(TSX: DFY)
(in Canadian dollars except as otherwise noted)
TORONTO, Aug. 3, 2023
/CNW/ -
Highlights
- Gross written premium1 growth of 9.0% in 2023 Q2,
supported by ongoing firm market conditions in personal property
and commercial lines and despite deliberate actions taken to
navigate the current auto environment
- Combined ratio1 of 95.3% in 2023 Q2, driven by
continued strong performance in commercial lines, and inclusive of
5.4 points of catastrophe losses largely in line with second
quarter expectations
- Personal auto combined ratio1 of 97.6% in 2023 Q2
reflects expected improvement from seasonality and continuing
stabilization of elevated claims trends
- Operating net income1 of $64.8 million in 2023 Q2, compared to
$51.1 million in 2022 Q2, resulting
in operating EPS1 of $0.56
per share; trailing 12-month operating ROE1 of 9.8%
- Financial position remained strong, with book value per
share1 of $23.42, 12.7%
higher than a year ago
- The acquisition of McFarlan
Rowlands and pending purchase of Drayden Insurance are
expected to result in our insurance broker platform approximating
$900 million in annual premiums
Executive Messages
"Severe storms and wildfires have impacted communities across
the country in recent months. I am proud of our team's ability to
be there for our affected customers during this difficult time.
Including the impact of these events, we reported a second quarter
combined ratio of 95.3%, in line with our target. We continued to
benefit from our strong broker relationships to drive solid premium
growth of 9%, despite actions taken to mitigate the impact of the
Alberta auto rate pause on our
direct business. Strong underwriting, robust net investment income,
and an increasing contribution from our recently strengthened
distribution capabilities combined to generate second quarter
operating net income of $64.8
million, or $0.56 per share.
We welcomed McFarlan Rowlands during
the quarter and announced our intention to expand our insurance
broker platform into Alberta with
the addition of Drayden Insurance. These acquisitions advance our
ambition to build this platform into another billion-dollar
business for Definity."
– Rowan Saunders, President &
CEO
"We maintained our strong financial position, with book value
per share up 12.7% compared to the second quarter of 2022.
Operating income continued to benefit from the expansion in net
investment income, strengthened by our proactive actions to capture
yield in a higher rate environment. Overall, we generated an
operating ROE of 9.8%, as increased earnings outpaced the increase
in our equity base. We continue to successfully deploy capital to
build a leading insurance broker platform, enabling us to diversify
our earnings with a complementary source of income. With
substantial financial capacity, and the continuance application
well underway, we have significant flexibility as we continue to
reinvest in and grow our business."
– Philip Mather, EVP &
CFO
Consolidated Results
(in millions of dollars, except as otherwise
noted)
|
Q2 2023
|
Q2 2022
(Restated)
|
Change
|
2023 YTD
|
2022 YTD
(Restated)
|
Change
|
|
|
|
|
|
|
|
Insurance
revenue
|
954.9
|
863.8
|
10.5 %
|
1,862.4
|
1,678.1
|
11.0 %
|
Gross written
premiums1
|
1,085.1
|
995.8
|
9.0 %
|
1,932.0
|
1,755.9
|
10.0 %
|
Net underwriting
revenue1
|
877.5
|
803.1
|
9.3 %
|
1,716.6
|
1,568.4
|
9.4 %
|
|
|
|
|
|
|
|
Claims
ratio1
|
63.7 %
|
63.3 %
|
0.4 pts
|
63.2 %
|
61.2 %
|
2.0 pts
|
Expense
ratio1
|
31.6 %
|
32.0 %
|
(0.4) pts
|
32.1 %
|
32.7 %
|
(0.6) pts
|
Combined ratio1
|
95.3 %
|
95.3 %
|
- pts
|
95.3 %
|
93.9 %
|
1.4 pts
|
|
|
|
|
|
|
|
Insurance service
result
|
132.2
|
101.6
|
30.6
|
226.1
|
217.6
|
8.5
|
Underwriting
income1
|
41.2
|
37.8
|
3.4
|
80.7
|
95.6
|
(14.9)
|
Net investment
income
|
42.8
|
31.8
|
11.0
|
83.8
|
57.6
|
26.2
|
Distribution
income1
|
9.8
|
2.9
|
6.9
|
19.3
|
7.6
|
11.7
|
|
|
|
|
|
|
|
Net income (loss) attributable to common
shareholders
|
71.6
|
(77.2)
|
148.8
|
172.5
|
(109.8)
|
282.3
|
Operating net income1
|
64.8
|
51.1
|
13.7
|
128.2
|
114.4
|
13.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
This is a supplementary
financial measure, non-GAAP financial measure, or a non-GAAP ratio.
