The Desjardins Group reported net income of $285 million in Q1 2020. This result is 28.9% or $116 million lower than the net income of $401 million in the first quarter of 2019.
“This decrease in surplus earnings was due to the negative financial consequences of the COVID-19 pandemic,” the cooperative says.
Loss in life insurance
These consequences include “the rise in travel insurance provisions after the Canadian government's announcement of travel restrictions” coupled with “the increase in credit balance insurance provisions,” Desjardins Group says.
These two factors contributed to the net loss of $41 million in Q1 2020 in the Wealth Management and Life Insurance sector, compared with net income of $133 million in Q1 2019. The loss amounts to 130.8% or $174 million.
P&C insurance solid
In contrast, the “solid performance of the Property and Casualty Insurance segment, which reported higher premium income and a favourable claims experience compared to the first quarter of 2019, mitigated the decrease in surplus earnings” at Desjardins Group, its quarterly report reads.
In addition, the cooperative reported net income of $73 million in Q1 2020, down from a net loss of $81 million in the same quarter of 2019. This change corresponds to an increase of 190.1% or $154 million.
The combined ratio fell to 90.5% from 112.5% in Q1 2019.
Premiums: P&C insurance saves the day
Desjardins Group reported net premiums of $2.5 billion in Q1 2020 versus $2.3 billion in the first quarter of 2019. This amounts to an 8.8% increase, at $205 million, fuelled by the growth in net P&C insurance premiums.
P&C premiums climbed to $1.4 billion in Q1 2020, versus $1.2 billion in the first quarter of 2019. Desjardins Group attributes this increase of 16.3%, or $193 million, to “Growth in the average premium due to rate increases in the previous 12 months, reflecting the current trend in the Canadian P&C market,” combined with a “larger number of policies issued as a result of growth across all market segments and regions since the comparative quarter.”
Net premiums in Wealth Management and Life Insurance also increased, albeit to a lesser extent. They stood at $1.2 billion in Q1 2020, for gains of 1.7% or $20 million, broken down into $11 million in annuities, $7 million in individual insurance and $2 million in group insurance.
This is the first time in any Q1 that the amount of P&C insurance premiums tops that of wealth management and life insurance premiums.
In addition, the Desjardins Group reported that premium income plunged by $72 million in the Other category. This decline results from the elimination of premium income that Desjardins Financial security and Desjardins General Insurance Group Inc. collect from other Group entities.
Personal and Business
In its Personal and Business services segment, one of its core activities, the Desjardins Group reported net income of $213 million in Q1 2020, versus $341 million in the same quarter of 2019. The cooperative attributes this 37.5% decline to the consequences of COVID-19. Notably, “This impact included an increase in the provision for credit losses, mainly as a result of the significant deterioration in the economic outlook” and to “the decrease in the fair value of derivative financial instruments due in particular to the volatility of financial markets and credit spreads.”
“Last March, Québec and Canada were temporarily shut down to slow down the spread of the COVID-19,” said Desjardins President and CEO Guy Cormier. “Desjardins was one of the first financial institutions to put in place relief measures for its members and clients. We managed to return $104 million to our members and the community, despite the pandemic’s financial impact.”
The cooperative points out that between March 16 and early May 2020, it received over 616,000 requests for relief, including over 408,000, or 66%, in auto insurance.
Roughly 89,000 requests, or 14% of the total, are linked to mortgage loans. The remaining 20% concerns payment deferrals for credit cards, auto loans and lines of credit.
Amidst the uncertainty caused by the COVID-19 pandemic, the firm Fitch Ratings revised Desjardins Group’s outlook downward on April 3.