second half of 2008, even though ICBC maintains a conservative investment policy with the majority of assets invested in high-quality, investment-grade bonds.
- ICBC continues to maintain high levels of customer satisfaction, as confirmed by independent third-party research from NRG Research Group. Levels of customer satisfaction with ICBC for our various lines of business are:
- Insurance services: 94%
- Claims services: 84%
- Driver Licensing services: 93%
- There have been significant decreases in the number of stolen vehicles in BC for each of the last five years with numbers decreasing for stolen vehicles, vehicle break-ins and vandalism. This trend is continuing with a 17.4 percent drop in auto theft claims for the first six months of 2008 compared to the same period for 2007. Some of the major reasons for the dropping auto crime rates are the success of the Bait Car program and other enforcement efforts, as well as the growing prevalence of immobilizers in vehicles.
- ICBC continues to invest in road safety programs to reduce the number and severity of crashes, and to help lower claims costs. Examples include support for enhanced traffic enforcement by police, road improvements at high-crash locations, and public awareness campaigns.
Media Contact:
Adam Grossman (604) 982-1332