Refer to Supplementary financial measures and non-GAAP financial
measures and ratios in this news release, and Section 12 –
Supplementary financial measures and non-GAAP financial measures
and ratios in the 2023 Q2 Management's Discussion and Analysis
dated August 3, 2023 for further details, which is hereby
incorporated by reference and is available on the Company's website
at www.definityfinancial.com and on SEDAR at
www.sedar.com.
|
|
Q2 2023
|
Q2 2022
(Restated)
|
Change
|
2023 YTD
|
2022 YTD
(Restated)
|
Change
|
|
|
|
|
|
|
|
Per share measures (in dollars)
|
|
|
|
|
|
|
Diluted EPS
|
0.61
|
(0.67)
|
1.28
|
1.48
|
(0.95)
|
2.43
|
Operating
EPS1
|
0.56
|
0.44
|
0.12
|
1.10
|
0.98
|
0.12
|
Book value per share
("BVPS")1
|
|
|
|
23.42
|
20.78
|
2.64
|
|
|
|
|
|
|
|
Return on equity
|
|
|
|
|
|
|
Return on equity
("ROE")1
|
|
|
|
15.5 %
|
N/A
|
|
Operating
ROE1
|
|
|
|
9.8 %
|
N/A
|
|
Note: 2023 Q2 ROE and
Operating ROE measures are on a rolling twelve-month basis. 2022 Q2
is N/A due to adoption of IFRS 17 — Insurance Contracts
("IFRS 17") and IFRS 9 — Financial Instruments ("IFRS 9").
The full year 2022 Operating ROE is 9.4%.
|
- Gross written premiums ("GWP") for 2023 Q2 increased by
$89.3 million or 9.0% compared to
2022 Q2, with growth across all our lines of business. Personal
lines GWP was up 6.3%, driven by growth in personal property.
Commercial lines GWP increased 15.3% as we continued to focus on
profitable growth in this line of business. Year to date, GWP
increased by $176.1 million or 10.0%
compared to 2022. Personal lines GWP increased 7.0% and commercial
lines GWP increased 17.3%.
- Underwriting income for 2023 Q2 was $41.2 million and the combined ratio was 95.3%,
compared to underwriting income of $37.8
million and a combined ratio of 95.3% in 2022 Q2. The
combined ratio reflects continued strong performance in commercial
lines, an active quarter with respect to catastrophe losses, and
continued elevated levels of claims severity from persistent, but
stabilizing, inflation and theft in personal auto. Total
catastrophe losses in the second quarter were largely in line with
our expectations, although a higher proportion of losses impacted
personal property.
Year to date, our underwriting income decreased by $14.9 million and led to a combined ratio of
95.3% as compared to 93.9% in 2022. Results were strong despite
elevated claims trends in both frequency and severity in personal
auto, and lower levels of favourable prior year claims development
in our personal lines.
- Net investment income increased $11.0 million in 2023 Q2 and $26.2 million year to date driven primarily by
higher fixed income yields that we captured by active management of
the fixed income portfolio, in an environment of rising interest
rates.
- Distribution income was $9.8
million in 2023 Q2 and $19.3
million year to date, compared to $2.9 million in 2022 Q2 and $7.6 million in the first half of 2022, due
primarily to the increased ownership position in McDougall
Insurance Brokers Limited ("McDougall") and our acquisition of
McFarlan Rowlands Insurance Brokers Inc. ("McFarlan Rowlands") in
the second quarter.
Net Income and Operating Net Income
- Net income attributable to common shareholders
was $71.6 million in 2023 Q2 compared
to a net loss of $77.2 million in
2022 Q2. Net income attributable to common shareholders increased
as a result of a decrease in unrealized losses on investments in
2023 compared to 2022, as well as the factors impacting operating
net income.
Year to date, net income attributable to common shareholders was
$172.5 million compared to a net loss
of $109.8 million in 2022 due
primarily to unrealized gains on investments in 2023 compared to
losses in 2022, as well as the factors impacting operating net
income.
- Operating net income was $64.8
million in 2023 Q2 compared to $51.1
million in 2022 Q2 due primarily to higher net investment
income and distribution income. Year to date, operating net income
was $128.2 million compared to
$114.4 million in 2022.
- Operating ROE was 9.8% for the twelve-month period ended
June 30, 2023 compared to 9.4% for
the full year ended December 31,
2022, as higher operating net income outpaced the growth in
average adjusted equity attributable to common shareholders.
1
|
This is a supplementary
financial measure, non-GAAP financial measure, or a non-GAAP ratio.
