Definity Financial Corporation’s Q2 earnings suffered a sharp decline.
The company, which includes Economical Insurance, Sonnet Insurance, Petline Insurance, and Family Insurance Solutions, reported net income of $21 million in the second quarter of 2022, compared with $43.9 million in the second quarter of 2021. This represents a notable plunge of 52.2 per cent or $22.9 million.
Definity pins this decline on three factors:
- Higher market value losses on the company's bond portfolio;
- An investment impairment charge of $19.3 million in the quarter, reflective of equity market volatility; and
- Lower underwriting income driven by higher catastrophe losses.
The downturn was “partially offset by higher net investment income,” Definity notes.
Definity reported a combined ratio of 95.8 per cent in the second quarter of 2022, versus 94.1 per cent in Q2 2021. This amounts to a deterioration of 1.7 points.
Definity reported underwriting income of $34 million in Q2 2022, compared with $41.2 million in Q2 2021, for a decrease of 17.5 per cent or $7.2 million.
“Our underwriting results were strong despite the impact of the significant windstorm in Ontario and Québec in May. Catastrophe losses impacted the combined ratio by 5.8 percentage points, compared to only 1.8 percentage points in the same quarter a year ago,” the insurer explains.
Definity's gross written premiums (GWP) were $984.7 million in the second quarter of 2022, versus $874.6 million in Q2 2021. This increase of 12.6 per cent or $110.1 million was “driven by growth across all our lines of business,” the company says.
Looking at the results in closer detail:
- In commercial lines: GWP totalled $296 million in the second quarter of 2022, versus $251 million in Q2 2021. The increase is 17.9 per cent or $45 million, "as we continued to focus on growth in this line of business," Definity says.
- In personal lines: GWP were $688.7 million in the second quarter of 2022, compared with $623.6 million in the second quarter of 2021. This upswing of 10.4 per cent or $65.1 million is explained by "increases in both our broker and direct businesses," Definity says.
Customer relief during the COVID-19 pandemic, the measures of which ended in May 2022, resulted in a reduction in GWP premiums of approximately $8 million in the second quarter of 2022, compared with a reduction of $14 million in the Q2 2021, the insurer points out.