Desjardins profits: less 68.5% in damages, less 26.4% in people

the Desjardins Group step back again.

For all of its activities, the financial institution reports earnings before member dividends of $477 million in the second quarter of 2022, compared to $935 million in the second quarter of 2021.

This decrease of 49% or $458 million “is mainly attributable to an increase in claims incurred in the property and casualty insurance sector, reflecting in particular the impact of the increase in automobile traffic on the roads, whereas this decreased significantly during the comparative period, in the context of the pandemic,” says Desjardins. “In addition, the second quarter of 2022 was marked by a rare weather phenomenon called derecho which occurred in Quebec and Ontario, as well as by a major event (wind and flooding), while none had occurred in the second quarter of 2021”, adds the financial institution.

The decrease “is also explained by the acceleration of the sums invested in particular in projects provided for in the strategic orientations, among others in terms of digital transformation and security, as well as by the increase in personnel costs to support growth. activities of Desjardins Group”.

All of these items were offset by “higher net interest income and other operating income”.

Damage insurance

Thus, for its property and casualty insurance sector, Desjardins reports a net surplus of $104 million in the second quarter of 2022, compared to $330 million in the second quarter of 2021. This is a drop of 68.5% or $226 million. $.

The combined ratio deteriorated by 28.2 points. It stands at 99.3% in the second quarter of 2022, compared to 71.1% in the second quarter of 2021.

Wealth management and personal insurance

For its wealth management and life and health insurance segment, Desjardins reports a net surplus of $173 million in the second quarter of 2022, compared to $235 million in the second quarter of 2021. This decrease of 26.4% or $62 million is mainly attributable the “effect of revisions to actuarial assumptions related to the potential risk of default having favorably affected the comparative quarter of 2021”.

This was partly offset by the “favorable effect of higher interest rates on policy liabilities during the second quarter of 2022”, by an “overall more favorable experience than that of the comparative quarter, mainly in insurance collective”, but also by “gains on disposals of real estate investments in the second quarter of 2022”.

Expenses

Expenses related to claims, benefits, annuities and changes in insurance contract liabilities decreased by $2.3 billion in the second quarter of 2022.

They decreased by $2.6 billion in wealth management and life and health insurance due to the decrease in technical provisions included in the “insurance contract liabilities” item. In return, Desjardins recorded an “increase in benefits linked to business growth and the increase in the cost of drugs and health care”.

Expenses also decreased by $3 million for the “other” heading.

On the other hand, they increased by 35.7% or $244 million in property and casualty insurance due to the deterioration of two ratios, that of claims in automobile and property insurance and that of claims related to catastrophes and major events. The increase is also explained by a “less favorable ratio of the development of prior years’ claims than in the comparative quarter of 2021”.

Operating income

Desjardins’ total operating revenues amounted to $5.1 billion in the second quarter of 2022, compared to $4.9 billion in the second quarter of 2021. They increased by 5.4% or $263 million.

The property and casualty insurance segment recorded operating revenues of $1.5 billion in the second quarter of 2022, compared to $1.4 billion in the second quarter of 2021. This is an increase of 3.7% or 52 M$.

The wealth management and life and health insurance sector recorded operating income of $1.6 billion in the second quarter of 2022. This represents an increase of 2.2% or $34 million.

Premiums

Desjardins’ total net premiums amounted to $2.6 billion in the second quarter of 2022. They increased by 1.8% or $46 million.

Wealth management and life and health insurance net premiums were $1.2 billion in the second quarter of 2022. They increased by 2.6% or $31 million, as net premiums increased by:

  • 8.6% or $9 million on the annuity side, “mainly from individual annuities”, to reach $113 million;
  • 4.4% or $10 million in individual insurance, to reach $235 million;
  • 1.4% or $12 million in group insurance, to reach $880 million.

Net premiums for the damage insurance sector amounted to $1.5 billion in the second quarter of 2022. This increase of 1.5% or $22 million “is mainly due to business growth,” says Desjardins.

Desjardins Group also reports a loss of premium income of $81 million under the “Other” heading in the second quarter of 2022, compared to a loss of $74 million in the second quarter of 2021. This is a decline of $7 million.

Investments

Desjardins reports investment losses of $1.8 billion in the second quarter of 2022, compared to investment gains of $909 million in the second quarter of 2021. This decline of $2.7 billion is attributable in particular to the sectors:

  • Wealth management and life and health insurance: this incurs investment losses of $1.7 billion in the second quarter of 2022, compared to investment gains of $847 million in the second quarter of 2021. This decline of $2.6 billion $ is explained by the “unfavorable fluctuation in the fair value of the assets associated with life and health insurance activities and supporting the liabilities”.
  • Property and casualty insurance: this incurs investment losses of $30 million in the second quarter of 2022, compared to investment gains of $75 million in the second quarter of 2021. This decline of $105 million is explained by the “variation negative in the fair value of the P&C insurance sector’s matched bonds, whereas a positive variation had been observed in the comparative quarter, explained by a rise in market interest rates in the second quarter of 2022, while a decrease occurred in the comparative quarter,” said Desjardins. The institution recalls, however, “that this fluctuation in the fair value of the bonds was offset by a reduction in the claims burden due to the matching”.

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