Refer to Supplementary financial measures and non-GAAP financial
measures and ratios in this news release, and Section 12 –
Supplementary financial measures and non-GAAP financial measures
and ratios in the 2023 Q2 Management's Discussion and Analysis
dated August 3, 2023 for further details, which is hereby
incorporated by reference and is available on the Company's website
at www.definityfinancial.com and on SEDAR at
www.sedar.com.
|
Line of Business Results
(in millions of dollars, except as otherwise
noted)
|
|
Q2 2023
|
Q2 2022
(Restated)
|
Change
|
|
2023 YTD
|
2022 YTD
(Restated)
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal insurance
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premiums1
|
|
|
|
|
|
|
|
|
|
|
|
Auto
|
|
|
|
|
442.1
|
431.1
|
2.6 %
|
|
799.9
|
770.9
|
3.8 %
|
Property
|
|
|
|
|
301.8
|
268.7
|
12.3 %
|
|
527.1
|
469.1
|
12.4 %
|
Total
|
|
|
|
|
743.9
|
699.8
|
6.3 %
|
|
1,327.0
|
1,240.0
|
7.0 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined ratio1
|
|
|
|
|
|
|
|
|
|
|
|
Auto
|
|
|
|
|
97.6 %
|
92.8 %
|
4.8 pts
|
|
99.2 %
|
94.5 %
|
4.7 pts
|
Property
|
|
|
|
|
102.5 %
|
102.9 %
|
(0.4) pts
|
|
96.9 %
|
97.9 %
|
(1.0) pts
|
Total
|
|
|
|
|
99.6 %
|
96.7 %
|
2.9 pts
|
|
98.3 %
|
95.8 %
|
2.5 pts
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial insurance
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premiums1
|
|
|
|
|
341.2
|
296.0
|
15.3 %
|
|
605.0
|
515.9
|
17.3 %
|
Combined ratio1
|
|
|
|
|
84.3 %
|
91.6 %
|
(7.3) pts
|
|
87.5 %
|
88.8 %
|
(1.3) pts
|
Personal Insurance
- Overall, personal lines GWP increased 6.3% in 2023 Q2
(7.0% year to date). The direct channel GWP was $101.8 million in 2023 Q2, a decrease of 4.9%
compared to $107.1 million in 2022
Q2, driven largely by our deliberate actions taken in response to
the Alberta auto rate pause as
well as other profitability actions. The direct channel GWP was
$196.1 million year to date, an
increase of 0.4% compared to $195.3
million in 2022. Personal lines underwriting income was
$2.8 million in 2023 Q2 compared to
$19.7 million in 2022 Q2. Year to
date, personal lines underwriting income was $21.1 million compared to $48.7 million in 2022.
- Personal auto GWP increased 2.6% in the quarter (3.8%
year to date), reflecting an increase in average written premiums.
The combined ratio of 97.6% in 2023 Q2 (2022 Q2: 92.8%) was
impacted by expected increases in frequency from normalization of
driving patterns, continued elevated levels of claims severity from
persistent but stabilizing inflation, heightened levels of theft,
and lower levels of favourable prior year claims development. Year
to date, the personal auto combined ratio was impacted by the same
factors that impacted the second quarter.
- Personal property GWP increased 12.3% in the quarter
(12.4% year to date), benefitting from continued firm market
conditions driving increases in average written premiums. The
combined ratio in the quarter was 102.5% (2022 Q2: 102.9%), a
slight improvement from 2022 Q2 due to an improved core accident
year claims ratio, partially offset by an elevated level of
catastrophe losses. Catastrophe losses accounted for 17.0
percentage points to the combined ratio in 2023 Q2 (including an
ice and rain storm in Ontario and
Québec in April, and wildfires in the Atlantic region) compared to
13.5 percentage points to the combined ratio in 2022 Q2. Year to
date, the personal property combined ratio improved due to an
improved core accident year claims ratio, partially offset by lower
favourable prior year claims development.
Commercial Insurance
- Strong growth momentum in commercial lines continued in
2023 Q2 as we benefitted from broad support from our broker
partners across Canada. GWP
increased 15.3% in the quarter (17.3% year to date) driven by
strong retention and rate achievement in a firm market environment
and further scaling of our small business and specialty
capabilities.
- Commercial lines benefitted from continued focus on
underwriting execution with a strong combined ratio of 84.3% and
underwriting income of $38.4 million
in the quarter. This compared to the combined ratio of 91.6% and
underwriting income of $18.1 million
in 2022 Q2. The combined ratio improved due to lower catastrophe
losses and increased favourable prior year claims development. The
increase in favourable prior year claims development was due in
part to a release of COVID-19-related provisions in the quarter, in
response to positive legal developments. Year to date, the
commercial lines combined ratio was 87.5% and underwriting income
was $59.6 million compared to 88.8%
and underwriting income of $46.9
million in 2022 Q2. The year-to-date commercial lines
combined ratio improved due to the same factors as the second
quarter.
