Desjardins Group declined for the fourth consecutive quarter.
For all of its operations, the financial institution reported surplus earnings before member dividends of $478 million in the third quarter of 2022, compared with $816 million in Q3 2021.
This decrease of 41.4 per cent or $338 million “was mostly due to a rise in the cost of claims in the Property and Casualty Insurance segment, reflecting among other things the impact of inflation and the increased frequency in claims.”
“The third quarter of 2022 was also marked by two major events: heavy rainfalls in Québec and Hurricane Fiona in the Atlantic provinces and Québec,” Desjardins notes. What’s more, surplus earnings fell due to the “increase in the provision for credit losses, mainly as a result of the deteriorating macroeconomic outlook, accelerated investments, particularly in projects provided in the strategic orientations, and a rise in spending on personnel.”
These elements were partially offset “by an increase in net interest income and other operating income.”
Property and casualty insurance
Desjardins reported surplus earnings in P&C of $83 million in the third quarter of 2022, compared with $289 million in Q3 2021. This represents a decrease of 71.3 per cent or $206 million.
The combined ratio worsened by 28 points. It was 103.6 percent in the third quarter of 2022, up from 75.6 percent in Q3 2021.
Wealth Management and Life and Health Insurance
Desjardins reported surplus earnings of $155 million in this segment in the third quarter of 2022, compared with $109 million in Q3 2021. This increase of 42.2 per cent or $46 million is driven by “an overall more favourable experience than for the comparative quarter, essentially in group insurance,” and by “higher gains on disposal of securities compared to the third quarter of 2021.”
This was offset “by an increase in non-interest expense, mainly due to a rise in spending on personnel in order to support growth in operations and enhance the services offered to members and clients, as well as to accelerated investment in strategic projects related, in particular, to security and the digital shift.”
Expenses
Expenses related to claims, benefits, annuities and changes in insurance contract liabilities climbed 28.7 per cent or $491 million in the third quarter of 2022, to $2.2 billion. This increase “was partially offset by a similar change under ‘Investment income (loss).’”
Looking at the results in closer detail, expenses increased by 50.1 per cent or $382 million in P&C due to the deterioration of the loss ratio. This was offset by the “positive impact of the increase in the discount rates used to measure the provision for claims, which was greater than that in the third quarter of 2021.”
Cost of claims increased 11.6 per cent or $111 million in Wealth Management and Life and Health Insurance due to an “increase of $68 million in actuarial liabilities, under ‘Insurance contract liabilities’” and an “increase in benefits related to business growth and the higher cost of drugs and health care.”
Costs rose by $2 million in the Other category.
Investments
Desjardins garnered investment income of $186 million in the third quarter of 2022, versus investment losses of $114 million in Q3 2021. Investment income thus soared by $300 million.
Wealth Management and Life and Health Insurance saw a $381 million upswing in investments, and Property and Casualty gained $73 million in investment income.
Premiums
Desjardins' total net premiums were $2.7 billion in the third quarter of 2022. They thus slid by 5.4 per cent or $158 million.
Net premiums in Wealth Management and Life and Health Insurance declined by 11.4 per cent or $168 million. This was due to a 58.4 per cent or $225 million decrease in net premiums in the annuity sub-segment, “related, in particular, to the addition of two major groups in the comparative quarter of 2021.” This downturn was offset by increases of 3.4 per cent or $8 million in individual insurance and 5.7 per cent or $49 million in group insurance.
Net premiums in the Other category were down $9 million.
By comparison, P&C net premiums rose by 1.3 per cent or $19 million, “in particular as a result of business growth.”
Operating income
Desjardins' reported total operating income of $5.3 billion in the third quarter of 2022, up 0.9 per cent or $45 million.
Property and Casualty Insurance had operating income of $1.5 billion in the third quarter of 2022, for an increase of 3.3 per cent or $49 million.
Wealth Management and Life and Health Insurance reported operating income of $1.7 billion in the third quarter of 2022, down 10.2 per cent or $189 million.
