Desjardins Group has faltered once again.
For all of its operations, the financial institution reported surplus earnings before member dividends of $477 million in the second quarter of 2022, down sharply from $935 million in Q2 2021.
This decrease of 49 per cent or $458 million was “mainly due to a rise in the cost of claims in the Property and Casualty Insurance segment. This primarily reflected an increase in road traffic, which had fallen considerably in the comparative period as a result of the pandemic,” Desjardins explains. “In addition, the second quarter of 2022 was marked by a rare weather phenomenon known as a derecho, which affected Quebec and Ontario, and by a major event (windstorm and flooding) that had no equivalent in the second quarter of 2021,” the financial institution notes.
“Surplus earnings also fell as a result of greater investment in particular in projects provided for in the strategic orientations, especially in relation to security and the digital shift, and to a rise in spending on personnel to support the growth of Desjardins Group’s activities,” Desjardins states, adding that this reduction “was partially offset by increase in net interest income and other operating income.”
Property and casualty insurance
For its P&C insurance segment, Desjardins reported a net surplus of $104 million in the second quarter of 2022, compared with $330 million in Q2 2021. This represents a decrease of 68.5 per cent or $226 million.
The combined ratio deteriorated by 28.2 points. It was 99.3 per cent in the second quarter of 2022, compared with 71.1 per cent in Q2 2021.
Wealth management and life and health insurance
For its Wealth Management and Life and Health Insurance segment, Desjardins posted a net surplus of $173 million in the second quarter of 2022, versus $235 million in Q2 2021. This decrease of 26.4 per cent or $62 million is mainly attributable to the “effect of revisions of actuarial assumptions related to potential risk of default that favourably affected the comparative quarter in 2021.”
This decline was partly offset by the “positive effect of higher interest rates on policy liabilities in the second quarter of 2022,” by “overall more favourable experience than for the comparative period of 2021, essentially in group insurance,” and by “higher gains on the disposal of securities and real estate investments than in the first six months of 2021.”
Expenses Expenses related to claims, benefits, annuities, and changes in insurance contract liabilities were down $2.3 billion in the second quarter of 2022. They declined by $2.6 billion in Wealth Management and Life and Health insurance due to the decrease in actuarial liabilities included in the “insurance contract liabilities” item. In contrast, Desjardins recorded an “increase in benefits related to business growth and the higher cost of drugs and health care.” What’s more, expenses decreased by $3 million in the “other” category. However, the cost of claims surged by 35.7 per cent or $244 million in P&C insurance due to the deterioration of two ratios: automobile and property claims and catastrophe and major event claims. The increase is also explained by a “less favourable ratio of changes in prior year claims than in the comparative quarter of 2021.”
Desjardins’ total operating income was $5.1 billion in the second quarter of 2022, compared with $4.9 billion in Q2 2021. It thus increased by 5.4 per cent or $263 million.
The Property and Casualty insurance segment reported operating income of $1.5 billion in the second quarter of 2022, versus $1.4 billion in Q2. This amounts to growth of 3.7 per cent or $52 million.
The Wealth Management and Life and Health Insurance segment had operating income of $1.6 billion in the second quarter of 2022, for an increase of 2.2 per cent or $34 million.
Desjardins' total net premiums were $2.6 billion in the second quarter of 2022. They rose by 1.8 per cent or $46 million.
Net premiums for the Wealth Management and Life and Health Insurance segment were $1.2 billion in the second quarter of 2022. They were up 2.6 per cent or $31 million. More specifically, net premiums increased by:
- 8.6 per cent or $9 million in annuity premiums, “essentially from individual annuities,” to $113 million;
- 4.4 per cent or $10 million in individual insurance, to $235 million;
- 1.4 per cent or $12 million in group insurance, to $880 million.
Net premiums for the P&C insurance segment were $1.5 billion in the second quarter of 2022. This increase of 1.5 per cent or $22 million resulted notably from business growth, Desjardins points out.
Desjardins Group also reported a loss of $81 million in premium income under “Other” in the second quarter of 2022, versus a loss of $74 million in the Q2 2021. This represents a decline of $7 million.
Desjardins reported investment losses of $1.8 billion in the second quarter of 2022, compared with investment gains of $909 million in Q2 2021. This $2.7 billion decline is mainly attributable to the following sectors:
- Wealth Management and Life and Health Insurance: This segment reported investment losses of $1.7 billion in the second quarter of 2022, versus investment gains of $847 million in Q2 2021. This $2.6 billion decline is due to a “decrease in the fair value of assets backing liabilities related to life and health insurance operations.”
- Property and Casualty insurance: This segment sustained investment losses of $30 million in the second quarter of 2022, compared with investment gains of $75 million in Q2 2021. Desjardins explains this $105 million decline by a “decrease in the fair value of matched bonds in the Property and Casualty Insurance segment compared to an increase in fair value in the corresponding quarter of 2021, as a result of an increase in market interest rates in the second quarter of 2022 compared to a decrease in the corresponding quarter of 2021.” However, “this change in the fair value of bonds was offset by a decrease in the cost of claims due to matching.”