1
|
This is a supplementary
financial measure, non-GAAP financial measure, or a non-GAAP ratio.
Refer to Supplementary financial measures and non-GAAP financial
measures and ratios in this news release, and Section 12 –
Supplementary financial measures and non-GAAP financial measures
and ratios in the 2023 Q2 Management's Discussion and Analysis
dated August 3, 2023 for further details, which is hereby
incorporated by reference and is available on the Company's website
at www.definityfinancial.com and on SEDAR at
www.sedar.com.
|
Financial Position
(in millions of dollars, except as otherwise
noted)
|
|
|
|
|
As at
June 30,
2023
|
As at
December 31, 2022
(Restated)
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial position
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
|
|
|
|
|
|
4,758.2
|
4,897.2
|
(139.0)
|
Equity attributable to
common shareholders
|
|
|
|
|
|
|
|
|
2,696.2
|
2,549.8
|
146.4
|
Financial
capacity
|
|
|
665.4
|
658.5
|
6.9
|
Note: Financial
capacity for December 31, 2022 has not been restated to reflect the
adoption of IFRS 17 and IFRS 9 nor OSFI's MCT 2023
guidelines.
|
- Equity attributable to common shareholders increased by
$146.4 million, or 5.7%, as at
June 30, 2023, due primarily to the
positive contribution from operating net income.
- The increase in financial capacity as at June 30, 2023 relates primarily to an increase in
capital available from the generation of net income, inclusive of
the unrealized gains generated on the FVTPL investments, and the
impact of our transition to IFRS 17. These were partially offset by
capital deployed in the acquisition of McFarlan Rowlands.
- Our capital position as of June 30,
2023 remains strong and well in excess of both internal and
regulatory minimum capital requirements.
Dividend
- On August 3, 2023, our Board of
Directors declared a $0.1375 per
share dividend, payable on September 28,
2023 to shareholders of record at the close of business on
September 15, 2023.
NCIB
- On May 11, 2023, our Board of
Directors approved the renewal of the normal course issuer bid
("NCIB"). Under the NCIB, we are authorized to purchase up to
3,476,781 common shares, representing 3% of our issued and
outstanding common shares during the period commencing May 31, 2023 and ending May 30, 2024. As at June
30, 2023, no common shares had been repurchased and
cancelled under the initial or renewed NCIB.
Conference Call
Definity will conduct a conference call to review information
included in this news release and related matters at 11:00 a.m. ET on August 4,
2023. The conference call will be available simultaneously
and in its entirety to all interested investors and the news media
at www.definityfinancial.com. A transcript will be made available
on Definity's website within two business days.
About Definity Financial Corporation
Definity Financial Corporation ("Definity", which includes its
subsidiaries where the context so requires) is one of the leading
property and casualty insurers in Canada, with over $3.8
billion in gross written premiums for the 12 months ended
June 30, 2023 and approximately
$2.7 billion in equity attributable
to common shareholders as at June 30,
2023.
Cautionary Note Regarding Forward-Looking Information
This news release contains "forward-looking information" within
the meaning of applicable securities laws in Canada. Forward-looking information may relate
to our future business, financial outlook and anticipated events or
results and may include information regarding our financial
position, business strategy, growth strategies, addressable
markets, budgets, operations, financial results, taxes, dividend
policy, plans and objectives. Particularly, information regarding
our expectations of future results, performance, achievements,
prospects or opportunities or the markets in which we operate is
forward-looking information. In some cases, forward-looking
information can be identified by the use of forward-looking
terminology such as "plans", "targets", "expects" or "does not
expect", "is expected", "an opportunity exists", "budget",
"scheduled", "estimates", "forecasts", "projection", "prospects",
"strategy", "intends", "anticipates", "does not anticipate",
"believes", or variations of such words and phrases or statements
that certain actions, events or results "may", "could", "would",
"might", "will", "will be taken", "occur" or "be achieved". In
addition, any statements that refer to expectations, intentions,
projections or other characterizations of future events or
circumstances contain forward-looking information. Statements
containing forward-looking information are not historical facts but
instead represent management's expectations, estimates and
projections regarding possible future events or circumstances.
Forward-looking information in this news release is based on our
opinions, estimates and assumptions in light of our experience and
perception of historical trends, current conditions and expected
future developments, as well as other factors that we currently
believe are appropriate and reasonable in the circumstances.
