Fort McMurray wildfires drag down corporate profits

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The wildfires in Fort McMurray slammed Canada's private sector in the second quarter, pummelling insurers' profits and deepening losses in the oil patch.

Property and casualty insurers swung to an operating loss of $410-million in the three months that ended in June, compared with a profit of $1.4-billion in the previous quarter, according to Statistics Canada's survey of corporate earnings released on Thursday.

The May wildfires destroyed homes and businesses in Fort McMurray and forced thousands of people to leave the area. The Insurance Bureau of Canada called the fires the costliest insured natural disaster in the country's history, with claims jumping by $1.4-billion from the first quarter to the second.

The northern Alberta city is expected to take months to rebuild.

Intact Financial Corp., Canada's largest property and casualty insurer, foreshadowed the industry's woes. The insurer had recorded a sharp drop in second-quarter profits due to the fires.

"We were expecting a weak quarter, and that is what we saw," said Leslie Preston, senior economist with Toronto-Dominion Bank.

The spring wildfires temporarily shut down some oil production, underpinning another quarterly loss in the energy industry. The oil-and-gas sector recorded an operating loss of $4.2-billion, its sixth consecutive quarterly deficit, though the loss was smaller than in the previous period.

But industries such as manufacturing and transportation also recorded lower earnings.

Across the private sector, operating profits fell 3.4 per cent to $72.9-billion in the second quarter, marking the sixth decline in the last seven quarters. Over the year, profits were off 15 per cent.

The government report surveys financial results for publicly traded companies and private businesses. The operating profits exclude items such as taxes paid and other items that are not part of regular operations.

Most of the weakness stemmed from the slump in oil prices. Crude is trading around $46 (U.S.) a barrel, compared with more than $100 in mid-2014.

That has wreaked havoc across Canada's economy, hitting sectors such as real estate, manufacturing, and professional, scientific and technical services.

"You can attribute general weakness in corporate profits to the impact of the oil price collapse," said Ms. Preston.

Alberta's economy is facing its longest recession on record, and has suffered from thousands of job losses. The unemployment rate is hovering at 8.6 per cent, and wages are declining.

Average weekly earnings in the province fell 2.4 per cent, to $1,119, in the 12 months ended in June, according to the government's survey of employment, payrolls and hours released on Thursday. Pay fell across most sectors, including construction and wholesale trade.

Although wages in Alberta have eased during the oil downturn, the average weekly pay in the province is still higher than the national weekly average of $958.

The payroll survey showed that the resource-dependent province lost 62,000 jobs over the year, while Ontario created 142,000 positions and British Columbia added 61,000 spots.

The commodities and manufacturing industries have been responsible for the bulk of the employment declines across the country. Employment gains were seen in areas such as health care, public administration, educational services, and accommodation and food services.

Statscan's payroll survey is one of two national labour reports and is considered more accurate, as it relies on employers and payroll tax-deduction filings.