Desjardins Group reported surplus earnings before member dividends of $935 million in second quarter 2021, compared with $529 million in Q2 2020.
This spectacular growth of 76.7 per cent or $406 million was “mainly due to a decline in the provision for credit losses, solid performance from the caisse network and a lower loss experience in the Property and Casualty Insurance segment,” says Desjardins.
The decline in the cost of P&C claims is explained by “favourable changes in prior year claims, mainly in automobile insurance” and by the “absence of catastrophes and major events, whereas one catastrophe, a hailstorm, took place in the comparative quarter.”
This upturn in claims experience fuelled a stellar increase in net surplus earnings for the Property and Casualty Insurance segment of 1,962.5 per cent or $314 million. These earnings were $330 million in second quarter 2021, compared with $16 million in Q2 2020.
The increase in surpluses is also explained by the “increase in net premiums, including the impact of the $155 million in automobile insurance premium refunds granted to members and clients as a relief measure to support them during the COVID-19 pandemic in the comparative quarter,” Desjardins points out.
The combined ratio improved by 29.5 points. It was 71.1 per cent in second quarter 2021, down from 100.6 per cent in Q2 2020.
Two other Desjardins segments posted growth. The main segment, Personal and Business Services, posted surplus earnings before member dividends of $397 million, up 26 per cent or $82 million. The “Other” segment recorded a net deficit of $27 million in second quarter 2021, compared with a net deficit of $63 million in Q2 2020, for a positive change of $36 million.
Decline in Wealth Management and Life and Health Insurance
Only one segment declined: Wealth Management and Life and Health Insurance. Its net surplus earnings were $235 million in the second quarter of 2021, versus $261 million in Q2 2020.
This decrease of 10 per cent or $26 million is mainly due to the “markets’ more positive impact on guaranteed investment funds during the comparative quarter.” In addition, “in the second quarter of 2020, the travel insurance provisions recognized in first quarter 2020 were revised downward,” Desjardins notes.
These two elements were offset by the “favourable effect of changes in actuarial assumptions related to potential risk of default.”
Premiums: Up 20.5 per cent in P&C...
Desjardins’ total net premiums were $2.6 billion in the second quarter of 2021, compared with $2.2 billion in second quarter 2020. This represents an increase of 15.6 per cent or $349 million.
In P&C insurance, net premiums were $1.5 billion. This gain of 20.5 per cent or $249 million is explained by “growth in the average premium for property insurance, reflecting the trend in the Canadian P&C insurance market.” It also stems from the fact that, in second quarter 2020, Desjardins granted $155 million in automobile insurance premium refunds, a COVID-19 relief measure.
... and 10.1 per cent in Wealth Management and Life and Health insurance
In Wealth Management and Life and Health Insurance, net premiums were $1.2 billion. Desjardins says that this 10.1 per cent or $110 million advance is explained largely by an 8.6 per cent or $69 million increase in group insurance premiums, which reached $868 million. The institution also explains the growth by an increase of 52.9 per cent or $36 million in annuity premiums, which reached $104 million.
Note that individual insurance premiums increased by 2.3 per cent or $5 million to $225 million.
Desjardins Group also reported a loss of $74 million in premium income in the “Other” category in the second quarter of 2021, compared with a loss of $64 million in Q2 2020.
Desjardins reported total operating income of $4.9 billion in the second quarter of 2021. This is an increase of 13.7 per cent or $585 million compared with the Q2 2020.
Looking at the results in closer detail:
- Property and Casualty insurance: Operating income totalled $1.4 billion, up 18.1 per cent or $218 million
- Wealth management and Life and Health insurance: Total operating income was $1.6 billion, up 11.3 per cent or $159 million
- Personal and Commercial: Total operating income was $1.9 billion, up 10.6 per cent or $185 million
- Other: This segment recorded an operating loss of $40 million, compared with a loss of $63 million in Q2 2020, for a positive change of $23 million.
Desjardins reported investment income of $909 million in the second quarter of 2021, versus $2.3 billion in Q2 2020.
This decrease of 60.9 per cent or $1.4 billion is primarily due to:
- The “decrease in the fair value of assets backing liabilities related to life and health insurance operations”
- “Lower gains on the disposal of securities compared to second quarter 2020”
- “Positive change in the fair value of matched bonds in the Property and Casualty Insurance segment than in the comparative quarter of 2020”; and
- “Lower trading income as a result of developments on financial markets.”