Despite a careful process to prepare and review the forward-looking
information, there can be no assurance that the underlying
opinions, estimates and assumptions will prove to be correct.
Forward-looking information is necessarily based on a number of
opinions, estimates and assumptions that we considered appropriate
and reasonable as at the date such statements are made, and are
subject to many factors that could cause our actual results,
performance or achievements, or other future events or
developments, to differ materially from those expressed or implied
by the forward-looking statements, including, without limitation,
the following factors:
- Definity's ability to appropriately price its insurance
products to produce an acceptable return, particularly in provinces
where the regulatory environment requires auto insurance rate
increases to be approved or that otherwise impose regulatory
constraints on auto insurance rate increases;
- Definity's ability to accurately assess the risks associated
with the insurance policies that it writes;
- Definity's ability to assess and pay claims in accordance with
its insurance policies;
- litigation and regulatory actions, including potential claims
in relation to demutualization and our IPO, and COVID-19-related
class-action lawsuits that have arisen and which may arise,
together with associated legal costs;
- Definity's ability to obtain adequate reinsurance coverage to
transfer risk;
- Definity's ability to accurately predict future claims
frequency or severity, including the frequency and severity of
weather-related events and the impact of climate change;
- Definity's ability to address inflationary cost pressures
through pricing, supply chain, or cost management
actions;
- the occurrence of unpredictable catastrophe events;
- unfavourable capital market developments, interest rate
movements, changes to dividend policies or other factors which may
affect our investments or the market price of our common
shares;
- changes associated with the transition to a low-carbon economy,
including reputational and business implications from stakeholders'
views of our climate change approach or that of our industry;
- Definity's ability to successfully manage credit risk from its
counterparties;
- foreign currency fluctuations;
- Definity's ability to meet payment obligations as they become
due;
- Definity's ability to maintain its financial strength rating or
credit rating;
- Definity's dependence on key people;
- Definity's ability to attract, develop, motivate, and retain an
appropriate number of employees with the necessary skills,
capabilities, and knowledge;
- Definity's ability to appropriately manage and protect the
collection and storage of information;
- Definity's reliance on information technology systems and
internet, network, data centre, voice or data communications
services and the potential disruption or failure of those systems
or services, including as a result of cyber security risk;
- failure of key service providers or vendors to provide services
or supplies as expected, or comply with contractual or business
terms;
- Definity's ability to obtain, maintain and protect its
intellectual property rights and proprietary information or prevent
third parties from making unauthorized use of our technology;
- compliance with and changes in legislation or its
interpretation or application, or supervisory expectations or
requirements, including changes in effective income tax rates,
risk-based capital guidelines, and accounting standards;
- failure to design, implement and maintain effective control
over financial reporting which could have a material adverse effect
on our business;
- deceptive or illegal acts undertaken by an employee or a third
party, including fraud in the course of underwriting
insurance or settling insurance claims;
- Definity's ability to respond to events impacting its ability
to conduct business as normal;
- Definity's ability to implement its strategy or operate its
business as management currently expects;
- general economic, financial, political, and social conditions,
particularly those in Canada;
- the competitive market environment and cyclical nature of the
P&C insurance industry;
- the introduction of disruptive innovation;
- distribution channel risk, including Definity's reliance on
brokers to sell its products;
- Definity's dividend payments being subject to the discretion of
the Board and dependent on a variety of factors and conditions
existing from time to time;
- there can be no assurance that Definity's normal course issuer
bid will be maintained, unchanged and/or completed;
- Definity's dependence on the results of operations of its
subsidiaries and the ability of the subsidiaries to pay
dividends;
- Definity's ability to manage and access capital and liquidity
effectively;
- Definity's ability to successfully identify, complete,
integrate and realize the benefits of acquisitions or manage the
associated risks;
- management's estimates and judgements in respect of the
adoption of IFRS 17 and the financial impact on various financial
metrics;
- periodic negative publicity regarding the insurance industry or
Definity;
- management's estimates and expectations in relation to
interests in the broker distribution channel and the resulting
impact on growth, income, and accretion in various financial
metrics;
- the processes, completion, and timing of McDougall's
acquisition of Drayden Insurance Ltd. ("Drayden
Insurance"); and
- the completion and timing of Definity continuing under the
Canada Business Corporations Act.
If any of these risks or uncertainties materialize, or if the
opinions, estimates or assumptions underlying the forward-looking
information prove incorrect, actual results or future events might
vary materially from those anticipated in the forward-looking
information. The opinions, estimates or assumptions referred to
above and described in greater detail in the "11 – Risk Management
and Corporate Governance" section of the December 31, 2022 Management's Discussion and
Analysis should be considered carefully by readers.
Although we have attempted to identify important factors that
could cause actual results to differ materially from those
contained in forward-looking information, the factors above are not
intended to represent a complete list and there may be other
factors not currently known to us or that we currently believe are
not material that could also cause actual results or future events
to differ materially from those expressed in such forward-looking
information. There can be no assurance that such forward-looking
information will prove to be accurate, as actual results and future
events could differ materially from those anticipated in such
information. Accordingly, readers should not place undue reliance
on forward-looking information, which speaks only as at the date
made. The forward-looking information contained in this news
release represents our expectations as at the date of this news
release (or as at the date they are otherwise stated to be made)
and are subject to change after such date. However, we disclaim any
intention or obligation or undertaking to update or revise any
forward-looking information whether as a result of new information,
future events or otherwise, except as required under applicable
securities laws in Canada.
All of the forward-looking information contained in this news
release is expressly qualified by the foregoing cautionary
statements.
Supplementary Financial Measures and Non-GAAP Financial
Measures and Ratios
We measure and evaluate performance of our business using a
number of financial measures. Among these measures are the
"supplementary financial measures", "non-GAAP financial measures",
and "non-GAAP ratios" (as such terms are defined under Canadian
Securities Administrators' National Instrument 52-112 – Non-GAAP
and Other Financial Measures Disclosure), and in each case are not
standardized financial measures under GAAP. The supplementary
financial measures, non-GAAP financial measures, and non-GAAP
ratios in this news release may not be comparable to similar
measures presented by other companies. These measures should not be
considered in isolation or as a substitute for analysis of our
financial information reported under GAAP. These measures are used
by financial analysts and others in the P&C insurance industry
and facilitate management's comparisons to our historical operating
results in assessing our results and strategic and operational
decision-making. For more information about these supplementary
financial measures, non-GAAP financial measures, and non-GAAP
ratios, including (where applicable) definitions and explanations
of how these measures provide useful information, refer to Section
12 – Supplementary financial measures and non-GAAP financial
measures and ratios in the Q2-2023 Management's Discussion and
Analysis dated August 3, 2023, which
is available on our website at www.definityfinancial.com and on
SEDAR at www.sedar.com. These measures have been updated to reflect
the estimated impact arising from the adoption of IFRS 17 and IFRS
9.
Below are quantitative reconciliations of non-GAAP measures for
the three and six months ended June 30,
2023 and June 30, 2022:
Distribution income:
(in millions of dollars)
|
|
Q2 2023
|
Q2 2022
|
2023 YTD
|
2022 YTD
|
Distribution
revenues1
|
|
32.0
|
-
|
57.5
|
-
|
Distribution business
expenses2
|
|
(22.2)
|
-
|
(38.2)
|
-
|
Share of distribution
profit from investments in associates2
|
|
-
|
2.2
|
-
|
5.6
|
Remove: Income taxes
included in share of distribution profit from investments in
associates
|
|
-
|
0.7
|
-
|
2.0
|
Distribution income
|
|
9.8
|
2.9
|
19.3
|
7.6
|
1
|
Distribution revenues
includes commissions on policies underwritten by external insurance
companies.
|
2
|
Included in Other
(expenses) income in our interim consolidated financial statements.
These amounts exclude amortization of intangible assets recognized
in business combinations and acquisition-related
expenses.
|
Net claims and adjustment expenses
(in millions of dollars)
|
|
Q2 2023
|
Q2 2022
(Restated)
|
2023 YTD
|
2022 YTD
(Restated)
|
Claims and adjustment
expenses1,2
|
|
613.5
|
548.3
|
1,171.0
|
1,009.0
|
Impact of onerous
insurance contracts3
|
|
(1.3)
|
1.1
|
(2.5)
|
0.4
|
Claims recoverable from
reinsurers for incurred claims2,4
|
|
(53.1)
|
(41.4)
|
(84.3)
|
(49.4)
|
Net claims and adjustment
expenses
|
|
559.1
|
508.0
|
1,084.2
|
960.0
|
1
|
Included in Insurance
service expenses and other (expenses) income in our interim
consolidated financial statements.
|
2
|
Excludes the impact of
discounting and risk adjustment.
|
3
|
Included in Insurance
service expenses.
|
4
|
Included in Net
expenses from reinsurance contracts held in our interim
consolidated financial statements.
|
Net commissions
(in millions of dollars)
|
|
Q2 2023
|
Q2 2022
(Restated)
|
2023 YTD
|
2022 YTD
(Restated)
|
Commissions1
|
|
140.6
|
131.4
|
277.1
|
263.0
|
Commissions earned on
ceded reinsurance2
|
|
(13.2)
|
(10.1)
|
(24.9)
|
(18.8)
|
Net commissions
|
|
127.4
|
121.3
|
252.2
|
244.2
|
1
|
Included in Insurance
service expenses in our interim consolidated financial
statements.
|
2
|
Included in Net
expenses from reinsurance contracts held in our interim
consolidated financial statements.
|
Net underwriting revenue
(in millions of dollars)
|
|
Q2 2023
|
Q2 2022
(Restated)
|
2023 YTD
|
2022 YTD
(Restated)
|
Insurance
revenue
|
|
954.9
|
863.8
|
1,862.4
|
1,678.1
|
Earned reinsurance
premiums ceded1
|
|
(77.4)
|
(60.7)
|
(145.8)
|
(109.7)
|
Net underwriting revenue
|
|
877.5
|
803.1
|
1,716.6
|
1,568.4
|
1
|
Included in Net
expenses from reinsurance contracts held in our interim
consolidated financial statements.
|
Operating net income, Operating income, Non-operating gains
(losses)
Net income (loss) attributable to common shareholders is the
most directly comparable GAAP financial measure disclosed in our
interim consolidated financial statements to operating net income,
operating income, and non-operating gains (losses), which are
considered non-GAAP financial measures.
(in millions of dollars)
|
|
Q2 2023
|
Q2 2022
(Restated)
|
2023 YTD
|
2022 YTD
(Restated)
|
Net income (loss)
attributable to common shareholders
|
|
71.6
|
(77.2)
|
172.5
|
(109.8)
|
Remove: income tax
expense (recovery)
|
|
22.2
|
(30.5)
|
52.8
|
(45.4)
|
Income (loss) before income
taxes
|
|
93.8
|
(107.7)
|
225.3
|
(155.2)
|
|
|
|
|
|
|
Remove: non-operating
gains (losses)
|
|
|
|
|
|
Recognized (losses) gains on FVTPL investments
|
|
(62.7)
|
(227.2)
|
29.0
|
(425.0)
|
Discounting1
|
|
52.0
|
25.8
|
68.4
|
42.7
|
Risk
adjustment1
|
|
3.7
|
1.1
|
6.0
|
5.2
|
Finance income
(expenses) from insurance contracts issued
|
|
18.6
|
29.8
|
(45.9)
|
82.5
|
Finance (expenses)
income from reinsurance contracts held
|
|
(1.6)
|
(1.9)
|
4.0
|
(5.1)
|
Interest on
restricted cash, less demutualization and IPO-related
expenses2
|
|
2.9
|
(0.4)
|
5.4
|
(2.3)
|
Amortization of intangible assets recognized in business
combinations2
|
|
(3.9)
|
(0.7)
|
(7.1)
|
(1.3)
|
Other2,3
|
|
(0.2)
|
(0.5)
|
(0.1)
|
(0.8)
|
Non-operating gains (losses)
|
|
8.8
|
(174.0)
|
59.7
|
(304.1)
|
Operating income
|
|
85.0
|
66.3
|
165.6
|
148.9
|
Operating income tax
expense
|
|
(20.2)
|
(15.2)
|
(37.4)
|
(34.5)
|
Operating net income
|
|
64.8
|
51.1
|
128.2
|
114.4
|
1
|
Included in Insurance
service expenses and Net expenses from reinsurance contracts held
in our interim consolidated financial statements.
|
2
|
Included in Other
(expenses) income in our interim consolidated financial
statements.
|
3
|
Other represents a gain
on sale of customer lists, acquisition-related expenses, foreign
currency translation of fintech venture capital funds, and a
number of other expenses or revenues that in the view of management
are not part of our insurance operations and are individually and
in the aggregate not material.
|
Prior year claims development
(in millions of dollars)
|
|
Q2 2023
|
Q2 2022
(Restated)
|
2023 YTD
|
2022 YTD
(Restated)
|
Changes in fulfilment
cash flows relating to the liabilities for incurred
claims1
|
|
(32.7)
|
(49.4)
|
(43.5)
|
(100.2)
|
Changes to amounts
recoverable for incurred claims2
|
|
(9.3)
|
9.6
|
(6.2)
|
20.1
|
Remove: discounting
included above
|
|
4.9
|
6.0
|
(11.1)
|
5.3
|
Remove: risk adjustment
included above
|
|
14.7
|
12.0
|
30.7
|
31.1
|
Prior year claims development
|
|
(22.4)
|
(21.8)
|
(30.1)
|
(43.7)
|
1
|
Included in Insurance
service expenses in our interim consolidated financial
statements.
|
2
|
Included in Net
expenses from reinsurance contracts held in our interim
consolidated financial statements.
|
Net underwriting expenses
(in millions of dollars)
|
|
Q2 2023
|
Q2 2022
(Restated)
|
2023 YTD
|
2022 YTD
(Restated)
|
Net
commissions
|
|
127.4
|
121.3
|
252.2
|
244.2
|
Operating
expenses
|
|
116.0
|
105.8
|
234.4
|
210.0
|
Premium
taxes
|
|
33.8
|
30.2
|
65.1
|
58.6
|
Net underwriting expenses
|
|
277.2
|
257.3
|
551.7
|
512.8
|
Underwriting income
(in millions of dollars)
|
|
Q2 2023
|
Q2 2022
(Restated)
|
2023 YTD
|
2022 YTD
(Restated)
|
Net underwriting
revenue
|
|
877.5
|
803.1
|
1,716.6
|
1,568.4
|
Net claims and
adjustment expenses
|
|
559.1
|
508.0
|
1,084.2
|
960.0
|
Net
commissions
|
|
127.4
|
121.3
|
252.2
|
244.2
|
Operating
expenses
|
|
116.0
|
105.8
|
234.4
|
210.0
|
Premium
taxes
|
|
33.8
|
30.2
|
65.1
|
58.6
|
Underwriting income
|
|
41.2
|
37.8
|
80.7
|
95.6
|
Below are quantitative reconciliations of non-GAAP ratios for
the periods ended June 30, 2023 and
December 31, 2022, as applicable:
ROE
|
|
|
|
|
|
|
|
|
|
|
|
For the 12 months ended
|
|
(in millions of dollars, except as otherwise
noted)
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2023
|
|
Net income attributable
to common shareholders
|
|
|
|
|
|
|
|
|
393.2
|
|
Equity attributable to
common shareholders1
|
|
|
|
|
|
|
|
|
2,696.2
|
|
Adjusted equity
attributable to common shareholders
|
|
|
|
|
|
|
|
|
2,696.2
|
|
Average adjusted equity
attributable to common shareholders2
|
|
|
|
|
|
|
|
|
2,543.1
|
|
ROE
|
|
|
|
|
|
|
|
|
15.5 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Equity attributable to
common shareholders is as at June 30, 2023.
|
2
|
Average adjusted equity
attributable to common shareholders is the average of adjusted
equity attributable to common shareholders (equity attributable to
common shareholders as shown on our consolidated balance sheets,
adjusted for significant capital transactions, if applicable) at
the end of the period and the end of the preceding 12-month period.
Equity attributable to common shareholders and adjusted equity
attributable to common shareholders as at June 30, 2022 was
$2,389.9 million.
|
Operating ROE
|
|
|
|
|
|
|
|
|
|
|
|
For the 12 months ended
|
(in millions of dollars, except as otherwise
noted)
|
June 30,
2023
|
December 31, 2022
(Restated)
|
Operating net
income1
|
|
|
|
|
|
250.6
|
236.8
|
Equity attributable to
common shareholders, excluding AOCI2
|
|
|
|
|
|
2,729.4
|
2,582.2
|
Adjustment for
unrealized gains on FVTPL equity instruments
|
|
|
|
|
|
(22.3)
|
(15.6)
|
Adjusted equity
attributable to common shareholders, excluding AOCI
|
|
|
|
|
|
2,707.1
|
2,566.6
|
Average adjusted equity
attributable to common shareholders, excluding
AOCI3
|
|
|
|
|
|
2,549.0
|
2,515.3
|
Operating
ROE
|
|
|
|
|
|
9.8 %
|
9.4 %
|
1
|
Operating net income is
a non-GAAP financial measure.
|
2
|
Equity attributable to
common shareholders, excluding accumulated other comprehensive
(loss) income ("AOCI") is as at June 30, 2023 and December 31,
2022.
|
3
|
Average adjusted equity
attributable to common shareholders, excluding AOCI is the
average of adjusted equity attributable to common shareholders,
excluding AOCI (equity attributable to common shareholders and AOCI
each as shown on our consolidated balance sheets, adjusted for
significant capital transactions, if applicable) and excluding
unrealized gains or losses on FVTPL equity instruments, at the end
of the period and the end of the preceding 12-month period.
Adjusted equity attributable to common shareholders, excluding
AOCI, as at June 30, 2022 was $2,391.0 million and as at December
31, 2021 was $2,464.0 million.
|
SOURCE Definity Financial Corporation